Financial Planning

Our economic recovery starts at home

Frugal Good news: Americans are spending less and saving more than at any other time in recent memory. For CPAs on the financial literacy front lines, that's a dream come true.

According to this Associated Press article, they're doing so out of necessity. It's simple, really. Greater economic uncertainty means Americans are finally reining in their out-of-control spending.

To some, this is the worst news possible.

"Frugality may be good for family budgets," the AP's Ashley Heher writes, "but it's bad for the national economy."

But is it really?

I've argued before that, for all the financial tomfoolery taking place on Wall Street (and there was plenty), American consumers themselves bear a certain amount of responsibility not only for the mess we're in, but for helping us clean it up.

And by "helping us clean it up," I don't mean "spending more money."

Lauren Weber agrees. In a recent interview with NPR's Steve Inskeep, the author of In Cheap We Trust says that for our economy to turn around, Americans first have to "clean up their balance sheets and get to a point of financial health."

Here's the key segment of Weber's interview:

"An economy built on debt and borrowing is just not sustainable. It leads to the kind of vicious cycle that we're in right now, which is exuberant bubbles fueled by debt followed by a painful bust. I think that the only way we can return to some semblance of a healthy, sustainably growing economy is by people saving some money and paying off that debt.

"To say otherwise, to tell Americans that they should go back to the shopping mall and charge up their credit cards, is like saying that you should give an alcoholic who's going through withdrawal a shot of whiskey to calm his nerves. You can't solve the problem with the same poison that caused it."

Listen to Weber's full NPR interview here:

It's just my opinion, but I completely agree. The minute we get our own financial houses in order, we'll greatly reduce the impact of whatever future economic shenanigans lie in wait.

Don't miss the 24th annual Advanced PFP Conference
CPAs can help their clients take control of their finances by attending the MACPA's annual Advanced PFP Conference. The 2009 edition of this popular conference will include a two-part session led by Natalie Choate, one of America’s leading speakers on retirement benefits planning. Get details and register here.


Bill Sheridan