Beware the Economy: Proceed with Caution

It is the last day of July, a fact that I wish I could avoid, the summer is going by too fast already. August is upon us and it seems I have not gotten to all the things I would like to do. We are definitely hanging closer to home and doing fewer outings. In previous summers, Newsday’s Fun Book was our guide and we went somewhere every day. This summer the children have attended some mini camps here and there so they are having a swell time and they don’t seem to mind spending more time at home.

Right now we are trying to preserve our funds for the uncertainty of the future and aggressively pay down debt, which unfortunately did not come from spending, though I wish it did. Then, I would be able to look around and see all of the nice stuff and at least be enjoying what I am struggling to pay for. Our debt comes from a failed business enterprise so in reality we have nothing to show for it except to acknowledge the experience as a very expensive lesson learned. For years, we scrimped to ensure that we had no debt and plenty of savings so that we could become small business people, deciders of our destiny and maybe even transcend the middle class. All of the money that we could have spent on home improvements is now gone plus a whole lot more. We are now stuck indefinitely with the old 1970’s kitchen, dreadful bathrooms and a myriad of unfinished home improvements that we decided to forego in order to have enough start-up capital for our business. Now we face the long road of reducing our lifestyle and spending in order to tackle that debt. Nevertheless, we are fortunate to have preserved our livelihood.

I think the smartest thing that we or anyone can do now is to proceed with caution until we can figure out what is going on with the economy. Even the economists cannot agree on its status right now. If you follow the stock market, it is clearly evident that the indicators have gone awry; the Dow is posting 200+ gains or losses daily. Market logic seems to be erratic with investors jumpy over every smidgen of good or bad news.. Lately, if any of the financial companies posts billion dollar losses, their stock goes up because they did not lose as much as the street expected. Today, when Exxon Mobil posted the largest quarterly profit ever, $11.8 billion, it was not enough to satisfy earnings expectations and the stock went down over $2. Yes, Wall Street expected Exxon Mobil to have gouged us even more, if that is even possible.

Thankfully, most of us are surviving and adjusting to the new price thresholds for energy and food and we will probably make it through the back-to-school shopping season fairly unscathed. Lucky for me, our school district has been phasing in a uniform policy for Kindergarten - 8th grade. This will reduce our clothing budget significantly. I suspect that the major rough patch for the Northeast will be winter when the heating oil bills kick in and right now it appears that nothing short of a miracle will reduce the tab for the 1st fill-up projected to be at least $1000 for those with the standard 275 gallon tank. Perhaps many will be prepared to absorb the impact of that 1st bill, the problem will be the 2nd and subsequent ones arriving every 4-7 weeks throughout the cold weather season. I know people who are already saving the “oil money”; I have become one of them. We should plan for it so we do not find ourselves with empty pockets at the worst time of year.

Yesterday, the Governor of New York warned of difficult economic times ahead and that the state should re-evaluate its budget and spending in order to head off a financial disaster. We should all take heed. If there is anything we can learn from all the government bailouts, insolvencies and foreclosures is that we all need to be wise about how we spend and save money at least in the short term.