To Stimulate or Not, That is the Question

This week my friend and fellow Elevenmom, Lynnae founder of was featured in an AP article called Tightwads Embrace Frugality to New Extremes.”  The article referred to pennypinchers as becoming neurotic in current economic times regarding money saving.

A couple of weeks ago, fellow elevemom Amy, founder of MomAdvice, wrapped up her monthly non-spending challenge.  She started this challenge because she wanted to get her family finances back on track.  As a result of her challenge and the savings she generated she was able to save her family $90,000 in interest by switching from a 30 year mortgage to a 15 year one.  Despite this, she faced some criticism from people who felt that this type of non-spending challenge put a strain in the economy.

This past week Meredith founder of Like Merchants Ships shared with her readers her new roof.  Meredith was very proud, as she should have been, of having been able to pay for this expense out of savings and also been able to help her local economy by creating jobs.  Yet, she was also criticized by some readers that felt speaking of such a big expense was “insensitive” in times when other people are facing very lean times.

Let me give you an example at the other end of the spectrum to help you realize the types of spending behaviors that got us in the mess we are in.  This family has a $250,000 mortgage on a $50K yearly annual income. How does she pay this mortgage every month?  First, they have a sub prime mortgage with a negative amortization schedule.  With this mortgage they can make “minimum payments” on their mortgage and any interest amounts left unpaid get added on to the principal value of the loan.  But they can’t still afford these minimum payments.  So they take cash advances on their credit cards to come up with the cash they need every month to live.  You would think that’s bad enough right?  Well, it isn’t.  This family thinks that because their children “are at that age” they should be taking a trip to Disney World.

So, I ask you this, are we bad citizens if we choose to stop spending money so we can get our finances in order? Or are we insensitive to other people’s struggles if we spend money responsibly from our own savings, in a necessary expense no less, and stimulate the economy in the process?  My answer is, of course we are not.  I think that it is exactly this type of behaviours what will help our economy make a come back.  So sure, some economists may be upset that savings rates have gone up and spending has gone down in a time when we need to be spending money to help our economy grow.  But if what we need right now is tighten up our belts in order to improve our personal finance situation, then let’s take the hit right now.  But becoming less indebted and leaving frugally and spending within our means will mean that in the future we will be able to spend money in a sustainable manner for a long term basis.