Saturday, March 18, 2006
A quick lesson..
Q: What is definition of "consumer confidence"? A: The belief that one can repay debts incurred today as some point in the future. Ergo, when you hear on CNN or Fox News or MSNBC or Bloomberg, or whatever, that consumer confidence is high or low or dropping or rising or steady; economists are taking the collective temperature of people's economic (in)security. It's also an excellent predictor of consumer spending. If people are worried they won't be able to pay the home loan, car note, etc.; they won't spend or won't spend as much. Example: a family's main bread winner's job is on thin ice because of downsizing. The annual summer vacation is coming up. If things were hunky-dory, they might go to Disney in Florida. This year, however, they'll camp in the Adirondacks (assume they live here in Westchester) and hit the water park and eat out once or twice. The kid’s will bitch, but the family will be able to save some money and maybe mom and dad pay down a credit card. This example is more valid than you might realize, as people will go on vacation no matter how well or lousy the economy is doing. Studies show this, and I’ve lived it in during my time in the Pocono Mountains.
I bring all this up because my consumer confidence just took a hit: I bought a certified used car today. The amount wasn't too bad: I owe 12K after deposit, but I did buy a 2001 Toyota Corolla with 25,000 miles. It is certified, but let's face the facts; Toyotas rule. Anyway, this changes everything I’ve been planning over the next year. Certain things are history, such as eating out, my trip to Germany in June, etc. I was going to eat the cost of the trip to Florida; now I can’t. Also, wants are now needs: I wanted to work the Faire, now I need to work Faire. I wanted to get on a budget, now it’s an absolute must. I’m taking Betsy out and this may be the last time I get to do this. I do have some contingency plans, and they are going into motion. With the up coming raises, my check will be about 1490. Add the $300 extra I’ll be getting, and I should be able to pay most of the big bills with one check (800 + 197 + 100 + 65 + 200 + 45 = 1307) and the bills that are due late in the month (232 + 155 = 387). I can temper some of these bills by canceling my camera and video phone service and taking the safety course. Mostly I just need to budget and pay down the high interest credit cards. Paying down the car loan is actually top priority, as once that happens I can reduce my insurance. I’m basically spending my September 1st raise and retro check before I got them. Let’s just say my consumer confidence is steady and leave it at that.
I bring all this up because my consumer confidence just took a hit: I bought a certified used car today. The amount wasn't too bad: I owe 12K after deposit, but I did buy a 2001 Toyota Corolla with 25,000 miles. It is certified, but let's face the facts; Toyotas rule. Anyway, this changes everything I’ve been planning over the next year. Certain things are history, such as eating out, my trip to Germany in June, etc. I was going to eat the cost of the trip to Florida; now I can’t. Also, wants are now needs: I wanted to work the Faire, now I need to work Faire. I wanted to get on a budget, now it’s an absolute must. I’m taking Betsy out and this may be the last time I get to do this. I do have some contingency plans, and they are going into motion. With the up coming raises, my check will be about 1490. Add the $300 extra I’ll be getting, and I should be able to pay most of the big bills with one check (800 + 197 + 100 + 65 + 200 + 45 = 1307) and the bills that are due late in the month (232 + 155 = 387). I can temper some of these bills by canceling my camera and video phone service and taking the safety course. Mostly I just need to budget and pay down the high interest credit cards. Paying down the car loan is actually top priority, as once that happens I can reduce my insurance. I’m basically spending my September 1st raise and retro check before I got them. Let’s just say my consumer confidence is steady and leave it at that.
