Due to the recession, households have been holding back on spending. A weak job market has made people afraid to spend; a weak housing market has made many people feel less wealthy and therefore reluctant to spend, and with the recent increase in gas prices consumers don't have the money to spend on other things. The National Foundation for Credit Counseling conducted a poll; 66% of respondents said they were suffering from "frugal fatigue." Retail therapy, here we come...

Now I Can Go Back To Spending Lavishly

Not so fast, with your pent-up demand. This situation is similar to a situation where a windfall has occurred. You really shouldn't change your lifestyle. Just because you aren't as concerned about finding a new job should you lose your current one (or you're more optimistic about finding one if you've already lost one,) doesn't mean you should go out and spend with wild abandon. Just because you feel as though your house is about to go up in value shouldn't make you feel any richer, either. We saw how fast those values can come down; besides, you haven't made any money on your house until you sell it. Do you have any interested buyers? Where will you move?

Track Your Spending And Pay Off Your Credit Card

Even though you might think your financial situation is better, it's still important to track everything you spend, whether you track it on paper or in an online money management tool. You will NOT be able to keep track of all you spend in your head. Stick to your budget; your budgeted expenses should NEVER exceed your income; if you haven't budgeted the money for the expenditure, then don't buy it! Liquid will be launching in late summer, 2011 and will track your spending; we'll keep you updated as we get closer.

Especially if you haven't been charging on your credit card, and your balance is lower than ever, don't start charging it up again. Keep the slate clean. Now, there's nothing wrong with charging something on your card as long as you have the funds in the bank to cover the charge and you intend to use those funds to do so.

Pay Your Bills On Time

Again, if you've managed to lower your balance there's no need to spike it with interest charges. Just one late credit card payment can inflict a penalty rate. While these rates are temorary, they can average over 25%! At that rate, if you don't make any other charges on your credit card, your balance will double in three years! (Of course, that's also without making any payments on it.

If you're one of those who feels better about the economy, would you go out and spend lavishly?

CategoriesCredit & Debt