Shall I save my money or spend in 2009?
Because of the way that banks collapsed in 2008, many of us are now asking whether it's a good idea to spend or save in 2009. However, some experts are saying that 2009 will be the year for saving rather than spending and others say the opposite.
It's harder to get credit than ever before and unemployment rates are rising so most of us realise that we'll need to squirrel away some cash if we are going to survive the recession. There are a lot of things getting in our way, however.
The first and most potent of these obstacles to saving is doubt. Many people are scared that if they put their money in to a bank it won't be safe there, because of the number of banks which have gone bust and needed government bail outs.
It's a perfectly logical fear, there's Northern Rock being plugged up with tax payer's money, then there's Bradford and Bingley and Kaupthing not to mention Ice Save, where UK savers almost lost all their cash. Thankfully, the Government saved them with yet more tax money.
Protected Personal Savings
The FSA (Financial Services Authority) protects banks which are regulated by them with the Financial Services Compensation Scheme (FSCA) and this covers savers for the first 50,000 of their savings, per person, per institution.
Savings Stamps and Christmas Hamper schemes are often not covered by the FSCA as they aren't regulated by the FSA, so you might like to avoid these. Cash ISAs are also protected by the FSCA. Investments are tricky too, so find out the exact terms before you make any.
Hardship
Another thing which is keeping us from saving, other than concerns about the safety of our money, is the extraordinarily high costs of living. There are bills; repayments on items bought on credit or being rented and when all of the costs of living have been met few of us have any money left over to put in to a savings account.
The Government tried to combat this by lowering VAT and the Basic Rate, but that hasn't done much to help us save cash on a daily, weekly or monthly basis.
Business Advice
Businesses are also being strongly affected by the current economic climate so many small to medium enterprises are also asking the question: is it better to save or spend in 2009? A few experts say there are certainly places where it is important to spend for businesses.
In fact, 'spend money on hiring more staff' is a strong message, because there are huge increases in unemployment so the more people we hire the better we will do the economy. 'If you can't hire new staff, then use contractors', experts advise.
Another suggestion is to save on rent if you're looking for new office spaces by driving a hard bargain. Landlords are eager to fill empty spaces that are not getting picked up so you could save some money by being business minded in that area. The same goes for anyone looking to buy a property in this climate, they can get away with murder if the seller urgently wants a sale.
According to some studies companies which spend plenty of cash on marketing during hard times, come through those hard times (including recessions and economic strife) with a higher market share. That's one reason to get your advertising hat on.
Haagen Dazs ice cream notoriously did very well during the 1950's recession. This was because they sold an affordable luxury item which made people feel special and like they were having a real treat, without breaking the bank.
If you run a business and you're thinking of spending money on new products or services, leave that well alone. If it isn't broke don't fix it, you would only be taking a big gamble. Recessions are not a good time to roll out new, expensive and convoluted plans or change a product which sells. You could alienate your customers and never recover.
Do spend money on going green. You'll essentially be saving money in the longer term and saving the planet too. This goes for businesses and personal finance. However, don't spend money on decorating your office or buying new furniture or luxury goods because you'll need every pound in 2009 working for you, not being sat on or toyed with.
The same again can be said of personal purchases. Consider everything you buy, that way you'll spend money on things that really matter and save money on things which don't. If you go out for a meal for example, and want dessert, why not skip it at the restaurant and get some on the way home.
Did we mention that ice cream does quite well during recessions?