Spending may falter

The holiday purchasing season is under way, and many nervous business people are hoping the next few weeks will rescue them.

Depending on which statistics a person goes by, approximately 40 percent of retail sales take place during the Christmas shopping season. If businesses can not reach that level, then many will greatly suffer heading into 2010.

This is true under normal circumstances, but conditions are especially dicey this year. The national unemployment rate is 10 percent and is at its highest point in the last 26 years. More people are out of work at perhaps the most important time of the year when it comes to supporting the economy.

Predictably, many shoppers are saying they will tighten their belts. According to a recent Associated Press poll, 93 percent of those polled said they will spend less or about the same as they did last year.

Half of the responders to the poll said they were feeling some debt-related stress, while 22 percent said they felt debt stress greatly or quite a bit.

Because of this, 80 percent said they will mostly use cash to pay for their Christmas purchases and avoid credit cards. This is bad news for businesses. As financial guru Dave Ramsey has pointed out many times, people tend to be a lot more disciplined about spending when they are paying with cash.

There is something thought provoking about plopping cash down on a counter for a purchase when compared to using a credit card. When using a card, the purchases are a little less painful, at least until credit card statements arrive the following month.

So, while businesses may take it on the chin in this respect this month, consumers will benefit in the long run. There will be no January hangover when confronted with a credit card account that was used to finance Christmas.

At some point, consumer spending was going to have to become more disciplined, and unfortunately, for the economy, it is coming at a really bad time. However, we have nobody to blame but ourselves because we have become over-reliant on easy credit over the last quarter century. It was only a matter of time before consumers and the economy pushed it too far.

The typical household currently has $46,000 in debt when considering mortgages, credit cards, and other types of loans. This compares to $14,000 in debt in 1982 when that amount is converted into today's dollars, according to the AP.

Abuse of easy credit has gotten a lot of us into big trouble. In a sense, we have become a nation of penthouse paupers. We have used credit to get items and a lifestyle that we craved. Unfortunately, too much reliance on credit has caused many to keep digging a deep financial hole that is proving very difficult to escape.

So, despite the hardship many of us are suffering, perhaps good can come of it in the long run. Maybe we all will learn the folly of overextending ourselves whether it is in finances or other aspects of life.

Also, maybe we will understand that life is a lot more enjoyable when it is simple. We have spent the last 25 years embracing materialism so that we can buy 'stuff' we do not really need.

When this mess is complete, maybe we will understand that a quiet evening with the family is better than working two jobs just to pay the bills.

Like many important lessons, we often have to learn them the hard way. Let's hope we learn these current lessons well so we do not go through them again.