One of my friends had a complaint about the personal financial press: why is it, she wondered, that they are telling people now about raising emergency funds and living below your means. Where were these columnists when her business was good and she had the money to set aside?

Suze Orman always talks about emergency funds, but most of the rest were writing about how to get the most value from your second house or how to buy stocks when things were going well.

Because I’ve been self-employed for ten years now, I’ve been forced to learn how to deal with irregular income. When things are good, I save. That way, I can spend at a steady rate when the work isn’t coming in and the customers are late with payment. Most people work for someone else and receive a steady paycheck, so they are more attuned to the mood of the times, and that is often reflected by advertising. When the economy is hot, advertisers have money to spend to entice you to buy what they offer. When the economy is not so good, the ads disappear, and then people writing about the economy become especially conservative.

Spending got us into this financial mess: spending money that people didn’t have on assets that weren’t as valuable as they thought, whether it was a condo in a new Las Vegas subdivision or a pair of Jimmy Choo shoes. But consumer spending is the engine of the economy. Personal consumption makes up about 70% of the gross domestic product, so when regular folks cut back, it hurts.

Now is a great time to be spending money, assuming you have money to spend. And you know what? A lot of people do. Most people have jobs, and some are getting raises. Bankruptcy lawyers are busier than they have ever been, and the good executives at AIG are collecting fine bonuses. The government’s stimulus package will give taxpayers an extra $8.00 a week to spend. Meanwhile, prices are falling because stores are desperate to attract customers. There are plenty of bargains to be had! (more…)