We live in a society where we take for granted that we can use the right things to create a better future. That we can take on the debt and make the decisions to save for retirement and then spend the remaining years of our life to invest wisely.

In this article we will discuss two popular strategies in the home economy and business management:

1. Savings strategy – careful – reduce expenses – save for the future
2. Consumption strategy – aggressive – spend a lot – take credit – support the economy

Careful strategy

The savings strategy is prudent. It involves spending money in a very aggressive manner and is based on saving.

The main premise of this strategy is to be ready for a downturn. People living with this strategy tend to spend much less than they can afford and avoid debt.

In this approach, we are dealing with the cultivation of saving money later.

This strategy works best in an environment of high interest rates – where bank deposits and bonds bear high interest and expensive loans.

Consumption strategy

This strategy is quite opposite to the careful one. It assumes the living on credit – more debt and general consumerism.

Such an approach is characterized by incurable optimists who believe that everything will be fine and that the current conditions will be the same.

This type of management is characterized by over-investment and often overly optimistic assumptions. The fact is that the old saying goes:

“Whoever doesn’t risk doesn’t drink champagne”

This strategy works best in an environment of low or negative interest rates – when bank deposits and bonds practically do not give us any profit, and in turn loans are very cheap – sometimes even free.

What determines the choice of strategy – what character traits

A new study is providing another reason why we’re all in this together: A recent study of about half a million Americans ages 55 and over by the Public Religion Research Institute (PRRI) found that, at a median age of about 50, nearly one-third (35 percent) had made some effort to save more than $100,000. By comparison, one in seven (14 percent) Americans age 50 to 64 said they had saved less than $10,000 in the preceding year.

The PRRI survey of 1,000 likely voters from the U.S. is part of an effort being conducted by the Public Religion Research Institute to understand the impact of retirement on young people.

This particular effort is looking at how people have saved and invested during a retirement period as part of the survey of the nation’s seniors. PRRI, along with the National Council on Public and Behavioral Sciences (which is housed at Duke’s Center for Community Change) and the Center for Retirement Research at the University of North Carolina at Chapel Hill, are working with the public, community and universities to collect, analyze and share data about the nation’s aging population from a wide range of sources.

“We need to find out more about the impact that we’re having now on the lives of our children and grandchildren,” said Robert Rector-Brown, chairman of the department of government and director of PRRI. “This is a time for us to think about the future and how we invest in that future and what that looks like for us.”

Rector-Brown said that the survey shows that for more than half of the adults living this generation, it’s hard to know whether they have started a savings program, but many of the other findings are encouraging — for example, that almost a third of those age 55 and up say that they’re saving more than they have in the prior three years.

As with previous PRRI surveys for the public, this one is conducted with the help of a panel of survey respondents, including those who have been polled in the past, as well as other people who have been surveyed by other organizations. The panel included over 2,000 people from the U.S. population as part of a larger cross-section of the overall population.

Situation in global economy in 2021

Currently, all over the world we are dealing with a situation where interest rates set by central banks are very low.

More about interest rates – you can read in this article

Does this mean that we should consume and not take care of savings

Unfortunately not.

The current situation is unprecedented.

In the conditions of a healthy world economy, a low story and a large oversupply of money are the result of a good economic situation.

Manufacturing plants innovate and reduce costs – offering ever better price conditions.

Consumers have more money and spend them for new goods.

Everybody is happy – that is the theory.

On the other hand, the situation we are currently dealing is pathological.

We see the oversupply of money which is the result of aggressive stimulation with aid packages (QE – quantitative easing – also known as helicopter money) and not as a result of an increase in the competitiveness of enterprises and economic development.

Saving or consumption strategy – what is best for you now?

Bearing in mind the above – we are forecasting a very serious financial crisis we tend to reduce consumption in favor of gathering assets – not only cash.

We should learn how to safe money because saving more money provides freedom, flexibility, and security.

Saving money also allows you to leave a financial legacy for your loved ones.

Current situation on the market does not encourage people for saving because of the low or even negative interest rates with high inflation.

It basically means that from 10000 USD on bank account – after year effectively you will have 9000 USD.

We are talking here about decline in the purchasing power of money.

For the same amount, you can buy fewer goods today than a year ago.

Nevertheless, we encourage you to save and not to take loans for large amounts.

Why you should be careful with credit cards?

Every time someone pays for something in a store, we use a credit card. Credit cards are basically electronic devices used as personal payments to make purchases.

The cards allow for credit to be used, and then for the customer to then pay for the purchase when they are ready. In the same fashion, we are using credit cards to pay for things that are available on the Internet, such as services. When someone purchases a car, or a house, or anything else, he or she pays for it using a credit card.

The credit cards are then stored on a customer’s credit card that is also used in these various transactions. When someone uses credit cards, they create a balance on their account that is used to make those purchases and purchases can be made using only a credit card that is not tied to the credit card used in a shopping trip. In some ways, credit is not as important as it used to be, but credit is still vital to the way we are spending money in today’s economy and that is due to the fact that it is the main mechanism of credit.

When you buy something on the Internet, you are creating a financial product called an online transaction. In many instances, these online products do not exist as real-world services.

As these online products are created, and eventually sold to the consumer in the form of a credit card, the consumer has purchased a loan based on the product being built upon.

These loans are then used in the purchase of things that are not available from a shopping trip. This leads to the consumer having a very poor understanding of how the economy works and how prices are set when they are made in a shopping trip.

The consumer may not understand that credit is the primary means by which the buyer is buying what they wanted for purchase.

How low interest rates affect your walltet

When interest rates are rising, both businesses and consumers will cut back on spending. This will cause earnings to fall and stock prices to drop.

On the other hand, when interest rates have fallen significantly, consumers and businesses will increase spending, causing stock prices to rise.

The key concept to understand here is that, as the interest rate rises, the amount of money created will have less room to grow. Therefore, the longer the interest rate rises, the greater the amount of money created will become available to invest. This is referred to as inflation. If the rate does not rise quickly enough, inflation would create more debt and increase the cost of goods and services (a known negative side-effect).

The above concept is one of the most fundamental concepts underlying modern times. It is often thought that the current economy was built on the principles of supply and demand and therefore has a tendency towards a cyclical pattern.

However, if the Fed’s policies are to be successful in preventing the US and world economy from experiencing this level of economic stagnation, then we need to make the case for changing the Fed’s strategy to one that focuses on keeping the rate low.

This will allow us as citizens to have greater control in our government’s policies (as it is important to us to have as much control over the policies and institutions we are given that we have as possible).

By keeping the interest rate low, we have less room to spend. We would be able to spend what we want, invest where we want as much as we like. The key to this strategy is to provide a level playing field so that both businesses and consumers have the ability to invest and grow in a market environment they feel they have been given.

In a cyclical economy, interest rates rise and fall, and when the interest rate remains low (or even decreases a little), companies and workers can be laid off as the economy falls down as a result.

The above concept is a key and fundamental concept within the modern day economy. To make it easier to understand, consider how we all use credit and financial products every day.

When interest rates are rising to the point that consumers cannot pay their bills, then the economy as a whole may become unstable, and the stock markets may crash.

To be clear, there has never been a time in all of human history where interest rates have increased in the same way as they are now.

There has never been a time when interest rates where extremely high which causes very good conditions for saving money (you earn the most) but from the other hand – very expensive loans and difficulties in getting mortgage.