Though we cheerfully wish each other a happy new year 2012, deep inside some of us are mentally jogging our brain cells, so as to find out a way to get out of the debt mess. It is not a good ways to start a year, when we have to depend on credit cards to pay for holiday gifts, take money out from savings to buy basic things like food, gas and utility bills. The fact that we are living in weaker economic times is evident in the way, we are compromising international vacations for domestic trips, using the same refrigerator even though it is the time to bring in a brand new one. Consumers who carry balances on credit cards may finally get a break, as more card carriers are beginning to offer zero percent balance transfers again, but 2012 will still be a challenge as income figures are slow to grow!

Economists say that the general growth pattern of the US economy is sluggish. Since consumer spending constitutes 70 percent of the economy, the fact that most of us are unwilling to loosen our pockets due to low purchasing power, is clear. If you look at the holiday season of December 2011, there was a spike in the Thanksgiving weekend, after which there was a huge dip. The retailers had to push prices down heavily on the following week. Though in the Christmas weeks, the numbers may have risen, experts feel that the numbers are not really flattering as retailers may have to compromise with their profit revenues to register higher sales. The main reason attributing the woes in consumer spending in these times was the callous way in which people borrowed money on credit. Sadly, they are still in the debt trap and are finding it hard to get new loans in these tough times.

Financial experts predict that the economic growth may be hovering at around 2 percent for the first half of 2012, quite less compared to 3. 6 % average growth registered in the final quarter of 2011. The reason for a compromised growth pattern is due to flat incomes and a tight job market. There have been a rise in some jobs for the last two years, but a huge share of it is in low-paying sectors like hospitality and retail.

The sales of houses may have shown some rise, but the mortgage lenders are still wary. Statistics show that 20 percent of borrowers still own more than their house is worth. Consumers are curbing on their spending habits due to the potential expiration of the payroll tax deductions and unemployment insurance benefits in the last two months.
The stock market growth also has not been flattering and we saw household wealth reducing by $2.4 trillion in the last summer and the beginning of the fall. Add to that the financial crippling in Europe has instilled more apprehensiveness in the consumer mindset. TransUnion, a premier credit rating bureau says that the delinquency rate rose for the first time in the last two years, but maintained that the rate is still quite low. Fortunately, mortgage delinquencies were pegged at 6 percent at the end of 2011 lesser from what it was at the end of 2010.

We however, do not mean to discourage you in the New Year and say things cannot be changed. Consumer spending is not going to be history; it is just that the terrain is rough. What we as consumers can do is initiate a change that will not be just good for the family but also for the nation. Take the example of Winona Adams, 34, a financial consultant who started her own business in early 2009, when she was laid off. She has managed to do fine, and has been able to make mortgage payments along with the help of her husband. Winona says, “Well, it was not easy. Plus, there was this storm that reduced my roof to rubble. We had to do all the maintenance ourselves, and we had mortgage payments. I was laid off, and instead of sitting there and mopping; I started my own business. Now we are doing fine, have managed to pay off debts and are able to pay mortgage payments too. I have to admit that some smart savings also helped us keep in fine stead.”

Winona says that she uses her credit card quite sparingly except for huge purchases. She says that she only applies for credit cards when they offer an introductory 0% apr rate of interest, and closes them just before the annual percentage rate moves up. At a more basic level, she does her homework before buying essential products. For instance, she buys milk for cheaper cost in plastic bags that are sold in the local gas stations, rather than buying it in gallon containers. She uses the apps on her mobile to find out the best deals, from buying gas to her car to finding out the best food products at discounted rates. A visionary approach and organized mindset to handling out finances at the micro-level can help spur things for a better economy in 2012.