Here’s a very important question: can we reconcile the ideas of “consumerism” and frugality? The answer has to be “yes.” Consumerism makes the economic world go around as we buy the things we need and want so that others have jobs designing, manufacturing, and delivering their various products and services to us. At the same time, the historical pattern for many Americans has been over spending and over extending. Many have now decided to be more frugal. 

So, what’s the answer if we are to keep the economy humming but not overheating? It’s back to being SMART about money. If you need a bigger car for a growing family, buy a used one that is sensibly financed. If your old TV is sputtering, save up for a new, moderate-sized, flat screen TV and pay cash for it. Now it’s really your TV and not the bank’s TV.

The feature article of the latest issue of BusinessWeek magazine is entitled, “The Incredible Shrinking Boomer Economy.” The wealthiest American generation has just seen its level of wealth decline significantly. What should we do? Retreat and just let the economy shrink? It is wise that we save more. And, we can’t spend money we don’t have. However, if you’ve got some discretionary funds, then loosen your spending to purchase things of substantive value. Money may flow in new directions, but it will flow.

Invitation: Tell us how you think we can balance the need for consumerism with the importance of frugality.

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