Are you feeling better about the economy? The rest of America is more optimistic. The University of Michigan Consumer Sentiment reached a 14-month high in September. And on the same day, it was reported that retail sales in August grew broadly, as well. Barring unexpected events in the international arena, it appears that Americans are more willing to commit their emotions — and their dollars — to the economy.

The job news has improved each month, and that has helped add to confidence. Even the high level of the stock market has contributed to the optimism, though many participate in the stock market only indirectly, through retirement plans. 

So what should you do with this news? 

Does it make you confident enough to go out and buy a new house? The jury’s still out on that issue because, despite record-low interest rates, mortgage applications have stagnated. Maybe that’s too big a leap of confidence for those just starting out on the first step to home ownership.

Does the news make you confident enough to start searching for a new or better job? Or at least, does it make you feel bold enough to ask for a raise? According to the PayScale Index, U.S. wages are expected to grow at a rate of 1.9 percent, quarter over quarter, in the period that ends this month. It’s a nice increase — but far below the 3 percent plus wage gains that were common before 2008 and the financial crisis. 

Does it make you confident enough to go out and buy a new car — or at least a new “used” car? It already has. The surge in new car sales in August has raised the possibility that sales could top the 16.6 million sold in 2006, the last full year before the recession, according to That’s up from 10.4 million vehicles sold in 2009 during the depths of the economic collapse. Since then, sales have risen by at least 1 million units annually through last year, when 15.6 million were sold.

Or should you just go out and replace items in your wardrobe that have worn out in your years of stringency and economic fear? Retail sales, even excluding autos, rose more than expected in August after a flat figure in July. Consumers are expressing their optimism at the store.

Or are we just getting back into the same debt trouble that brought us into the financial crisis? 

Yes, credit card debt is rising again. In fact, according to Sober Look, “Over the past three months, the year-over-year growth in credit card debt has exceeded wage growth in the United States. This is the first time we’ve seen this trend since the Great Recession.” 

And that does not include student loan debt, which continues to rise beyond $1.1 trillion, exceeding total credit card debt outstanding.

Meanwhile, the personal savings rate, which had spiked to about 12 percent in the summer of 2012 amidst a continuing anemic recovery, has now dropped back to a rate of 5.7 percent.

Spending more and saving less? It may be temporarily good for the economy — but is it good for  you?

That’s called the “paradox of thrift” — a concept popularized by economist John Maynard Keynes. It basically says that what is good for the individual (saving), is not necessarily good for the broad economy.

So where does your responsibility lie? Are you encouraged to spend because it will “help the economy” by increasing demand for products, causing companies to hire more workers, who will, in turn, spend more money?

Or is your greater responsibility to yourself and your family to be conservative in your spending, to pay down the burden of your debt while the economy is growing and you have the income to do so — and to put more money away for your retirement so you will be less reliant on the government.

It’s an unconscious choice for most Americans. If income and credit are available, we will spend and borrow. That does help the economy in the immediate sense. But it’s no way to deal with our long-term economic future. And that’s The Savage Truth..

Terry Savage is a registered investment adviser and is on the board of the Chicago Mercantile Exchange. She appears weekly on WMAQ-Channel 5’s 4:30 p.m. newscast, and can be reached at She is the author of the new book, “The New Savage Number: How Much Money Do You Really Need to Retire?”