Economic growth improves, but don’t rush to the mall yet

As the U.S. economy shows signs of recovery, you might feel it’s time to swipe your credit cards again in all your favorite stores, but not so fast…

Even though the economy has grown, permanent hiring remains stagnate and the housing market has not improved. The Federal Reserve reports that consumer borrowing in the U.S. is at its highest levels in 10 years. Credit also increased by $20.4 billion in November. The economy expanded at a moderate pace in November and December because retail sales and demand for services increased. For instance, Macy’s Inc. reported a 6.2 percent increase this December.

This is great news for retailers, but should you be confident about the economy?

The economic growth during the holidays is not strong enough to lower unemployment rates or to improve the housing market. In December, the unemployment rate fell from 9.4 to 8.5 percent, but the unemployment rate is still high. The housing market is another factor in the slow economic recovery. According to the Fed report, the residential estate market held steady at low levels, except for the construction of multifamily homes.

Here are three tips to keep in mind if you are tempted to whip out your credit cards and spend more freely:

Follow the “I can live without it” rule: This is probably the hardest rule to follow, but if you put in practice, it will make your life easier. Every time you see a pair of jeans or purse that you love, ask yourself: Do I have other jeans or purses that could be worn in place of the new item? If the answer is yes, DON’T BUY IT!

Do a weekly budget: First, make a list of your monthly expenses that are necessary. You can include: rent, taxes, insurance, loans, children’s basic expenses, utilities, food and credit card debt. Then, make another list with expenses that are important but not crucial. For example, cell phone, cable, gas, clothing, laundry and entertainment. Then, add up all the expenses and subtract them from your monthly income. After that, divide the total of your expenses by the number of pay checks and other income that you receive per month. This should indicate how much money you should put aside from each check to cover your monthly expenses. After you do the budget for two or three months, compare your worksheets to see if you have improved the administration of your money.

Build an emergency fund. You should have up to three-six months of savings to take care of your living expenses. If you lose your job, or become sick for a long time, then you should be able to pay your bills without getting behind in your bills. Save a small amount every week and put it aside in a separate bank account that you don’t frequently use. A good idea is to take 3 to 5 percent of your check and have it automatically deposited in that account. You will be surprised how small amounts of money add up over time!