Bloomberg News reported last week that the tax stimulus package approved by US Congress may prove less of a jolt to the US economy that previously thought. "Americans Plan to Save, Not Spend, Tax-Rebate Cheques, poll says", by Matthew Benjamin. The results of the survey were extremely disappointing in that only 18 percent of Americans plan to spend the money (a rebate of about $800 per eligible taxpayer) into the economy, instead of the 40 percent of the money spent on consumer goods."

Economists, and certainly those who put the entire stimulus plan in place, were counting on the US consumer to continue to, just well consume. The US economic engine is largely driven by the multiplier effect of consumer consumption in a thriving economy.

Which just goes to show that more often than not those at the upper end of the food chain haven't a clue about how tough it is to survive financially when you are a bottom feeder. This is not to say that some famous, influential and wealthy financial people did not start out with humble beginnings. Even so, once acquired wealth and status become a second skin, it is easy to forget those tough beginnings. Really, who would want to revisit years of hardship?

Evidently the thoughts of a US recession promoted endlessly by the financial media talking heads to the point where it will probably happen simply because they keep telling everyone it will happen, is having an effect.

US citizens, who are eligible for the tax rebate, will use the money to pay off high debt, or save it — presumably for a rainy day. This is good news for banking institutions since the savings rate of the average US individual is simply appalling. On average, it is a pure negative rate due to the fact that so many took money out of their home on equity lines of credit to finance such luxuries as vacations (if an interlude from stress is really a vacation), home improvements, paying off high interest rate credit card debt and the like.

With credit limits tight in that environment and many starting to feel the pinch of higher food and fuel costs, it certainly is no surprise to this columnist that most people are going to place that paltry ($800) into their current contingency plan. $800 of something is better than nothing.

With these cheques not forthcoming until May at the earliest, it is a little late to jump-start much of the economy, except for the back-to-school shopping routine that traditionally generates more shopping revenue than Christmas.

At this point, you here in Bermuda may be either turned off, or totally bored. Why, do you care whether the average US person goes on a shopping spree down the road? You'd much rather focus on your next shopping trip, although you've just been thrown another curve ball now that some of the airlines are planning on charging you an additional $25 per each suitcase after one. Gloom and doom, there will be no more trips when you head home with six suitcases full of every goodie you have ever wanted.

Surprise, you need to start saving more too.

And why is that? Because if US persons (and this includes the wealthy) are saving and not spending, they won't be getting on a little old plane and trucking down to beautiful (still we hope) Bermuda to spend money! Cruise ships may also feel this 'poor' syndrome. When you do not feel wealthy, you don't feel like rewarding yourself — you are more concerned about making sure you have enough in a contingency plan, at least for the next few months.

Is this natural? This tendency to spend and retract? Of course, the ability to splurge and repent is as old as the first caveman buying a new club, then selling to buy food. What does another discussion about saving mean to us? The Youngers among us. For those in younger age brackets, a stop and start saving strategy can work fairly well throughout most of your working life. You won't put aside as much as the person who saves consistently, because when you are young and ambitious, you always think you can make it up with that recurring annuity called increasing wages.

Almost without exception, in our civilized world, wages have always increased. Will wages continue to go up? We don't know — but what we do know is that we are far more competitively constrained as well as linked to the rest of the global economy. Many of our jobs can be done by other people in other places, far more cost-efficiently than they can be done here.

The Olders, the Best of Us.

When you are looking at a much shorter worklife than the youngers among us, it really does behoove you to take control of your finances, and understand what is happening — on a much more frequent basis. If you don't think that you have enough money saved, you may need to exercise the self-control you have ever experienced. There will be those who just do not want to consider belt tightening — some would consider it extreme sacrifice. It is easier than you think. Use constant visualisation to picture yourself, doing what you want to do (and not working); then, put your savings in the piggy bank instead of into a new handbag or electronic gizmo.

Ballpark estimates?

Are you uncomfortable about this whole retirement issue? Many people are. It is so much easier to put it off (again) until after that latest trip to Las Vegas. That's because it is too much homework to try and figure out what you may need — in the future. You do absolutely need to calculate your retirement costs, and whether your savings rate needs to be stepped up. While there are any number of retirement calculators on the web, one of my favorites is Ballpark Estimate.

You can get a ballpark estimate of where you are by going to http://www.choosetosave.org/ballpark/ estimate and working your way through a simple income and savings need tool. It is free and can be used on a repetitive basis — and in the privacy of your home. Try it; you will like it. Stay tuned in a couple more weeks for the remainder of your pension plan checklist.

Martha Harris Myron CPA -NH1929, CFP® -67184 (US licenses) and a Society of Trust & Estates Practitioner.uk student member. She is a Senior Wealth Manager at Argus Financial Limited, specializing in comprehensive financial solutions and investment advisory services for individual private clients and their families, business owners, endowments and trusts. DirectLine: 294 5709 Confidential email can be directed to mmyron@argusfinancial.bm The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/ sell any investment product. The Editor of the Royal Gazette has final right of approval over headlines, content, and length/brevity of article.