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Meet the Street: Balancing Spending and Saving

The CEO of offers advice on cutting expenses in these dicey times.

It's a difficult dilemma: Do you spend or do you save? Do you answer President Bush's call to buy and keep the economy going, or, with the ever-growing threat of layoffs, do you snap your wallet shut and sock your money away?

Matthew Coffin

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Matthew Coffin, CEO of, a Web site where consumers can search for lower rates on everything from insurance to long-distance bills, says people should be doing a little of both. Depending on people's comfort level at their job, they should have between three and six months' worth of living expenses in the bank, Coffin recommends, and he advises reassessing your budget, bills and shopping habits to help save money.

Make sure, however, you have a little left over to spend, he says. Otherwise, the economy will continue to spiral downward and a prolonged recession will be a self-fulfilling prophecy, he says. Here he explains how to strike this delicate balance.

TSC: We all know that there's a need for consumers to continue to spend confidently in order to hold the economy up. But at the same time, with the specter of layoffs hanging over practically everyone's head, spending might not be the right thing to do at this time. So should people be spending their money at this time?

Coffin: It depends on the person and where they are financially. Do they have more money in the bank than just next month's rent? The reality is that most Americans live paycheck to paycheck. On the other hand, folks who have a good deal of savings and who are at low risk of losing their jobs should not go into hibernation. All that does is create a negative domino effect on the economy. That's where you get this mob mentality and it becomes a self-fulfilling prophecy.

TSC: In terms of how much money you should have in the bank to take care of yourself in the event of a layoff, the general rule of thumb is three months' worth of living expenses. But today, with many people still out of work after six months and even the government now thinking of extending unemployment insurance, that might not be realistic. What would you recommend?


Three to six months is what you should have in the bank or in some liquid asset. But most Americans today don't have that. The average- to moderate-income household has two months in the bank, or mistakenly thinks that they have four to five months' worth

of living-expense coverage in the bank, but they also have high credit card debt.

TSC: So, what should people who have some fear of losing their job be doing about their spending habits at this time?


People really need to take a solid look at what they spend every month in terms of their discretionary and nondiscretionary income. Many people are looking at their discretionary spending, which for the most part is dining out or buying toys or clothes for their kids, if they're a parent. Many people are cutting back or shopping around for better prices, better deals.

This whole layoff issue has been like a slap in the face for many people. People are like, "Whoa! This is serious; I have a friend who has been out of work for six months. Look at the change in his lifestyle and the emotional crisis that has happened to him or her. This is very, very serious, and I have to look at my own spending habits."

TSC: What about investing? Should those who have trepidations about their jobs still be maxing out on their 401(k)s, IRAs or other retirement accounts, or even be in the stock market?

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My personal outlook is that they should continue to invest because we are going to see a rebound. I believe the

Fed will continue to lower rates and that will continue to boost the solid companies. It's a tricky time. If you ask 100 people, you are going to get 101 different answers.

TSC: Your specialty, of course, is lowering bills and managing your budget. What should people be doing about their budgets right now?



easiest way to fight the economic crisis right now is to lower your recurring monthly bills. The two biggest ways to save money there are by cutting bills or curtailing your shopping habits. What do I mean by lowering bills? Auto insurance, credit cards, mortgage bills, wireless telephone, energy -- when you actually compare providers and plans, there is no change in lifestyle. That's why it's such a no-brainer, and someone with a moderate income can save as much as $3,000 to $4,000 a year.

TSC: In fact, we ran a recent article about that, painting a picture for an average, middle-income to upper-middle-income person, and we found that with current mortgage, credit-card and auto-loan rates coming down because of the fed rate cuts, they could save nearly $3,500 a year.


That's absolutely right, and you can find some multiple quotes at And in terms of shopping bills, you can cut back on dining out or extravagances such as having a yoga instructor making a house call. One of my clients had a yoga instructor come to their house three times a week, and they are now coming only once a week.

TSC: What about the high rollers, the Wall Street investment banker with high overhead -- the Jag, the Greenwich mansion, the yacht club membership -- who may not be getting a bonus this year? Are those who are living the high life concerned, and is there anything you would advise them to do to safeguard their financial future?


Without question, there will be many people who will get a significantly lower bonus or no bonus at all. I've talked with a number of investment banking friends who have definite concerns, folks who are now cost-cutting and becoming pragmatic about their expenses. You've always got instances of people who may be making a lot of money but are still living paycheck to paycheck. Now might be a good time for them to sell or rent their house or rent out a guest cottage, if they should have one on their property. I also think the quickest way for those folks living high on the hog is to stop going out to dinner so much.

In fact, I had a vacation plan to Bali that I canceled. I looked at the expense and thought, "Maybe I don't want to do that right now." It's a delicate balance, the concern over the economy and the fear of losing one's job, but you can address both issues by spending in moderation.

The biggest problem with the American consumer right now is that there is lack of clarity. They don't know if we are in a recession or even a depression.