Omaha - Since the economic downturn in 2001, consumer spending has been credited with keeping the economy moving. Consumer spending has consistently maintained an average of 70% of all U.S. economic activity. Amid mortgage rates at historic lows, the refinancing boom resulted in one out of every four mortgages being rewritten. Cash-out refinancing enabled many consumers to pay for new cars, remodeling projects and so on. Researchers at the Federal Reserve have said that although many consumers have been funding their spending through their home equity the past few years, these are purchases that would have been made regardless and at much higher rates of interest. Those not making purchases with the funds from their equity are paying off debt from higher-interest credit, like credit cards or finance companies. Nevertheless, many economists are concerned about the pressure put on consumers to keep up with these spending rates as the refinancing pace slows and suggest that if consumer spending drops many of the economic advances made recently will be lost.

With this in mind, according to websites set up to assist and encourage people with their resolutions, the number one resolution by Americans in 2004 was to pay off their debt. This was the first year debt reduction beat out weight reduction in the New Year’s resolution race. Credit counseling research suggests that one of three American households is behind on payments or over the limit on at least one credit account and during this same time frame consumers dropped their savings to 2% of their after-tax income.

It is not completely clear if consumers will be able to continue their current rate of spending. Spending that increases the consumer debt load will not assist economic recovery in the long run. At some point, consumers will need to begin replenishing their savings reserves and reducing their debt to maintain their households. Whether American consumers will recognize this reality on their own (reflected in their 2004 resolutions?) or be forced in this direction due to tapped-out equity is uncertain. Ideally, as consumer spending slows, business spending and expansion will increase to maintain the recovery momentum.

Were you one of the many to resolve to become debt-free this year? Is this your resolution for 2005? So what can we do to make our efforts successful while the direction of the economic recovery is not completely clear?

Something old is new. Accomplishing resolutions still calls for discipline and discretion but can be done by committed individuals.

Know what you owe. It’s simple. You cannot develop a feasible spending plan or budget if you do not know what you owe. By keeping track of your expenses for the minimum time period of a month it actually becomes easier to determine exactly what you are spending money on and isolating the fat in your budget.

Know your goal. Where do you want to go? What do you want to achieve? Until you determine your goal, budgeting is, quite frankly, just a bunch of numbers. Until you know your goal, you are unable to complete the next step.

Create your plan. Now that you know where you want to go, how will you get there? Start with your basic budget. Include in your budget the all-important, ‘paying yourself first’ savings. Allot funds for your standard monthly debts. Decide on a percentage of your budget for those common budget busters like the holidays, auto repairs and so on.

Learn to live within your means. Realistically examine your needs and your wants. Do some of your ‘needs’ need to be reviewed? What about your wants? Are there emotional entanglements within your needs and wants? Only you know the answers. Make every effort to be honest with yourself about your debt. Discipline will be necessary to learn the new behaviors needed to succeed by reaching your goals.

If you mess up, keep trying. Research shows that the majority of folks do not reach their goals on a first attempt. Yep, sometimes you’ll mess up. By reviewing your situation and renewing your commitment to your goals, you are actually increasing your chances of success.

Your positive outlook to keep up the effort will go a long way to keeping you on track and on target to achieve!