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Rising household wealth could boost spending

Jan 07, 2014 Quinn Thomas

In recent years, numerous factors such as rising home prices have led to increased household wealth, which may cause more consumer spending in the future.

Household net worth has jumped significantly since 2011, with a $6 trillion increase in 2012 and $6.3 trillion hike through September of 2013, according to Kiplinger. As a result, expenditures may pick up as consumers save $3 less for retirement for every $100 increase in home equity - money that is put toward entertainment, apparel and gadgets. The stock market is also on the rise, and with every $100 increase in their portfolio, consumers spend $1.50 more.

However, these people could be putting their financial future at risk. By saving less and spending more, an unexpected expense could prove detrimental. For example, if winter weather leads to a leak in your roof, repair costs could lead to you falling short in other areas.

In such a situation - i.e. failing to pay a cable bill - consumers could face expensive late fees and penalties, but that doesn't have to be the case. Short term lending could prove beneficial, as people are able to get funds quickly to cover their monthly essentials without falling behind.

Many people aren't aware of the benefits that come with short term lending though, as this type of financing often gets negative press. But it is important for people at risk of missing a bill payment to weigh the positives of securing a short term loan. For instance, critics may say the high fees and interest rates are unfair, but these often total less than what would be incurred in late fees and penalties by missing a credit card payment.