Debt Reduction Not The Top of Everyone's "To Do" List
You might think debt reduction would be front and center on people's "to do" list during this recession. Apparently it's not happening all that fast. In fact, while some personal debt has been paid off, it certainly hasn't been a flood.
And you you might think that if people aren't paying off their debts, they'd be either spending their money or saving it. Well, it turns out that spending's continuing to be weak too.
Now that leaves savings. They should be up. And they are - but not all that much.
Ah, it must be that people just aren't making as much money. That certainly would explain things, wouldn't it? Sure enough, unemployment continues to increase. When you count people working part time who would rather work full time, we're around 17.5% - a hefty number.
Less money in, less money out. It's simple math.
So if people aren't paying off their debts, it's probably got a lot to do with the fact fewer people have money to pay off their debts.
That's why come 2010 and 2011, we may see more and more foreclosures. Millions of mortgages are going to re-set in the next couple of years. And if folks have less money how will they pay the increased mortgage payment?
Don't worry you say, mortgage rates are low. A nice theory, but it's wishful thinking. Most of the mortgages due to re-set were sold with "teaser" rates as low as 1%. The deal was you get the teaser rate for a year or so in exchange for higher than market rates when the re-sets come.
What about re-financing. By all means do it - if you qualify. Note "if you qualify." Because banks aren't giving money away these days. They're going to really give you the once (or twice) over and check your finances carefully. And, of course, if you're unemployed, they're not going to be interested in giving you a mortgage.
Come to think of it, that used to pretty much be the way banks did business for years and years, isn't it?
So if you can pay down debt, do so. If you can re-finance, do so. If you can save money do so. If you can't do any of these, at least don't add to your debts.
When I started the year talking about saving and investing safely, I wasn't bringing up anything that shouldn't be pretty much obvious, right? And now here I am talking about some more obvious common sense things. Things like debt reduction, re-financing and saving should be obvious, just common sense. But then again, common sense went out the door for quite a while, and what should have been obvious wasn't - for far too long.
My thought as we go into the New Year has been that maybe spending time on these formerly common sense, obvious things might benefit some people. So as we go into the year, I'm planning to talk more about basics.
And you you might think that if people aren't paying off their debts, they'd be either spending their money or saving it. Well, it turns out that spending's continuing to be weak too.
Now that leaves savings. They should be up. And they are - but not all that much.
Ah, it must be that people just aren't making as much money. That certainly would explain things, wouldn't it? Sure enough, unemployment continues to increase. When you count people working part time who would rather work full time, we're around 17.5% - a hefty number.
Less money in, less money out. It's simple math.
So if people aren't paying off their debts, it's probably got a lot to do with the fact fewer people have money to pay off their debts.
That's why come 2010 and 2011, we may see more and more foreclosures. Millions of mortgages are going to re-set in the next couple of years. And if folks have less money how will they pay the increased mortgage payment?
Don't worry you say, mortgage rates are low. A nice theory, but it's wishful thinking. Most of the mortgages due to re-set were sold with "teaser" rates as low as 1%. The deal was you get the teaser rate for a year or so in exchange for higher than market rates when the re-sets come.
What about re-financing. By all means do it - if you qualify. Note "if you qualify." Because banks aren't giving money away these days. They're going to really give you the once (or twice) over and check your finances carefully. And, of course, if you're unemployed, they're not going to be interested in giving you a mortgage.
Come to think of it, that used to pretty much be the way banks did business for years and years, isn't it?
So if you can pay down debt, do so. If you can re-finance, do so. If you can save money do so. If you can't do any of these, at least don't add to your debts.
When I started the year talking about saving and investing safely, I wasn't bringing up anything that shouldn't be pretty much obvious, right? And now here I am talking about some more obvious common sense things. Things like debt reduction, re-financing and saving should be obvious, just common sense. But then again, common sense went out the door for quite a while, and what should have been obvious wasn't - for far too long.
My thought as we go into the New Year has been that maybe spending time on these formerly common sense, obvious things might benefit some people. So as we go into the year, I'm planning to talk more about basics.
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