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Controlling Debt
We have such a big problem here in the US controlling debt. Credit card debt is the biggest problem we have since we use it to buy things that we can't afford. When the economy has problems, the stock market suffers as a result since everything happens in cycles. The Federal Reserve Bank steps in and starts to lower interest rates in order to jump start the economy. In turn, interest rates are cheaper for Banks to loan out money. Individuals are then able to get loans at a lower interest rate. That is what happened years ago during the early 2000's and it's currently happening again. The Federal Reserve cut rates so low that it was easy for anyone to get a loan. It didn't matter if the person did not have a stable income or assets to prove his credit worthiness. The lenders and banks simply didn't care, they approved the loans since there were no laws at the time Times were booming and everyone was making money except those who had a problem controlling debt. They made it so easy for people to get loans that everyone jumped on the bandwagon and people didn't care about controlling debt. Fast forward a few years and everything start to crumble. The economy got better and the Fed started to raise interest rates again. We'll you can imagine what happened next, those who took out fancy loans such as an ARM (Adjustable Rate Mortgage)saw their mortgage payments shoot up because the ARM reset after 5 years. Since the Fed raised rates the person had to pay the adjusted rate. Well, that is where we have the current credit crunch if you're not aware of it, it's still happening. Most people buy things on credit, it's a fact. Most of us do not make that much money to be able to afford luxury items. So they rely on credit cards to purchase all these high priced goods. I read somewhere that most households in the US owe at least $6,000 in credit card debt and climbing. Some other resources on the Internet say $8,000 or $9,000. That's a lot of money especially if your interest rate is high. So you see people are just accumulating debt at a tremendous rate. One needs to be controlling debt because you need too, it should be your number one priority. If you have a lot of credit card debt then you need to take care of it immediately. Please don't buy things on impulse, it's the worst thing you can do. Letting your emotions dictate your spending habit is a recipe for disaster. Sue Orman recommends that you pay down your highest credit card debt first. Then work your way down, but if you're in deep debt, you may need to contact a debt consolidation business. They can help you, but be careful, don't use a home equity line of credit to pay down your bills. You see it all the time on TV or in your local newspapers. Home Equity is basically the amount of money already paid on your house or the amount the home is worth at current market value. This is called equity and some people take out loans on equity and find it difficult to pay it back. The result is that now have no credit card debt and you start all over again. No one said that controlling debt is going to be easy, but you have to make the effort. Don't forget that equity loan has to get paid back as well. Just because it's part of your mortgage payment doesn't make it any easier, it becomes much harder. Banks are getting into serious problems because people can't afford to pay back the loans so they go into foreclosure and lose their homes, its happening at an alarming rate. In some cases people lose their house entirely since the house is no longer worth what it once a few months or years ago did. Controlling debt is critical in building financial wealth. I'll have much more to say about this in the future as I expand the writing and offer suggestions to get help. I will explain even in more detail what can be done to protect you from the credit card blues. Leave your credit card at home, save your money and buy whatever you need with cash. If you can't pay the bills entirely this month, make sure you pay it soon enough and don't keep adding purchases to your cards. Also, be aware of those department store cards, they'll rip you off with very high interest rates. I don't understand why they charge so much interest and get away with it. A card charging 22% is just insane so leave it at home or better yet don't apply for one. Don't do it and if you do, pay it off as soon as you get the bill. Controlling debt can make you wealthy, all it takes is for you to be smart, stay ahead of the game. It's that simple. Good luck.
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