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Sunday Question – How Do You Feel About The Economy?

Posted by Mitch Mitchell on Mar 28, 2010

By the time most of you read this, I should be on my way to New Jersey for almost a week of consulting for a hospital system in the area. This is a big deal to me because it means that the chains are finally off the wallets of some hospitals, now that the health care bill has been passed, and that most of them have some kind of idea of what their monetary situations are as it pertains to Medicare and Medicaid reimbursements.

As I look at health care, it makes me wonder whether the economy is finally starting to turn around for the better, after about 2 years of horrible financial distress around the world. Actually, that’s not quite a true statement. I don’t wonder about it at all because I think I know the answer, and I’d like us to discuss it to see if I’m alone in this thought.

What I think the answer turns out to be is “no”. Here are some reasons why I say that.

1. Unemployment in the United States is around 9.7%. It’s remained there for the last two months, which means it hasn’t gotten any better, but it hasn’t gotten any worse. I’m not one who believes if you’re not falling further behind that you’re actually making progress.

2. Housing is still in the tank. Real estate people are saying that things are getting better because foreclosures are starting to diminish. I’m sorry, but if foreclosure rates were around 40% a month for awhile, and now they’re down to 22%, to me that doesn’t mean things are getting better, just that there are fewer properties for banks to foreclose upon. Home sales in general aren’t getting all that much better, home prices are still way down, and banks are trying to inflate the prices of some homes by withholding how many foreclosed properties they’re putting on the market.

3. Banks are closing at a higher rate than last year at the same time. There were around 140 banks that were closed last year by the Federal Reserve, the highest number since 1990. As I wrote on my finance blog last week, we were at 37 bank closures before Friday (that’s usually when you hear about more banks being closed), which was 16 ahead March 28th of last year. Also, all the large banks that had received bailout money from the government have paid it back, but more than half of those banks are recording losses ever since they left. That doesn’t bode well for anyone.

4. And that’s only in the United States. British banks are in trouble because the American banks are in trouble. Most of you heard about the problems in Abu Dhabi as they thought they’d be able to build forever without having any extra cash, investors, or clean water, let alone building everything on slave labor (no, they don’t like talking about it). Foreign investments are having problems as well, and let’s face it, the Chinese market is killing all of us because they just won’t open up; Chinese leaders, communism is dead and dying!

5. Credit. I’m talking about all of it, or the loss of it. Remember when you used to get 3 to 4 credit card offers a week? For about 8 or 9 months I stopped getting any, and now I’m getting one a week, for my business, and that’s it. Banks have learned the wrong lesson. They were giving a lot of credit to people who didn’t deserve to have it, or as much as they gave out, and they got burned. They got burned because they generated a lot of revenue that’s not real money, and when people were suddenly out of work and couldn’t pay, even collection efforts couldn’t save banks because all that money, which they turned around and invested, wasn’t real.

Now they’ve decided they’re not giving almost any money out, even to people with high credit scores, which I’ve already deemed are worthless. There are people with high credit scores being turned down for loans; that’s a shame. And let’s not even talk about how people are being cheated as it comes to their credit cards, even with the new legislation. Once again, this isn’t just in the United States.

Those are only a couple of reasons why I don’t believe the economy has turned around. I could go into a litany of things, but this should be enough to get a discussion going. Yes, some things are finally starting to turn around for me, but I never use myself as a gauge for how things are going for everyone else. What say you?

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Credit Card Solutions

Posted by Mitch Mitchell on Mar 12, 2008

This is something much different than my norm. I originally wrote what’s below the red line on March 12, 2008. At that time, there was a website called Credit Card Solutions that had a bunch of videos on it on how people could work down their debt. Now that site is pretty much gone; I think someone else owns it, but they haven’t done anything with it. I had to unlink this site from that site because it just looked pretty stupid with what I had here.

Today it’s September 10th, 2009. I’m rewriting this post because, strangely enough, it seems to be a post that many people come by to visit because of its title. This makes me feel as though I’m misleading you because what was here isn’t here any longer. I decided I had to rewrite this post and offer those of you who are coming here some advice and options.

I’m going to assume you’re in some kind of difficulty with your credit cards, and that’s why you’ve stopped by looking for solutions. Here’s the first one, which is more informational than actual solutions. I have a blog on finances called Top Finance Blog. I wrote a review of a book called The Skinny On Credit Cards. Go there and read my review, then buy the book. Trust me on this one; it’s the easiest way to understand how credit cards work.

Number two, immediately stop using your credit cards until you can figure out your debt. You figure out your debt by looking at all of your balances, looking at your interest rate, then seeing how much you owe monthly. I could give you the easy way and the hard way of putting together calculations for how many years it would take you to pay off your debt, but I’m going to give you an easy way to make an estimate.

If your balance is $500 or less, look at how much your monthly payment is. Take $5 off that amount, then multiply that figure by 12. Subtract that total from your balance. Then take another $5 off your previous payment amount and multiply that by 12, and subtract that amount from your balance. If you’re at a negative balance, but barely, it means it’ll take you between 18 and 24 months to pay off your balance if you don’t use your card again and only pay the minimum balance.

If your balance is between $501 and $1,500, do the same thing, only in $10 increments every 12 months until you’re down to between $15 and $20. Yes, that’s right; it’s going to take you 5 years or so to pay off that balance if you never use that card again.

If it’s higher than $1,500,… well, just realize it’s going to take you more than 5 years and run with that for now.

Number three, call each of your credit card companies and ask if you can get a reduction on the interest rate. If you can, great. If not, you at least now get to request a free credit report from all 3 agencies, because they have to give you an official reason why you didn’t qualify.

Number four, start paying off your cards, but get rid of one as fast as you can. There are different rules of thought here, but I’ll tell you mine. If you can get one card paid off, you’ll feel a sense of accomplishment and see the plan works. Concentrate on the card you can actually pay off the quickest, and pay more than what’s due only on that card. Doesn’t matter how much it is, just pay more than the minimum. When that card is paid, take that payment and add it to the next card, and so on. If you have only three cards, pay in the order you can get rid of them. If you have more, start with the lowest two, then go after the one with the highest interest rate, not the highest balance. You actually will bring your debt down quicker because that high interest rate is kicking your behind, but now you have extra funds to throw at it, so it’ll come down quickly.

And there you are; it’s not a lot, but these are some valid solutions on how to bring down your credit card debt. If these work for you, then subscribe to the RSS feed of my finance blog, because periodically I write posts on budgeting that might help you out. As a matter of fact, there are a few on there right now, which I’ve paused because they haven’t been getting read all that much so far. But if interest peaks up, I’ll write more. Good luck.

A friend of mine sent me a link to some videos created by the lawyers who set up the site CreditCardSolution.com. It’s very good stuff, especially the videos on third party debt collectors, of which there are two. In a previous post I talked about the Fair Debt Collections Parctices Act, and the guy in these videos takes it even further. It’s something important for everyone to hear, so here’s the link to their video page. Great stuff; thanks guys!

The Skinny On Credit Cards by Jim Randel