Surviving the Crisis

By now, many who’ve been laid off, furloughed, had our hours cut, or worse, are really running tight on cash, even as the pandemic rages on.  While both federal and state governments have promised quick access to unemployment funds, stimulus checks, and other forms of help, these things take time.  Time that you may no longer have.  So, what are your options?

If you’re fortunate enough to have credit available, you may want to consider using your credit cards to get you through the immediate cash crunch.  However, you’ll definitely want to sit down and consider all of your options first.  If you’re already in too deep with credit cards, racking up more debt might not be the best thing to do, especially if you don’t have a plan to repay the debt once you get back on your feet financially.

But, if you do expect your cash flow shortage to be temporary, and you do have a plan to pay off the debt you incur, then you may be able to utilize your credit cards to get through it.  By using your credit cards to pay when you can, you can save cash to pay for things like your mortgage, car payment, certain utilities, etc.  This one move can give you the time you need to get through a cash crunch, whether that means going back to work, getting your stimulus check, or starting up unemployment.

 

 

10 Ugly Truths About Credit Cards

Credit card debt is one of the most difficult financial obstacles to overcome – interest rates are high, minimum payments barely scratch the surface of the actual debt, and it’s just so, so easy to fall into the trap you set for yourself whenever you use your credit cards without having a real plan for paying them off.  Unfortunately, the ugly truth about credit card usage has only gotten uglier in the past few years.  Not only have interest rates risen, but credit card use itself has tripled, and there doesn’t appear to be an end in sight.

Here are just a few of the down and dirty truths about credit cards and the debts we carry… and you might be surprised at just how much you don’t really know!

1. Nearly Half of the Population is in the Same Boat You Are

That’s right, you’re not alone.  Nearly half (46%) of all adults carry a balance on their credit cards from month to month, and since interest rates rarely drop, we’re all paying a premium for those purchases we made on that card.

2. It Takes Years to Pay Off Some Balances

If you’re like most people, and there are months when you can only pay the minimum payment, it can be very difficult to pay your credit card balances in full, ever.  For example, if you carry $3,000.00 in debt, at 17% interest, over time, your interest charge can easily amount to another $3,000.00.  That’s DOUBLE your initial balance – take a look at how much of your monthly payment actually goes toward the principal.  You might be sick.

3. Americans Aren’t Paying Off the Balances

Even though we’re really good at spending money, it turns out we aren’t nearly as good when it comes to paying the balance off.  In fact, for every dollar on average that we pay off, we’re adding another $2.65 in new debt.  It doesn’t take a genius to figure out that this cannot continue indefinitely.

4. The Average Household Credit Card Debt Is $5,700 

Even though the overall economy has improved significantly, the average household still carries around $5,700 in credit card debt, and are still unable to pay off much of that debt.

5. Interest Rates Are Not Coming Down

Even though the economy has improved, and mortgage rates, car loans, and other types of loans have low interest rates right now, most credit cards average at or above 16% interest.  Make just one late payment, and that can jump to 30% (or higher).

6. Just One Late Payment Will Damage Your FICO Score 

Even though it’s better to pay late than not at all, making just one payment that is more than 30 days past the due date can really harm your credit score for a very long time.  Payment histories stay on your credit report for up to seven years and can cause your score to drop significantly.

7. Baby Boomers Have the Least Amount of Credit Card Debt 

Perhaps it’s because baby boomers are aging, but the least amount of credit card debt belongs to the Baby Boomer Generation, while Gen X owes the most.  Born between 1967 and 1981, the average Gen Xer holds a credit card balance that is nearly $8,000. Even more telling, credit scores have historically dropped lower with each successive generation, meaning the successive generations will likely carry a larger balance than the Gen Xers.

8. 20% Of Americans Have More Credit Card Debt Than They Have In Savings

Even though it’s recommended that we all build an emergency fund that will cover three-to-six months of living expenses, most people have less than $1,000 in savings, and another 12% don’t have any emergency savings at all.  That means an emergency can quickly put most people into credit card debt.

9. Women Carry Less Debt Than Men 

Even though women are the “shoppers,” men actually carry more credit card debt, coming in at an average of $7,407 vs. women, who carry about 22% less, or $5,245.

10. Most of Us Will Die Carrying Credit Card Debt

Approximately 65% of Americans will owe credit card debt up to the day we die.  That’s more than those of who are not expected to leave this earth without a mortgage.  The average debt, which is more than $4,000, also leaves a legacy that family members have to deal with.

In closing, understand that credit card debt is an ugly problem that we Americans have yet to take control of in our own lives. But, it doesn’t have to be the norm – not if you take action now.  Control costs where you can, pay as much as you can on those balances, and stop the cycle before you find yourself struggling. 

Want the Best Interest Rates? Time’s Almost Up

Getting the best interest rates on mortgages, auto loans, personal loans, and even credit cards depends largely on two things – your credit score and the market.  Yesterday, the Federal Reserve raised the interest rate by .25% and they “signaled” two more planned interest rate hikes this year alone – that means that the rates on every single loan of any kind can be expected to go up by that same .25%.

Now, while that doesn’t seem like a lot of money, over the term of any loan, it can add up to a significant amount of money that you will pay in interest.  For example, that 30 year home loan, or that 6 year car loan, or even those credit cards that you’re only paying the minimum payments on each month… ALL of them will cost more, and not just with this rate increase, but with the two more that are expected before the end of this year.

So, what should you do?  Well, if you’re considering buying a home or a new car, now is definitely the time to lock in those loans!  And those credit cards?  Maybe it’s time to take out a personal loan at a lower, fixed rate so that you can get those paid off, too.  But remember, interest rates are going up again, so you don’t have much time to waste.  Here are some of the best personal loan offers we’ve found today:

Dramatically Improve Your Finances

Want to dramatically improve your overall financial picture?

While it does take a lot of restraint, patience, and time to make significant financial changes, you have to remember that, when it comes to your money (and your credit score), it’s a lifetime journey.  Yes, there will be some unexpected curves, a few peaks and valleys, and likely a few bumps along the way, but if you do your best to stay on track, you will eventually find that financial security is possible regardless of your income level.

Here are our top five recommendations for improving your finances:

Manage Your Credit Cards Wisely

With interest rates rising, credit card debt becomes much more expensive, even for those of us with excellent credit.  The easiest way to manage your credit cards is to use them sparingly and pay off as much as you can every month.  Balance transfer cards are an excellent way to lower your interest rates and free up more cash to pay down the debt.  Just be careful – too many credit inquiries can hurt your credit score and if you don’t get the balance paid off before the promotion ends, you could end up paying interest from the time you transfer the balance!

Pay Off Your Student Loans Sooner

Let’s face it, almost no one can afford to go to college without some type of student loan, so there are plenty of people out there struggling with student debt, and it’s keeping an entire generation from buying their first home, their first new car, or in some cases, moving out of their parents’ home.  If you’re one of those whose student debt is holding you back, then you need to make a plan to pay off your student loans.  Start by paying extra every month if you can afford to, either write a bigger check or have your employer do an automatic payroll deduction that goes straight toward your college repayment.  You’d be surprised at how quickly you can do this if you just set your mind to it.

Make a Savings Plan and Stick to it

Did you know that more than half of the people in this country essentially live paycheck to paycheck, with little or no money saved to cover those unplanned emergencies?  What about you, how much do you have in your savings account?  Do you even have a savings account at all?

Although it seems impossible at first, you can save something if you try hard enough.  The first thing you have to do is take a long hard look at what you’re spending… Do you really need that $5.00 cup of coffee in the morning?  Can you skip that expensive dessert when you go out to dinner?  Do you really watch all 700 of the channels that you pay for each month?    Once you identify areas where you can reduce spending, put the amount that you’re saving directly into savings and resist the urge to spend it on something else.  Remember, if you lived without spending that money on something else before you had the extra money in your budget, chances are you can continue to live without it.

Don’t Forego Saving for Retirement

When you’re young, retirement seems like a lifetime away, and it’s really easy to tell yourself that there’s plenty of time, that you’ll save extra later, and so one.  But the truth is, if you’re not saving now for retirement, you likely won’t save enough later, either.  And one day, you’ll “wake up” and realize that you’re not going to be able to retire unless you do something drastic… trust me, that’s not a good feeling.

Instead, start now.  Join the 401(k) at work and make sure that you’re taking full advantage of the employer’s match if there is one, if not, put money into the account anyway and increase the contribution as often as you can.  Retirement really is closer than you think.

Get Professional Help

Have questions you can’t answer?  Looking for sound advice on your budget, your credit report, or your retirement plans?  Don’t hesitate to seek the advice of a trained professional when and if you need it.  It’s worth every penny spent in the long run!

 

Rising Mortgage Interest Rates May Influence Homebuyers

Interest rates for home mortgage loans have risen since November. Experts have taken notice — and so have homebuyers, since rate increases generally make homes less affordable.

What’s a prospective homebuyer to do? Wait for rates to drop again? Buy now, before they go even higher?

“The most important thing is to keep perspective,” says Greg Jaeger, president of USAA Residential Real Estate Services. He says rates were at 18% when he bought his first house in the 1980s, four times what they are today.

“Over the past eight years, we’ve become so conditioned to extremely low interest rates that some people get concerned about any increase, even when the rates are historically still very low,” Jaeger says.

But interest rate fluctuations represent real money to consumers. For example, as the rate crept up from November’s 3.3% to 4.125% two months later, the monthly payment on a 30-year conventional loan for $250,000 increased by $115.

For Jaeger, even the higher cost has a silver lining. “It may tip the scale for some potential homebuyers, but if it helps them look again at a home’s affordability, it could protect them from financial overreach.”

Interest rates fluctuate daily, and even throughout the day, but the changes typically are small. Even a bigger jump in interest rates could be offset by a decrease in home prices, so Jaeger advises not trying to time the market. “Instead, focus on the big picture,” he says. “Can I afford this? Does my budget allow a mortgage payment, and all the things that come with homeownership, and still allow me an emergency cushion and savings?”

If not, now may be a bad time to buy, no matter what the interest rate is. On the other hand, if your financial and personal situations make homeownership a good deal, buying at the current rates may be one of the best investments you ever make.

by

‎02-27-2017 07:00 AM

Content provided courtesy of USAA.