Posted: February 26th, 2009 | Author: Joe | Filed under: Credit, Debt | Tags: Debt | 2 Comments »
We’ve heard a lot about “toxic debt” in reference to banks and subprime loans, but what about personal toxic debt?
Toxic debt for individuals, not to be confused with Zombie debt, is debt where:
- The lender can change rates and terms at any time.
- The standard or default interest rate is in the double digits
- Initial “teaser” terms and rates encourage you to borrow more than you can comfortably pay back.
Given the above definition, it’s no surprise that most toxic debt for individuals is credit card debt, but it could also be in the form of payday loans or even personal loans. This debt is toxic because the terms of the debt prolong the time you remain in debt. It acts like a wound that bleeds slowly at first, then becomes more acute over time until you realize it’s too late to heal it!
Getting rid of this toxic debt and cleansing your financial life is not as easy as getting into debt in the first place, but it can be done.
- Cut any unnecessary expenses. You can live without cable T.V. for a few months, or even a year if that’s what it takes.
- Take all the money you save by cutting out the unnecessary, and put it toward paying down your debt.
- If that’s not enough, consider debt counseling but be aware that it will most likely prolong your servitude to debt, and you’ll end up paying for it in some way.
I know it’s hard, but it is possible. You can read how I did it in 7 steps to getting out of debt.
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Posted: February 24th, 2009 | Author: Joe | Filed under: Credit, Debt, Economy | Tags: Credit, Credit Cards, Debt, Economy | 9 Comments »
Got credit card debt?
Need a bailout?
Well, you may be getting one. According to a USA Today article:
“This year, delinquent credit card accounts hit a six-year high of 4.9%. Meanwhile, charge-offs – when banks give up on collecting debt – have been rising for about two years, hitting 5.47% in the second quarter, the latest data available, according to the Federal Reserve. Credit card and mortgage losses have dragged down banks’ earnings.”
To avoid the fallout from not being able to collect from bankrupt consumers, the banks are proposing to forgive up to 40% of credit card debt owed by financially strapped consumers near bankruptcy. Those consumers would then have up to 5 years to pay the remaining 60% – interest free!
The banks are also looking to have a rule repealed that requires them to file losses on the forgiven debt in the same fiscal year.
The banks get to avoid further losses, and consumers who are nearing bankruptcy and have high debt get a size able chunk off their shoulders. This seems like a win-win! Yes, I know it rewards irresponsible borrowing and lending, but we’ve pretty much past the point of being rational in such regards (sigh)…
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Posted: February 19th, 2009 | Author: Joe | Filed under: Investing | Tags: bailout, Investing | 2 Comments »
File under: “huh”?
I’m not sure why, but Nasdaq has released a “New Benchmark Tracks Companies That are Participating in the U.S. Government’s Financial Relief Plan“.
It’s called the “NASDAQ OMX Government Relief Index” and it’s ticker is QGRI. My first thought is, “Why?” I mean, these banks are not likely to be profitable any time soon since the government with have first dibs on any profits they are able to make. On the other hand, the index is up 11% as I write this, so maybe it’s worth a look? Chances are it would still fall under the speculative/momentum type of “play” more than an investment per se.
UPDATE: Maybe I was right and 11% is only a bounce? According to this site, the index was down 36% since its inception! It just goes to show that wall street will make an index out of just about anything these days…
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Posted: February 17th, 2009 | Author: Joe | Filed under: Economy, Real Estate | Tags: Home Prices, Home Selling | No Comments »
Here’s an article from the AP that now reads “S&P index shows plunge in November home prices“, though when I found it yesterday the headline was “S&P index shows posts sharpest decline in home prices on record”!
I think you’ll agree the latter is a bit more eye catching, if not dramatic.
The point is though, that there really isn’t much of a story here since the index they are talking about (the S&P/Case Shiller Home 20-city housing index) only covers prices since 2000!
Essentially, after housing prices posted one of the largest (if not THE largest) increases in history, they have now falling dramatically. Sorry, but isn’t this to be expected? Assets don’t increase in value forever.
This is like using the value of the NASDAQ from 1998 – 2003! Using an index with an 8 year history is akin to basing your entire world view on your experiences in a single week of your life! There’s no historical perspective here.
We already know that the housing market is in decline, but skewed statistics like these don’t help the situation.
Interestingly, the index itself goes back 20 years, so I’m not sure why they only cover from 2000 in this article…
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