Dec

30

I just read on Forbes (consumer debt) that the average consumer debt is $9,200 per household. As many of us do not carry any credit card debt this number is actually much higher. I personally know too many people that have over $25,000 in credit card debt.

Folks, this is crazy. Carry a balance this large costs you about $368.00 a month if you make the minimum payment of 4% on the balance at 15% interest. If you never add another dime to the card it would take you 10 years to pay the balance down to $324.00, and you would have paid close to $9,000 in interest on the balance.

Think about this. You will have paid $18,000 for items that you probably cannot even find anymore (the ones that are not perishable), and if you could would not even yield 25% of their value at a garage sale.

What can you do?

1. Spend what you make

2. Ceate a budget and stick to it

3. Begin to make more than the 4% required minimum payment.

Will this hurt a bit? Of course it will…but what are your goals?

A) To keep your debt at its present level.

B) To keep increasing your debt.

C) To pay down your debt.

The choice is entirely up to you.

Have a great upcoming new year.

 

 

Dec

24

Unless you are at the edge of the cliff ready to fall, the following are a list of taboo financial moves to make

  1. Borrowing against your 401k or other retirement accounts
  2. Borrowing against you mortgage to payoff credit card debt
  3. Stopping retirement savings to deal with monthly cash flow problems

1. Some 401k plans allow you to borrow money against your earnings. Stay away for these! The whole point of retirement plans are to save for your future. Never withdraw or transfer money from retirement accounts without first consulting with a tax professional. The penanlties for doing this are severe and you would actually save money by just burning it in your fireplace.

2. How did you get into credit card debt to begin with? Are you not disciplined with spending money? If the answer is no, then how are you going to stay out of debt once you pay it down? Borrowing equity in your home to pay off your credit cards is a rotten idea. Take a pair of scissors and cut the cards up, then start making double or triple the minimum payment required. This is the best way to get out of debt.

3. If you are considering cutting or stopping your retirement savings in order to meet your monthly spending you need to reconsider. For one, if you are in a qualified pre-tax plan you will end up paying more in tax and actually cutting your paycheck. And, if your company matches your contributions you are giving money away. 401k information. Instead, put together a budget, or change your budget. Some belt-tightening may be in order.

Dec

23

My wife and I recently watched Al Gore’s An Inconvenient Truth . It was quite a sobering movie.

This past week the Puget Sound region (Seattle Metro Area) got hit with a windstorm that knocked out power for half a million+ area residents. Good ‘ol mother nature created some real havoc in our area. A few days after the storm we experienced gas lines that were quite long. This really got me thinking about how fragile our civilized society really is.

You walk through these huge mega supermarkets and on one hand marvel at the abundance, and on the other hand realize how quickly the shelves would be cleared in the event of a catastrophic situation (like Katrina).

About a year earlier I had purchased some food for storage from Walton Feed. It was actually pretty good stuff and quite reasonably priced. These recent events in our weather patterns have really made me wonder if having a weeks of food on-hand is really not such a bad investment after all.

Don’t get me wrong. I am not suggesting that we all buy Bowie knives and take to the woods to live off the land. But, these are some very interesting times and, well, just trying to be prepared.

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