I apologize if this post seems like a rant, but I just read a great article on CNBC titled, “Credit Cards Could Become Next Trouble Spot in Crisis” by Kenneth Stier which provides a lot of great info, but seems to completely ignore the underlying problem (beyond a sentance or two). The Article is best summed up by two paragraphs which state,
As the economy worsens and unemployment rises, more Americans are having trouble paying off their credit card balances. That has pushed up losses for credit card issuers, forcing them to tighten standards, which puts a further squeeze on cash-strapped consumers.
And because consumers no longer have the equity in the house to fall back on, they’re relying even more on credit cards to pay for living expenses.
It is completley logical that credit cards are the next lender to tighten standards (the article indicates that CCs may have been doing this over the past year or so), and more importantly, start to see increased delequences. However, this ignores the underlying problem, previously noted in “Leave your Retirement Accounts Alone” – we need to fix the underlying problem – STOP SPENDING MORE THAN YOU MAKE. If you make $35,000/yr you can not afford an esclade, if you make $200,000/yr you can’t afford a Lambo, and if you make $900,000/yr you can’t afford a private jet.
Look at that! I just set up the “My Journey Budget” – write out your expenses, figure out your NET income and start doing some math. As my debt status bar to the left inidicates I am not screaming from the roof top because I am better than the average american, but I have made a plan to clean up my mess. It only took an hour and some handy equations (+ & -) inside an excel spread sheet.
