Posts Tagged ‘finance’

“‘If I were given $1 million’
According to the respondents, here are some of the things people would do if they suddenly received an influx of cash…

  • 54% of respondents would spend it

According to Charles Schwab, Americans are paying attention to their friends’ personal-finance choices. Sixty percent of people said they’ve wondered how others on social media were able to afford things like expensive trips… And out of a variety of factors (including family, friends, and co-workers), social media was reported to have the worst influence on money management…

A whopping 59% said they live paycheck to paycheck, and 44% carry a credit-card balance or struggle to keep up with payments, according to Charles Schwab.” -The Crux

“…the world has been binging on debt like never before.

The International Monetary Fund reported last month that total nonfinancial-sector debt has ballooned to an all-time record of $152 trillion… while the global debt-to-GDP ratio has also soared to an all-time high of 225%, up from 200% just 14 years ago.

Worse, we’re seeing record debt at the government level, the corporate level, and the consumer level (via auto and student loans, in particular). The boom in corporate borrowing is especially concerning…

U.S. companies have already borrowed $1.4 trillion this year to date, according to data firm Dealogic. This is on pace to shatter last year’s previous all-time record of $1.5 trillion.

Unfortunately, most are using this money to refinance existing loans… buy back stock and pay dividends… and finance expensive (and often questionable) mergers and acquisitions. This will do little to help the economy. But it greatly increases leverage… and risk.” -Justin Brill

Far, far, far too much money – mind-boggling amounts – has been borrowed….  Students have borrowed $1 trillion for college.…  Roughly 90% of GM car buyers finance their purchases.  And as recently as 2014, 83% of their loan book was subprime, with a shocking amount categorized as ‘deep subprime’.  Deep subprime is essentially people who don’t have a credit rating or people who are currently in bankruptcy.” -Porter Stansberry

It’s good to have nice things and to get an education, but these things must be done responsibly and according to need.

One key feature of the private reserve strategy is that one builds a pool of funds from which to finance many purchases in life.  The benefit is the interest paid returns to one’s own pool instead an alternate finance company.

“Capitalism is constantly burying its mistakes and discovering tomorrow. Cronyism, on the other hand, keeps you in the past. It is today and yesterday trying to stop tomorrow from happening…. The future is where new wealth is created. When you try to stop or twist the future into the shape want, you prevent this wealth from ever happening. Cronyism depends on the credit bubble…. Cronies owe money.  They borrow money.  They depend on borrowed money for their budgets, their spending, their bonuses, their portfolios, their welfare checks, and their special privileges.  They all depend so heavily on borrowing that few of them – whether in academia, media, business, finance, or government – can see the truth… let alone speak it.  They are all paid not to see it.  And if they do see it, they keep their mouths shut.” -Bill Bonner

Debt Liability

Posted: October 21, 2014 in Debt
Tags: , , ,

“The last thing you want to do is go into debt to finance a liability…” –J. Reeves

Do you want to be like everyone else?  Are you one to follow the beaten path?  Does conventional wisdom seem like the most comfortable place to be?  Let’s take a peek at what others are doing before you give a final answer.

The news is filled with, what is to me, troubling discourse.  Bloomberg News reported on March 9th that “global debt exceeds $100 trillion”.  They explain this to be a 40% increase since 2007.  Wow, that is a lot of money!  “Governments have been the largest debt issuers,” according to the Bank for International Settlements.  How long will it take to pay that off when governments have to borrow more money to cover their current expenses?!!

In a DailyFinance article from January 2, 2014, another bubble seems to be forming in automobile loans.  They give an example of a gentleman who had just filed for bankruptcy, yet received a check in the mail from a finance company for $30,000 to purchase a car from any car dealer in the area.  He went out and purchased a used BMW.  They report that “88% of GM’s North American financial receivables are firmly in the subprime category”.  With delinquencies on the rise, this cannot be a good sign.

What do these examples mean to you?  Are you currently a part of the credit growth people and governments are experiencing?  Can this discouraging news have any positive benefit for you personally?  Well, that depends!  Positive things can only happen if someone takes advantage of a situation.  The only way it can benefit you is if you do something other than the majority.

You can be different from those treading in their own sea of debt.  They are simply trying to meet their current expenses, paying interest but making no headway on their debt load.  This may even be you.  However, a simple yet willful defiance to increasing debt is the starting point.  It takes a first choice to turn the negative compounding of interest payments into your own financial reservoir.  Is it time to make a willful decision to be different?