For my regular readers, this will come as no surprise. From CNN Money:
Roughly half of Americans are saving 5% or less of their incomes, including 18% that are not saving anything, according to a survey from Bankrate. Only about a quarter of people are saving more than 10% of their earnings.
I have a problem with the way they presented the survey, lumping people saving >5% in with those saving nothing. Making the transition from non-saver to saver is the most important step you’ll ever take in your financial life, even if you’re only saving 1%. Saving small is a starting place; in time, as you develop better habits and are able to watch your savings grow, it will be easier to save a larger portion of each paycheck.
Here’s another personal interest story from CNN Money. It tells the sad, yet familiar story of 3 people in their 20s who have a ton of student loan debt ($56k-$114k).
What’s most telling is that there is no mention of what kind of degrees they hold. Finance? Communications? Trans-alpine paragliding? What?
Not all college degrees are created equal.
Did you know that money you owe to the government can end up in collections just like credit card bills or medical debt? That’s right. Here, CNN has an exposé on the largest collector of government debt in the country.
Key Points:
- Debt collectors often get details wrong. That’s one of the reasons that 70% of people have errors on their credit reports. Combine lots of errors with an enormous bureaucracy that is difficult to deal with, and you have the recipe for prolonged battles to get errors rectified.
- Dealing with debt collectors is kind of like dealing with robots. So many processes are automated that there are few points in the process where human judgment can intervene to correct problems.
- Document everything. This may be your best defense.
With interest rates at a historical low right now, it’s only a matter of time before they go up again. Maybe next month, maybe next year, but it will eventually happen. These things are cyclical.
If you’re in the market for a new car, now is a pretty good time to take out a loan. If the Fed raises rates, however, what will happen? This is the first I’ve seen someone put a concrete figure on it:
…should interest rates rise later this year, some households and corporations may find themselves overleveraged as interest rates and borrowing costs rise. When looking at interest rate sensitivity by loan product, we see that auto loans rates are the most sensitive to changes in the fed funds target rate. In addition, we can see that for each one-percentage point rise in the fed funds rate, the interest rate on a 48-month new car loan rises 0.61 percentage points.
So that’s the magic number. Expect a larger increase for longer loans and used car loans.
Credit numbers are out for the last quarter of 2014. Here are the highlights from ZeroHedge:
Housing Debt
- Originations, which we measure as appearances of new mortgage balances on consumer credit reports and which includes refinanced mortgages, increased slightly, to $355 billion, but remain low by historical standards.
- About 122,000 individuals had a new foreclosure notation added to their credit reports between October 1 and December 31.
- Mortgage delinquencies improved, with the share of mortgage balances 90 or more days delinquent decreasing slightly; 3.1% of mortgage balances were 90+ days delinquent during 2014Q4, compared to 3.2% in the previous quarter.
Student Loans, Credit Cards, and Auto Loans
- Outstanding student loan balances reported on credit reports increased to $1.16 trillion (+$31 billion) as of December 31, 2014, representing about $77 billion increase from one year ago.
And the kicker:
- Student loan delinquency rates worsened in the 4th quarter. About 11.3% of aggregate student loan debt is 90+ days delinquent or in default in 2014Q4, up from 11.1% in the third quarter.
- Auto loan delinquency rates worsened. The 90+ days delinquency rate is now at 3.5%, up from 3.1% in the previous quarter.
That’s a lot of deliquency. Nearly 1/8 of all student loan debt is 90+ days late. And that debt doesn’t go away.
From Marketwatch:
“I don’t have to worry about the word ‘struggle’ no more, and neither do they,” she said. “I just want them to understand that money doesn’t change you, but it can help you, so they don’t have to worry about debt, none of that. They can go to college; they don’t have to worry about nothing. And I’m glad that I can do that for them.”
Such a strange juxtaposition. On one hand, she says money doesn’t change you. True. But then she said that her children won’t have to worry about debt any more. That’s false. If money doesn’t change you, and you’re in debt now, then you’ll find a way to get back in debt even after a $100 million+ payday.
Without the right mindset and habits around money, you will always be living paycheck to paycheck–no matter how big that paycheck is.
Despite what you may think, Americans aren’t rushing out to spend all that money we’re saving on gasoline at the pump.
From ZeroHedge:
How can we explain this disconnect? It seems that consumers are saving some of the windfall cash from lower gasoline prices, with the personal savings rate increasing to 4.9% in December [my note: this personal savings rate they are talking about does NOT mean people are literally putting cash in savings accounts]. Another factor is that our data may be skewed by consumers with credit cards who are not as budget constrained as those who spend predominately with cash. Looking at a breakdown of spending by key sectors, we find a pick-up in sales at home improvement stores, restaurants and grocery stores, but a slowdown in lodging and furniture sales.
From ZeroHedge:
The most notable aspect was the $5.77 billion surge in revolving credit (e.g. credit cards) as Americans extended and pretended into the holidays – the biggest rise since April, and the second biggest monthly increase since the GFC…student and auto loans rose by the smallest amount since February 2012!
So student loans and auto loans are still increasing; they’re just growing at a slower rate.
I suspect this has something to do with the fact that so many loans have been made, they are reaching the saturation point. With student loan debt at all-time highs, there isn’t much room for more growth.
Still, lending standards are loose. If you have good financial habits and low debt, now is a great time to get a loan and move up the credit ladder.
It seems like every day we hear about another massive data breach. Here’s the latest.
From USA Today:
SAN FRANCISCO – As many as 80 million customers of the nation’s second-largest health insurance company, Anthem Inc., have had their account information stolen, the company said in a statement…The hackers gained access to Anthem’s computer system and got information including names, birthdays, medical IDs, Social Security numbers, street addresses, e-mail addresses and employment information, including income data, Swedish said.
In other words, everything a hacker would need to steal your identity. 80 million people–and that’s just the latest. At this point, is there anyone in the country who hasn’t had his information compromised?
If you set out to do the EXACT OPPOSITE of what these people did, you’d be in good shape.
From WaPo:
A decade ago, Comfort and Kofi were at the apex of an astonishing journey they had made from Ghana in 1997, when they had won a visa lottery to come to America. They did not know it at the time, but they were also at the midpoint in their odyssey from American Dream to American Nightmare.
Today, they struggle under nearly $1 million in debt that they will never be able to repay on the 3,292-square-foot, six-bedroom, red-brick Colonial they bought for $617,055 in 2005. The Boatengs have not made a mortgage payment in 2,322 days — more than six years — according to their most recent mortgage statement. Their plight illustrates how some of the people swallowed up by the easy credit era of the previous decade have yet to reemerge years later.
