Prime Rate Credit

I remember when I first started my foray into managing my own money, I started my first checking account (which by the way, I still have my checking account through them) at Key Bank, which is a bank that is headquartered just one hour from me, in Cleveland Ohio. It’s recently had some financial problems, as most banks these hard days have, but all in all, I’ve not felt any of it since I am an FDIC insured customer. Overall, I’m happy with the service but do feel that some of their transaction and maintenance fees are a bit absurd.

I also almost left the bank when I bounced the account unknowingly because of a check that did not go through as it should have, and they charged me several fees, however they later reversed them when I expressed my discontent, so I was happy with that outcome. I started to hear about credit unions when I was in my early twenties, and I really didn’t understand first of all what they were, and why so many people seemed to want to go to their credit union to sevure loans instead of to a bank that was pushed on them at car dealerships, etc. to buy large items.

After doing a bit of research, I discovered that credit unions often allowed people to have checking accounts with very little maintenance and service charges, but it also offered loans sometimes at better interest rates than customers could find at commercial banks. Because of this, I thought it was interesting how credit unions offered to people in various professions seemed to be the better way for people to secure credit as well as checking and savings accounts that were generally a better deal than what they could get at chains.

Of course, the downside to credit unions is that you’re not going to find them too much when you travel. Major metropolitan areas generally only have the major banks, and sometimes you’re even SOL if you try to find your bank if it’s a major name (I’ve found this with Key once in a while when we’re traveling across state). Not only that, credit unions are usually local, so you can’t really do deposits or withdrawals unless you are at home, and that could be a definite drawback in this day and age of convenience.

It seems like every time we think we’re going to get a break in this down economy and a break from the ever increasingly ridiculous gas prices that seem to be pinching every American’s wallet, we are hit with yet another natural disaster or some other factor that is said to again increase the gas prices, or take us out of the running from a much needed reprieve from the high prices.

Well, it seems that Hurricane Ike, which is as I write this (on Spetember 14th), hitting Texas very hard, may again drive up our gas prices at the pump, forcing Americans to again resort to car pooling, cutting back on holiday driving, and also cutting back on all the other fun stuff they can use their disposable income for.

I know for our household, we have taken to only shopping at a grocery store that offers money off gas the more you spend there, that’s one of the ways we deal with the gas prices and others have other ways of cutting back to make room to pay for gas. No doubt many of the best gas credit cards have gained in popularity too since the gas squeeze started, since they give you points toward gas purchases too.

Yep, you guess it, all that stuff that adds to the faltering economy will happen again (as if it has stopped, no I know it hasn’t, I’m just saying it will again become a real concern, not something we think is going away any time soon). Ike may be hitting key oil refineries as well as making gas transport harder in many stricken areas, and that drives those that speculate on gas prices for a profit to speculate the prices higher, which means that we will pay the higher price tag for gas again at the profit of rich people who speculate, in a nutshell.

I had received a petition to sign that was sent to key congressmen for my state of Ohio a few months ago which called for legislative action on oil speculation, which many say is one of the main reasons we pay such high gas prices when stuff like this happens, and signed it. I did get a response (I’m sure canned since they’ve no doubt gotten millions of letters at this point), that they were seriously looking at this for potential action, but we’ll see if anything actually happens from it.

Fannie Mae and Freddie Mac, two of that largest mortgage backers in the US, have gotten bailed out by the US government, and some people think it’s a good thing and some think it’s a bad thing. For one, I think it’s a good thing because this was obviously needed so that many homeowners don’t lose out and also so that the economy doesn’t totally tank - in fact on news of the government bailout, stocks actually rose slightly, which is somewhat counter to what most would think intuitively since it isn’t exactly glowing news for a faltering economy.

Those who are invested in financial stocks should be happy about this bailout though, since it signifies that when a major financial institution is in dire straits and serious danger of going under, those that are invested in those financials have less to lose. Of course, the stock prices would still be reduced, but you wouldn’t be looking at a total 100% loss if the government came in and bailed the bank out.

This also means that those who cannot afford their mortgages currently will be assisted by a range of government sponsored financial help programs designed to help those that are over their heads to pay their mortgages at reduced monthly bills or perhaps through some sort of cooperation of reduced interest rates. The move also instantly cut the prime rate as well.

It looks like in the end the most people will benefit from the government bailout, but the financial analysts are still saying we are a long way form economic recovery, and the financial and mortgage markets have even longer to go than the general overall economy and stock market. Commodities seem to be doing well still of course because of the rising costs of energy and living expenses and food, but it seems that all financial related stocks will be towing the line for years to come.

The economic downturn has done more than just pinch the wallets of Americans and caused them to stop spending so much discretionary income (since they barely have any nowadays thanks to astronomical gas prices, energy prices, food prices and other factors that are exponentially increasing just to live life normally), but they also have stopped saving as much for their future.

That’s right, the money that many Americans had earmarked for their retirement or even savings plans that were not meant for retirement has dropped significantly, with many people citing increased cost of living as a reason they do not have as much to put away, or some do not have anything to put away now. It’s gotten so bad that in fact I was just reading about how the financial services sector is one of the worst areas to get a job now because there is so little opportunity.

Financial planning companies are struggling to talk their customers into keeping up with saving for retirement and investing their money instead of spending it on things that go away in a little while. Hopefully you have found it somewhere in your discipline to make cutbacks elsewhere instead of cutting out your retirement or investment savings plans, because we are all still going to need that financial security when we retire into our golden years.

My dad’s good friend is still in the stock brokerage industry, and he says he’s never had clients so worried about their money, trying to call and pull it out all the time. He said he spends more time trying to talk people out of making that mistake, only to have them come back again and again every time the stock market takes a hit, or to have him downgrade their investments because of financial hardship so they can use that money for living expenses.

It’s probably one of the worst times to be in the financial services industry with all the economic factors currently at work, and I truly feel bad for those that have to deal with it and also with the fact that losing money for people is simply a fact of life in a down market, and there’s nothing anyone can do besides wait it out and stick with their solid investments over the long haul.

It seems that the stranglehold that high gas and food prices, combined with a number of other factors that you’ve undoubtedly heard discussed in the news at great length, has had an effect on the month of August’s back to school sales of clothes and other back to school luxuries, with consumers focusing mostly on the absolute essentials and not going all out on things like extra clothes or higher end stuff.

What happened is, although of course parents bought their kids the basics, but they didn’t go above and beyond and go all out with the clothes and shoes as retailers normally hope they do so that they exceed their sales expectations and actually profit. Did you know that the majority of profits from retailers comes around holiday times and special occasion times like back to school, and if it weren’t for these special times, they really would not be a profitable enterprise at all! Makes sense if you think about how empty stores seem to be and how no one seems to be actually purchasing anything at places like malls during the days of the week.

Retailers like Wal-mart though apparently posted stronger than forecasted sales, lending to the theory that consumers are getting the lower end stuff and just the basics, since they went a couple of percentage points over what they came up with as forecasts, which doesn’t seem like a lot but in retailers speak it’s quite significant!

Another factor that is lending to the slow August sales is that people are seeing their incomes drop with the employment rates going up as well as companies being forced to offer minimum raises to employees (this happened at my place of work it seems, at least to the majority of people). Even with gas prices going down and mortgage relief being offered by the government, consumers are still feeling the proverbial squeeze on their pocketbooks.

I remember I had talked about this a while back, the phenomena that really isn’t too surprising these days given the “me” and immediate gratification sentiments that seems to run rampant in both my generation (I’m in my early thirties), and the generation after me, which would put that somewhere in the twenties. When I was in my twenties, it was the worst time for spending wildly with money I certainly didn’t have, and it’s the reason that I got in way over my head with credit card debt thanks to putting everything from car repairs to mine and my college room mate’s new stereo system on my trusty credit card.

It didn’t take long before my naturally somewhat thrifty and shrewd spirit kicked in and I realized that although I was waiting tables almost full time to support paying the rent and food and other necessities, I was still spending way beyond my means, and using plastic to boot when I couldn’t afford to pay for things, whether they were necessities or not. Never mind the fact that I never had a red cent to put away, invest or save, I was just trying to make ends meet and have fun as a college student to worry about starting to save. I thought, jeez, I’m so young, I don’t need to start savings until I’m in my thirties or forties and I’ll be fine for retirement!

Little did I know how badly I was shooting myself in the foot back then, since compound interest, that glorious concept that multiplies money a gazillion times the longer money stays invested in interest yielding instruments, takes time to build and the younger you start, the more likely you are to be at that ideal million dollars for retirement - or more.

Well, it seems that these days the sentiment hasn’t really changed among those that are considered “young”, and they still have somewhat of a handicap when it comes to saving their money or even spending it wisely to begin with for that matter. One large company that handles 401k retirement accounts for many large companies says that it sees the majority of younger people cash out their 401k accounts when they switch jobs instead of rolling it over, which is the wiser thing to do so you don’t miss out on that compound interest or end up spending that money on things that’ll be gone in five to ten years, leaving you with nothing for the golden years.

Because they say that “Generation X” people tend to have this sort of mentality when it comes to their retirement money, it could definitely show that there is an impending savings crisis that may manifest when genx-ers reach retirement age in the next thirty years or so. Many Generation x’ers say that they recognize that saving for retirement is important but they have so many other impending obligations they have to save their money for that they end up paying those before they “pay themselves” so to speak through their retirement savings plans.

Well, now there’s another excuse for high gas prices, and this time it comes in the form of a natural disaster of sorts, the latest hurricane to rock the gulf coast and supposedly many refineries that will affect the gas prices again (ok, I thought the majority of our oil came from the middle east, but my bad), and make us scrounge our nickels and dimes to pay for the dang gas tank to be filled once more.

Sometimes you almost have to wonder if the oil companies are praying for a natural disaster just so they can use another excuse as to why the gas prices are heinous. I know I’ve heard that the oil companies don’t make that big of a profit, at least not what we are thinking, and that in fact, as a business venture oil in fact does not yield as much pure profit as many other businesses that doesn’t get a lot of negative press, however you just can’t help but throw your arms up in dismay when you hear yet another excuse as to why we are being reamed at the gas pumps.

Americans are squeezed, no doubt about it, and not just from gas prices as we all know too well now. It’s pretty sad when we are happy to pay $3.60 for our gas, and that is actually a relief from the previous $4.00 prices just a bit ago, when we would have laughed at the fact that anything under 4 bucks was a blessing just a few short years (heck, months) ago.

This latest hurricane is not only a disaster that will require a lot of federal aid from the government who is already bogged down by other disasters such as the banking systems that are falling, not to mention the war in Iraq and the bailout of thousands of homeowners in distress from the mortgage fraud situation or the mere fact that they are in over their heads with mortgages they cannot truly afford.

Now the oil companies have another prepared reason for why they are charging an arm and a leg for something that we all need as a necessity to live our daily lives and contribute to society.

These days everything just seems to be a catch 22, but I’m sure there will come a day soon when all the dust will settle and our economy will once again be booming, jobs will be plentiful, and credit crises will come to a halt (although they never truly do, they are ongoing, just in varying degrees of emergency). We’ll remain positive on America’s outlook because that’s what we do best, we make sure that we will never give in to despair, and watch our country become a booming one again.

Sorry, I had to title this with a play on words from one of the more popular (and my personal favorite) HGTV shows that shows people what their hard worked houses are worth, because it only seemed logical. I wanted to talk a little about what I feel has gotten so many Americans in such hot water these days when it comes to their personal finances, and one of the biggest reasons I feel is that people have forgotten what it means to live below their means and save more money so that they can look forward to a stress free retirement in the golden years.

I think that one reason for people living above their means is that they put too much that they have into their homes, or they get themselves in over their heads from the get go (hence the current subprime mortgage crisis, thanks to some unscrupulous lenders and repackagers of these loan risks) when it comes to a mortgage they can afford, and truly afford, on an ongoing basis, no matter what happens to their personal financial situation.

When we went to purchase our home about a year and half ago, we were able to not put anything down on our home, but apparently that has changed and many lenders are demanding a down payment of at least that 20%. We were able to get a second mortgage to pay for our downpayment because we had other plans for the thousands of dollars we had saved originally for the downpayment. And when we sat down with loan officers, we realized that for our personal situation, even a $30,000 downpayment would have barely made a dent in our monthly house payments, which was one of our major concerns.

People are trying too hard to keep up with the Joneses these days it seems. Square footage has taken over, and people are going really large for homes that they don’t even really need the space for, and it’s showing in the fact that many people are feeling the squeeze even more from the gas prices and high cost of foods, products and energy, because their mortgage is simply too high. So, what is your house worth? Are you ok with not adding on crazy additions and upgrades, and instead saving that money for your future?

If so, you’ve really got a good head on your shoulders, and you realize that the mac daddy of houses isn’t the thing that defines you, and that in the end you will live a more stress free, happier life because of that. Below the means, that’s something that has truly been lost on most people, if we could just get back to that mentality, we wouldn’t want for so much.

We have definitely entered a new era in the midst of the national credit crisis which seems to have everyone from mortgage lenders to automobile loan lenders running for the hills or closing up shop because many times these loans are simply no longer profitable to them. Included amongst the victims, you could say, are many private student loan lenders who are either not giving as many student loans or toughening their guidelines for giving them, or are just stopping offering them all together and sometimes not even bothering to send current lendees notice (this has happened actually).

Many would be college students and their parents who often get the loans for their children as collateral since they are more financially established, are asking how they are supposed to find private lenders for their kid’s college tuition and living expenses when many of the banks have flat out rejected them or refused their renewal of an existing loan. Student loans typically have a low interest rate, so maybe they are figuring that giving these loans out too much just doesn’t make much sense because they aren’t as profitable to them as other loans may be.

Not only are people being turned down for student loans, but they are also having a hard time finding lenders who still find it “worth their while” to actually offer student loans. This has boiled the choosing pool down, and many are complaining that it’s hard to find someone willing to loan them money for their child’s tuition and other expenses. Increasingly, students are also having to rely on college student credit cards to make up the difference in living expenses rather than overages on their student loans, as was traditional in the past with traditional government backed student loans.

Gazillionaire Warren Buffett is talking about the economy, and as usual, when the guru of investing and economics talks, everyone listens. Buffett says that he believes we will still be in what he calls a recession (although some economists have rebuffed that claim because it may not meet the technical definition of a recession which is so many consecutive weeks of downturn and a decrease in domestic product) several months from now, although he has hopes that the economy will be looking stronger in five years or so.

He says that he believes that the mortgage giants such as Fannie Mae and Freddie Mac may remain solvent, however, most likely not without a lot of help from the government and other non privately held entities since the scope of help would be so huge. Buffett has always said he is a long term “bull” when it comes to the US economy, even with short term bear trends and that he always believes the strength of the American economy will bounce back with a vengeance simply because it is too large to just collapse.

Buffett’s comments are always seeked when we are in financial dire straits, especially in recent years where he seems to have earned a sort of wise soothsayer standing because of not only his age but the testament to how standing steady even during tought economic times can stand to make you a lot of money as time goes on, and how it’s the people who panic sell when the first sign of bad news comes that usually end up in the whole when it comes to playing the stock market.

Buffett is known for buying and holding stocks for years and years, and has made a lot of money from doing so over the years, earning him a status of someone who is not only patient, but also someone who knows which companies are set to weather the ups and downs of the economy. He overtook Bill Gates as the richest man in America fairly recently, and his comments and views are seeked on everything from different stocks to the future of the US economy.