Prime Rate Credit

I have to admit, I am so torn between the two candidates in the 2008 presidential race, John McCain and Barack Obama, that I try to read anything and everything I can about their political agendas and stances, and how they intend to treat this ailing economy that I just get more confused on who to vote for by the day.

On one hand, I associate strongly with many of Obama’s more socially friendly plans and his openness to things like abortion rights and stem cell research, but on the other hand, I am having a problem with processing and understanding exactly what his tax plan is, and I admit I have a problem with a socialist-type approach to “spreading the wealth around” as he has said in the past because to me, that means the real earners are going to be punished for earning a lot. I know that sounds a bit elitist, but that’s how I feel, and I’m not sure if it’s the Republican party’s strategy to make it seem more like he is a punisher of the more wealthy and well off, or if that is truly how his tax plan will work.

Now, as far as John McCain goes, with him, I’m afraid he doesn’t have a very even temper and is a tad bit too keen on carrying this Iraq war much further than it has to be. I’m also not crazy about who he picked as a running mate, Sarah Palin, who seems more intent on convincing Americans that her and her husband Todd are just more “Joe Six Packs”, than she does in trying to convince Americans that she is well versed in foreign policy and economics. That just doesn’t sit well with me.

I also don’t care for the typical Republican attitude toward tax payers which is usually that they give the big business guys and corporations all the most meaningful tax breaks while making the little guys suffer more. However, there is always the argument that Democratics almost always raise taxes for almost everyone while they are in office.

I don’t like the health plan proposed by Obama, which to me is more socialist in nature as well, but McCain’s is similarly weak, proposing a tax credit for families to choose their own health care, which supposedly could jack the costs of health care beyond many employer’s reach, cutting benefits for thousands of Americans through their jobs.

The problem with choosing a candidate is that you never know what they’re going to do for this country until they are in office. That’s the real trick to the whole thing, you just don’t know until it happens. Can’t we just get Bill Clinton back? I think that would make me happy!

A lot of people I know are not so fortunate throughout this whole Wall Street fiasco, where many have seen their 401k and personal retirement accounts dwindle by as much as thirty to forty percent. Many of these people too, like my own mother, are close to retirement age, or at least five to ten years away from it, have lost very much of their principle and it’s hard to get that back within the next few years, unless we happen to see a huge rally in the stock market sooner than everyone thinks.

For those of us that are in our thirties, or those of us that are fortunate enough to have started an investment account in our twenties, there is still plenty of time to recover, and the good news is that while we may have lost some of our initial principle in our accounts, we can certainly buy shares of whatever we have in our accounts at a great discount, and have more of a stake in those shares so that when the market does go back up and stays there for a while, we can come out of this whole thing way ahead.

It’s hard to think positive during times like this when people are losing their homes, their jobs and their life savings, or at least significant portions of it, but there is a silver lining around this storm cloud, and that is that this is a huge buying opportunity for people who have some extra money to spare, and only if they can live without that money for at least 10 years.

This way, the market has enough time to recover and you can enjoy some nice profits with less taxes since you held those investments for longer than one year, where it becomes eligible for a lower tax since the government likes to award long term investing more than short term investing, which adds to market volatility and economic instability.

This is a good question, and in fact, even credit card lender companies have been tightening their credit limits and who they give credit cards to in the first place for a while now. In the past few years many of my friends have made the observation that they no longer get the free for all credit card offers that they used to just a few years back.

Some credit card lenders have really taken to increasing the APR on credit cards that are extended to people who either have late payments a few times or who are a poor credit risk to begin with under the guidelines they have established for their lending practices.

With the new credit crunch, which has mostly to do with lending for new homes and mortgages, it may very well extend into the credit card market as well, so this is another reason that we have to add for a decreasing GDP (Gross Domestic Product), which just means that people have less loaned money to spend and to put back into the economy, creating a more severe and deeper recession.

The bottom line is that if you are looking for a good balance transfer credit card to put higher interest debt on, you might want to jump on a card offer that you get that works for you while you still can. There is no telling how far down the credit crisis is going to delve, and it’s not such a far fetched idea that credit card companies may pass this pinch down to their customers with more credit limit restrictions, penalties for late payments, and increases in the interest rates we are charged, so it’s better to get in while you can if you’re getting good offers.

Auto makers have had it just about as rough as home builders over these past few turbulent months on the stock market and in the general economy, with new car sales going down by as much as thirty percent at many dealerships since consumers are a little jumpy about the state of the economy, and there have already been some job losses seen from this unprecedented economic recession time for the US (at least in my lifetime and the lives of most baby boomers).

In reaction to that fact, Toyota, one of the most popular foreign imports here in the US along with Honda, and also being reputed as an excellent make of car as far as dependability and lastingness, has started to offer a nice little deal on their car’s financing, making it a zero percent deal for those who qualify. So basically, you are not paying any interest on the vehicle, you are just paying for the car itself - imagine that!

Toyota was among one of the first auto makers to realize a steep decline in car sales, so they wanted to act quickly to save their US sales, and although simply offering great financing won’t make everyone jump out of their seats to go grab one (although it really does save the buyer thousands in the end when it’s all said and done), there will be some more interest conjured up in buying these high quality, low maintenance cars from people who really know their financing and want to get a good deal on it while the getting is good, so to speak.

I know that when I bought my Honda three years ago, another foregin import with an impeccable record for quality and dependability, I had options as far as financing went, and they were offering 1.9, zero, 2.9 and 3.9 percent financing depending on (of course) your credit score when they ran it.

At the time I didn’t qualify for the zero percent, but I did qualify for the 1.9 percent financing, so I went ahead and took that, and I’m happy with it - not as happy as I would have been with zero, that’s for sure! That makes a big difference in the time it takes to pay the car off and I may already have had it paid off if I would have gotten that deal.

Financial analysts, in their infinite wisdom (we hope) about the workings and trappings of the economy, have predicted that there will be more bank failures this coming year. Just when we thought we may have been out of the woods when it comes to our banks failing in the US, we may be putting more and more pressure on the FDIC, which is the institution set up by the US government after the Great Depression to insure people’s deposits up to $100,000.00 after many lost their life savings.

There is also whispering about the fact that there may be an increase in the limit to the amount of money that is able to be insured by the FDIC, since many are jittery about deposits that are over $100,000 being covered in these uncertain economic times.

We tend to think that banks are infallible, but the fact is that although banks do have money coming in every day through loans and deposits and various other instruments of investment, they are still susceptible when the amount of defaults goes up significantly.

The problem is that with the increasing numbers of subprime loans being defaulted, banks had more money out in bad loans than they had coming in, hence the problems that are being widely reported as of late.

Analysts are saying that it’s almost certain we will see more bank failures in the year to come, it’s just a question of how they will go down, whether they will be bailed out by the government or they will be bought out by other banks that are looking to make an investment for the future.

Even with the passing of the provisioned massive 700 billion dollar bailout, which by the way, the government may end up making money on in the very distant future contrary to many thoughts that we as taxpayers are throwing down a hole, there will still most likely be more bank failures to come unfortunately, it’s just a matter of when where and why, and how they will be bailed out.

This term was a new one to me, but it is actually one of the most important financial terms if you’re interested in knowing the ins and outs of your credit score, and how certain items and happenings may impact this vital score, if you go to get a home mortgage loan or happen to need credit for some other major purchase such as a car or home improvements such as an addition or other major home improvements that require large amounts of capital.

The term I’m talking about is the “debt to limit ratio”, and what it means is how much, out of your total available credit have you used thus far? This means that yes, credit card and other companies are looking at not only whether you’ve ever surpassed your credit limits on lines of credit and credit cards, but also how close you are to maxing them out. So essentially, it doesn’t matter if you haven’t maxed your card out or even gone over the limit, they actually look at how close you are to your various limits as a means of determining what type of credit risk you are.

Take for example, you have a $10,000 total credit line through various banks and credit card lenders. You have spent $9,500 of that money though, so this means that you have used most of it and have not made much progress in paying it down. This is looked at by lenders as a higher risk loan or line of credit, and therefore in response to that higher risk what do you think they will do?

Well, of course they will either charge you a premium annual percentage rate for taking on a larger risk in their eyes, or increasingly many lenders are saying no to these loans that they view as a higher risk of not being paid back, not being paid timely, or of being a poor risk in the near future as far as ability to pay the loan or line of credit off.

What you can do is make sure that first of all, you do not have a whole lot of credit cards floating about out there. This means that some of your favorite airline miles credit cards, gas credit cards and other special interest credit cards that you may like to use, such as a retail store card, should either be paid off every month to avoid the breaching of the credit limit, or you should just use them very minimally.

What I find works best for me is that I use primarily one major credit card, which happens to be my favorite one, the airline miles card by United, and when I do get new retail cards, for example I currently have a World Market credit card and an Express credit card, I make absolute certain that I pay those charges off every month so that not only do I not incur additional charges for the interest on these items, but I am also watching that my debt to limit ratio is not reaching anywhere near it’s maximum capacity for credit.

This means that when I do finally go out to get a loan to get a deck put on the back of our house, I won’t need to worry about this aspect, the debt to limit ratio, messing up my chances of getting the loan in the first place, and also of getting a good APR if I do get it.

Remember the infamous movie in the late eighties called “Wall Street” where the egomaniac and ruthless takeover and scam artist Gordon Gekko, played wonderfully by the master actor himself Michael Douglas, takes a young aspiring stockbroker under his wing, played by Charlie Sheen, who’s also excellent in this Oliver Stone film, and some insider trading and other unethical things ensue?

Well, this movie was sort of a culmination of the multiple news stories on insider trading scams in news in the 1980’s and it may also hold true today in this day and age with all the hoopla we have going on around us and the seemingly iminent collapse of many banks and other financial institutions because of the greed and unscrupulous moves of the heads of these companies. I tried to sugar coat that, but that is in fact why we are finding ourselves in this unfortunate situation today and there is no way around that sad fact.

The movie has a famous line in it from Gekko’s character that “greed is good”, and that sentiment echoed true for a lot of the CEO’s and company heads that allowed the bundling of subprime mortagages into profitable (short lived, albeit) packages for investors to buy.

This is what led to a lot of the problems we are seeing today, but today we are unlucky enough to have many other factors working against our economy besides just the greedy moves of CEO’s and other people in charge. We also have the high gas price factor, the fact that there are too many homes and not enough buyers (too much building, not enough people to purchase in other words), and we also have the Iraq war going on.

Simultaneously we had the culmination of the bad mortgage debts happen all at once, so all the chips seemed to fall at the same time in this dire age. And what of employment? If the unemployment rate goes up significantly as well as an addendum to this crisis, we could see something akin to a depression, but of course nothing as bad as that since we do have certain safeguards in place to protect against that.

It seems that market panic has hit, but also a rise in people withdrawing money from their nest eggs - aka 401k’s has been seen as people are getting more and more desperate for cash as well as getting panicked about the stock market and perhaps prematurely withdrawing money in an effort to save it from the falling stock market, even in the face of some pretty hefty early withdrawal tax penalties which most people want to avoid like the plague if they can.

I understand the tempatation to withdraw early from your 401k or other retirement savings accounts early, I’ve been there, and in fact I did take a loan against mine one time, but it was for a nominal amount, and because it was a loan there was no penalty and I also paid myself back with interest, so I’d like to think that it was worth it when I was in a crunch for the money years ago before I started getting paid better at my job.

However, as any financial expert (I don’t claim to be one, don’t get me wrong), would tell you, I think that withdrawing early from your savings accounts for retirement should only be a last resort if you really need the funds bad for something that may be an emergency, say for emergency mortgage payments if suddenly money dries up or something like that where you are in danger of losing large assets.

Other than that, I don’t think it should be done, not only because you are banking against your own retirement, but also because you are paying a significant portion of the proceeds in taxes, enough to make anyone think twice about withdrawing early from these special tax sheltered funds, as they were designed to do by the federal government. Funny how they’re so willing to bail out big corporations though, and all the American people get is a small rebate check.

I’m wondering where all this money is coming from, that’s what worries me. If you’re really worried about your money being in the stock market in your 401k you may want to investigate putting it in a money market account or something much lower in risk (talk to your financial advisor), until the market stabilizes.

I’m not really sure what I think about the proposed $700 billion bailout plan as proposed to congress by President Bush a few weeks ago, but one thing is for sure, and that is that our financial services industry is on the verge of collapse and needed desperate bailing out by someone if they were to survive, and of course that someone happens to be the Federal government as of late. First we had the bailout of several large banks, and now the latest was with the largest insurer and financial instruments investor company AIG, and there are more lining up that will claim they need the government’s help.

I just have one major problem with this, and that is, where is all this money coming from? I mean we know that the government has emergency funds set up in place for things like this, but isn’t this going over even what the Fed’s deep pockets can responsibly offer without putting taxpayers way in the hole for years to come? It seems like this will definitely be falling on the shoulders of taxpayers over the next several decades, but what we don’t know is if this change will be fairly transparent and minute or whether it will be more painful than we think.

I have mixed emotions on the subject. As my dad, says, the government is trying to legislate away a depression and it won’t work. Nature will take it’s course and we were supposedly overdue for a massive market correction of sorts, however the government is wanting to smooth this over with emergency funds. Will this money work to bail out these major companies from years of abuse and loose lending practices and bad choices in subprime mortgage investment instruments?

I don’t have the answers, as most economists and experienced financial gurus do not either (I’m not putting myself in that category, trust me, I’m a novice at best, but an interested novice), but one thing is for sure. We must be in for a few years of turmoil and low markets, and it’s probably not going to be a good investment choice to get into any markets for the next year or so since the markets supposedly will not move anywhere but adjacent for a while. There will be rallies, but nothing long term until the dust settles.

I should have titled this one to “get and stay” out of debt, however I was a little worried that would be too lengthy a title for it to be read by anyone What I’m talking about is a recommendation by financial experts that of course is not doable for everyone by a longshot, but can certainly be done if one puts their mind to it and makes sure they stick to a budget and also at the same time make sure they are disciplined in putting away an immediate percentage of 50% of their pay.

50% is a lot! I’ll admit that, but if you have a business, or you do make a lot more money than you need for the basics, and tend to waste a lot of money on things like eating out a lot and taking a lot of vacations, this option is definitely a possibility for you. Some experts say that most people don’t have the discipline, but if they did, they could potentially be out of debt in much less time than if they took traditional ways out like consolidation, plus they would also be guaranteeing themselves in effect that they would never go into debt again since they are not spending anything that they don’t have in cash.

If you could live on 50% of what you make, not only would you be debt free very soon, but you would also eventually have a lot of money to invest for your future retirement, which means you’d be putting a lot more money into yeilding investments, and have more time for that interest to compound which means you have higher chances of retiring as a millionaire like most people need to these days just to make it by.

I know someone like this. He and his wife both made very good money and were naturally frugal and wise when it came to spending decisions. They both put away a combined percentage of 50% of their income because he had always expressed that he wanted to enjoy an early retirement, especially since his job involved a lot of travelling. Now, they have their first child on the way, and I’m not sure if they are going to be realistically able to keep up with putting so much of their income away, but they can certainly shoot for it.