Control What You Can – Don’t Worry About The Rest
November 25th, 2008
As Thanksgiving approaches, I am reminded of how fortunate I am to live in this wonderful country. This is a great time to reflect on all of the good things in our life and to stop obsessing over the challenges that lie ahead.
As I watched the Dow bounce around the lows of the 2002 recession last Friday, I thought of a principle I learned from my Dad when I was young. He would say, “Control what you can, don’t worry about the rest.” All of a sudden day-to-day movements of the stock market are affecting our mood. If the market is up 500 points, we feel good. If it’s down 500 points, we feel bad.
We need to stop watching day-to-day movements of the market and worrying about what we can’t control. I’m not trying to make light of the very real problems we have in the economy I’m acutely aware of the issues we are facing. However, I can’t help but feel the problem has become a bit overstated when my younger brother, who has never followed the market, tells me we are on the verge of the next great depression.
I couldn’t help but laugh on Friday when I turned on CNBC near the close of the market and heard one of the commentators say, “Stay tuned to see how to invest your money for the weekend.” Come on, do people really believe this stuff? As part of my job I do presentations for the public. One exercise I like to do is ask the audience what their goal is when investing. Without exception I get the answer, “make money.” This is a reasonable response, but not a very good goal. In my opinion a goal is, “Pay off my credit card debt,” “Retire at age 65 and live on $8,000/month”, or “Have my house paid off and leave $20,000 to my grandkids.”
I find that people focus way too much on the daily movements of the market and not enough on their long-term goals. So, here are some suggestions to keep in mind during these difficult times.
Financial planning advice
- Set long-term financial goals and stick to them
- Constantly add money to your investments, especially during tough times
- Don’t let the market dictate your mood
Let’s all pause during this time of Thanksgiving and take a moment to remember the things that are really important in our lives. I am determined not to let the media, or anything else for that matter, negatively affect my mood. The market will go up over time. This I know, and for now that is good enough.
Posted By: Matthew Shriber | Comments (0)Think Twice about Chucking that Letter from Your Credit Issuer
November 19th, 2008
I’ve become somewhat of an expert mail sorter over the years. It’s almost like I’ve developed a robotic sixth sense for detecting worthless mail at first glance. I pull out a stack that weighs 5 pounds from the mailbox, sit it on the counter, and in less than 60 seconds I walk away with a few more wedding invitations in hand and a healthy contribution of unopened junk mail for the shredder.
I must admit I get duped from time to time. Those letters that really look like they’re from your mortgage company and say “Time-Sensitive Documents Enclosed” are my worst enemy. For a split second they always cause me to hesitate and lose focus. Inside I really want to open them to see if they’re for real, but my sixth-sense tells me “Don’t waste your time – it’s just another ad!” I cave in on occasion and risk another painful papercut to appease my curiosity. I’m usually disappointed.
Unfortunately, I’ve had to devote extra time lately to this daily process because we should all be thinking twice about throwing away any unopened letters from our lenders or credit card companies. In this recessionary climate, it’s a well-known fact that credit card companies and home lenders are taking drastic measures to tighten the reins on consumers and minimize their exposure to risk. That letter you are throwing away might be notifying you of a large interest rate hike, a reduced credit limit, or a home equity line that will be canceled. You might expect them to notify you by email as well, but that’s not always the case. An actual letter is often required by law. Here’s a little anecdote to help you sift through the credit card mail and find what’s actually important:
Credit card advice
I received one the other day from Citibank for a credit card I’ve had for a long time, but rarely use. It had a sizable credit limit, I’ve never missed a payment, always paid the balance in full, and still used it from time to time. Obviously not often enough. Citibank said they wanted to help me “better manage my credit accounts”, so they closed the account due to inactivity. Thanks a lot Citibank! So thoughtful of you. My east-coast sarcasm should be shining through right now.
So, if you have mad mail sorting skills too and can fly through a huge stack in under 60 seconds, I suggest training your eye to catch anything that could possibly be from your lenders or credit issuers. Take a few minutes to read the letters and make sure you understand what’s going on with your accounts. If you’re unhappy about the new conditions or an account closure, pick up the phone, give them a call, and ask to speak to a supervisor who has authority to make changes to your terms. You may be surprised how much you can actually accomplish when making a reasonable request to the right person.
Posted By: Joshua Heckathorn | Comments (6)Is a Credit Card Crisis Next in Line?
November 12th, 2008The latest estimate I saw for US credit card debt stood at $915 billion. I don’t know exactly where it stands today, but the number seems to rise 10 billion or so every time I hear it mentioned. It may sound like a familiar number to you as well, since it’s a mere $15 billion more than the amount of consumer debt that drove the subprime mortgage meltdown earlier this year.
Should you be concerned about this rise in US credit card debt? I think so. You would be crazy if you’re not concerned. Especially if some of it is held by yours truly. As major credit issuers such as Citigroup and American Express report their worst quarterly earnings since 2001, many analysts fear that rising unemployment and subsequent credit card delinquencies will be catalysts for the next meltdown in global credit markets. But is a credit card “crisis” really next in line? I’m not convinced quite yet.
I can’t deny there are similarities between the issues we’re experiencing with credit cards and subprime mortgages; however, I see one major difference that leads me to believe things will not be as bad as many predict. It’s a well-known fact that mortgage delinquencies were at all-time highs and dramatically increasing months before the subprime meltdown. On the other hand, credit card delinquencies are actually coming off unusally low levels. And according the American Bankers Association, credit card delinquencies increased just slightly to 4.54% during the second quarter this year. That was an increase of only 3 basis points compared to HELOC default rates that continue to see double digit increases quarter after quarter. So not only are we starting out in a much better place, but it’s also clear that people are keenly aware of what we just experienced in the mortgage markets. There’s a heightened sense of awareness, and all signs indicate that many consumers are cutting back on spending, trying to save as much as they possibly can, and pay off more of their debt.
Credit card default rates will likely continue to increase in the coming months, as they did in the third quarter, but I don’t expect the fallout to be so severe that we will see substantial downgrades to securities backed by credit card receivables like we did with subprime mortgage-backed securities. So, the next important question is whether President-Elect Obama will be able to implement a stimulus package that will create more jobs and convince corporations to get out and hire more talent. Because if companies continue to shed employees like a bad sunburn after a week at the beach, we may be in for a long dry spell before any of us get a much-needed vacation. What do you think?
Posted By: Joshua Heckathorn | Comments (1)A Cashless Life
November 6th, 2008It’s a rare day when you are able to walk through any major city’s downtown or financial district without being asked at least once: “Can you spare some change?” My answer is always, “No, sorry!” It’s not that I’m void of all compassion or that I don’t want to give away the money I’ve worked so hard to earn. But unless the panhandler has a credit card machine in his pocket, I literally can’t spare change because I don’t physically have any! I cannot remember the last time my wallet even came close to smelling the scent of a USD bill of any denomination.
What are my reasons for living a completely cashless life?
First, cash is hard to come by. Even though I live in the same building as my bank, direct deposit and automatic payments give me no reason to step foot in the branch. And frankly, I don’t miss having to try and remember my bank account number to fill out a deposit slip and then wait in a long line just to deposit a check with an amount that eventually seems insignificant compared to the time it took me to even deposit it! And then if I want cash, I’d have to either go back to the branch and stand in line or go in search of an ATM that won’t charge me $3 just to use it.
Second, I love me some points! I personally use the Citi PremierPass Elite credit card for most of my purchases and earn points I can redeem towards free travel around the world. Cash gains me no points whatsoever, so why not at least get something back for the money I’m spending?
Third, I’ll take a 30-day interest-free loan anytime I can get it. I learned from the day I turned 18 the importance of only spending on credit what I could pay back upon the due date. So while my credit card allows me to spend now and pay back later, I put my cash in an online savings account that earns one of the highest interest rates in the country until the payment is due.
Fourth, when I charge all purchases, I have a record in the form of an online credit card statement of every single purchase I have made on my credit card. At the end of each month, I know exactly how much I have spent on food, gas, entertainment, apparel, etc. When I pay using cash, it’s all gone before I know it, leaving me to wrack my brain to try and figure out how every penny was spent.
A cashless life is not for everyone. Some of you may be recovering credit-a-holics and part of your recovery program is to learn how to live on a budget by using only what cash you have. And some of you may prefer to use cash instead of credit just because you like the feel of cold hard cash in your hands. Whatever it is you choose, I’d love to hear what you prefer and why. Feel free to leave a comment below.
Posted By: Elisabeth Chan | Comments (1)
