Why US is Consumer Debt Ridden?

US is well known as one of the biggest creditors, as well as debtors in the world.

Although US helps funding other countries, especially developing countries, it own people is debt ridden.

Why such a contrast? In my opinion, culture and opportunities are the main culprit.

Taking consumer debts, especially with the ever-present of very interesting credit cards offer has been a trend, if not a culture in every American life.

Credit card, a major part of the cashless society movement, offers convenience to its holder. It’s unbelievable today if we know someone without having at least one plastic in one’s wallet.

Nothing wrong with the credit card - it’s the holder that cause the problems

Credit cards are basically useful and convenient. You don’t have to carry cash with you, bringing convenience in your daily life, as well as minimising the risk of, say, pick pocketing.

With low interest cards being offered these days, with additional perks, such as 0 APR or interest free period for a limited time, consumers are attracted to sign for one.

No matter how much information on credit cards benefit available, the debt-ridden US today is suffering simply due to the nature of human being - spend what they see, and spend even more what they don’t see.

For example, if you had a $100 in your wallet, you have the tendency to spend it recklessly when you go to the supermarket. This ‘genetic’ problem is amplified by the availability of credit cards. Suppose you were given a limit, say $500. You will always have the tendency to spend more than you should, because you don’t ’see’ the money you have in your pocket. This is amplified by the sense of ‘you-can-pay-the-bill-later’.

Credit cards can actually deliver you from debt

Here’s a good news for responsible and well informed credit card holders - you can actually clear your debt with the help of credit cards, as well as helping you raise your credit score.

Clearing debts - Using credit cards smart and cautiously will allow you to have 30-day interest free loan. The key is to pay your bills before it’s due, and pay them in full.

Raising credit score - Choose reputable credit card issuers, and use your plastics as usual. The key is never pays your bills late. Do this regularly will give you a ’shining’ report.

Choose your credit cards wisely, and they will help you in your personal finance.

Jobs to go at HBOS mortgage sector

This is a guest post.

With the mortgage drought in the UK continuing since the onset of the global credit crunch last year, it is not only consumers who are suffering. Many people that work within the mortgage industry have also suffered as a result of the turmoil in the mortgage sector, and recently HBOS has announced that there are to be job losses in its mortgage loan sector. The closure of a specialist mortgage branch by HBOS is to result in the loss of 325 jobs by the end of March next year.

The Mortgage Business, which is an arm of HBOS, will be closing to new custom later this month, and the bank will also close a mortgage processing centre. The job losses have been described as a blow by union officials, who have said that the number job losses is actually larger than the bank has cared to admit. In the first six months of the year HBOS announced that pre-tax profits fell by around 72%.

The bank said that it hoped the jobs could be cut through voluntary redundancies and turnover of staff. It added that the bank had to focus on streamlining the business. Union officials have said that the closure of the processing centre will affect jobs in Livinston, Chester, and Cardiff. One union official stated: "This is a further blow for jobs in the UK financial services sector which is being brought about by the credit crunch and the changing economic climate." 

Another union official said: "We are never happy about any reduction in roles in HBOS even if we understand the commercial logic for the changes."

5 Ways our Brain Works to Wreck our Finances

Why does negativity sell?

This is a rant and a question about something that really bugs me. I spend quite a bit of time reading financial news, primarily on the Internet, and I am struck by how much writers and commenters wish for bad economic news, the worse the better. It is a widely accepted belief that if you want to start a successful paid financial blog or website it is better to concentrate on a negative subject.

Many times an article with a positive slant on the economy or job statistics or the housing market will be followed with numerous comments proclaiming the sector involved is in the middle of a deep recession that will last for years, decades, forever, etc. Here are some of the more virulent topics, first, with what I see as factual, followed by some common perceptions:

• U.S. economic recession: Although government statistics show the economy is still growing, although at a slow rate and the historical average recession lasts 6 to 9 months many Internet opinions put us well into a deep recession that will last for many years.
• Worldwide economic recession: Economic growth is healthy in most parts of the world with strongly growing economies in most regions. Again, however, many expounding on the Internet are convinced the U.S. ‘monster’ recession will drive the rest of the globe into recession or vice-versa.
• Sub-prime credit crisis: The failure of the sub-prime mortgage market has hit many financial institutions hard and has caused a real recession in the housing market. Reading the internet and following the financial stocks would have one believe no bank will ever make a profit again or even survive.
• Inflation/Stagflation: Rising commodity prices, especially oil, have caused many prices to increase. Many in the Internet world do not believe any government statistic on inflation and fear U.S. monetary policy will drive us deeper into the multi-year, multi-decade recession they are all wishing for. Or so it appears if you read enough of this stuff!
• Housing market: From about 2002 until near the end of 2006 real estate prices and new home sales shot up at unprecedented rates. Since 2006 home prices have generally fallen and home building has been severely curtailed. Now home building rates and prices are back to somewhere around the 2002-2003 levels. Internet pundits keep comparing their data to one year ago or peak rates and project the current slow down all the way to zero. Many I read will not be happy until everyone’s home is worth $1,000.

This type of stuff really bugs me. First, of all I am a positive guy and want to make money by investing in positive ideas. An investment that goes up in value is positive. I do not see the value of all of the negative prognostication, especially on finance/investment internet sites. Excepting of course, the financial sites pushing this stuff and making some serious coin! Second, I have been watching financial news a long time, and everything goes in cycles, especially herd mentality and stupidity. And the herd includes everyone from bank CEOs to Wall Street numbers geeks to your neighbor getting-rich-on-investment-real-estate-with-no-money-down until it all collapses. The long term trend of economies and markets and real estate are to grow in value, but these are not straight line trends. There are many ups and downs along the way. As an investor, I want to find the places in the trends where I can make more money than putting my cash in the bank or T-bills. Projections of impending or current doom and collapse do me no good.

So my question again is: What is the appeal of all of the negative financial scenarios in the news? Why aren’t more people interested in stories that show them where things are positive and there are money making opportunities? Or are the positive money makers happy with their lot, and leave the doom pounding to those without the ability to find positive investment stories to help them make money? I look forward to reading any comments on this subject.

Cutting costs doesn’t mean losing status

The New York Times recently ran an article on the many ways that Americans are finding to cut costs in the current price-of-living increase we’re facing.

Spending data and interviews around the country show that middle- and working-class consumers are starting to switch from name brands to cheaper alternatives, to eat in instead of dining out and to fly at unusual hours to shave dollars off airfares…Retail sales figures and consumer surveys confirm that Americans are strategically cutting corners, whether it is at the coffee house or the airport.

If you’ve been feeling the pinch of $3.60-a-gallon gas and milk, you’re not alone; it’s happening to everyone, and people are acting on it instead of pretending it’s not there. They’re pinching pennies, cutting back on luxuries, doing for themselves rather than purchasing convenience.

Discounting worries over the economy and such, this is fantastic news for our brains. Consider: we don’t have to spend money we don’t have to look better than our neighbors. In fact, if our neighbors are pinching pennies, we may not even have to spend the money we have. The social pressure is easing off (for the working- and middle-class at least) to have the newest, shiniest things, and since relative wealth is the key to happiness, we don’t have to work so hard and buy so much.

Aside from a slackening in subconscious tension that comes from being in a race for social status, being able to look better than others with less money is a positive pleasure for the brain. Two studies recently published in the scientific journal Neuron found that the brain processes monetary and social rewards similarly. Keeping up with the Joneses (among other factors) has kept us as a nation from saving as much money as we otherwise might; now, knowing that the Joneses are letting their manicured lawn go dormant and their fashionable clothes go out of style will give your brain a double charge.

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