Personal Finance Blog by Debit versus Credit

Please, Do Your Own Research

July 29, 2008 | Filed in: Miscellaneous | 1 comment

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I have friends who are completely anti-Obama.  I’m OK with that.  What I’m not ok with is when people make up their minds about things that they heard somewhere without ever bothering to find out themselves if it’s true or not.  A little disclaimer: I’m leaning more towards Obama at this point.  My mind is not made up yet, however, and will not be until probably a week before elections.  I like to keep an open mind about things and I don’t know everything about either of the candidates campaigns yet.  What I do know about them is that from what I’ve read and researched myself I prefer Barack Obama.  He seems to be a better match than John McCain for our country and its’ needs.  Like I said, this could change.  I don’t agree with everything he’s preaching, but I agree with a majority of it.  I think that’s the proper way to choose who to vote for, right?  Who cares if the candidate is male, female, black, white, Cuban, Asian, Mexican or Puerto Rican.  The point is that he or she is trying to do whats best for our country and that you agree with them.

I have two purposes for this post.  First of all I want to get across my point that an uninformed decision is a bad decision.  Period.  Secondly (and relating to the first point) I want everyone to know about an untruth which has been going around about the Obama campaign.  The reason for this?  It’s a pretty important topic and I absolutely can’t stand all of the hate going around.  It all goes back to my first point, of course.  Do your own research before making up your mind.

So What If Your Girlfriend Is An Obama Hater

Here’s a quiz for you.  Let’s say your significant other doesn’t like a certain presidential candidate and they feed you all of this information about him/her.  Do you a) agree with your significant other or b) research it and make up your own mind.  If you answered with “b” then good for you.  If you answered “a” then please reconsider option “b.”  Make sure that before you ever make any decisions that you always research and make up your own mind.  This is one of the primary lessons that I’d like everyone to pick up on here at Debit versus Credit.  This can be applied to every aspect of life, whether politics, finance or even your job.

Let Me Refute A Falsehood About Obama

I keep seeing information go around about how Obama is going to make everyones life miserable by raising taxes.  This is a half-truth.  Taxes will most likely increase under Obama’s leadership, this is true.  However to blatantly spread lies about how even the poorest in the U.S. will have to take on a larger tax burden is completely unaccurate.  I’d like to correct this misconception, so that people might be able to make a clearer decision.  Obama will only be raising taxes for couples making more than $250,000 in taxable income and for single filers making more than $200,000 in taxable income.  Income tax brackets will not change other than for these numbers.  That leaves a huge majority of U.S. citizens right where they currently are with taxes.  In fact they might even pay less taxes because Obama wants to introduce more tax credits for lower and middle class Americans.

Please don’t take my word for it.  Also don’t think I’m trying to convince you that you MUST vote for Obama.  Vote for whoever you feel most strongly for, but only after doing the research.  Good decisions probably shouldn’t come that easy.  Click Here if you would like to read more about what both McCain and Obama plan to do with taxes.

Tags: Barack Obama, John McCain, Politics, Rants

Young Ignoramuses

July 16, 2008 | Filed in: Debt | No comment

How’s this for a hotly debated topic: Should credit card companies be punished for soliciting to youth and college age students? There’s many an argument out there in favor of punishing these companies for “hard-selling” their product to ignorant youth.  I’d wager that there’s probably just as many arguments saying that these companies have no control over if someone misuses their credit card and gets in over their head in debt.  After all the credit card company only provided the loan - it was the recipient who used more than they could easily repay.  I tend to agree more with the second position.  There’s only so many excuses that one can make for their lack of sound financial responsibility.  I say it’s about time that we stop blaming everyone else for our own mistakes.

Hard Marketing - Hard To Say No?

I’ll not pretend that these credit card issuers don’t try to hard sell their products to students.  Being a student myself I’m aware of the different attempts that marketers will make in trying to promote their credit card.  They tout its features and even offer free gifts just for filling out and signing a credit card application.  While I don’t necessarily agree with these hard marketing tactics I don’t feel that it is the root cause of so many college-age kids getting into too much debt.  It may be hard to say no to these marketing tactics.  I’ve had difficulties in the past saying no.  It seems like such an easy way to get a free t-shirt or maybe a concert ticket.  Not saying no, however, doesn’t automatically cause the applicant to have unmanageable debt.  They do that to themselves.

Financial Illiteracy Rates Must Be Through The Roof

Why is it that financial education is so unimportant to so many people?  It’s hardly taught in formal educational institutions.  It’s sometimes taught by parents, but oftentimes so many parents are illiterate themselves.  It’s not like the information is just completely unavailable though.  With the mainstream appeal and availability of the Internet it’s easy to learn just about anything you could ever want to learn about.  You’ve got sources such as traditional news sites, financial blogs and even education websites.  With so much easy access to information there really isn’t an excuse for students - or anyone else - to be so ignorant.  I strongly believe that personal finance should be taught at educational institutions.  Children should learn at a relatively early age what makes the world go round and how to use it (money) to their advantage - rather than to their disadvantage.

Don’t Blame Anyone But Yourself

It’s obvious that a huge number of college-age youth are disadvantaged on strictly financial terms.  After all why else would a College Freshman sign up for a credit card and be approved for a $2,000 dollar limit, only to have that card maxed out within a year and have no way of repaying it.  It’s ludicrous.  Sure maybe the credit card companies shouldn’t have solicited to someone with such little income.  That’s a completely different issue though.  If you don’t have the means to repay a loan - and credit cards are loans - then why would you borrow?

Tags: credit cards, Debt, Ignorant Youth, Rants, Student Credit Cards

Finally! No New Rate Cut!

June 25, 2008 | Filed in: Personal Finance | No comment

Ben Bernanke and the Fed decided today to leave their federal funds rate at its current level of 2%.  They’re finally starting to worry about inflation and seem to think that there is much more upside risk (by inflation of course) than downside risk (recession and a slowing economy) at this point.  I’m inclined to agree with good old Bernanke on this one.  Although I’ve been thinking that this was the case over the past several rate cuts that the Federal Reserve has made.

The question that I’m asking at this point however is: is it too little and too late?  I’ll admit that the financial markets have been arduous lately.  I know this more than a lot of people, because I work at a credit union in Phoenix, AZ.  I’ve seen the massive slowdowns and read about the increasing loan delinquencies and writedowns that are taking place.  This with a relatively small (relatively speaking) and very conservative credit union with around $3 billion in assets.  Things must really be difficult for a lot of the larger financial institutions.  It’s obvious they are actually from the constant news of new write-downs.  This so-called recession has even taken from us one of the largest investing companies in the U.S., Bear Stearns.  Things are definitely crazy, but have these huge rate cuts been helping?  Or have they actually been hindering the recovery process?

These Things Take Time

Anyone who’s studied even the most basic of economics knows that market changes don’t happen overnight.  They also don’t happen in a week, or even a month.  Large changes in the financial markets can take months and even years to happen.  Keeping this in mind, one would ask why the Fed cut rates twice to a total of 1.25% percent over a matter of about a week and a half not too long ago?  These things take time, right?  So why so much over such a short amount of time?  I understand their reasoning.  They were hoping to restore confidence to the financial markets… specifically the stock markets.  Something that’s not exactly in their job description.  However I won’t go into that as it’s a completely new topic.  My point in bringing this up is that I’m actually fairly convinced that these large and frequent cuts have done much more harm than good.  All opinions are welcome on the matter, and keep in mind that I am no economist and this is only my opinion.

Have you seen the price of oil lately?  Or the consumer confidence index?  They’re at an all time high and low, respectively speaking.  Obviously there are many factors going into these things, but it’d be foolish to assume or to say that these fed rate cuts have nothing to do with it.  I’m of the opinion that because of the .75% emergency rate cut that the Fed made back in January, followed by the .50% percent cut a week later that consumer confidence was actually hurt.  As a generally uneducated crowd when it comes to finance and the ways of the financial markets we sort of come to expect what’s normal.  What’s normal to us are small and steady rate changes.  .25% here and there up or down are pretty normal in our eyes.  Naturally when we see a much larger change that was initiated by an emergency Fed session we’re going to think something bad is going on.  Self-fulfilling prophesy is a relatively common term that floats around in economics.  In the case of these ridiculously large cuts by Bernanke and company this term might be applied.  As consumers we noticed large emergency cuts and naturally starting to believe that things were much worse than we had previously thought.  Naturally this caused us to become skeptical of the whole situation and we began being more careful with our money.  Self fulfilling prophecy?  I do believe so.

What I’d Like to See

I’d love to see a rate increase in the next few months.  Inflation is going to be a huge problem if the Fed doesn’t do something to try and combat it.  Keeping rates steady will hopefully stop any more increases in the level of inflation, but it’s not going to cut it down.  Not at all.  

Tags: Federal Funds Rate, Federal Reserve, Rants, rate cuts

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