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Is it lack of spending restraint or lack of income?? October 28, 2014

Posted by forwardfinancialplanning1 in Credit Cards, Economic Conditions.
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Came across some statistics recently that made me wonder, “What is the real cause of this negative development in US consumer finances?”
Money Zine evaluated debt growth and income growth over the past few decades and found: Back in 1980, the consumer credit amount per person was $1,540, which represented 7.3% of the average household income of $21,200. In 2013, consumer debt averaged $9,800 per person, which was 13.4% of the average household income of $72,600. In other words, consumer debt increased 70% faster than income from 1980 through 2013.

Clearly, credit is more widely available today than it was in 1980. So are we getting more than enough rope to hang ourselves? Credit card issuers demonstrate a willingness to readily extend credit as it is highly profitable for them. But, why can’t the average American “just say ‘no””?? Some in Washington would like us to believe that problems such as these are created by lack of income growth. While perhaps there is some truth to this supposition, I would suggest that a more likely factor is our collective lack of spending discipline. And, the federal government is in no position to criticize, as their spending record is many times worse. The big question is, “how long can this debt binge continue, before it threatens our civilization?”

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Progress on credit-worthiness October 13, 2014

Posted by forwardfinancialplanning1 in Credit Cards, Economic Conditions.
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A recent report by the American Bankers Association offers hope to the beleaguered US consumer. The ABA says installment loan delinquencies are at secular lows and all home related delinquencies have fallen. Total debt delinquencies are at a 40 year low.

We have heard much about the struggles of the middle class and the lack of wage growth in our economy. But, perhaps the lessons of fiscal conservatism from the Great Recession have taken hold. Let’s hope that the lessons are permanent………….

General mistrust or a “do-it-myself” trend October 11, 2014

Posted by forwardfinancialplanning1 in Financial Planning, Investing-General, Retirement Savings.
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A recent Fidelity Investments study of Millennials may pose more questions than it answers. In particular, the Millennial Money Study found that 23% of millennials stated that they trust “no one” when it comes to financial advice. In addition, 41% disagreed with the statement that, “my parents provided a good example of how to have a successful financial future.” And, 49% don’t get financial advice from their folks.

This blog has often commented on the abysmal state of financial literacy in the United States and these findings raise the question: “Where will these young people go for advice?” In a best case scenario, they’ll take the initiative and acquire the knowledge to become self sufficient in this area. After all, this is is not rocket science. In a worst case scenario they’ll look to the government to take care of them, which will superimpose their problem on our society as a whole. The future collective financial health of the nation may depend on the answer.