Here’s a funny parody of where our lending institutions are heading… be sure an read the fine print!
Thanks Mike
Category Archives: Finance
How Not To Handle Money
I was listening to the Dave Ramsey talk show recently and a lady called in and had done the following financially…
She took out a home loan to consolidate her $8000 in credit card debt. Fairly normal. For reasons undisclosed she chose a new 1st mortgage instead of a 2nd mortgage or some other type of home equity line of credit. Which meant she had to pay closing costs (though you can usually get a lower interest rate). Since her credit was bad, she had to pay $7000 in closing costs and still only got an interest rate of 9% (which many people have on their credit cards). This $7000 was, of course, added to the new mortgage — since if you had $7000 you could all but pay off the credit cards.The best part is that she actually took $15000 of equity out of her house (and only increased her loan by $22000) and so she had $7000 left over. She then decided to called Dave Ramsey the king of “get out of debt at all costs” to ask how she could best invest that $7000. Nice.
For you number crunchers out there: When you consider the closing costs her effective interest rate was actually 10.8% on that $15K and that’s spread across a 30 year loan…. it’s actually much worse spread across, oh, say 10 years… then your at a 20% effective interest rate. Ouch.
Credit Averages
While reviewing my credit report, I found some interesting numbers on the national credit averages. I found some of them surprising. The average American consumer has 5 open credit accounts and 1 late payment on their credit report. The average mortgage balance is $106,782 with an average payment of $1,020. The average auto balance $12,141 with an average payment of $416. Meanwhile, the average total debt in America is $79,884. Uh, do that math… (yeah, I know)
Those numbers don’t seem too out of line to me. What struck me is that the average credit card debt is $1,006. A GRAND! A grand? I don’t know anyone that has a credit card balance of $1K. People I know either DON’T carry a balance on their cards or they owe ten, twenty, THIRTY thousand dollars to Mr. Visa. I guess that just shows how averages can be deceiving. Still these averages can give you a hint as to how enslaved you are to “the man” or your stuff at least.
A Ramsey Moment
Dave Ramsey is the self-proclaimed King of Debt… well anti-debt, actually. His methods are a bit extreme for the financially savy, but they are sound advice for the average American. If nothing else, he offers a great place to start your journey to wealth/retirement.
Anyway, I thought of old Mr. Ramsey when I got an enthralling letter from Discover Card. Credit card companies hate it when you don’t have a big balance and love to make bad deals sound good. This one just made me laugh… The offer? Transfer your balances and save with a low, low rate of 2.9%!!… The catch? Well, a small transaction fee and the low rate only lasts for 4 months…So here’s the math: For a 3% charge you can reduce your annual interest rate by 9% (the average credit card interest rate is about 12%) for 1/3 of a year… great deal eh? Ah, credit card companies… always looking out for us.
Quarters For A Cause
So a mystery economist has partnered with Glenn Beck to bring you “Quarters for the Cause”. I have to admit that this idea is GENUIS. Using an army of kids to sift and collect quarters for the Red Cross is great. I think their projections of $7 Mill/day is unrealistic. I would say this idea in full swing might hit $7 Mill/week, but even that is a tad optimistic.
But, here’s the twist…once these quarters are donated they will be spent and put right back into circulation. So, if this concept were to catch on, $7 million would be donated EVERY SINGLE DAY. That?s over $2.6 billion a year.
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