Pending Financial Disaster
Fixing the money thing!
We have tackled many topics regarding your personal finances, however it’s time we tackled the pending financial disaster in America.
Today the stock market fell once again. Sound familiar?
Remember 2000 to 2003?
The stock market has fallen more than 1000 points in the last month, most of that in one week. Is this just another minor market correction?
Why are the cost of goods going up at an alarming rate? Why are there so many forclosures on new homes? Why with so little unemployment are we seeing the kind of economic indicators we saw during the Carter administration? Should I be alarmed? What can I do to protect myself from a financial disaster if one should occur.
Joe intends to tackle these issues in this blog.
Lets look at some of the factors that have contributed to the unsettling times we are facing.
High national debt,the highest in history. High personal debt, also the highest in history. The blog host shows stastistics on his website that are alarming regarding personal debt and national debt.
Someone has to pay the piper.
Home forclosures are at a national record. In my sons 4 year old new home subdivision 1 out of every 5 houses is abandoned, in forclosure or severely behind on their payments.
Why?
Builders, bankers, realtors and their lobbies influenced the Government to modify lending rules several years ago to keep the housing boom going. The lenders were able to get people approved for loans that 2 0r 3 years earlier they would not have approved.
Buyers with considerable credit challenges were approved and the builders and realtors were thrilled. They could now get people in homes that they would not have qualified for before.
The problem comes in that the buyers were already in excessive debt and we just added hundreds of thousands to the burden. When you buy a new home the real estate taxes are based on the LAND only the first tax year.The second year the payment including taxes and insurance went up considerably. The third year,the loans were not fixed interest and the interest went up and so did the payment.
Buyers who were struggling to make the payment initially now were unable to make them at all.Thus forclosures! In many new home subdivisions people are just walking away from the home in the middle if the night.
The housing and mortgage industries are in a panic.The stock market is affected and so on and so forth.
Oh what tangled webs we weave in an effort to deceive!
THE STOCK MARKET
In 1960 only 2% of Americans owned stocks.
Then came the Mutual fund!
Today most Americans have Mutual funds through employer retirement plans like 401k’s, 403b’s, 457’s, IRA’s, and Roth IRA’s.
What does that mean?
The stock market is vastly overinflated.
Before mutual funds, the only people who owned stocks were people of means who were able to pay someone to watch, move, buy and sell on their behalf continuously.
Today the American people have been lied to by the brokers and agents who sell these mutual funds at big commissions and continued (Trail commissions ) even when the market goes down!
When the experts sell the mutual fund, owners are told to buy because the market is so good. When the market is low and the experts know what and when to buy the mutual fund brokers say again, buy now because the funds are a good value.
In other words, no matter what is happening they are giving you the exact same advice.
Sound a bit suspicious to you?
When in 2000 -2003 the market began it’s largest loss in history. The advice was exactly the same. It will come back, don’t worry!
Well, they were right! The market did come back. Over all, the average holder of mutual funds and stocks had vertually NO GAIN for 7 years!
How often can you afford those kind of setbacks?
Now, with the largest one week loss in the history of the stock market earlier this month what do you suppose the advice of the mutual fund dealer is? Same old, Same old!
Why are we not suprised? They don’t want to give up those hefty commissions.
The stock market is more volatile than ever in it’s history and we predict a much longer and much larger loss than in 2000 -2003 over the next several years.
Can you afford it again?
What then should we do?
Lets start by using some of the common sense that our Government, Realtors, Builders , Bankers and Investment brokers seemed to have left on the Table of the BIG COMMISSION!
Start by developing an aggressive strategy to pay off all consumer debt!
First, make sure you have at least $2,000.00 in the savings accounts for immediate emergencies.
Then attack the debts one at a time starting with the highest intrest rate and going down.
Don’t add a little to each debt. Take all the extra money you can free up monthly and attack them one at a time!
Stop paying into retirement plans and eliminate consumer debt first.
That flies in the face of conventional wisdom due to the employers contribution.
Don’t let greed destroy you! Pay off the debt!!!
If a major economic downturn, recession or worse happens you will be on top and not at the bottom!
The choice is yours!
You can keep on doing the same thing you are doing now in whch case if the above happens you will be destroyed financially.
Or you can do something different.
The definition of insanity is doing the same thing and expecting different results.
Are you willing to bet we are wrong?
Joe Money Matters is a section of the VAJoe Blog to ask for quick financial tips and advice from an expert with more than 20 years experience in counseling families to live without debt and to reach there financial potential. Please leave comments on this Blog. You can learn more about the Joe Money Matters advisor at his website. The posts and comments by JoeMoneyMatters reflect his two decades of financial counseling expereince. VAJoe.com does not endorse any financial strategies, but offers this blog as a service to its site members for discussion.
