Even though the recession is long gone and unemployment has fallen below 5%, the findings of a recent survey by Bankrate.com conclude that there are still significant financial issues that many households are struggling to handle. Around 35% said that their biggest concern was meeting their bills, including reducing their old debts. A further 20% said they were worried about paying off their student loans and about the size of their credit card balances. Credit card companies charge a high rate of interest on a balance remaining after the user’s monthly payment is applied. Those that just pay the minimum required will not see their balance reduce significantly.
Wage Statistics and their Impact
The USA Economy is improving but wages are not rising to any significant extent. There are clearly people who got into trouble during the recession. Those who lost their jobs found it difficult to meet their bills then, and often they found new jobs, but not necessarily ones that paid especially well. There are no statistics but there is a feeling that lots of workers remain in fairly poorly paid jobs. People who need to reduce their debts are finding it hard to do so because their wages may be static while livings costs are rising. Recent data says that the average family income in the USA is 8% down in real terms from ten years ago with lower income families the hardest hit group.
The latest survey by Bankrate.com is little different from the one done a year ago even though the unemployment rate has dropped during those twelve months. Both surveys found that low income households, those below $30,000 annually, are the least optimistic. Over 50% talked about their concern about meeting their bills. That compares with around 30% of those earning more than $75,000.
The Case for Credit Cards
There is no doubt about the convenience of credit cards. You don’t need to carry cash when you go shopping because you can use your card. Likewise, if you want to shop for online loans, then a credit card is the best way to do it. Unfortunately, they are very tempting; you can buy something and spread the cost over several months if you wish, but therein lies the problem. Card companies make their profit from the interest they charge on balances outstanding at the end of the month once the user’s monthly payment has been decucted. The rate of interest is high and if you only pay the minimum required, you will find yourself with a problem; a stubborn balance that hardly falls month by month. Every item you buy effectively costs you the purchase price plus the interest until it is paid for in full.
If you are carrying credit card debt you will find it difficult to save. There are plenty of people, the younger genersation especially, who want to save whether for their retirement or an emergency fund. Saving is important yet of equal importance is paying off any credit card debt, perhaps with a personal loan that is at a much lower rate of interst?
Financial Naivety or Not Facing Facts?
Whatever the conclusions of surveys, there is little doubt that many Americans are poor at financial management. They say they want to get rid of debt and they want to save but too few seem willing to improve their financial status. Perhaps it is just that in modern society, everyone wants things that were once regarded as luxuries and if that involves taking more credit, that is exactly what they will do.
Many are making poor financial decisions on a regular basis and show little sign of trying to improve their situations despite what they are telling the market research interviewers who are collecting information for surveys. The answer is a budget, making a list of income and expenditure and trying to create a surplus. For those in trouble who say they want to pay of their debt as a matter of priority, it will not be easy. However, there is no magic wand to make debt disappear. It is time for people to act in line with what they are saying is important to them.