Tag: credit cards

What Will Cause The Next Stock Market Crash?

Summary:

  • Investors feeling safer than they should is the primary cause of market crashes.
  • Consumer debt is at unhealthy levels, but it is not reflected in consumers’ credit scores.
  • Bonds in every sector have the potential to be much riskier than their credit ratings indicate.
  • It may be a good time to avoid long-term bonds and securitized debt and to look for investments less exposed to high levels of debt.

Stock market crashes, like those that hit the U.S. markets in 1929, 1987, and 2008, tend to follow the same formula. This makes people wonder why they keep happening and we cannot prevent or even predict them. In fact, the act of thinking that we can prevent or predict them can at least partially be credited with causing them.

The formula is essentially as follows…

Continue reading at Seeking Alpha.

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My Year with a Cash Back Credit Card

Like many consumers, my wife and I have long been suspicious of credit card companies. We are generally cautious about debt, not wanting to add to our massive student loan obligations. Credit cards, of course, are among the worst kinds of debt: with high interest rates compounding at a rapid rate.

Up until the end of 2016, the only credit cards we ever had were from making a large retail purchase on credit. For example, I purchased my Macbook Pro with Apple Credit, which is really just a Barclay credit card. The first year has no interest, so I paid off the account in one year and paid no interest. I wanted to keep that line of credit open to build my credit rating, so I set up automatic bill-pay on a bill that is $15/month. I pay off the balance every month, and I don’t use that card for anything else. It has been great for building my credit at no cost. Otherwise, it not very useful and adds to my stress sometimes when I worry about forgetting to pay it.

blue-cash-everydayWhile teaching my high school personal finance class about credit cards and credit ratings, I decided to do an experiment and try using a cash back card. I compared some cards and decided to apply for the American Express Blue Cash Everyday rewards card. Credit Karma informed me that with my credit history, my application would have a good chance of being accepted, and it was. Continue reading “My Year with a Cash Back Credit Card”

The Case Against Emergency Funds

Most financial advisors will probably tell you to establish an emergency savings account. I personally am a fan of the emergency fund strategy, but it is different for every person, depending on what kinds of risks they have in their lives. I talk with my finance classes about different types of risk we are exposed to:

  • Concentration risk
  • Income risk
  • Inflation risk
  • Interest rate risk
  • Liquidity risk
  • Personal risk

Emergency savings can help with some of these risks, like a medical emergency or job loss, but they lose buying power to inflation, and they have an opportunity cost. The question is which of the risk factors above carries the most weight for you. If you work in a highly volatile industry, income risk may be a major concern. If you are a contracted teacher like me, maybe not so much. This is why it is important to “play devil’s advocate” and make arguments against conventional wisdom in finance. Let’s examine the argument against establishing the infamous emergency savings account. Continue reading “The Case Against Emergency Funds”