Tag: debt

The Net Worth Budget

You know that you need to budget, save, and pay off debt. Your parents, your teachers, your friend who is a financial advisor, and the morning news show you watch have all told you so. You made a list of bills and expenses and subtracted them from your income, figured out how much you had left, and maybe put some of that into your savings account every month. You’ve been doing that for awhile and don’t seem to be getting anywhere.┬áThe savings always gets spent, or somehow the money never makes it into savings in the first place. Something always comes up. The student loan debt seems like it is never going to go away, and saving up to buy a house is never going to happen. It’s time to look at a new approach to budgeting. Continue reading “The Net Worth Budget”

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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.

Book Review: The Total Money Makeover

Total Money MakeoverDave Ramsey’s Total Money Makeover is not a perfect system, nor is this a perfect book, but it is the reality check that tens of thousands of American consumers need. After one filters out the unhelpful testimonials and the plugs for his radio show, this book a lot of good common sense about finances.

Ramsey rightly compares personal finance to personal health. Most of it is common sense, but as he says, it is 20% knowledge and 80% behavior. Ramsey’s system is all about correcting behavior. There are some methods that are more efficient than Ramsey’s but that offer too many temptations that many people can’t handle. While Ramsey encourages you to follow his system strictly, he is forthcoming about the arguments against everything he says. This is an important reason why I recommend this book.

Some people need this system and need to follow it strictly to fix their finances. Some people are already doing okay and can keep doing what they are doing. I would say that this program is not for everyone, but everyone should read it to make sure. It could be the difference between becoming a millionaire and going bankrupt. Even if you don’t use it all, there is plenty of good information and some solid reality checks in here for everyone, even those who already know a lot about finance and are financially successful.

The Net Worth Mindset

I didn’t get into studying finance until I was in my 30s, but when I did I studied hard and tried to make myself an expert in it. I had to, because I had to teach it. One of the things I latched onto early was the balance sheet. It fascinated me and continues to command my attention. Predictably, when I learned to look at my own personal balance sheet, my personal financial life literally started to come into balance. Continue reading “The Net Worth Mindset”

These 3 Charts About Student Loans Should Scare Everyone

Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, wrote a startling article on “the economic side effects of the student loan crisis.”

1. Homeownership is on the Decline

chart1-homeownership

2. More Student Loan Debt Among Older Age Groups

chart2-studentloan

3. College Education is Still Key to Employment and Earnings

chart3-earnings

So you have to have a college education to earn decent income and steady employment, but the cost of that degree makes it nearly impossible to purchase a home, save for retirement, etc.

Rieder offers some excellent perspective on why this is some seriously alarming data for the economy.