Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Here’s Why The Left’s New Economic Policies Are Just Stupid - 19th Feb 19
Should We Declare Emergency for Gold? - 19th Feb 19
Why Stock Traders Must Stay Optimistically Cautious Going Forward - 19th Feb 19
The Corporate Debt Bubble Is Strikingly Similar to the Subprime Mortgage Bubble - 18th Feb 19
Stacking The Next QE On Top Of A $4 Trillion Fed Floor - 18th Feb 19
Get ready for the Stock Market Breakout Pattern Setup II - 18th Feb 19
It's Blue Skies For The Stock Market As Far As The Eye Can See - 18th Feb 19
Stock Market Correction is Due - 18th Feb 19
Iran's Death Spiral -- 40 Years And Counting - 17 Feb 19
Venezuela's Opposition Is Playing With Fire - 17 Feb 19
Fed Chairman Deceives; Precious Metals Mine Supply Threatened - 17 Feb 19
After 8 Terrific Weeks for Stocks, What’s Next? - 16th Feb 19
My Favorite Real Estate Strategies: Rent to Live, Buy to Rent - 16th Feb 19
Schumer & Sanders Want One Thing: Your Money - 16th Feb 19
What Could Happen When the Stock Markets Correct Next - 16th Feb 19
Bitcoin Your Best Opportunity Outside of Stocks - 16th Feb 19
Olympus TG-5 Tough Camera Under SEA Water Test - 16th Feb 19
"Mi Amigo" Sheffield Bomber Crash Memorial Site Fly-past on 22nd February 2019 VR360 - 16th Feb 19
Plunging Inventories have Zinc Bulls Ready to Run - 15th Feb 19
Gold Stocks Mega Mergers Are Bad for Shareholders - 15th Feb 19
Retail Sales Crash! It’s 2008 All Over Again for Stock Market and Economy! - 15th Feb 19
Is Gold Market 2019 Like 2016? - 15th Feb 19
Virgin Media's Increasingly Unreliable Broadband Service - 15th Feb 19
2019 Starting to Shine But is it a Long Con for Stock Investors? - 15th Feb 19
Gold is on the Verge of a Bull-run and Here's Why - 15th Feb 19
Will Stock Market 2019 be like 1999? - 14th Feb 19
3 Charts That Scream “Don’t Buy Stocks” - 14th Feb 19
Capitalism Isn’t Bad, It’s Just Broken - 14th Feb 19
How To Find High-Yield Dividend Stocks That Are Safe - 14th Feb 19
Strategy Session - How This Stocks Bear Market Fits in With Markets of the Past - 14th Feb 19
Marijuana Stocks Ready for Another Massive Rally? - 14th Feb 19
Wage Day Advance And Why There is No Shame About It - 14th Feb 19
Will 2019 be the Year of the Big Breakout for Gold? - 13th Feb 19
Earth Overshoot Day Illustrates We are the Lemmings - 13th Feb 19
A Stock Market Rally With No Pullbacks. What’s Next for Stocks - 13th Feb 19
Where Is Gold’s Rally in Response to USD Weakness? - 13th Feb 19

Market Oracle FREE Newsletter

The Real Secret for Successful Trading

Get on Top Of Debt Before It Gets on Top of You

Personal_Finance / Credit Cards & Scoring Feb 18, 2018 - 03:36 PM GMT

By: Boris_Dzhingarov

Personal_Finance

The financial markets are in a constant state of flux. Judging from the current volatility in equities markets, one would be remiss not to pay attention to economic indicators when making trading or investment decisions. For example, one of the most important components of investment-related decision-making is interest rates. On Wednesday, 21 March 2018, the Fed FOMC will be meeting to discuss another possible rate hike. The federal funds rate (FFR) is expected to rise 25-basis points in the region of 1.50% – 1.75%. The current probability of such a rate hike taking place is 83.1%. This has far-reaching ramifications on a typical US household’s ability to manage debt repayments.


For starters, every time the Fed increases interest rates, it has a knock-on effect through banks. Stock markets do not take kindly to multiple successive rate hikes, given that this is more than a once-off phenomenon – it is a pattern. When the federal funds rate rises, this means that the loans held by listed companies are subject to higher repayments. This eats into company profits and reduces the bottom line. More importantly, it affects companies from the consumer side – lower levels of personal disposable income result in lower purchases of goods and services. Clearly, the domino effect of rising interest rates and the broader economy is evident.

What Techniques Are Households Using to Effectively Manage Debt?

The first element of effective debt management is acknowledgment of debt. Once you are aware that debt is an issue that requires urgent attention, you have taken the first step in a proactive approach to debt elimination. The statistics are unequivocal in this regard: Household debt in the United States for example is approaching $13 trillion, meaning that an increasing portion of every paycheck is going towards repaying the interest and principal on debt. Rising interest rates do not bode well for those with high levels of debt, and especially those with variable debts. Here in the UK, a similar problem exists. UK household debt has steadily been rising, and as much was attested to by John McDonnell, the shadow chancellor of the UK.

By the end of 2018, it is expected that the average UK household will be indebted to the tune of £14,000. By 2019, this figure could increase to £15,000 +. If projections are correct, that number could spiral to £19,000 by the end of 2022. This is part of a much bigger economic quagmire that currently grips the UK and the global economy. For many years after the global financial crisis, we witnessed quantitative easing – monetary accommodation replete with low or near-free access to lines of credit.

As the global economy started to mend, central banks wanted to prevent inflation from taking root. They do this by raising the interest rate. The Bank of England, the Fed, the Bank of Japan, and the European Central Bank all follow the same textbook rules. When inflation starts to rise, interest rates must rise to drain excess money from the economy. Increased interest rates encourage higher levels of saving, and simultaneously discourage higher levels of loans.

One way to manage debt on a personal level is consolidating all similar debt such as credit card debt into a single figure. Once that figure has been evaluated, and audited for accuracy, a debt consolidation loan could be used to pay down that debt. The merit in such a technique is the lower interest rate on the debt consolidation loan versus the high APR on the credit card debt. Britons across the board are using this resource for managing debt repayments on unsecured debts like credit cards. It is a useful tool that can certainly put more money towards savings and retirement as opposed to paying down high interest on loans.

By Boris Dzhingarov

© 2018 Copyright Boris Dzhingarov - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules