Hi, I’m Evan from stockinvesting101.net! MLR has allowed me to submit a guest post!

Take a quick look at the US Debt Clock. Over the past 3-4 years we have all seen and heard people ramble about the amount of debt our government and our citizens are in, but most never realized it was this bad, including myself.

Breaking Down the Debt

Currently the federal government is over 12 TRILLION dollars in the hole. This is not meant to be a political post, both parties are certainly at fault in one way or another. 12 Trillion works out to be over $115,000 per tax payer. If the average person earns 40,000 dollars at a 20% tax bracket that would yield 8,000 dollars a year. It would take over 14 years for the debt to be repaid based on that example assuming there is no spending from the government which, of course, is completely unrealistic.

MLR’s note: I like to put things in perspective. Saying we have more debt today than in 1970 in nominal terms is pretty much a given. Let’s put the numbers in context:

What is the national debt as a percentage of GDP? Last year we were at 53% of GDP, which is up from 35% in 2000, but much lower than the 109% at the end of World War II.

What is the national debt as a percentage of total credit market debt? Last year we were at 22%, higher than the 17-18% for the rest of the 2000s, but lower than the +50% post WWII, +30% 1960s, and +25% 1995.

You can also see that the average citizen has over $50,000 dollars in debt compared to a paltry $1,500 dollars in savings. That is pitiful to say the least.

Where is all of this going to end? Are we going to push our national debt up to 15, 20, 50 Trillion dollars? When will China and other creditors pull the plug? We are no where close to having a balanced budget currently and even if our budget was balanced, we would still have a huge amount of debt on our shoulders.

Biggest Problem Facing America

This is, without a doubt, the biggest problem facing America. In the midst of the worst economic period in 80 years it makes sense that the government did not make any efforts to decrease spending or increase taxes, we could be in a depression currently if they did. But when will the government and our citizens start changing their ways?

Part of the problem is that politicians think we are playing with monopoly money. The government has no real money, it all comes from taxes. Guess who pays taxes each and every day? Me, you, and everyone else!

Social security is set to go bankrupt within this new decade and, Medicare and Medicaid are both on life support [get it?].

MLR’s note: I am not aware of anyone predicting social security going bankrupt this decade in the same sense as a business going bankrupt. The term bankrupt when used with social security typically means that the benefits will have to be cut. The Congressional Budget Office predicts that social security will pay out full benefits until 2037 at which point it will have to reduce distributions to 78% of promised benefits. Not ideal, but it will rebalance the inlays and outlays.

We are going to have to make some drastic changes soon. 14 trillion dollars is more than anyone could possibly imagine. That is 14 thousand billion dollars.

I am naturally an optimist and I do think that we will get this problem worked out in the end, however the situation does not look too pretty now. All politicians are worried about is getting re-elected, which means they are all promising to decrease taxes and increase spending, which got us in this situation to start with.

You Can Help.

Do everything you can to turn this around. E-mail your congressmen, talk to your friends about the problem. A vote and a voice are two very powerful things. Put them to work!

The credit CARD Act of 2009 just went into effect as of Feb. 19, 2010. It will affect the credit card companies in a big way, as well as consumers. The major credit card companies say that they will lose as much as half a billion dollars each this year as a result of the new laws. It is important to protect consumers, but is it healthy to stifle businesses in down economy?

CARD Intent & Benefits

This act was created to protect card holders, and will give them some extra checks and balances before they are able to get deep into debt.

Minimum Payment Advisory

One thing in the CARD act that will help consumers is that credit card companies will have to print on the statement how long it will take to pay off the balance, if they only make minimum payments. It will become glaringly obvious that people are just digging themselves into a hole by paying the minimum every month. Its easy to forget that you are paying an extra 15% interest on your money, when you just see that small minimum payment in bold print.

Targeting College Students with Freebies

Another part of the act that was made to help consumers lose the habit of taking on a lot of debt, is the restrictions on cards for college students. Credit cards are given away at college campuses like they are concert tickets. There is always a booth that gives out free t-shirts, hats, and a credit card along with it. These new laws are going to change that. They require people under the age of 21 to get a co-signer, unless they can demonstrate the ability that the can actually pay the balance. (Apparently, that wasn’t a requirement to get one in 2009) The average student graduates with over $4,000 worth of credit card debt. Maybe these new laws, will help students break the habit before they become debt ridden adults.

45 Days Notice to Changes

Have you ever been blindsided by a change in terms? The CARD Act has instituted a new rule that I think most consumers will really like. Credit card companies must give 45 days notice before they change any term of their cards. This includes interest rates, late payment fees, or yearly fees. And for the 1st year you have the card, you cannot get your interest rates increased at all. This will make it easier to switch if a company baits you in with a low rate, then jacks it up.

CARD Oversight & Consequences

There are some definite benefits to these new laws, but there might also be some unintended consequences.

Lost Income Will Be Replaced With New Sources

Companies are now restricted how they make their money, which is why their income will dwindle. This will cause them to come up with new sources to make up for their lost revenue. For example, there is no cap on interest rates at all. Recently a Delaware bank created the highest interest rate credit card in history targeted at sub-prime cardholders. This card had an interest rate of almost 80%! (the average is about 15%)

There also may be new yearly fees, processing fees, and new fees on balance transfers. These fees will affect every credit card holder, not just students or people with poor credit. Credit card companies generate a lot of revenue and will think up other ways to make up where they’ve lost it. We are all going to paying extra because of that.

CARD: Both Good And Bad

There are some definite positives and negatives to these new laws. For people that aren’t very conscious about money issues, it will be very helpful. It might help to stop the cycle of debt before it gets a chance to start.

But, people that aren’t as responsible about their money are the credit card companies best customers. This is where they make their biggest percentage of profits. So with less of these people available, extra fees will end up hitting everyone else like a smack in the face. It remains to be seen how significant these fees are going to be, but with the loss of half a billion dollars per year, per company, it will have to be for them to survive.

My last post went over my one year anniversary. And then I disappeared.

I did not intend for this to happen, but it did! I’ll give you a little update about what has happened in my life since then, and when I intend to return to my normal posting schedule. I guarantee you that I have been swamped.

Life Events

So, this has been what’s been keeping me away:

1) I was in the process of house hunting and found a house I liked.
I had already got a mortgage pre-approval so I had already shopped rates and fees for the most part. I put an offer in, she countered, I countered, and she accepted. The offer was for about 2% lower than the listing price (which is about where my market is… no real big crash here). It also came with an [...] Continue Reading…

One year ago today, I started MyLifeROI.com. I just wanted to write about personal finance. I didn’t have a lot of debt. I didn’t have aspirations to be a full-time blogger. I had no expectations of income from this blog. But I had opinions! How times have changed (obviously not referring to the opinions part ;) heh) I appreciate everyone who has followed my site for the past year. You make it more enjoyable for me to share my opinions and findings a few times per week. MyLifeROI.com in Numbers Here are some of the statistics from the past year: 1) Visitors In total, I have had 120,854 visitors to my blog in the past year. That is an average of about 10,000 per month. As you see, the last [...] Continue Reading…

I am going to give you tasks that require your attention, memory, concentration and creativity. For example, I am going to give you a puzzle to assemble while throwing tennis balls at a target. Now, I am going to run three different rounds in a vacuum. In other words, pretend each round is given as if you have no previous knowledge of the exercise. In round 1, I will give you $200 if you perform well. In round 2, I will give you $2,000 if you perform well. In round 3, I will give you $20,000 if you perform well. In which round will you perform the best? Most people would say round 3. After all, higher rewards usually drive better results, right? That is the typical line of thinking and it makes perfect sense. The [...] Continue Reading…