Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
9.WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING MARKET - Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
The NEXT BIG EMPIRE WILL BE..... CANZUK - 25th June 22
Who (or What) Is Really in Charge of Bitcoin's Price Swings? - 25th June 22
Crude Oil Price Forecast - Trend Breaks Downward – Rejecting The $120 Level - 25th June 22
Everyone and their Grandma is Expecting a Big Stocks Bear Market Rally - 23rd June 22
The Fed’s Hawkish Bite Left Its Mark on the S&P 500 Stocks - 23rd June 22
No Dodging the Stock Market Bullet - 23rd June 22
How To Set Up A Business To Better Manage In The Free Market - 23rd June 22
Why Are Precious Metals Considered A Good Investment? Find Out Here - 23rd June 22
UK House Prices and the Inflation Mega-trend - 22nd June 22
Sportsbook Betting Reviews: How to Choose a Sportsbook- 22nd June 22
Looking to buy Cannabis Stocks? - 22nd June 22
UK House Prices Momentum Forecast - 21st June 22
The Fed is Incompetent - Beware the Dancing Market Puppet - 21st June 22
US Economy Headed for a Hard Landing - 21st June 22
How to Invest in EU - New Opportunities Uncovered - 21st June 22
How To Protect Your Assets During Inflation - 21st June 22
AI Tech Stocks Current State, Is AMAZON a Dying Tech Giant? - 20th June 22
Gold/Gold miners fundamental checkup - 20th June 22
Personal Finance Tips: How To Get Out Of A Tough Financial Situation - 20th June 22
UK House Prices Relative to GDP Growth - 19th June 22
Will Global Markets Be Pushed Deeper Into Crisis Event By The US Fed? - 19th June 22
Useful Things You Need To Know About Tweezer Top Candlestick Pattern - 19th June 22
UK House Prices Real Terms Sustainable Trend - 17th June 22
Why I’m buying the “new” value stocks… - 17th June 22
Optimize Benefits from R&D in Software Product Development with an R&D Tax Credit Software - 17th June 22
Want To Save On Your Business Energy? Here Are Some Helpful Tips - 17th June 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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