Tag: debt

The Trumpet: Financial Reckoning – Here’s What You Can Do Right Now

Timothy Oostendarp of The Trumpet has an article up on the many people facing difficult financial times as a result of the pandemic and some basic things that you can do to regain your financial footing and stay sane – Financial Reckoning Now Confronts Millions

Whether you live in America or somewhere else, right now the biggest problem you’re likely facing is paying your monthly bills. The forced shutdown of the global economy has pulverized national and family budgets. In Canada, it is reported that federal unemployment insurance claims have rocketed to Great Depression levels.

Ding-dong, Dorothy, the economy is dead.

Last month, many Americans were living paycheck-to-paycheck. This month has seen that paycheck taken away.

There is no sense citing endless statistics. Tens of millions of Americans can’t even handle a $400 emergency. Banks and credit card companies are preparing for a tsunami of payment deferrals and loan defaults as consumers buckle.

Like boozy wastrels drunk on prosperity, millions have squandered precious time and money in the face of mounting evidence a crash was coming. Instead of having savings for a rainy day, Americans are now facing a financial reckoning that’s going to burn. The toll isn’t only financial; it’s physical, emotional and spiritual. And authorities are seeing a corresponding spike in suicides and substance and domestic abuse.

The fiscal grim reaper is here. In all fairness, he did send us many notices of his impending arrival, like the Great Recession in the late 2000s. That financial bloodbath was as long as Wall Street and up to the businessman’s belt.

Since that tender time, federal reserve banks have made themselves hoarse yelling into deaf ears. They have repeatedly warned about gross government and corporate debt, the perils of endless quantitive easing (printing money), and escalating household debt.

More than 10 long years have lapsed since the Great Recession. What did we learn? What is this latest economic jolt teaching us? We learned that we are thoroughly addicted to materialism. We learned that decadence defines our daily living. We learned we lack character. Even the poor among us live like feudal kings, yet millions are now beyond broke.

Prosperity is bankrupting us in more ways than we think. If you are suffering financially, the good news is that, if you are willing to correct your living, there is a little time left to set your financial house in order.

Here is what you can do right now.

The first step is to understand God has set basic financial laws into motion. When those laws are broken, penalties result. The penalty is a sign that laws are being broken—and signs are meant to be heeded! God has put penalties in place for broken law to help correct our thinking and our living. When God’s laws are obeyed, great material and spiritual blessings result—including freedom from anxiety, worry and fear.

When someone becomes physically sick with a cold or the flu, the body begins to immediately discharge poisons through mucus production, the eliminative system and by rest. That is the human body trying to bring itself back into alignment with God’s laws governing health. Likewise, financial poison comes in the form of debt, budget deficits (not enough money to cover your bills), and burdensome interest payments. These poisons must be ejected! This is the second step!

Without jeopardizing your health or that of your family, reduce your standard of living to pay off your debts and balance your budget as soon as possible! This means doing everything practically possible to avoid consumer and business debt. A well-considered loan will produce above its principle and interest—meaning it should profit! The wise earn interest while the foolish pay it.

Right now, many governments are offering no-strings-attached money to help small businesses and citizens. If you need to, you might have to take advantage of the assistance your taxes have already helped to pay for or will help to pay for later. God is not against accepting help in time of need. In certain well-advised circumstances, it is the prudent thing to do. There is no shame in taking a handout in a time of need—especially when we are determined to go on and use that help to correct the cause of the problem.

Consider seeking wise counsel before taking on long-term debt or loans for what could be a short-term employment problem. A bad loan will be a poison, which will seriously aggravate your financial problems! Get creative—use drive and initiative. These are some of the laws of personal and financial success. Talk to a rich uncle who might be willing to give you a hand (not handout) during these difficult times. Offer to work for the help. Take odd jobs doing handiwork. The point is, make your opportunities.

The next principle is to set a budget and track your spending. Herein we see another basic law of God: Don’t spend more than you make. Budget! Our financial problems don’t usually revolve around not having enough money but not managing it properly. Slipshod financial management is a reflection of a breakdown in character. We all have to learn to manage our prosperity—especially those who haven’t learned the first principle of working hard.

Examine your attitude toward materialism. God’s law forbids lust and coveting, but coveting drives the world economy. Is it driving your spending? God’s Word says a person trying to get the best of his employer or trying to get riches will not prosper in the end. It often leads to owning substandard possessions and always leads to substandard character.

We all must come to learn the first lesson of life: Seek God’s Kingdom and His character above riches. That is the only way to financial prosperity. Strive to better yourself in an effort to give to your employer, your family and to God—but also strive to learn to be content in your circumstances.

Get creative. Housing, transportation and food are major line items in personal budgets. Excessive car loans that stretch into five to seven years are financial folly. Maybe it’s time to evaluate cutting these areas without jeopardizing your ability to work, and without jeopardizing your health and your family’s well-being.

Another financial law of success is persistence. Don’t throw in the towel! If you’ve recently been laid off, realize many hundreds of thousands have been laid off too. Most of them will begin to waste time. Don’t waste time.

Sloth is stealing, even if it’s only stealing time that can’t be recovered. Put your time to profitable use. Stay productive. Read a good book; improve your skills; refinish some old furniture; play games with your children; go for a walk; breathe in fresh air.

“Chomp at the bit” to get back to work. A robust work ethic is at the heart of building righteous character. Begin calling prospective employers. Line up interviews. Make a job out of getting a job.

This can be a time to advance your career! Employers will start hiring again. Make sure your name is at the top of the list. God is a producer. He expects the same from us. He doesn’t waste a moment or an opportunity. Hiring may be at a momentary freeze, but you don’t have to be frozen in time or frozen in one spot. Be zealous and work hard!

Next, when you get back to a solid financial footing, start saving for a rainy day. There are two types of savings to aim for: operational savings and reserve savings. Operational savings are for emergency repairs and other out-of-the-blue expenses. Reserve savings should equal three times your monthly net income—or at least enough to cover your expenses for three months. If need be, put your budget on a diet, because austerity may be the order of the day to achieve the results you need. The old saying applies: Make hay while the sun shines. Time is fast running out.

When tragedy strikes this world, God is often accused of loafing on the job. Mankind shakes his collective fist at God. He is accused of being heartless, unwilling to lend humanity a helping hand. God gets blamed for nearly all tragedy, pain and suffering. But if He were to stop you from chasing your pleasures that lead to such destruction, you’d soon accuse Him of interfering in your life. When the tragedy strikes, who is to blame? We can’t have it both ways.

Related:

Motley Fool: What to Do If Coronavirus Cuts Your Income

CNBC: How to Build a Cash Reserve If Coronavirus Causes You to Miss Work

USA Today: How to pay the bills during the coronavirus pandemic

Fox: Coronavirus financial concerns: What to do if you can’t pay your bills

Organic Prepper: How to Talk to Creditors When You Can’t Pay

Daisy Luther at The Organic Prepper has an article on How to Talk to Creditors When You Can’t Pay Your Bills. With some businesses closing permanently and others temporarily closed over the coronavirus pandemic, many people are put in an economic bind with no income coming in. While Washington state has announced some coming benefits for workers who are quarantined or laid off because of the coronavirus, we don’t know how long it will take to file, eligibility, or how it affects hourly workers who are not laid off or quarantined, but are not working because they business is closed or slow.

As our economy gets rocked by the coronavirus outbreak, lots of folks are already beginning to have financial problems. For others, they see money trouble on the horizon.

These issues are occurring for several reasons. Some businesses are cutting back staff or hours preemptively so they can survive financially. Other businesses are laying people off because of supply chain shortages – if you can’t get parts to repair furnaces, you can’t pay people to repair furnaces. The travel and shipping industries are already feeling the pain from the global outbreak.

So if you aren’t having money problems now, it’s very possible you will be soon.

What to do when your income slows down

This is something I’ve written about in detail in more than one article. Here’s a detailed article about job loss but the strategies would also work if your hours are cut. The basics are:

  1. Know your rights. You may have some recourse if your hours are cut or if you are laid off. If you have any type of employment contract, now is the time to go over it with a fine-tooth comb. Don’t sign anything until you’ve taken the time to calm down and think things through.
  2. Begin a total spending freeze. Give it a couple of days before you spend a dime. You’ll need to re-assess your budget.
  3. Apply for unemployment. Whether you lost your job completely or your hours were cut, you may qualify for unemployment or other benefits. You’ve been paying taxes for just this reason, so don’t be too proud to accept the help.
  4. Create a budget for necessities. Sit down and create a budget for the absolute bare minimum expenditures.
  5. Slash luxury spending. Now isn’t the time to go on a vacation, join a gym, or eat out at restaurants.
  6. Look for new streams of income. If you can, look for odd jobs, start a small business that doesn’t require an investment, or use your expertise to begin consulting in your field.
  7. Sell stuff. All that stuff you’ve been meaning to go through in the basement just might be the key to keeping a roof over your head.  Sell things online or in person, keeping in mind your personal safety.
  8. Audit your budget. Take the time to see where you can slash your spending. Can you cut your fixed or variable expenses?

Take action right away to stop the bleeding of money. A few dollars may not seem like much right now but it could be a much bigger deal in the future. You may need to make drastic cuts.

Make a list of your creditors.

Once you have created your new emergency budget, it’s time to take a look at those to whom you owe money. Some of these will be necessary expenditures. Keeping a roof over your head, the utilities on, a car in the driveway, and remaining insured. are likely the most important expenses.

Other expenditures are things like unsecured debt: credit cards, student loans, and personal loans. You may have some secured debt on things with which you’re willing to part – second cars, recreational vehicles, etc.

Write down all these expenses, your account numbers, your minimum monthly payments, and contact information for the creditor.

Before anybody jumps in and says, “You shouldn’t have any credit card debt” or “I bought my car in cash,” remember that I’m writing about a change in circumstances here. Sure it’s better to be debt-free, but when you have found yourself in a crunch, it’s all about surviving the rough time, not about beating yourself up for previous decisions.

Contact them one by one.

Next comes the part that may be difficult for some – you need to contact your creditors and see if they can help.

Keep in mind that many people are running into difficulty right now and these companies know it. Some places may have already authorized negotiations with debtors in expectation of the difficulty in which you currently find yourself.

Contact them in order from most essential to least. Below you’ll find some tips to help you guide the conversation.

How to talk to creditors… (continues)

Click here to continue reading at The Organic Prepper.

AIER: Paul Krugman Is Wrong on Gov Debt

The American Institute for Economic Research has up an article on why economist Paul Krugman is wrong when he says that government “debt is money we owe to ourselves” and therefore not anything to worry about.

Krugman’s Zombie Idea: We Owe It to Ourselves

Paul Krugman coined the term “zombie ideas” to describe “policy ideas that keep getting killed by evidence, but nonetheless shamble relentless forward, essentially because they suit a political agenda.”

Krugman has revived one of his favorite zombies: the notion that high government deficits aren’t dangerous in the way that an individual incurring heavy debt is because the national debt is “money we owe to ourselves.” He doubled down on his claims in response to an article comparing the dangers the debt poses to future generations to climate change.

Krugman has repeatedly written on this topic at his blog (see here and here). It was a common refrain of his during the Eurozone crisis and in the aftermath of the Great Recession when there was a bipartisan push to cut future deficits to prevent future Greek-style debt crises.

As with most myths, there is a grain of truth to the claim. National debt does differ from the debt individuals and households incur in a few notable ways. Individuals have a finite lifetime to incur and repay their debts. Governments don’t; they can pass debt onto future generations. So long as people are willing to lend it money and the government can service debt as it comes due, government debt can persist in perpetuity. And to the extent that the debt is owned by domestic citizens, the money that is used to repay the debt needn’t leave the economy.

That said, this grain of truth doesn’t eliminate the ocean of evidence against Krugman’s claim that worrying about the burden the national debt might impose on future generations is nonsensical. Here are some reasons why this argument is fundamentally flawed.

A large share of the national debt is owed to foreigners

For starters, it’s not the case that the national debt is entirely owed to “ourselves” (i.e., that it is exclusively owned by US citizens). Nearly one-third of the US debt ($6.636 trillion of the $22 trillion in debt) is owned by foreign governments and international investors.

This isn’t necessarily a bad thing. The willingness of foreigners to lend to the U.S. government has helped keep Treasury rates at historical lows, making it cheaper for future taxpayers to repay the interest on the national debt. If the US government is running deficits to finance justifiable initiatives (say, fighting World War II) and spending programs that will boost future growth, we should welcome funds from investors regardless of their nationality.

Nevertheless, it undercuts Krugman’s case that repaying the debt won’t burden future taxpayers and the future economy on net because the money will “stay in the U.S. economy.”

The fallacy of “we” and the reality that future taxpayers really do “foot the bill”

A bigger problem is that Krugman commits what Don Boudreaux calls the “Fallacy of Us, We, and Our.” Even if the entire national debt is owned by US citizens, there is no real sense in which “we” owe the debt to “ourselves.” The individuals incurring and benefitting from the debt are entirely different from the individuals who must bear the burden of repaying that debt.

Once we move past the intellectual sleight of hand of using collective pronouns like “we” and “ourselves” to describe all Americans across time, we get a much clearer picture of who gains and loses from the national debt.

Current taxpayers and citizens clearly benefit; they receive the benefit of increased government spending without incurring the full cost of those expenditures. Future taxpayers and citizens, who will have to repay the debt as it comes due, are clearly hurt. They have to pay higher taxes to repay the debt incurred and owned by the prior generation.

This insight remains true even if the older generation sells them its bonds before they pass. As James Buchanan astutely noted decades ago, future generations first have to buy these bonds from the prior generations. And, in order to buy them, they must first reduce their consumption. It is that reduced consumption — not the higher taxes they’ll have to pay when the debt is retired (since, by assumption, that money will flow right back to them as bondholders) — that is the true cost imposed on future generations from government debt.

Government debt “crowd outs” private investment and creates deadweight loss

The “we owe it to ourselves” argument also glosses over two of the most important arguments for why deficit spending is not a free lunch for taxpayers or the future economy.

First, deficit spending crowds out private investment…

Click here to continue reading at AIER.org.