Living Beyond Your Means?

A great article was published via Yahoo! Finance on Monday titled “Five Signs That You Are Living Beyond Your Means”.  This article stresses several key factors that many struggling with debt are acutely aware of:

1. Your Credit Score is Below 600
2. You are Saving Less than 5%
3. Your Credit Card Balances are Rising
4. More than 28% of Income Goes To Your House
5. Your Bills are Spiraling Out of Control

What struck me more than any of the other statistics quoted in the article was that the personal savings rate has severely deteriorated over the past couple years.  The following chart was provided based on data from the U.S. Bureau of Economic Analysis.

For the full article provided by Investopedia on Yahoo! Finance click here.

Technorati Tags: personal savings rate, debt settlement, budgeting, economics

Growing Debt Among Retirees

Even though financial hardships come in many different forms, there have been certain recurring themes — such as medical hardships or job loss — that have made up the majority of clients who have sought out Provanta’s professional services.  More recently, there seems to be a growing trend toward another type of hardship: retirement.  

Retirement was once something people looked forward to as the great reward after years of hardwork.  So how is it that retirement is now becoming a financial hardship?  The title of an article that can be found on http://www.msnbc.msn.com/id/23484918 it all — “2008 retirees need $225,000 for health care.” 

Our client has been collecting social security and disability income since 2001.   In the past 7 years, our client has needed 10 surgeries.  In March of 2006 he was returning home from a post surgery check-up and was involved in a very bad car accident.  The accident caused a hernia at the site of the surgery that also resulted in severe neck and lower back trauma.  Our client has required further treatment and surgeries to address these complications.  The other driver’s car insurance company accepted responsibility for the accident but did not accept the fact that the medical condition and treatment resulted from the surgery.  As a result,  our client used the credit cards to supplement his income and pay for out of pocket medical bills.

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Technorati Tags: retirement financial hardship, medical hardship, health care costs, retiree debt

Foreclosure & Cardholder Default

An article released yesterday by Bloomberg quoted American Express CFO, Daniel Henry, as saying “Defaults by cardholders worsened most in areas where U.S. home prices dropped by more than 5 to 10 percent”.

While this may appear obvious to some I firmly believe that defaults on unsecured debt will continue to increase as mortgage deliquencies and foreclosures continue to climb.  With no sign of a turnaround more-and-more Americans will see their unsecured debt loads increase and will continue to struggle to make ends meet as they try and make the monthly minimum payments to their creditors.

To read the entire article visit Bloomberg.

Technorati Tags: debt settlement, credit card debt, home foreclosure, debt relief

Home Prices Continue To Fall

The other day I was looking at the S&P/Case-Shiller Home Price Indices.  The indices follow trends in home values in several of the country’s largest metropolitan areas.  With almost no exception every index has shown a sharp decline since the latter half of 2006.  Based on residential real estate indicators, provided by Standard & Poors June 2008 report, there is no sign of a turnaround.  In fact, all mortgage delinquency indicators have continued to rise quarter over quarter since the end of 2006.  For example, foreclosures started, as a percent of all loans, in Q1 of 2007 was 0.40%.  As of Q1 2008 this figure has risen to 0.99%.  Delinquency rates, regardless of loan type, have continued their climb in all categories.  Below is a graphical representation of the indices covering a period from 1987 through April 2008:

As disheartening as all this appears the dip has to bottom out somewhere.  The question of course remains when and how far.  I don’t want to spend too much time on this topic, but at the time the dot com bubble burst, I was working as a financial advisor for Morgan Stanley.  The graph above bears a strange resemblance to the trends of other market indexes I pored over with my clients during this period.  Keeping this in mind I am cautiously hopeful but also believe that the dip may end up squaring out for some time before climbing again.

Reference: S&P/Case-Shiller home Price Indices

Technorati Tags: residential real estate indicators, home prices, home values