Have You Reduced Your Debt? You Should.

In its latest report, the New York Federal Reserve announced that household debt has decreased by almost 1%. Although it may seem small, the amount that household debt has reduced amounts to approximately $110 billion and is a sign that many households are taking to heart some of the warning signs that if not done now, debt reduction is a necessity if one wants to survive financially in the long-term.

Some of the ways that people with debt will struggle and could ultimately lead to bankruptcy include higher interest rates and consequently higher monthly payments, adding stress to household budgets until those budgets are no longer able to accommodate such higher payments. Another way is through income loss, either partially or temporarily, which remains a very realistic threat to many households given the unemployment rate which remains close to a 26-year high.

Signs that interest rates are bound to increase while unemployment remains fairly high can be seen in the following recent statistical data:

1. Business spending is increasing. When the economy starts to recover, rates will start to increase. And when rates increase, consumers who carry big debt loads will feel the pinch. As business investment starts to improve, investors start to increase the rates these companies pay on bonds and other credit. The increase that has been noticed in business spending (oil company mergers, tech company acquisitions, etc.) will gradually show up on everything we pay, from debt to the cost of regular goods.
2. Investor concerns about bonds. A bond is an investment for someone but a debt for another person. Investors, who have enjoyed healthy returns on bonds are look at rates to increase. There is a lot of uncertainty about what will happen to investors’ portfolios when bond yields increase and debtors like the rest of us need to worry about what will happen to our rates as well. Whether they are credit card rates or floating rates, the level of concern out there is enough to make everyone wonder how they will weather increasing rates.

These are just two things that demonstrate the fear that most of Wisata di Makassar have about higher fares. So if you haven’t started reducing household debt, now is the time to start. Even by reducing household debt by 1%, new bankruptcies have decreased by 16%. Therefore, we can surmise that reducing our own personal household debt will help us maintain a personally healthy financial position as well.