The Real Score of the Economic Ouch

Why is it that when uncle Sam's (referring to the country USA) economy is sick, the rest of the world's economy also crumbles? Somebody asked me this question.

My human chips inside my head started to process something. Searched a very important key point to start with my argument. Then pop the information that it is the biggest economy in the world. Most, if not all economies of the world are exporting to uncle Sam. Take Japan for example. How many cars and electronic gadgets are being exported for uncle Sam's consuming public? It is too much to count. And there were lots of other countries, which exports their products and agricultural produce to uncle Sam.

Now, if uncle Sam's economy becomes ill, the most logical result is, like any person who is also sick would lose his appetite. Otherwise stated, the consuming public spending will be affected, hence lesser consumption of those exports from the rest of the world.

But why has uncle Sam's economic health became sick lately? Now this same person followed up this question. And my quick answer is their dependence on credit.

The aspect of credit that, in my opinion has greatly affected uncle Sam's economy is the over-emphasis of the plastic money, in lieu of the the legal tender that it issued--the green bucks.

The reckless usage of credit cards and other consumer loans offered by financial institutions created a great deception as far as economic movement is concerned. This plastic money or any consumer loans allows anyone to spend more than he or she earns. It made spending easier and more difficult to track or even stop because it will just create a habit in most of us.

Uncle Sam's economy started with the saturation of the consumer loans defaults. The result then is an economic imbalance.

Now 1 Timothy 6:6 "godliness with contentment is great gain" should be seriously considered if you do not want to become part of that economic imbalance.

Some advise to live within your means. But, I say live below your means and set aside something for the rainy day.

Caveat: I am no economist. The above narration are my very own humble opinion. These may be inacurate, but I am confident that they made a very good sense.

God bless everyone!!!

Dangerous Quick Fix

The last couple of weeks, I have been hearing people talking about debt problems. These same people are discussing on ways to just get by with the monthly payments.

One topic that caught my attention was the mention of consolidation of debts. This method is one where a debtor approaches one party (usually a financing company or bank) to which another indebtedness is applied for, the amount of which is more than enough to cover the total of a number of debts for the purpose that monthly payment is concentrated to one party.

Similar to how I advised people who approached me for counsel, I discouraged them to resort to debt consolidation. This is a quick fix. I believe that nothing instant is worthwhile.

The biggest danger that this debt consolidation can bring is the artificial facade it may create in the borrower's perception. After several installments paid for by the borrower, a sense of a reduced debt might be felt by the borrower, thereby signalling his emotions to again swipe those cards, or apply additional loans.

A slow and disciplined elimination of several loans is favored. Along the way to eliminating your loans, a very valuable lesson could be learned.

A very effective way is one that I learned from Dave Ramsey's Financial Peace University called debt snowballing. This procedure suggest that loans should be listed in an ascending order based on loan balances. Elimination starts from the loan with the least balance. Once the first one is paid off, the monthly payment that is used to pay for the eliminated loan will be added to the next loan in the list. The same procedure is being followed until everything in the list would have been totally eliminated.

The key to unlock the chains of debt is not how much cunning or calculating one is, but how one behave. It is not all brain, but behavior. Hence, any quick fix like debt consolidation, as the majority may calculate is not a healthy solution. A Slow, steady and disciplined way like snowballing is a very effective solution.

Patience and perseverance is one valuable virtue anyway.