The economy has been OK to good for a while.
A long while.
How much longer will the upturn last?
Julia La Roche at Yahoo Finance has a story on a guy who is not comfortable with the rosy credit scenario continuing indefinitely.
“It’s been a terrific market for investors for quite a long time and if anything is concerning it’s that we now are more than eight years into a benign credit cycle,” Altman, a professor at NYU Stern School of Business, told Yahoo Finance. “We’ve never had such a long benign cycle. And just that one little fact is something that we should be concerned about because if it comes to one and it could come to an end very dramatically.”
But Companies Are Making Money, Right?
If companies are making money, they hire more people, or, pay higher wages, right? Or at least do not lay off employees.
Companies are like people, they borrow more money when money is cheap, and get nailed when interest rates rise, or something else negative happens.
“[What] I’ve seen over the years is larger and larger companies filing for bankruptcy on a regular basis. On average, in the United States, something like 15 more than $1 billion companies, in terms of liabilities, go bankrupt every year, on average,” Altman said. “This year already it’s 13. Last year, it was almost 40.”
He noted that inflation has something to do with it, but what’s actually happening is companies have been taking advantage of debt and low interest rates like never before, and the corporate debt ratios are way up.
Are You Borrowing Too Much?
Everyone should have a budget of their income and basic living expenses, the stuff you HAVE to pay.
Rent, food, clothes, utilities, car insurance. You need to know where you are to plan, anything.
Well, seems like we consumers are, consuming.
Anna Bahney at CNN Money:
Nearly half of Americans say their expenses are equal to or greater than their income, according to a new study from the Center for Financial Services Innovation. And for those 18 to 25 the percentage is over half, up to 54%.
If you already incurred the debt, it is too late to say NO. But not too late to say STOP!
The suggestions from the article:
How do we get out of the rut?
New financial tools aim to help people manage their money more efficiently. Like Activehours, which allows you to get part of your pay ahead of payday in a way that is not a payday loan. There is also a tool called Even, which, in addition to helping you budget, does just that: it evens out your pay from high periods and shoots it to you when you have lower periods.
But Tescher doesn’t see tech tools as a magic bullet.
“We have a series of structural challenges in this country that require policy solutions,” she says. “We need to remove the stigma of talking about money problems and make it clear that a lot of people are struggling.”
Buy now, pay later, is not a good philosophy, especially when you do not know how much you are going to make later.
And you cannot borrow your way out of a debt problem.