June 21, 2006


Did you know the average American household has about $8,500 in credit card debt? About 3 times what it was back in 1990. Many Americans are in way over their heads when it comes to managing their credit card debt. And the numbers keep increasing every year. If you are in that predicament, you are not alone.

So how do you eliminate credit card debt, if you've gotten into such a deep hole?

The first thing you need to do is come up with a plan your attack. And to properly do that, you need a good assessment of your current financial situation. That means getting a picture of your current income and expenses.

How much do you take in per month? Can you take on a part-time job? You'd be surprised how quickly you can eliminate debt with additional income coming in, provided that your spending does not increase. If your extra income went solely to paying off the credit cards, you could quickly eliminate that debt. There are always part-time jobs available in the restaurants, hotels, retail, etc.

If an extra job is not in the works, then you need to look at the other side of the equation: expenses.

How much do you spend per month? And what can you cut back on? Obviously, curtailing expenses is not easy in this spend-happy society that we live in. We are constantly bombarded with advertisements to buy this or to buy that. It will take some discipline, but it can be done. But in order to get where you are going, you must know where you are starting from. Keep track of every expenditure. There are good computer programs like MS Money, Quicken, etc. that can help you do that. You can also set up a spreadsheet, or even use a good old fashioned notebook. Ideally, you'd like to get at least a 3-month history. It may not be as time consuming as you think. Your bank probably has your banking detail online that can be exported, or printed for these purposes.

Next, determine the balance on each card, and the interest rate that you are paying. List them in order, starting with the highest interest rate. This is the first one you want to attack. See if you can consolidate credit cards to the one with the lowest rate (if you're not maxed out). You may look for cards with a low introductory rate. That way you can transfer the balance from a higher rate to a lower rate. And while you are in the introductory period, be sure to pay off as much as you can to take advantage of that window of opportunity.

Stop using the credit cards, or use them only in the case of an emergency. Or start using your debit card instead, that way, there is no bill to pay at the end of the month. Or just use one credit card (the one with the lowest rate) and keep the rest at home.

Pay more than the minimum amount due. All you do is dig a deeper hole when you pay the minimum amount due. Your balance will INCREASE when you pay the minimum. And you boost the profits of the credit card companies. Even if you have to scrimp and save, do whatever you can to pay more than the minimum. That way you start reversing the tide into your favor.

Avoid late fees. Late fees can quickly add up if you are not paying your bills on time. And it will put gravity on your credit score. If you can, set up an online payment where it automatically deducts from your bank account every month. That way you'll save money (and won't have to worry about your credit score going down).

See if you can renegotiate the interest rate. Many of your credit cards that are in the 18 to 19% range will lower rate if you just call and mention you are thinking of transferring the balance. You usually can get them to lower to about 12 to 13%. All you have to lose is a phone call. They would rather keep the business, than losing the account to a competitor.

We all know that having too many credit cards, especially if they are near the maximum will hurt your credit score. So how many credit cards should you carry? What is the optimum number of cards? Although the credit bureaus will not publish an optimum number, ideally you want to have around 3 or 4. If you have more, cut up the cards - but don't close the account - especially if you've had it open for more than 2 years. Credit history accounts for a big part of your credit score in a positive manner.

Stop the flood of credit card offers: You can opt out of the credit bureaus selling your information by dialing 1-888-5-OPTOUT.

Do you have any savings that might be better served in paying off your debts? Compare the interest earned on the savings vs. the interest you are paying on the credit cards. You'll find the interest on the credit cards are usually a lot higher. Although, you have to weigh that against having some emergency money available for the so-called "rainy days".

Consider consolidating your debts into a regular-term note. The interest rate will be lower, and you'll only have to make one payment a month. But resist the urge to take on more credit card debt, until you have the consolidation loan paid off.

And finally, if you are a homeowner, you may need to take out a home equity loan (HEL), home equity line of credit (HELOC), or refinance your existing mortgage. The benefits are that the interest on the HEL or HELOC is a lot lower than the interest you are paying on the credit card. And you may also realize some tax benefits as the interest on the is usually tax deductible (consult with your tax advisor for proper treatment).

This should be a last resort, but if you are thinking of the last two alternatives, please consult with a mortgage professional. They can quickly determine if that alternative is right for you.

And with a little bit of time, discipline and planning, you too can join the many other Americans that have been able to get out of credit card debt once and for all.

June 7, 2006

A colleague of mine just passed along an excellent rehab investment opportunity:

• 4 bedroom / 2 bath
• 1716 square feet
• Lot 50x100

• Massive kitchen w/ island
• Roof approx 3 years old
• Fireplace

After Repair Value - Sold comps = $344K
After Repair Value - Active comps = $383K

Asking price = $250K
Repair estimates = $20K

The location is in excellent south Tampa.
Please call me asap if you want to know more about this opportunity!

June 4, 2006

Where are interest rates headed?

With the most recent downturn in the stock market, one has to be wondering whether we are heading into a bear market, and if there will be a Fed policy shift to keeping interest rates steady during the next FOMC meeting in June. In fact, May's monthly performance was the worst in nearly two years:

Dow -1.8%
Nasdaq -6.2%

There are also some other signs that could bode well for an interest rate pause:

• Weaker than expected Employment Report for May
• New hires of 75K versus expectations of 175K
• Hourly earnings rose .1% instead of expected .3%
• Positive note: Unemployment down slightly to 4.6% nationwide
• Pulte Homes (PHM) reported that new orders for April and May were down 22% compared to the same period last year. Of course, higher interest rates, along with higher inventories will impact housing demand.

This past Wednesday, the Fed released the minutes from their May meeting. Obviously, inflation was a major topic of discussion. The members discussed policy options from a rate pause, 25 basis point increase, and even a 50 basis point increase. They of course, settled on a 25 basis point increase.

From the minutes

"Still, it seemed most likely that, with modest further policy action, including a 25 basis point firming today, growth in activity would moderate gradually over coming quarters, pressures on resources would remain limited, and core inflation would stay close to levels experienced over the past year."

Despite some economic cooling, I believe we're in for another 25 basis point increase for the June meeting. It is unlikely in my opinion that the Fed will pause after just one month of economic data. There are aberrations in the data that happen all the time. But it does appear that after 16 straight rate increases, that their work is starting to pay off, and that maybe we will see rates stay flat during the summer months. Which would be good news for the housing and the stock market.