“Are You 100% Sure You’re Going To Have A Great Retirement or Do You Have Some Doubt?”

If you’re like most of the country, you’re getting a bit concerned about the ever-increasing cost of just about everything while interest rates continue their climb (making buying on time even more expensive). As I’m sure you know, paying more for life’s essentials without a corresponding increase in income means something has to give; usually savings. And that’s exactly what’s happening on a national scale. As of the end of August of this year, the Personal Savings rate has fallen to an abysmal 3.9% (FRED Economic Data). What we’re also seeing (see below) is an increase in the use of credit cards to make up the household shortfall, leading to an explosion of debt. As it stands, Americans are clearly financially stressed, with higher prices and debt being the primary reasons. 

Two and a half years ago I wrote my first post, “Explaining Debt: the nine hundred pound elephant in the room that no one wants to acknowledge”. Although inflation wasn’t too much of a factor at that time, the central thesis of the post was to discuss how debt of any kind robs us of future wealth by moving forward purchases to now (via financing) instead of paying for them in cash when we have the money. Although it’s always gratifying to have now instead of waiting for what we want later, most of us know that by doing so, we’ve just increased the cost of that purchase by whatever the interest rate is at that point in time (maybe more, as in today’s case of rising rates). For the past thirteen years, financing purchases could be rationalized away, as the Federal Funds rate from January 2009 until April 2022 was practically zero! (FRED Economic Data). Yes, there was January 2019 when it hit 2.40%, but overall, interest on purchases of any kind was quite manageable. And of course, once buying on credit begins, for many It can be very difficult to stop, if not become addictive. Today, of course, it’s even worse, since life’s necessities are now being added to the credit load. 

I bring all this up because of the current state of affairs we as a country find ourselves in. Between new auto loans averaging around $40,000 for 2023 (with durations extending to 84 months), credit cards with an average balance of approx. $8,000 (with interest rates reaching almost 30%!) (US Debt Clock.org) and student loan repayments ramping back up (average balance of approx. $41,000), Americans are drowning in debt, while robbing themselves of any type of secure future. And remember, these are averages, meaning that although half of all Americans have less debt than these figures, half have more than these figures. On the whole, total credit card debt is approaching $1.3 Trillion, while student loans have eclipsed $1.8 Trillion. Let’s also not forget mortgage rates, now hovering around 8% for a 30 year loan. Financial stress, indeed. 

If this were the whole story it would be depressing enough, but it’s not. Because of inflation, Jerome Powell of the Federal Reserve has not only raised interest rates to the current level, he may continue to do so, depending on if inflation continues to rise or cool. And even when he does stop raising rates, those rates will stay at those then-current levels until he’s convinced inflation has not only stopped, but is in full retreat. Which means those higher rates might be around for a lot longer than most people currently believe. 

But there’s more; in order for the Fed to begin lowering rates, the economy must begin pulling back, consistently. This means that spending needs to slow to allow for prices to stop rising (and perhaps start falling a bit, ie: supply and demand). The downside to this scenario is that when sales fall, production is a byproduct. If production falls to the extent that a current workforce is more than what is required, layoffs are sure to follow, leading to rising unemployment, which is NOT what the Fed wants long term, but may be necessary. This, of course, could lead to a recession, hence the “soft landing versus hard landing” you may have heard about. 

So the question now becomes, what can be done about all of this debt? If this is you, first and foremost, do not despair, for you’re certainly not alone. Looking at options is the start of a way out and, the sooner a plan is put in place, the sooner the debt starts to shrink and the brighter the future looks. As a byproduct, your emotional outlook will improve immeasurably as well, as progress is a great motivator to continued improvement. 

A great way to put a plan in place is to consider Your Family Bank, a program I offer that, on average, gets clients completely out of debt in 9 years or less (credit cards, auto loans, student loans, even mortgages). Your actual time frame may be a bit more or less, but the bottom line is that you will have a proven, measurable program to achieve becoming debt free much faster than would otherwise occur. Afterward, when debts are completely paid off, clients have their own “bank” from which they can make future purchases via self-financing. Hence, Your Family Bank.

If becoming debt free sounds good to you, reach out to me at 941-704-3134 or via email at d.babecki@db3insuranceservices.com. Additionally, you can always visit my website at www.db3insuranceservices.com and click on the red “Other Services” tab to read more about YFB. Thank you for your time. 

Let’s put a plan together to help you be 100% sure you’re going to have a great retirement!

The above article reflects the opinions and thoughts of David J. Babecki. The information contained in this material is believed to be reliable, but not guaranteed. It is for informational purposes only and is not a solicitation to buy or sell any products which may be mentioned. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

Please note: All guarantees and/or promises are based on the claims-paying ability of the respective insurance company.