Newsletter Issue IV: Footsteps Along the Path by Clear Path Credit Consultants
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This
edition of Footsteps Along the Path was initially issued by Clear
Path Financial Education Services which has now become Kuehn
Financial Education Services LLC. For more information about
Kuehn Financial Education Services LLC, please email Clear
Path Credit Consultants believes: In this issue: *Article: "Frugal Living in a Consumption Economy" *Being a Consumer is a Powerful Thing: A compilation of news, views & reviews *Reasons students get into trouble with credit cards *Topic for the next issue of Footsteps Along the Path Small business owners juggle personal and business finances. Clear Path Credit Consultants acknowledges the difficultly in expanding your business while managing the household budget. To increase your knowledge in cash flow and credit, please join Deborah A. Kuehn MBA on August 9, 2:00 p.m. at the Glendale Library (59th Ave & Brown St) for the free seminar, Building a Business on a Plastic Foundation. If you have attended this presentation in the past, please be aware the upcoming session will discuss cash flow more in-depth. To register call: 623-930-3552. For more information on Building a Business on a Plastic Foundation, please click on the link: http://www.azcentral.com/business/columns/articles/0722MoneyMinute22-ON.html to read Brahm Resnik's "Money Minute" column. In addition, Clear Path Credit Consultants was featured on Channel 12 during Mr. Resnik's "Money Minute" segment aired 7/22/03. Thank you, Mr. Resnik. Frugal Living in a Consumption Economy The U.S. government budget has swung from a surplus to record deficit. Perhaps the same is true for your household budget. Pres. Bush is not a proponent of frugal living. The tax refund checks of 2001 and 2003 are aimed to promote personal spending not savings, explaining why Lowe's and Wal-Mart will gladly cash them. In an effort to improve the economy, Alan Greenspan believes keeping interest rates low will create consumer and business spending. Well, he is half right. The Bush Administration proudly proclaims that job productivity is continually increasing. Guess what, so is the jobless rate. Historically, the market place was based on manufacturing and trade. Today, service and consumption anchor the economy. The need for us to spend is evident, our economy depends on it. But, does service and consumption create a financial system that fosters savings and frugality? The majority of services are intangible. Thus to benefit, consumers must consistently purchase. Whereas, manufacturing and trade provides an enduring product along with more inflow of foreign funds and increasing GDP. So, once an item is purchased, the patron is satiated for the period of time in which the product holds value. This frees money that can be saved or invested. However, in addition to the budget deficit, the United States is in a trade deficit, importing more than exporting. Our government wants us to believe it is our patriotic duty to spend. Greenspan does not minced words and states," the economy rests on the backs of consumers." Two-thirds of the American economy is driven by consumer spending. Many have done their part by borrowing, refinancing their homes, cashing out equity, and reaching an average credit card debt of $ 8,940. After three years of financial downturn, is this feeling a bit heavy? Unlike consumers, in poor economic times businesses reduce borrowing. Therefore, the demand for money is lower. Connecting the "supply and demand" dots, the government has more capital to borrow, financing the deficit at low interest rates. Though, when the economy improves the private sector will increase their demand for money. Competition for available funds between government, consumers and businesses will occur. More demand will eventually cause interest rates to rise. A word to the wise, start paying down lines of credit with variable interest rates, including home equity lines of credit! Also, the Social Security trust fund is being tapped to partially finance the deficit. Think I.O.U upon retirement. A nation must cover its spending just as a household. Many Americans do not have adequate savings to weather a job lay off. But, should unemployment be a concern with the government chanting "the recession is over" and "productivity is higher." Productivity is a measure of goods produced at a cheaper cost per unit. It is not a measure of employment! In reality, the more productive the process is, the fewer employees needed. This is one reason for the current 6.9% unemployment rate and the "jobless recovery." Spending, debt, increasing interest rates, I.O.Us, financial distress due to job loss...frugal certainly does not come to mind. Frugal starts with asking yourself, "what is it I want my life to look like?" Frugal in action is living within your income, taking care of your future and maximizing your pleasure. Are we a frugal nation? Are you a frugal American? Clear Path Credit Consultants encourages individuals to balance the service and consumption economy we live in with the responsibility to provide financial security for oneself. (Note: This article was written two weeks ago, for release today. Ironically, The Arizona Republic printed "Economy gets second wind" (Business, Sec. D1), today. To compare and contrast information: http://www.azcentral.com/business/articles/0801economy01.html In addition, the unemployment rate decreased in July to 6.2%, due primarily to disgruntled people abandoning their job search. The authentic number is not 6.2%. Instead, it is 556,000. This is the figure in which the labor force shrank. Logic extends itself...if less people are considered unemployed, the jobless rate will decrease.) Being a Consumer is a Powerful Thing On July 25, 2003, the House Financial Services Committee approved legislation that permanently will allow the federal government, not the states, to regulate credit reporting under the Fair Credit Reporting Act (FCRA). Ensuring privacy and accuracy of credit reports is the main focus of FCRA. As consumers, you be the judge on how well the Federal government is doing. Anyone who has ever pulled their credit report and dealt with correcting an error or worse ... identity theft... will have an opinion. However, many people will not have an opinion on federal versus state regulation of credit reporting. But, to be a powerful consumer, it is worth a few minutes of your time to consider the impact. The Public Interest Research Group (PIRG) states on it's website: "What will bring Congress to the table in the future, when states won’t have the right to prod it and come up with new ideas?...It’s bad public policy to roll back the right of the states to protect their consumers from identity theft and their investors from fraud.The states should continue as laboratories of democracy because they have proven, time and again, that they are leaders in finding solutions. Without the states as leaders, our advice to consumers and investors will be simple: Look Out.” -- Edmund Mierzwinski, Consumer Program Director www.pirg.org U.S. PIRG is a public interest watch dog organization. It's roots are at the state level. However, Arizona does not have a PIRG. The East coast subscribers to Footsteps Along the Path have state PIRGs. Hmmm, perhaps Clear Path Credit Consultants should look into offering assistance in developing an AZ PIRG. Reasons Student Get into Trouble with Credit Cards Credit card companies are anticipating a fledgling flock of freshmen stepping foot on campus in a few weeks. Please discuss with your college bound child the appropriate use of credit. Robert Manning, author of Credit Card Nation, states the primary contributors to students problematic use of credit cards stem from: 1) extensions of unaffordable lines of credit 2) increasing education related expenses 3) peer pressure to spend 4) financial naïveté. (Excerpt from comments to Bankrate.com) Credit Card Nation is well written book examining the history of credit and why Americans love their plastic. For the interested frugal people simply check this book out at your local library. Upcoming in Footsteps Along the Path Next issue look for information on "Does an inferior credit card offer yield an inferior customer: The Consumer Bankruptcy Reform Act." Deborah A. Kuehn is the sole proprietor of Clear Path Credit Consultants, a financial management education service. Kuehn views herself as a consumer advocate that assists people in leading a debt free and credit worthy lifestyle. She has a MBA with a B.A. in Communications. Clear Path Credit Consultants' services include: spending plan development (budgets), cash flow budgets and forecasting, credit bureau report analysis, money management skills sessions, assistance with interest rate negotiations, along with community and corporate lectures. "Clear Path Credit Consultants: Helping you sleep better at night." PH: 623-580-9293  This issue is dedicated to Rianns, a marvelous companion, who passed away August 4, 2001. Written by Deborah A. Kuehn MBA All rights reserved Clear Path Credit Consultants is a registered trade name Issue IV August 1, 2003 |
