Tuesday, October 8, 2013

My Friend Needs Advice From Financial Experts

I have a friend who got a small raise last year.  He already owns his own home, but a significant portion of his income is going to paying the mortgage and utilities.  The remainder goes to covering food for his wife and kids.

Over the past year he has grown increasingly frustrated because he has seen his neighbors go out and buy new cars, get new TVs and all the cable channels to go along with it.  He doesn't want his kids to go without so he went ahead and took out a credit card so he could buy those nice things for them.  He doesn't want them to go without simply because he doesn't have the money to pay for them.

To reward himself for doing such a good thing for his family, he went out and signed a lease for a brand new Mercedes-Benz.  It's top of the line with all the bells and whistles.

Unfortunately, he quickly discovered he didn't have the income to pay for his mortgage, utilities, food, clothing, minimum payment on his credit card, and this vehicle.  So he opted to use his credit card to make the car payments.

Within a few short months he had pushed his credit limit near the max.  He knew that without an extension to his credit limit, next month he would not be able to continue paying for the car unless he stopped paying the minimum on his credit card or cut back in other areas, which might mean his kids don't have the things their friends have.

When he called Visa for the extension they ran his credit.  They informed him they would not be able to increase his credit unless he cuts back on his spending.

This did not make my friend happy.  He demanded they increase his credit.  He said he can't be allowed to default on his car lease because that would hurt his credit score and prevent him from getting future credit.  He was worried it might also trigger interest rate adjustments in his mortgage loan or worse, land him in court as the target of a lawsuit.

My friend thinks he does not have a spending problem.  He says that just increasing his credit line doesn't mean he will actually increase his spending because all he wants to do is cover the expenses he has already committed to pay for.

What can he do to get the credit he needs or to get out of this situation?







Oh yeah, it's not really my friend I am talking about, it's my country...

5 comments:

Anonymous said...

The father should do what's best for himself based on the future earnings he expects, knowing full well that if everyone cooperates and one group doesn't hold a gun to the family's head over a battle they've already lost, they will all be better off for it and save money in the long run over the spiraling costs for such necessities that are gouging everybody.

The father also should regain control of his family from a ridiculously partisan faction that has only the interests of wealthy white males in mind. Plus if the father wasn't afraid of and didn't suck up so obviously to the top five percent, and didn't start needless and costly wars, and didn't have a total lack of empathy, he could afford whatever he wanted.

It's funny you use a family as an analogy but it's totally incorrect here. Familes care about their members. Blackmail is not a legitimate tool.

Also the father's friend should stop her shrill whining.

Oh yeah, it's not really the father I am talking about, it's the Republican Party...

Anonymous said...

Oh yeah, it's not really the father I am talking about, it's the Republican Party...

Let's look at this. You are implying that the democrats are the responsible ones. Everyone seems to know that we have a financial crisis, both democrat and republican. But what is at the top of the agenda of the democrat party? At or near the top of the democrat party's concerns is immigration reform and a pathway to citizenship for the estimated 11 million illegals. Of course once they are legalized, it sets up the chain migration process which allows them to bring to the USA their direct relatives, courtesy of past democrat legislation, which means another 20 to 30 million people could become legal in the next decade or so.

Given that the overwhelming majority of these newcomers are eligible for affirmative action, which is a disgrace to our fellow black Americans, and that a majority will be net tax consumers over their lives through welfare and food stamp programs, how can anyone believe the democrats are concerned about the future finances of this nation? Bringing in that many more government dependents, essentially importing a permanent economic lower class, is the last thing a nation worried about tight finances should be doing.

And just in case you think I am letting the GOPers off the hook, I am not. The leadership of that party is just as crazy.

The only thing keeping any sort of check on this is the conservative base who is balking at amnesty. I wish the "average Joes" of the democrat party would push their leaders for sanity as well.

theKansasCitian said...

Today congressional Democrats started coming to their senses. 23 Democrats joined house Republicans earlier today to pass a resolution funding Head Start. Not long after they jointly passed a measure to fund the FAA and back pay for federal workers.

Democrats and Republicans are working together in the House to find areas of agreement. Shouldn't the Senate and White House be doing the same?

Anonymous said...

This is inane. You have a third-grade education and display it every time you sit at a keyboard.

The debt of the United States is not like the indebtedness of a household. Thus, the U.S. does not need to "balance" its budget.

Why not? Because the U.S. government has the power and the means to increase the money supply (i.e., supply of dollars) with which to pay off its bonded indebtedness.

But look at Greece!

Wait.

Greece gave up its power to increase its money supply when it joined the EU. Since Angela Merkel is now in charge of the EU Bank, and since Angela does not wish to increase the supply of euros, Greece has as a result collapses into a failed state, financially speaking.

So please no more of the simplistic, "we need a balanced budget," or "we have too much debt." The US government is not in any financial danger from borrowing money, other than from the know-nothing Republicant's.

Anonymous said...

Why not? Because the U.S. government has the power and the means to increase the money supply (i.e., supply of dollars) with which to pay off its bonded indebtedness.

The US enjoys a unique advantage among all nations because our currency is a reserve currency. We can afford to print more money because a lot of it will get sucked up by foreigners. Even countries with their own currency like Canada cannot do that. They would immediately cause massive inflation if they tried to print as much new currency as the US.

I enjoy the position the US has in this regard. Therefore, I'd like to keep it this way and not give other currencies like the Euro the opportunity to displace the dollar. Therefore, I think it would be in our long term interest to be fiscally responsible. If the fed keeps pumping $80 some billion per month, other nations like the Chinese are going to look other currencies like the Euro. Why would they want to keep holding dollars when the value of those dollars will steadily decline?

Thus, I don't share your optimism that the USA can continue to accumulate deficits with no consequences. That view is highly irresponsible, and similarly to the other anon's comment about the democrats and immigration, goes to show how little the democrats seem to be able to the future consequences of their present decisions.