The economy is always a hard thing to understand, even for the “experts.” But lately it’s been even more psycho than normal, with some signals freaking out the professional investor types. What’s going on? Well, let’s check it out.
Here are Five Fast Facts on normal folks falling behind on their bills:
- 💳 Taking Credit - Interest rates are pretty painful on most credit cards, even with the recent rate cut. The average rate in May of this year was over 21.5%, up from only 15% back in 2019. Why is it that the pandemic changed everything??
- 📈 Delinquencies On The Rise - The amount of credit card balances becoming delinquent over the past year was over 9%, the highest in a decade. Many banks expect higher charge-off rates for the rest of the year, meaning they are writing off balances because they don’t expect customers to pay them. But don’t worry, they’ll still keep chasing you down for those balances, just in case!
- 💨 Vroom Vroom - Some lenders who focus on car loans are projecting more charge-offs there, too. The average interest rate on a 60-month car loan in May was 8.2%, up from 5.3% in 2019. Over the last year, about 8% of all car loans went delinquent, the highest rate in more than a decade. This is key because cars are critical for most people to get to work so it’s the last thing they stop paying. 😱
- 💰 Going Up? - Is there any growth in spending at all? Yes. But banks are reporting that their wealthiest customers are the ones driving most of it. A quick look at income inequality confirms this: wages for those in the bottom 90% of all income earners grew by about 33% from 1979 to 2022. Wages for the top 1% of earners grew by almost 172%, and for the top 0.1% wages grew by 344%! The poor and middle class got slightly less poor, but the rich got a whole lot richer…and they’re spending that new wealth!
- 😣 It’s A Cume Thing - Put this all together, and it’s clear normal folks are having a very tough time paying their bills, but the wealthy are having a grand old time. But if inflation has come down, why are things still so expensive? Remember our old friend cumulative inflation? Yeah, he’s a real a$$.
🔥Bottom line: The last few years have been brutal on most people. If you’re fortunate enough to have started out with a proverbial silver spoon you’ve actually done quite well for yourself, but for the rest of us, well, it’s been tough, and many have been balanced on the edge of a knife for a while. As savings and reserves have been burned down over time, we’re starting to see people fall off the edge and get gashed. Wherever we can find to save a few bucks, we’ll be sure to let you know!
What’s your best money saving suggestion?
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