Yeah,
hi everyone and welcome to
our new show called Stretching Your Dollar. I'm Christian Scher
here at the New York Stock Exchange.
And during this half hour,
we're going to give you every day tips to make the most of your money.
We are going on this money saving journey
together.
So we'll talk about all sorts of topics, how to negotiate better,
how to save for that dream home and how to stay out of debt.
So each day,
I'll share my expertise here at the New York Stock Exchange and I'll be joined
by experts in their particular field to find out how we can stretch our dollar.
We start with some good news today.
This is a definite for the 12 th straight month inflation actually declined.
The consumer price index data for June showed a rise
of 3% its slowest pace of gains in two years.
The lowest that we've seen since March of 2021
and overall inflation has dropped from a high of
9% last summer in June of last summer,
cooling off even more than the 4% that was reported in May.
So lower energy prices continued to be a major factor pulling
down inflation with gas prices off about 27% versus last year.
But rent prices unfortunately showed no signs of slowing.
They were up half of a percent in June at
the same pace as in May, certainly during these busy summer months.
So as inflation is still elevated, still a concern, that's for sure.
Even though it's cooling, it's above the fed's long term 2% target.
And consumers have shown signs of pulling back.
Consumers actually slowed borrowing in May to an annual pace of 1.8%.
And that pull that comes as credit card rates
are
at a record
high.
So joining me now to understand what we need to
know about debt in this environment is Rebecca Walzer,
President
of Walls or Wealth Management and a
top three financial advisor according to invest.
Welcome. Thank you. Thanks for having me.
I'm glad to be here. It's so good to have you on set. So let's start with the first one.
What viewers need to know about using a credit card safely in this environment?
All right.
Well,
the first thing is rates have gone
up astronomically and especially the default rate.
So make sure you
read the fine print and find out when your payment has to be received by just missing a
payment by even one day can put you into the default rate of your credit card bill.
And that can be as high as 29.99% because rates have gone up so astronomically.
So we're bumping up to the 30% level now and that
will take you forever if you get that default rate,
right?
Be very careful on that. Yeah, very dangerous. Good point there.
So let's say you have found yourself in debt in that scenario.
How should you organize paying off creditors if
you have it coming from several locations?
Great question. Let's rank the credit cards.
Revolving debt obviously has to be attacked first because installment debt
is going to have a fixed kind of period of time.
So revolving debt is where we really get into trouble.
Rank your actual interest rates highest to lowest
most aggressively tack the highest rates fastest because
those are the ones that people still in
their sixties paying for their dinner on their,
in their college dorm room because they just have not paid off that card.
So attack those first. Is it possible to negotiate with creditors at all?
You know,
we had a lot more negotiating ability before the bankruptcy laws were changed.
Consumers used to call creditors all the time
and say I'm going to file chapter seven.
There wasn't a lot of parameters around chapter seven and
they could really get away with that chapter seven now,
which is a complete and total liquidation, bankruptcy for a person
has become income constrained. You have to have income limit test me
and so you can't just do a straight right off.
So that has taken and that has definitely given the creditors more power.
But obviously, there are are still some people that you know,
should be writing off their debt.
They will never have the cash flow to sustain their debt.
That is a chapter seven case and that is something that can trump the creditors.
Otherwise, if you're just in a cash flow situation, that's tight right now,
you need to communicate, call them, talk to them, make arrangements.
The worst situation is just putting your head in the sand trying to
pretend like it's going to go away and not have any conversations.
That's when you're going to start getting harassed by these
within the limits of the law.
So let's say you just don't have the money to make a payment.
What should you do in that scenario? What are your options?
You absolutely need to call your creditor and you need to explain the circumstances
and you need to let them know and you need to be honest.
And then if that doesn't, first times when you call,
you're going to get just the regular customer service, ask to speak to a supervisor,
tell them that you're looking for a debt settlement negotiation
and you know, really push it to a higher level.
So they get you to a settlement department.
There's usually a specialty department that is trying
to preserve as much revenue as possible.
Now,
when it comes to taking out a loan or even consolidating your debt right to over time,
try to get out of some of this debt that you've racked up.
Unfortunately, nowadays, at very high rates,
what is the process to get that started?
Well, the first thing we have to understand is what is our true free cash flow.
I mean, I think people don't know their budgets when they come to speak with us.
The first thing we ask is how much cash flow are you spending?
You know, after taxes month,
99% of people don't even know that number.
So they don't know what they have if you don't know what you have after your, you know,
basic fundamental living fundamentals,
you don't know what you can actually afford to pay.
So the very first thing that we have to do is get a solid budget of
what is being spent and then cut out all the things I hate to say it,
but to cut out the streaming, cut out the subscriptions,
cut out the things that you just signed up for and they're recurring.
This is the new system.
The subscription model keeps you probably $200 per monthly and
you even realize because of all these little things here,
$19 here, $20 there, everything that's subscription based,
eliminate those things.
If we have a debt problem,
we don't get to have all those things and tackle the debt as fast as you can.
Ok, very good advice your credit score. How does that come into play?
So the credit score is impacted by a couple of
main factors and this is a really important point.
So the more credit cards you open.
So debt consolidation loan, if you have to apply for a debt consolidation loan,
that is the credit pool and any credit pulls do affect your credit.
However,
having five cards outstanding with balances is worse to a
credit score than having three cards outstanding with balances.
You know,
having balances that are 99% of the available credit is worse
on your score than having 50% available credit still available.
So what I would say is consolidate the cards that are junk to the better cards,
keep the longest open cards still open because that is one of the
largest factors on your credit profile is how old is the longest account?
And how long have you had credit?
So don't go off and close your oldest account unless it's just
at a 29.99% interest rate in which case definitely close it.
But those are the factors. Not too many,
you know,
revolving consumer credit card debts open and making sure we have some balance
in some room otherwise it looks bad and consolidate the ones that are,
that are not going to work for us.
Rebecca w are with everything that we need to know. Rebecca. Thank you. Thank you.