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You know what they're doing. They're
increasing their credit card balances at a rate

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again that we've never seen before.
It's worse, worse than we've ever seen.

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So the younger generation, the entire
population, really hasn't gotten the message.

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We continue to spend money. It's
starting to cool off a little bit,

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but the under thirty crowd, man, they just refuse to change their

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behavior. You are listening to Carrie
Lutz's Financial Survival Network, where you get

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00:00:26,399 --> 00:00:32,000
valuable information. You just can't find
anywhere else to thrive in today's trying times.

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You need the Financial Survival Network now
more than ever. Go to Financial

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00:00:37,799 --> 00:00:45,079
Survivalnetwork dot com and get your free
newsletter and gift. Financial Survival Network now

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00:00:45,320 --> 00:00:53,759
more than ever, And welcome you
are listening to and watching the Financial Survival

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Network. I'm your host, Carrie
Lutz. Well, hey, inflation,

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it's kind of like death taxes.
Inflation is always with us. It's just

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that sometimes it's more noticeable than others. Like right now, how many of

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you are feeling the pinch the higher
prices and the gas pump at the supermarket

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when you get your mortgage statement.
If you had to buy a house after

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rates started going up, you're feeling
it, and you're feeling it really big.

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And our good friend Paul Ouster is
here from a better qualified dot com.

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Paul A. Inflation's bad, but
if you don't have good credit,

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now it's even worse, isn't it. Yeah, So you just hit the

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nail directly on the head, because
it's not just interest rates, right,

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insurance premiums, so homeowners insurance,
your property in shorts, your auto insurance,

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those things are all directly tied.
Property and casualty directly tied to your

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credit score. And we'll call it
a credit score there. It's alden in

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short score, but it's based upon
the same information that's used to determine your

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mortgage interest rate. So the cost
of owning a home, uh, and

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it varies when you start to look
at everything. But the cost you know,

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for goods and services have have risen
so dramatically and so quickly that it's

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it's become cost prohibitive, especially for
the younger population to even purchase a hole.

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So that's why there's literally, you
know, the real estate market is

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so stagnant. We've never seen anything
like this again in our in our brief

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history here, because we've never had
the perfect storm that we have right now.

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So it's not just the interest rates, it's it's it's everything else.

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Okay, you know we joked about
it when when it first came out,

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But the dollar store is no longer
a dollar store. It's a dollar ish

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store out of business. Didn't they
you go out? Because they can't say

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people didn't want to pay more than
a buck. Yeah, well so we'll

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see, we'll see what ultimately happens
happens there. But look at the fast

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food chains, right they're all trying
to play catchup and say, well,

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we better go back to the two
dollars menu, the five dollar menu,

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because they were all I don't want
to say they were price gouging, but

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they were pushing the envelope during COVID, during the free money pandemic, nor

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are the really good times here.
Retailers were pushing the envelope to see how

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much they could actually charge will what
would the market bear, you know,

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for a fast food hamburger, And
they found that consumers were willing to spend

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a tremendous amount of money relatively speaking
to what they were doing before COVID.

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Look at all the delivery services,
the convenience services, Door Dash, Uber

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Eats. You know, if you
order something through those services, you're paying

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ten twenty percent set more than what
you would if you drove, you know,

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to the fast food chap. So
all of those things combined. Now

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now the retailers are also getting hit. You know, they get hit with

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the cost of goods and services.
All of their production costs are through the

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roof. So now they're trying to
figure out a way to play ketchup and

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go back to the consumer and say, hey, Carrie, we're sorry,

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we were you know, we put
the hammer down on it for the past

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couple of years. Come back to
us and we'll start to give you some

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discounts. Hey, you know,
I saw a shocking statistic ball fast food.

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I'm not a fan of it,
but you know, on occasion,

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that's all there is. It's up
seventy two percent like in the last three

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years. Man, that's way worse
than any other stated inflation other than energy,

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which three years ago, three and
a half years ago is a buck

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eighty a gallon. Now it's in
the flours. I mean, man,

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how does it's enough to make you
want to cook food at home? Isn't

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it? Well? It should be. But unfortunately, again what you're saying

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right now is spot on, you
would think, and again, especially this

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younger generation, let's say, folks
that are under the age of thirty,

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it's like they haven't got the message. They haven't changed their behavior. You

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know, what they're doing. They're
increasing their credit card balance is at a

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rate again that we've never seen before. It's worse, you know, worse

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than we've ever seen. So the
younger generation, the entire population, really

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hasn't gotten the message. We continue
to spend money. It's starting to cool

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off a little bit. But the
under thirty crowd, man, they just

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refuse to change their behavior. And
what that means is that they're just increasing

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their debt. You had the student
loan deferment period end. That's starting to

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take its toll along with everything else. And that's the segment of the population.

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And we see it credit card delinquency. So credit card balances are increasing,

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you know, at just a tremendous
rate. But thirty day delinquencies,

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sixty day delinquencies are all creeping up
very quickly. We see auto delinquencies starting

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to creep up. We see mortgage
delinquencies, pre foreclosures and these are all

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the early indicators that the consumer is
not even able to tread water anymore.

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I mean, forget about putting money
into savings and all that again, all

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that good stuff that was happening when
there was literally free money being thrown around

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as now gone by the wayside.
We were all hoping for at least one

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rate cut, if most people were
hoping for multiple rate cuts during this year

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twenty twenty four. We're lucky if
we get one. We're lucky if we

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get one. So the average interest
rate on a credit card is now close

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to one one percent. It was
fifteen percent, less than two years ago,

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which was saying every time, yeah, well, but what's happened is,

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you know, average people that were
paying fifteen percent, and unfortunately,

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folks with bad credit, we're paying
close to thirty percent. Now you have

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average interest rate is just that much
closer to the same as somebody with bad

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credit. So you're paying twenty one
percent to borrow money out of credit card,

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you're paying twenty nine thirty percent if
you have bad credit. You're paying

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twenty nine to thirty percent on department
store cards at this point in time,

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and again, most people have never
had a lesson in how to manage credit

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card death. They have no idea
about daily compounding interest works, and I'll

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just I'll set it up in a
couple of sentences. Daily compounding interest means

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that your balance is going to increase
every single day during the billing cycle.

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Then you'll get hit with all of
that interest at the end of the billing

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cycle unless you pay it off in
full. If you don't pay it off

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in full, your ballot, you
could cut the card up and not spend

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another dollar. At the end of
the billing cycle, your balance will be

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higher than when you started the months. Every single day it increases. So

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people have to understand how to get
out of credit card debt. It's not

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easy, but it's certainly not complicated
either. They just have to be willing

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to be disciplined and get themselves into
a debt management plan. Yeah, so

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true, so true. I mean, Einstein always said he was mystified by

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the power of compound interest, and
that guy was probably the smartest guy in

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the world. There's certainly one of
the top five. So if I can't

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figure it out, how do you
think you're going to figure it out?

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Just look at your credit card statement, right but this is yes, this

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is not sustainable, dear Paul,
is it? It is not? So

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what happens is, you know,
every financial transaction is based on emotion,

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and right now again we have all
this pent up demand still, so people

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say, well, you know,
times are tough and things are rough,

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so I deserve the hot tub.
I deserve to go on the cruise.

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I deserve even though in the mental
math that they do in thirty seconds,

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they know they can't afford it.
But you know what I mean, I

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have some room on my credit card. I well, you know what,

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I'll go on and apply for this
buy now, pay later stuff a firm

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and Karna and all these. That
part of the economy has not even reared

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its ugly head yet. It's not
factored in to the current credit card debt

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that we see, you know,
spiraling out of control. Once we get

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our handle on those facts and figures, it's really painting a bad picture for

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the average consumer. We're right now, Yeah, isn't that the truth?

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Uh? Yep? So look,
you know what do you do? Yes?

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So the message, the message is
clear for the young people. Look,

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if you need something and you have
to put it on your credit card,

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that's different than buying something that you
want right. If you need a

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roof over your head, if you're
you know, you got to replace a

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window, you got to you have
an emergency repair in your car. That's

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different than stopping at the convenience store
every day. If you can delay the

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big ticket items, you know,
your durable goods, If you can delay

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that for six to twelve months,
hopefully we do get a rate cut.

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Hopefully we do see the inflation continue
to cool off a little bit and the

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prices of the goods and services will
come down. So shop around, even

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with grocery shopping, you know whatever, the percentage is supposed to be obviously

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varies from household to household, but
shop your pantry before where you go shopping,

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Shop around before you go shopping.
That we did a thing that actually

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was down at Florida. I don't
know if you and I had spoken about

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it, but I think it was
Kroger and they stopped their delivery services.

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They were looking to get rid of
all these discounts. And you know,

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maybe it's time for consumers. If
you if you know what, if you've

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shopped around and you have a list
and a budget, hopefully to start with

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go online and take a look.
You might find that the place three blocks

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away has chicken for you know,
two dollars less a pound. It's on

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sale. So again, this is
a very very big change of behavior for

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most people. But if they don't
change their being gone, if they don't

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change their behavior, and they don't
you know, figure out how to do

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things differently, they're going to get
themselves in trouble. So true, a

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maoun so true and so uh ok. So you get it under control.

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But it's easier said than done,
isn't it. Well, you have to

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have a plan. Yeah, and
we say this all the time. You

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have to kind of swallow your pride, raise your hand, realize that you

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are in trouble, and then figure
out how you're going to deal with it.

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Maybe you could take a short term
loan from a family friend. But

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if you have any any balances on
your credit card, it's got to be

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your number one focus. Because if
you're putting money into a four to oh

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one k right now and you're earning
let's say four or five percent, it's

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gotten that part of this economy has
gotten a little better for the savers,

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But you're earning four or five percent
over here, but you're paying out thirty

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percent over here. The math doesn't
add up, so you have to Every

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dollar that you put towards credit card
debt is like getting a thirty percent return

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in the market. So come up
with a plan. Figure it out.

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The first thing you have to do
is stop spending. Maybe it's time to

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you know, get that second gig. You get a part time job for

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a little while. You take every
penny and apply it towards your credit card

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debt. There's only really two accepted
ways to pay off credit card debt.

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The first one is you you pay
off the credit card with the highest interest

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rates. First, obviously you got
to pay the minimums on all your other

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cards. And then the other method, the snowball effect, is where you're

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you're paying off the balance is the
smallest balances first and foremost. It gives

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you a good sense of accomplishment.
It's a positive feeling for people. Does

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it work for that knockdown or something? Well, Avalanche is paying we use

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avalanche and snowball. Balanche is going
after the highest interest rate. Snowball is

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you know, kind of the snowball
effect. You're gobbling up the smallest ones

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as you roll along. But listen, Kerry. If you can't figure it

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out on your own, fire a
company to help you. It's like hiring

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a personal trainer. Right. So, there are some tremendous nonprofit groups out

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there. They're credit counseling companies,
debt management companies. You're going to pay

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them a management fee, but it's
worth every penny in what they're going to

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be able to save you. Not
to mention, they keep you on track,

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right, and they hold you accountable. But more importantly, they have

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much more leverage with the creditors.
If you call your credit card company and

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ask for help, you're one person, right. These companies have thousands of

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clients, so their leverage is far
greater than what we have. So they're

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able to get better terms and conditions. You're talking about principal balance reductions,

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you're talking about zero percent interest while
you're paying back those cards. So raise

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your hand, swallow your pride,
ask for help. Obviously, do your

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homework. Not all even if they're
even if they're nonprofit companies, they're not

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all created equally. So you're going
to get you know, you have to

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do a little homework and make sure
you wind up with the best fit for

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you when you're researching these types of
companies. Yeah, yeah, So the

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key is you got to do something. One thing that's really good about companies

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like yours is it creates a effectively
an accountability coach. Yeah, that's it

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person. So you know, if
you miss it, you know you're not

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going to beat them up, but
you're going to say, hey, look,

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you're not achieving your goal here.
You got to step this up.

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Don't go to Starbucks and don't you
know, cook it home. Don't think

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you're saving money on fast food.
And you know, hey, go to

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Costco for gasoline, whatever you need
to do, right, but don't go

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shopping thereafter, because you're just going
to blow a lot of and raise your

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credit card balance. Right. Listen. One of the things we track every

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single month for every single client is
their utilization ratio. And that's the difference

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between your credit card balances and your
credit limits. And we track that like

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a hawks because it's an indicator of
where the client is and if they continue

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to increase their utilization ratio. Look, it's the second biggest factor when we

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talk about credit scores. Let's just
take a step back. There's five factors

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payment history is number one, right, rightfully, So you pay your bills

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on time, you're going to have
a better credit score that somebody than somebody

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who misses thirty day late payments sixty
day lay payments. But the second biggest

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factor is your utilization ratio, And
the credit score has nothing to do with

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your income. Your credit score has
everything to do with how much credit you

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have available and how much credit you're
using. You have to have to pay

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attention to that. Those two things
combined are sixty five percent of the overall

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score. Then you have credit history, right. People ask me all the

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time, oh, should I close
this credit card? Before you close a

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credit card, you should do a
deep dive credit analysis to make sure it's

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not going to have a negative impact. In your mind, you would think

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there's no way that closing a credit
card could actually hurt me, but from

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what we've seen over the past twenty
years, it's the number one thing that

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can hurt someone besides late payments and
collections and judgments and charge offs. Closing

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a credit card, think about your
utilization ratio. Whatever credit you had available

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on that card is wiped away,
and whatever credit history you had for that

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account is also wiped away on the
day you close it, so be careful

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about closing it. Then you have
types of credit. There's really only two

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installing contracts and revolving your installment contracts
or your mortgages, car payments, UH,

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student loans where you have a fixed
monthly payment revolving, or your credit

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cards. And the last piece,
you know, is that new credit piece,

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and that's where your inquiries can can
hurt you. Look, you're there's

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a risk of only losing a couple
of points for each inquiry, but people

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get themselves in trouble by applying for
numerous cards. You know, you buy

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a new house, or you're or
you're looking to get a house, or

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you and you're you're applying for far
and all this stuff. Those inquiries start

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to add up very very quickly,
and it can tank your score pretty quickly.

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So be careful about how many people
you allow, how many creditors you

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allow to actually pull a hard inquiry
for your credit report. And let's not

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forget that. You know, when
you go applying for new cards and you

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get new cards, that also dings
your credit report. Assuming you can get

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it right for sure, it takes
about six months. We call it seasoning,

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the tradeline and the new account.
So the new account is scary to

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the fight O scoring algorithm or the
vantage score algorithm, because no one knows

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how you're going to manage this new
debt. So if you open a new

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account, it's open, active and
positive. After about six months, it

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might actually help you. But in
the beginning, make no mistake or doubt

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about it, you're going to lose
some points just by opening that new account.

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This is why you know we deal. We're very very much referred within

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the real estate industry. Lenders and
realtors and real estate agents. They cringe

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when they're go going through the home
purchase pro process and the barer buys new

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furniture as soon as they put the
contract in on the home. They buy

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new furniture. They don't use their
debit card, they don't pay cash,

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they open the line of credit with
the furniture store because they're going to save

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fifteen to twenty percent. Never ever
fall for that trick. It's a marketing.

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The marketing geniuses put together those point
of sale discounts for good reason,

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but that could actually we've seen it
destroy the home purchase process. Someone was

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not able to buy a home because
they opened a new account. And it's

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not just one person. Unfortunately,
over the past twenty years, we've seen

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it happen numerous times. They bought
a new car, they got a new

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credit card, department store card,
they co signed for student loans. Those

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are all the types of things that
can actually sink a real estate transaction.

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So consumers have to be careful.
Yeah, careful with your credit. That

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should be the byword. And one
little trick I saw was people that had

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the money and they don't have a
lot of the a lot of credit to

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actually make prepayments on the cards so
when the charge is hit, it doesn't

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up their utilization rate and they're basically
the scores stays around the same. Brooking

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micro payments on any line of credit
is always a good idea, but especially

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for credit cards because remember what we
said about daily compounding interest. It's based

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upon yesterday's the week before, whatever
those ballances were. So let's just say

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you were you know, you're going
to pay one hundred dollars towards towards this

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credit card. Make four payments of
twenty five dollars, make two payments of

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fifty, make free payments of thirty
three thirty three, however you want to

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do it without driving yourself crazy.
But any micro payments that you can make

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bi monthly weekly instead of that one
lump sum, whether it's for your mortgage

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or your credit cards, will always
help you decrease the amount you're going to

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pay an interest. Yeah. Yeah, And just because they watch it,

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they give you the pay once for
the month doesn't mean you can't be paying

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weekly. And you could just set
up auto transfers from your account. You

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sure catch charged anything more for it, of course, and you will wind

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up paying less interest and raising your
score in the process. Absolutely, absolutely,

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there's a great point saving money on
interest and keeping your utilization ratio lower

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than what it would be if you
only made one payment, right, and

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especially if you're going to be going
for a mortgage or something and you're on

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the edge, I mean, you
don't need what do you need for a

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mortgage? Well, obviously the higher
your credit score, the better the cheaper

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the you're going to be paying.
So that's going to be a benefit,

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But you've got to get over the
threshold of six eighty or whatever it is

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these days. Actually, some lenders, you know FAJ lenders are still going

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down to about six twenty. It's
somewhat of a sliding scale based upon down

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payment, what percentage you're gonna put
down on the on the home purchase.

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But again it could come down to
the point where one, five, ten

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twenty points could make the world of
difference of not only just getting approved,

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what how much it's going to cost
or save you. You know, in

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interest everything is based upon what's called
tiered base pricing, So every lender has

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different tiers and that's where they're going
to offer different interest rates. So as

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your score goes down, your tiers
go up in terms of your interest rates.

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And again a six nineteen is not
a six twenty. Six twenties not

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a six thirty, so all of
those. Every time you go up or

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down at a tier, it's going
to cost or save you money. So

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people look, I say it all
the time. You don't have to be

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crazy about it and watch it every
single day, but especially if you're thinking

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about financing anything, you better start
paying attention to your credit score. Hey

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couldn't agree with you more. That's
why we always love having you on here,

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00:24:25,680 --> 00:24:27,279
Paul. Hey just tell us again
where we find you, how we

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00:24:27,319 --> 00:24:32,240
connect with you, on the web. Yep, go to better Qualified dot

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00:24:32,279 --> 00:24:36,680
com. All right links in the
show that's to this interview on Financial Survival

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00:24:36,799 --> 00:24:38,640
Network dot com. Please, when
you visit the site, sign up for

306
00:24:38,640 --> 00:24:44,319
your free newsletter. There's over thirty
thousand of you getting this newsletter now for

307
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good reason. Tips like these,
Hey, these are free tips that instantly

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00:24:48,319 --> 00:24:52,519
make you money. You don't have
to buy anything or anything else. If

309
00:24:52,519 --> 00:24:56,119
you want to supercharge it, then
you definitely want to talk to Paul my

310
00:24:56,640 --> 00:25:00,640
email case you got a question for
Paul and myself at carrie lets dot com.

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00:25:00,680 --> 00:25:03,880
Paul, thanks for coming on again
and we'll talk to you again real

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00:25:03,960 --> 00:25:06,920
soon. Thanks, Carry, I
have a bid one. Thanks for listening

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00:25:06,960 --> 00:25:12,160
to Carrie Let's's Financial Survival Network,
your solution to today's trying times. For

314
00:25:12,240 --> 00:25:19,480
the latest, go to Financial Survivalnetwork
dot com. Financial Survival Network now more than ever