Latest / Financial Survival Network / The Decline of Credit Scores - Buy Now Cry Later -- Paul Oster #6044

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The Decline of Credit Scores - Buy Now Cry Later -- Paul Oster #6044 · Financial Survival Network

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  Credit card delinquencies are way up. Pre foreclosures, thirty day mortgage lates,
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  auto delinquencies, all of those things are in place, and they're increasing as
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  rapidly as the scores are declining. So the average consumer's drowning. I don't
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  care, like you just said, the gd NE, the CPI, all
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  these crazy numbers that can get fudged every which way. But Tuesday. The
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  one thing I know. I've been doing this for over twenty years. The
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  average consumer is starting to drown in debt. You are listening to Carrie Let'sa's
• 0:30
  Financial Survival Network where you get valuable information you just can't find anywhere else to
• 0:37
  thrive in today's trying times. You need the Financial Survival Network now more than
• 0:43
  ever. Go to Financial Survivalnetwork dot com and get your free newsletter and gift.
• 0:48
  Financial Survival Network now more than ever. Ed Welcome you are listening to
• 0:58
  and watching the Financial Network. We made it through the eclipse. We only
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  had a couple of minor earthquakes, one in one in New Jersey, more
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  major one in where was it? Japan? I guess, and hey,
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  but we survived it, and let's see if we can survive the earthquakes that
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  are rattling the credit markets. Our credit expert here, Paul Poster, is
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  with us now and you find Tim at better Qualified dot com. Paul,
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  great to have you back on. So we got like things happening here.
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  Credit scores for the first time in over a decade are falling, and that
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  is an indicator, especially when you think of how much the Consumer Financial Protection
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  Bureau has inflated credit scores over the past decade. And it's kind of like
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  the GDP numbers. They can't keep it going, can they? No,
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  they cannot, And look like you just you, you're spot on with what
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  you just said. This problem is worse than it actually even looks like it
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  because cours have been so artificially inflated for the past decade that this is unfortunately
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  just a tip of the iceberg. So some people the other side of the
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  coin, I have people say, Paul, what a couple of points decline
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  and you're running around like the sky is falling. But a couple of points
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  is a big deal because it's the first time that we've seen this, whether
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  it's a stagnation or a slight decline, it hasn't happened in over a decade.
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  So unfortunately, what I think again, we have some precursors out there.
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  Credit card delinquencies are way up, pre foreclosures, thirty day mortgage lates,
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  auto delinquencies, all of those things are in place, and they're increasing
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  as rapidly as the scores are declining. So the average consumer's drowning. I
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  don't care, like you just said, the gd NE, the CPI,
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  all these crazy numbers that can get fudged every which way on Tuesday. The
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  one thing I know, I've been doing this for over twenty years. The
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  average consumer is starting to drown in debt. This is unlike other times in
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  the past because the phenomenon is that the psychological impact hasn't taken effect. So
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  people are still running around like spending money. I mean, at the end
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  of the year in the fourth quarter last year, it was four times what
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  the forecasters were thinking about, four times the amount of debt that was a
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  mass credit. And look, this isn't good debt, right If you think
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  out a mortgage, that's good debt. If you have debt for durable goods
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  and products, that's a good debt. This is revolving credit card debt,
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  and that means people are putting their groceries on their credit cards, they're putting
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  gas on their credit cards because they haven't changed their behavior. So there's only
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  one way to go here, and I think it's unfortunately again, it's gonna
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  get worse before it gets better. I couldn't agree with you more fault.
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  You know, you can do financial tricks. You can do stuff only so
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  much, and then the piper has got to be paid. But people you
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  know and I know are much more engaged in their credit scores now than they've
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  ever been before. So they're already doing all the hacks that you possibly can
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  do to raise your score, right, spreading out the balances, lowering utilization
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  ratios on particular cards, right, all of these things, and yet the
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  scores go down so right. And one thing I've touched base on repeatedly here
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  obviously most recently, but all of these buy now, pay later programs,
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  they are not a factor into people's credit scores. So there are literally millions
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  and millions and millions and millions of dollars and balances that are sitting on those
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  accounts. And look, it's another one of those situations. It's painless to
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  do it. Every online shopping site as those options. Some of them are
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  even interest free as long as you pay it back on time. So consumers
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  say, okay, so I'm going to put this three hundred dollars purchase on
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  this buy now, pay later program. It's interest free, it's only four
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  payments of whatever. But then they put the other three d other actual credit
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  card. So there's all sorts of things here, like you just said that
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  are kind of waiting in the wings, or or they're behind the smoke and
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  mirrors that when they when that shoe starts to drop, the scores are going
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  to come down even further. Well, I saw a store recently. They
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  were like opening up. They were desperate for business. They had the buy
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  now, pay never plan. Paul, Yeah, and you can you can
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  go to your right. We used to have dollar generals. They're not dollar
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  generals anymore. They're now five seven dollar generals. They're doing that business.
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  The ninety nine cents stores that couldn't make it anymore. They hadn't do it.
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  They had to become the five dollars store, right, yeah, yeah,
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  So all of these things are just falling in line. And again the
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  average consumer has to realize that if they don't change their behavior, they continued
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  to behave the same way that they have even before the pandemic. During the
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  pandemic, now post pandemic. Look, the average cost for goods and services
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  for an average household is about six hundred dollars more than a year or two
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  years ago. So where's that extras? It's an extra six hundred dollars for
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  the same exact stuff. Now, if you don't change your behavior, where's
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  that extra six hundred dollars going to come from? A lot of people were
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  post of the red line, you know, as it is, So an
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  extra six hundred dollars a month, by the way, you know, that's
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  that's real money, and that's a real financial hardship for people, and especially
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  for the ones that don't change their behavior. That's you that extra six hundred
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  bucks is going on a credit card, but that's going to run out sooner
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  than later, and it's already started. We can see that. That's where
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  you're thirty day lates, sixty day lates. And even if it doesn't run
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  out, Let's say if you had five thousand dollars out a credit card,
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  and right now the average credit card interest rate is almost twenty percent the average,
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  which is up from let's say pre pandemic, it's about fifteen percent,
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  So five thousand dollars on an average credit card for the average consumer if you
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  only paid the minimum, which this is what a lot of people do.
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  If you're also paying a minimum, it's like twenty years a companion're insane,
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  Yeah, it's insane. It could take you twenty years to pay off five
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  thousand and listen, it's not five twenty years from now. That's going to
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  be ten fifteen thousand dollars easily when you rack up the interest. So people
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  need to plan that. You know. The biggest miss that we see there
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  is no financial planning. There's no household budget. People literally live paycheck to
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  paycheck because that's how they want to do it. Right. There's a great
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  book out there. It's called You're Broke Because You Want to be Because people
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  would rather just walk around thinking that at some point in time every day,
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  somehow, miraculously, this is all going to be okay and go away.
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  Now, maybe under the current administration, you know, there might fail programs.
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  There might be some programs out there that are going to help and look
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  all kidding aside, the student won problem is a real problem. I don't
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  think complete debt forgiveness is the way to go. There should be incentive based
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  programs, there should be work based programs. All those things could could accomplish
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  the same means, but to just completely forgive the debts, especially the younger
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  generations, because this is not the path forward to home ownership. Right.
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  So one of the things I hear constantly is how all of these people should
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  ultimately own their own home and they have to stop renting. That's not how
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  you teach someone to own their own hole souse on the house. Right,
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  Yeah, you know what? Right? What are we going to do?
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  Tell the bank, Oh, you can't foreclose on the house, Tell the
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  bank you can't share it happened, all that will happen if we have another
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  housing bust, which looks inevitable because prices have gone up so high. We're
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  not going to go through another foreclosure crisis. The government will not allow the
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  banks to foreclose, and they'll bail them out. And because the models in
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  place here, it is this is the way they'll do it. I'm telling
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  you. I see the writing on the wall myself, Kerry, And again,
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  look, these are really unfortunate circumstances for us, for the future generations
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  that are going to someone ultimately has to pay this bill, or we will
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  be owned by a foreign entity in a foreign country because we'll buy our debt
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  for pennies on the dollar. It's not going to be worth anything. The
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  dollar isn't going to be worth anything. Forget about cryptocurrency and all this other
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  craziness. But are are are? You know, GDP and what the country
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  was built on? What's going to happen at some point in time? The
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  smoking mirrors and the wizard isn't going to be able to just say, oh
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  that that country needs a trillion dollars, let's give a trillion. That country
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  needs a billion, let's give them a billion. You know, at a
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  certain point in time, the well is going to run dry. I think
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  the well is already dry, and we are just playing a game of smoking
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  mirrors. I could not agree with you more, Paull And you know,
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  so, so what do you do here? How do you handle this?
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  You know, like we're not talking to people like you and I where we've
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  hopefully responsibly managed our finances and cut back when necessary all of that, But
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  what do you do? Like how so you really. Yeah, you got
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  to make you got to make a conscious decision to be disciplined. And I
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  know it's easier said than done, but if you don't take a step back
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  and do something about it, and the first thing you have to do about
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  is think about it, right, because what we've been taught of the societal
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  influences. You know, there's tremendous amount of pressure out there from social media,
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  from the media, every tick dock, every TV show, all of
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  these societal pressures are weighing on the average consumer. Every financial transaction is based
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  on e motion. If you buy that new car, the smell of the
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  car and shiny and new. You know, going on vacation, they show
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  you all the pictures. Look, people are going on vacations and they're in
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  debt up to their eyeball and they're spending five, ten, fifteen thousand dollars
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  on cruises and vacations. That doesn't make any sense to me. So there's
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  a there's a psychological thing that has to happen sooner than later. The average
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  person has to realize and it's a reward system, right. So you're looking
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  at something and your brain tells you, Paul, mathematically, this does not
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  work, right, you cannot. You can, so good, Paul,
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  but not on the other side. And then on the other side of your
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  shoulder, you know, the band Paul is saying, literally, man,
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  you deserve it. You work hard. Your family deserves it. They're good
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  kids, they're a good family. So there's this constant battle going on back
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  and forth. But that's for the people who haven't just stepped back and said,
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  wait a second, this is how much I can afford to spend every
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  month. And you know what, it's a hard number to swallow because that's
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  reality and you might only have eight eight hours. So if you go over
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  that budget, that's not as bad as someone who has no idea what they
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  can really afford and they're just spending money, you know, handover fest.
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  But putting that number out there, that says, this is how much money
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  I can spend recreationally, right, or you know, on any expense.
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  So that means that maybe you don't go out to dinner twice a week every
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  week, but maybe it means you don't stop for drinks. Maybe it means
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  you don't stop at the convenience store on your way to work, on your
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  way home from work, maybe it means before you go to the grocery store.
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  Right, And I'm sure a lot of your listeners and followers are guilty
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  of this. There's no plan, there's not a list, there's not a
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  budget that says I'm guilty, Right, I can spend one hundred and thirty
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  two dollars, right, And then you put the list together and you might
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  have to take some stuff off the list, or you're well going down the
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  aisles and you're and you're just picking stuff. Oh, this looks good,
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  this looks good. That's not the way to do it. Groceries are a
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  huge, huge expense for people, and they spend very little time in budgeting.
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  And they're old groceries. No, they don't shot their own pantry,
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  right, So these are the people that are in trouble financially. They're spending
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  money at their credit cards to buy their groceries. Yet they have a pantry
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  filled with canned goods and boxes and they don't use those, but then they
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  go out and buy new stuff. So shop your pantry first and make sure
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  you compare. Right. We're creatures a habit. So if you always go
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  to the same store, you have no idea that a store one mile down
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  the road might have the same products for better prices. We just did a
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  big show on I think it's Kroger in Florida. Yeah, and they stopped,
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  they stopped their delivery service and Sir Kroger, yeah, so what people
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  s are to do? And rightfully so was okay. So if they're not
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  going to deliver my groceries, where am I going to go now? And
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  what they found in the survey was that people found cheaper options and alternatives.
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  And go back to what I said about making the plan. So now if
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  you know what your grocery list is, you can actually comparison shop. Maybe
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  today I go to Kroger's because they have the best deals on these items.
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  But tomorrow or or the next time I go, I'm going to get these
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  items at the other store. People have to start doing that or they're going
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  to wind up in an even worse position than they are right now. Again,
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  cost of goods and services are way up when you look at interest rates,
• 15:45
  when you look at insurance premiums, everybody's insurance premiums are way on.
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  Where's statics money coming through the roof And that wasn't even calculated into that extra
• 15:56
  six hundred dollars, so just insurance alone. So shit, when was the
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  last time you did an insurance protection audit? Those people, unfortunately, are
• 16:04
  either underinsured or overinsured, and most of them have no idea what they should
• 16:11
  be paying in a premium. So do an insurance protection audit. Does it
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  take time? Yes? Is it fun? No? But you could literally
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  save yourself hundreds of dollars a year, if not thousands, based upon new
• 16:26
  plans, new policies, new premium. So this is a time where we
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  have to take a look every single expense item and no one does this right.
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  So these are my weekly, daily, weekly, monthly, and annual
• 16:40
  expenses and where can I start to cut those expenses? I always mention a
• 16:45
  second gig. You might want to not do it for the rest of your
• 16:48
  life, but right now to get out of debt, you should do it.
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  Get a second gig until and that may help you focus on your debt
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  repay. You know you're tired of Sure you have to do the second job
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  at night on the weekends. I don't want to do it. Well,
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  oh, pay great, then accelerate your debt elbe that's your reward. That's
• 17:11
  your reward, or it's decisions borrowing against the four to one k. You
• 17:15
  know, look, these all come with some pros and cons, always being
• 17:19
  of a certified financial planner. But if you're drowning in credit card debt that's
• 17:25
  at twenty eight thirty percent interest, okay, it's very, very hard to
• 17:30
  move the needle. If you're only paying here's the warning site. If you're
• 17:33
  only paying the minimum payments on your credit cards, you need help. You
• 17:37
  need help right now. You got to speak to somebody. And sometimes I
• 17:41
  think you know, you and I have talked about this. People that need
• 17:45
  financial planning the most think that they don't need it. What do I need
• 17:48
  a financial plan for? I live paycheck to paycheck. I'm barely making ends
• 17:52
  meet. Man, if you sat down with somebody and they were able to
• 17:56
  show you how you could save a couple one hundred bucks a month, that's
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  worth well more to you than it is to the millionaire. So these are
• 18:06
  the people that really have to reach out, raise your hand, swallow your
• 18:10
  pride. I'm in trouble. I need help. Hey, and anybody out
• 18:15
  there can knock ten percent off their monthly expenditures. I don't like that,
• 18:21
  anyone. I mean, don't go to Starbucks. You know what, look
• 18:25
  at your cable TV bill and get rid of all the extras. It's always
• 18:30
  the people who can afford at least that have the maximum plan for cable and
• 18:36
  for their wireless, their mobile phones. They've always got added on extras,
• 18:41
  you name it. Hey, you know data, all these things. You
• 18:47
  need to look at everything. You know. Insurance It's an interesting thing because
• 18:52
  you know, I live in Florida. We have the highest rate of uninsured
• 18:56
  motorists in the nation. And when you go get quotes online, they always
• 19:03
  quoted to you without uninsured motorist protection. But in Florida, that is the
• 19:08
  coverage that is probably the most important besides your liability. You've got to get
• 19:14
  it. But yep, maybe you up your deductible and you know what,
• 19:19
  maybe you change cars because certain car is like you're riding a Tesla. You
• 19:26
  paid double for car insurance on a Tesla. I can tell you from personal
• 19:30
  experience, Yeah, it's a good decision. So you have to look at
• 19:34
  every single thing. I'll just tell you one thing I was in business.
• 19:38
  Business was failing, and I called up my partner and I said, hey,
• 19:45
  well, if we don't cut two hundred and fifty k off of our
• 19:49
  expenses annually in six months will be out of business. So we went over.
• 19:56
  We printed out literally a list of every expense for the past six months
• 20:03
  and we went sorted them from high to low, went out every single one.
• 20:08
  They you know what, we actually figured out how to save three hundred
• 20:11
  and fifty thousand. We laid off three employees. That was the hardest part,
• 20:15
  honestly. We redid our insurance. We basically our are building what we
• 20:25
  were. Our offices in New York that we were renting were in foreclosure,
• 20:30
  so we stopped paying the rent. We didn't do that with the but we
• 20:33
  knew it would take them six months to get us out. They had security.
• 20:37
  And you know what, we moved to a new place, downscale,
• 20:41
  half the half the rental cost of our old place, and within ninety days
• 20:47
  we were making higher profits than ever. We actually hired back those three people
• 20:52
  and we were still saving two point fifty a year. And you know,
• 20:57
  we changed our accountants, change our lawyers, all of this, so anybody
• 21:03
  can do it, and anybody should do it regularly to avoid being in that
• 21:07
  position in the first place. And people, well, you just pointed out
• 21:12
  that scenario an example, and I've said this before, in today's world,
• 21:18
  our households are small businesses, right, two, three, four, five
• 21:22
  people living under the same house. The amount of transactions that flow through those
• 21:27
  books are a lot. And again, when the times aren't so tough,
• 21:34
  we overlook the cable bill. We overlook all of these silly subscriptions Netflix,
• 21:40
  Spotify, Lulu, Roadblocks, Xbox, PS four whatever. Listen, I'm
• 21:45
  not saying that you have to eliminate them forever. I'm just saying, if
• 21:48
  you're in debt, you can't pay your credit card bills, you're only making
• 21:52
  the minimum payments, then this is the time that you cut all of those
• 21:56
  things and you start there. And like you said, it's not a lifetime.
• 22:00
  Within a couple of months you're gonna say, Okay, you know what
• 22:03
  I can add back. We can have Netflix, so we can have a
• 22:07
  movie night at home, and then I can add this back, so it'll
• 22:11
  come back to you. But if you don't do anything about it, sticking
• 22:15
  your head in the sand. You know, not making a choice is making
• 22:18
  a choice. So make the choice. Then get out of debt. Your
• 22:22
  priority start right now. The thing that I've heard over and over for the
• 22:27
  past twenty years. All My only regret is that I didn't start this six
• 22:32
  months ago, a year ago, because once you take my first step,
• 22:36
  it gets easier and easier, and now you're never going to get out of
• 22:38
  debt as fast as you got into debt. But it will not take you
• 22:44
  that long to get out of debt. And people see it. It's the
• 22:47
  snowball effect that the avalanche. However you want to do it, but it
• 22:51
  happens very quickly and it's a tremendous positive psychological impact people that you're still in
• 22:59
  the same amount of debt, but just knowing that now there's a little bit
• 23:03
  of money left over, you're not putting at you're not going any further into
• 23:06
  debt, is a huge, huge lift for most people. Absolutely couldn't agree
• 23:11
  with you more. Hey, Paul, tell us, where do we find
• 23:15
  you? How do we connect with you? On the web? So it's
• 23:17
  an easy The consultation and analysis is always free. Just go to better qualified
• 23:22
  dot com. You can fill out a brieform. You can text us you
• 23:26
  know if you wanted to, and we'll get back to you and we'll put
• 23:30
  a plan together for you, whether or not you execute it, whether or
• 23:33
  not you want to work with us, that'll be up to you. But
• 23:34
  at least you will walk away with a plan to get out of debt.
• 23:38
  All right, So that's better qualified dot com and the link is in the
• 23:42
  show notes to this interview on Financial Survival Network dot com. When you're there,
• 23:47
  please sign up for your free newsletter. You get very useful information like
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  this and lots more. And if you've got a question from Paul myself,
• 23:55
  email is Klatcarrie Lutz dot com and we'll answer your email quickly. Paul,
• 24:00
  always a pleasure, Thanks for stopping by. Hey, thanks for having me
• 24:03
  back on KREY. Thanks for listening to Carrie Letz's Financial Survival Network, your
• 24:08
  solution to today's trying times. For the latest, go to Financial Survivalnetwork dot
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  com. Financial Survival Network now more than ever,