Okay Average Joes, it is time to for us to begin paring down our debt loads as fast as possible.
Now, I know for those of us who engage in manufactured spending, credit card churning, and applying for all the credit cards we can in order to keep scoring all these crazy airline points bonuses, this is a painful pill to swallow. But trust me, this is for the best.
Let me explain why-
The Federal Reserve; America’s Banker
The Federal Reserve, that quasi-federal institution that you think has your best interest at heart, has made it known that for all of that money that they printed following the Great Recession and loaned out at near zero interest rates, well, now they want it back. And, they are going to get it. With interest.
The Federal Reserve sets interest rates for the money they lend to banks. Banks, then borrow money from the Federal Reserve, loan that money to you and then charge you even more interest than what the Federal Reserve is charging them to use their money. They then make their money off fee’s and this interest rate spread differential (also known as arbitrage).
For the last several years, we, the Average Joe’s, have enjoyed historically low interest rates. Even to the point of the interest rates being abnormal. This time of prosperity is ending.
The Federal Reserve, which normally holds its cards close to its chest, has given off some signals that it may raise interest rates. “Fed Watchers,” those people who are paid to pay attention to everything the Federal Reserve does and then report out on it, suspect the Federal Reserve will raise rates at each quarterly meeting they have through 2019; and, then possibly continue raising interest rates into 2020.
This is bad news for us Average Joes who have credit lines that are not fixed. Typically, credit cards have variable interest rates and are most susceptible to these interest rate changes. Home loans are often fixed. But, not always. This Average Joe has a variable interest rate home loan(s). Note, I said loans.
So, those of us who are playing this game of accruing dozens of credit cards in order to earn airline miles and then taking free flights, well this game we play is about to get dangerous.
And, as long as you understand the game (and the danger), we can still win!
And, win big –
With rising interest rates, trade wars, and uncertain political climate, anything is possible. But, these ingredients generally add up to trouble. And, we, the Average Joes are usually the first victims when uncertainty abounds:
- General Motors is shuttering factories and laying off the average workers (again).
- Amazon is building an army of autobots (not just the stuff of movies anymore) to replace workers in the warehouses. Less hourly workers will be needed going forward.
- McDonalds is setting up kiosks to order your Big Mac’s without ever seeing a smiling face. Less entry level workers will be needed going forward.
- Crypto-Markets are in disarray. A crypto-war among Bitcoin Cash has spilled over into all of the crypto currencies setting of a chain of unexpected selling. Unfortunately, almost 50% of the crypto coins are held by people over 44 years of age. The one group of people who cannot accept more losses on the back of the housing crash, the stock market crash and job uncertainty.
- A friend of mine, just an average Joe, was just laid off from a famous outdoor supply company because of “restructuring”. He worked 25 faithful years for them. Companies don’t care about you and never will.
These cracks in the economy are just beginning to show, but, I predict will get worse as this period of artificially propped up prosperity ends. And, it’s not just this Average Joe who pontificates this-
Gary Vanerchuk – the crass, F-bomb dropping, entrepreneur regularly rails about our false economy and the coming retrenchment within corporate America. This is the one podcast I will listen to regularly. I may not agree with everything he says, but I respect everything he says.
Joerg Angele – a European economist notes, “Everything is pointing to an overheating economy.” Remember when you hear the word, “overheating” that is code for, “the shit is about to get crazy.”
Your 401K – Stocks are a leading indicator of where the economy is heading. Check your 401K (if you have one), is it up or down? These holdings could be trying to tell you something.
Small Rate Hikes Add Up
The Federal Reserve meeting of September 2018, resulted in the Fed agreeing to raise interest rates .25%. At first glance, you would think this small quarter percentage point would not equate into much expense on the Average Joe. And, it is not meant too.
However, for this Average Joe, I noticed a $10.00 increase in my monthly payment to just one specific credit card.
I have almost forty lines of credit at any given time, of which, all but three have variable interest rates. I soon began to notice other creditors had indeed followed suit, and they too began raising their interest rates on me. This quickly resulted in higher monthly bills. Suddenly, an average of a $10.00 increase times forty lines of credit equates into an almost $400.00 increase in my monthly bills. This is serious.
Going forward, If I do not make any changes to the one credit card in my example, I can forecast, based on what has already happened, that my credit card payment will go up $40.00 next year based on four Federal Reserve Interest rate hikes of a just a quarter percentage point each in 2019.
Across all of my lines of credit I could be looking at an additional $1,200.00 a month increase in my bills by the end of 2019, if I don’t do something now.
For this Average Joe, a $1,200.00 increase to my monthly bills could and would break the bank.
Slash and Burn
We have to eliminate debt now, before it reaches a crises as fueled by these rising interest rates.
Debt is a silent killer of the Average Joes. It is easy to accumulate, easy to carry, and we have good times while we are doing it so it is easy to forget about. But, it does not go away on its own. We have to eliminate it. Period.
Debt is also one of the major factors in the health of the Average Joes. Many divorces, suicides, health ailments can be directly related to debt accumulation. No one ever thinks, “Boy, I can’t wait to go to bankruptcy court.”
Yet, millions do.
To eliminate my debt, I am taking a multiple prong approach for the next three years. These are:
Entertainment- Weekly trips to the movies, online books, reoccurring subscription memberships, fine dining, haircuts twice a week; these activities have all been eliminated. I am adopting a Spartan lifestyle for the next few years. Estimated savings per month, $500.00.
Transportation – Years ago, I gave away my car with the goal of instead relying on Uber, my work car, public transportation and my feet to get me where I need to go. Seriously, I walk an estimated 60 miles a week! This has saved me on gas, insurance, repairs and frivolous spending on soda and snacks at gas stations. Estimated savings per month, $300.00.
Working Harder and Longer – No one wants to work 60+ hours a week. But, sometimes we have to suck it up. I have taken an assignment where I knew they would pay out overtime which has become scarce in my industry. And, then once on the assignment, I volunteered to stay for a year.
What I Won’t Sacrifice-
Amazing Vacations – I love to travel. And, I love to travel well. But, I understand that every amazing adventure has a budget and every amazing trip has to be substantially paid for with hotel points, airline miles and rebates earned. To me, earning free or near free trips is a game. And, I love the game that I play.
On a recent trip to Maui, I had an amazing time, but, I limited my expenses. I incurred very little debt from that trip; instead counting on my hotel points, credit card rebates and my money making apps to give me an amazing opportunity.
Apps To Our Rescue
Apps are our force multiplier. They are our tool to both earn money and save money. I am currently working with the following apps to help track my spending, earn more money and reduce my debt levels-
Qoins – Qoins allows me to select a debtor (credit, home, student loan, etc.) and using a linked credit card, I can round up purchases and use that excess money, to make an additional payment to the debtor. For example, I spend $3.75 at Starbucks for an ice tea using my Delta Sky miles card. Qoins rounds up the purchase, and the additional $.25 is ear marked as an additional payment towards my Delta Sky miles credit card bill.
Qoins charges 1.99 a month for the service. Also, the money is still drafted from your primary funding account like a checking or savings account. So, you have to make sure you always have enough money in your primary account to cover these withdrawals or you could be hit with an overdraft fee.
Acorns – Similar in concept to Qoins, you link a credit card to Acorns, and then as you make your normal day to day purchases, the app rounds up the purchases and deposits them into an interest bearing account. The goal of Acorns is to help you save for retirement. But, if you need to divert money to pay a bill, so be it. I was shocked at how fast my money began to accumulate in this account. One of the cool advantageous with this app is they have developed a number of corporate deals where you can earn even more money if you take your business to their recommended merchant.
Credit Karma – A free app that allows me to monitor all of my linked credit cards and accounts. This allows me to monitor which of my accounts are dangerously close to being maxed out, which ones are affecting my credit score, and where I need to focus on paying down my debts. I use this app weekly! Credit Karma makes its money through referral fees if you sign up for a credit card offer through them. I browse the deals monthly looking for the best offers on a new credit card.
Mobee – Sometimes the only way to get more money, is to make more money. Mobee allows me to do secret shopping and as of this writing I have done over 600 secret shops. That extra cash begins to add up and I can easily use it to pay down bills! I try to earn about $750.00 to $1,000.00 a year.
Ibotta – Cash rebates for the things I buy, including alcohol and Uber; it is a no brainer! Ibotta has been one of my longtime favorite apps. I just drew down $500.00 recently and it was deposited right into my PayPal account. A longtime favorite of this Average Joe!
Job Spotter – The easiest app out there for scoring free money. You find a help wanted sign, you snap two pictures, submit and get paid! I have earned over $500.00 with this simple app.
These are just a few of the apps I will be using to reduce my debt. As more great apps, come on line, I will keep you updated! Also, check out our 25 Money Making Phone Apps for additional recommendations.
Referral Codes = Money!
Our goal is to keep the Average Joe blog ad free. We hate ads! Average Joe makes a couple of dollars off of each referral. If you would like to try these apps, here are the referral codes you can use so you get a bonus and we make a few dollars to keep the site up, the lights on and the ads away.
Job Spotter – No referral code, just download and go!
Mobee – We each get $3.00. A sweet deal! My referral code is RGTB
Ibotta – Seriously, this is a just a free money source. We each get $5.00. My referral code is qffkbsh
Acorns – A painless way to save money! We each get $5.00. My referral code is FMJYHF