I always have a chuckle at the media when they make an event sound like the end of the world is upon us. Earlier in the year it was “Rental Crisis” and now it is “Rates Hike.” One quarter of a percent is hardly a hike, if anyone has gone on a decent hike you will understand my disapproval in the use of the word. You could maybe call it a step, which is a tiny part of a hike.
Plus, why is everyone so down on interest rates? Does everyone need another lesson in basic economics? Dr H has already given one about inflation and the negative consequences that result from irresponsible financial management. Interest rates are used to curb this inflation so that our money won’t become worthless and so prices don’t spiral out of control. So perhaps people should start to think of interest rates more as a friend than an adversary. Try and imagine living here with the same situation Zimbabwe is in financially. It would be a heck of a lot worse than one little step up in interest rates.
What about the banks and financial institutions lending money with what seems a blatant disregard for what the customer can afford. We have credit card applications in the mail every week it seems, Motor Finance Wizard is saying yes when the banks say no, and Radio Rentals is encouraging us to join the “rental revolution” this month, as they have no credit history checks. All of this, meanwhile, is adding to an individual’s debt.
Not all blame can go to institutions though, as the public seems very willing to jump in the debt pool of their own accord. “Three years interest free” Gerry Harvey might shout enthusiastically. “Woohoo” says Gullible Joe Citizen, “Now we can get that big screen plasma that we wouldn’t be able to afford normally.” If you can’t afford it now then most likely you won’t be able to afford it in three years. Then you will be paying something like 25% interest on your TV, is it really worth it?
How about getting into a habitual savings regime and go without the big TV that isn’t really necessary. One thing people forget is that interest rates on savings accounts should go up with every rise as well, but that’s not newsworthy enough for 6 pm. One guarantee is that if we save more and spend less you’ll be watching the interest rates come down again.
What about the banks and financial institutions lending money with what seems a blatant disregard for what the customer can afford. We have credit card applications in the mail every week it seems, Motor Finance Wizard is saying yes when the banks say no, and Radio Rentals is encouraging us to join the “rental revolution” this month, as they have no credit history checks. All of this, meanwhile, is adding to an individual’s debt.
Not all blame can go to institutions though, as the public seems very willing to jump in the debt pool of their own accord. “Three years interest free” Gerry Harvey might shout enthusiastically. “Woohoo” says Gullible Joe Citizen, “Now we can get that big screen plasma that we wouldn’t be able to afford normally.” If you can’t afford it now then most likely you won’t be able to afford it in three years. Then you will be paying something like 25% interest on your TV, is it really worth it?
How about getting into a habitual savings regime and go without the big TV that isn’t really necessary. One thing people forget is that interest rates on savings accounts should go up with every rise as well, but that’s not newsworthy enough for 6 pm. One guarantee is that if we save more and spend less you’ll be watching the interest rates come down again.
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2 comments:
There is some sound advice in there Tim. Too bad we are generally too greedy to think first though!
So, so true. And as we find now, in 2012, interest rates are going down, down and very down, because our dollar is so high against America. So although we had a few minor inclines in rates a couple of years back, they're leveling out again. A bit like the flux in climate, really. But don't get me started....
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