Why the Federal Reserve Needs to Get Its Act Together

Federal Reserve Yellen
NEW YORK — It’s unbelievable, the position that the Federal Reserve is in right now.

As the markets wait for the results of the U.S. central bank’s policy setting meeting this week, there has been a “destabilizing period of uncertainty over the Fed’s intentions” and “weeks of mixed signals from the central bank,” according to an article Sunday in the Financial Times.

This situation calls into question Fed Chair Janet Yellen’s leadership and highlights the need for the Fed to get its act together.

True, some of the current uncertainty and complexity in the global economy is due to the behavior of China and other emerging-market nations. But the Federal Reserve has been a big contributor, too, with its three rounds ofquantitative easing. And the Fed’s attempts to provide financial markets with “forward guidance” have been a disaster.

A decision to raise short-term interest rates has been on the Fed’s menu since it ceased its quantitative easing programs last October. The Fed was going to start raising short-term rates in the first quarter of this year. Then it was going to raise them in June. Then, for sure, in September. As each meeting approached, the noise surrounding the possible increase got louder and louder, and financial markets became more and more volatile.

The fear of many analysts is that a move by the Fed in current conditions will result in even more volatility. The chief economist at the World Bank has even said that a move on interest rates by the Fed could trigger “panic and turmoil” in emerging markets.

Others, attempting to quiet the markets, have suggested that the interest rate move being discussed is so small, only 25 basis points, and has been discussed for such a long time, that any Fed movement to raise rates will be a nonevent, a fait accompli.

The problem is that it should never have come to this.

The Federal Reserve has brought this burden upon itself. By creating market expectations, the Fed sets itself up for criticism if those expectations are not met. If expectations are not met a second time, the Fed just opens itself up for further criticism. And so on and so forth.

If Fed continues to act like this, then it will become clear that it doesn’t understand leadership and is failing the economy.

Yes, the economy is at a new place, a place that it has never been before. Yes, over the past seven years or so, the Federal Reserve acted in a way it never had acted before. Yes, the Fed is going to have to use new thinking and new tools to move us on into the future. (Binyamin Appelbaum addresses these new tools in an article in The New York Times titled “Retooling the Fed for Liftoff.”) The key issue going forward, however, is leadership.

Right now Federal Reserve policymakers look like a herd of cats. They don’t seem to have any idea where they’re going or any idea how they got here. And reliance on “data guidance” contributes little to leadership vision and market stability.

Yes, these are difficult, confusing times. Yes, there are a lot of problems out there in the world that must be taken into account. Yes, models that have been used in the past are incomplete or out of date.

Leadership must be exerted, however. The U.S. is still the No. 1 economic power in the world, and the U.S. economy is growing, while much of the rest of the world seems to be going in the opposite direction.

Speak With One Voice

In a complex economy, forward guidance isn’t going to carry the day. Also, the Fed needs to speak with one voice for a while. Having several different members of the Federal Open Market Committee discussing their own views on random occasions doesn’t help.

The Fed also needs to determine what it can and can’t do. The Federal Reserve played a big role in preventing the Great Recession from becoming worse. It helped to sustain the banking system over the past seven years after several decades of “irrational exuberance” underwritten by the economic policies of the federal government.

The Fed can’t do a whole lot in attaining faster economic growth. There was only so much that it could do anyway, but the credit inflation of the past 50 years taught the economy that it could earn more money through financial investment than through investment in plant and equipment.

Meanwhile, the global economy is changing, bringing on a new economic era. This new era is going to require new central bank goals. For example, Paul Volcker, former Federal Reserve chairman, has written in his book “Changing Fortunes: The World’s Money and the Threat to American Leadership” that the price of a country’s currency is the most important price in the economy of that country. Maybe the Fed should focus on the maintenance of a strong dollar. If Federal Reserve leadership doesn’t establish its goals, express them clearly and firmly, and then act in a way that is consistent with achieving the goals, the discussion of Fed actions are going to become even more vocal and the markets are going to become even more volatile. The world can’t afford that.

Fed Says Consumer Spending, Auto Sales Boost Economy

Federal Reserve Chair Janet Yellen Lecture On Inflation Dynamics And Monetary Policy
WASHINGTON — The Federal Reserve says steady consumer spending and an improving housing market spurred modest U.S. economic growth in the late summer, though factory output was sluggish in part because of the strong dollar.

The Fed said Wednesday in its latest snapshot of the economy that nine of its 12 regional banks reported that growth was moderate or modest from mid-August through the beginning of October. Two banks said economic activity increased while the Kansas City Fed said the economy slowed slightly.

The Fed’s report echoes other recent data that suggests the U.S. economy, while still expanding, has run into headwinds from overseas and lost some momentum. Most analysts forecast that growth will fall sharply in the July-September quarter to an annual pace of about 1.5 percent from 3.9 percent in April-June.

The report, known as the beige book, will be used by Fed policymakers as a basis for discussing the economy’s health when they meet next on Oct. 27-28. The beige book is released eight times a year and consists of anecdotal reports from businesses in each of the 12 districts.

Fed Chair Janet Yellen has said the Fed may raise short-term interest rates before the end of the year should the economy continue to expand. Yet most analysts expect that if an increase does occur this year, it will happen in December rather than this month.

Americans generally boosted their spending, likely because of solid hiring in the past year that has put 2.8 million people to work. Auto sales were even stronger, particularly in the Richmond, Atlanta, Chicago and Dallas districts.

Hiring rose at a modest to moderate pace in nine of the 12 bank districts, the beige book said. The Boston Fed said that advertising and consulting firms were planning to add jobs, while manufacturers were laying off workers.

Yet even as job gains were steady, wage growth “remained subdued” in most regions, the Fed’s report said. Eight districts said that only slight to modest pay gains occurred from mid-August through early October.

Steep drops in oil and gas prices in the past year continued to weigh on many energy producers, which are still cutting jobs in Texas, the Dallas Fed said. Oil and gas drillers are also ordering less steel pipe and other equipment, dragging down factory output, according to many districts.

Manufacturers are also struggling because of the strong dollar, which has increased about 13 percent in value against a basket of other currencies in the past 12 months. That makes U.S. goods more expensive overseas and lowers the price of foreign goods in the United States, cutting into U.S. exports.

The stronger dollar has also discouraged many overseas tourists from visiting the United States by raising the cost of hotel rooms and other goods and services. The New York, Minneapolis and Dallas districts reported that tourism was restrained by the strong dollar.

Social Security Is Turning 80 – but Will It Make It to 100?

detail of several social...
Friday marked the 80th anniversary of President Franklin D. Roosevelt’s signing of the Social Security Act of 1935 during the Great Depression.

The U.S. Social Security Administration’s anniversary slogan is “Celebrating the Past and Building the Future.” But Gallup Poll results released Thursday show that most Americans doubt the SSA’s ability to help secure their future.

This year, 66 percent of Americans polled said Social Security is either in a state of crisis (21 percent) or has major problems (45 percent).

While that is down from a high of 77 percent in 2010, at least two-thirds of Americans have viewed the system as being in crisis or having major problems since 1998. And that’s unlikely to change without movement in the nation’s capital, according to Gallup:

These negative views likely will continue until elected officials in Washington take action to tackle the system’s long-term problems or the projections about the system’s financial strength improve as a result of shifts in the economy.

Gallup’s poll results are based on phone interviews conducted this month and last month of 2,020 adults from every state and the District of Columbia. Among Americans who have yet to retire, 51 percent doubt the system will be able to pay them benefits when they retire.

That’s not much higher than it was when Gallup first measured in 1989, when 47 percent felt that way. It is also down from an all-time high of 60 percent in 2010.

But the younger a worker is, the more likely he or she is to doubt getting benefits. On one end, 64 percent of people age 18 to 29 are doubtful. On the other end, 3 percent of nonretirees age 65 and older are doubtful.

Gallup notes that Americans’ doubts about Social Security appear to be grounded in reality.

An annual report released last month by the trustees who oversee the Social Security Disability Insurance program stated that the reserve for its funds is projected to be depleted in 2035.

Do you think Social Security is in crisis or has major problems? Do you think future retirees will have their benefits cut? Share your thoughts in our Forums. It’s the place where you can speak your mind, explore topics in-depth and, most important, post questions and get answer.

What’s Wrong With Millennial Credit Scores

woman sitting at the desk ...
NEW YORK — Millennials get plenty of recognition for frugality and their desire to share everything from cars to clothes, but they also have the lowest average credit score of any generation, according to a new study.

The average millennial credit score is 625, and 28 percent of them are ranked below 579, says NerdWallet, a personal finance website. In the world of credit scores, anything above 660 (out of 850) is considered good.

Based on millennial credit habits, those scores may not improve.

Among the key issues: Some millennials (18- to 34-year-olds) are shunning credit cards completely after hearing so many debt-related horror stories from the financial crisis. Others are applying for the wrong cards and getting rejected.

Millennials are misunderstanding, or are simply unaware of, the benefits of credit cards.

“Millennials are misunderstanding, or are simply unaware of, the benefits of credit cards,” says Sean McQuay, NerdWallet’s resident credit card expert.

A recent study by Experian found that millennials are making student loan debt more of a priority. That’s in contrast to the previous generation, Gen X, which prioritized getting credit cards.

About a third of millennials have never even applied for a credit card, NerdWallet says. That means they aren’t building credit and will have a hard time when they need a credit history.

Millennials’ avoidance of getting into the credit card game will cost them in the long run. For example, you need a solid credit score to rent an apartment, get the best insurance rates or just get a loan.

Credit scores are even sometimes used to vet job candidates these days. Credit history is key for making grownup purchases — and the length of that history is a big part of your credit score.

The good news is that the majority of millennials have applied for a credit card. But when they do apply for credit, about half (48 percent) are motivated by an advertisement or promotion, according to NerdWallet’s research. That can lead to a bad fit.

For example, a millennial who doesn’t drive shouldn’t apply for a gas card. Credit cards aren’t one size fits all.

Ironically, NerdWallet’s study found that millennials with the lower FICO scores — between 300 and 579 — are applying for credit the most. Not surprisingly, they also get approved less frequently.

Credit Strategies

Getting credit for the first time needs to be done strategically. Here’s why: when a consumer applies for a new credit card, his credit score gets what is called a “hard” credit inquiry. The more inquiries a consumer has, the riskier he or she appears to be to lenders, and that in turn lowers his or her credit score. If you are starting out cold with no score, that gets amplified.

“A good rule of thumb is to wait six months to a year between card applications,” says McQuay.

NerdWallet recommends Millennials take advantage of the free FICO scores now offered by many credit card issuers.

Other potential sources for this information for some student borrowers include Sallie Mae, along with credit counselors.

A common pitfall to avoid: store credit cards, which often come with an initial discount off items purchased. “They say, ‘Do you want to save 10 percent?’ And my answer is always only if you don’t run my credit and that ends the conversation,” says Cary Carbonaro, author of “The Money Queen’s Guide.”

Your credit score goes down the more you shop for credit and keep adding outstanding credit lines, Carbonaro notes.

Carbonaro’s advice is to apply for low-limit cards and charge small amounts on a regular basis. Pay off your bills every month and slowly build a credit score.

Be careful of rewards cards, too. Or at least do the math before you sign up. The average annual fee on a reward card is $58. The average reward rate is 1.14 cents a point. You have to spend $5,088, just to earn back your annual fee. If that’s not likely to happen, it is better to go for the no-fee card, especially since almost one in five people didn’t redeem any of their rewards last year.

Paying cash for everything may sound great. But, like it or not, you need credit to establish yourself in the financial world. It’s better to reward yourself with a strong credit history.

Why Consumers Like High Deductible Health Insurance Plans

Doctor with digital tablet comforting older man in hospital
NEW YORK — High deductible health insurance plans are becoming commonplace as more employers are shifting health insurance costs to their workers.

Consumers are gravitating toward plans that have lower monthly deductibles in an effort to lower the costs of their monthly premiums. High deductible plans have many advantages, especially for millennials and Gen-Xers who rarely go to the doctor because they are healthy and don’t rely on many prescription drugs. The catch is that the out-of-pocket costs might prove to be a surprise for consumers who don’t budget for meeting the higher deductible.

“If they’re young and healthy, a high deductible plan may be a good fit,” said Nate Purpura, vice president of consumer affairs at eHealth.com, an online health insurance exchange based in Mountain View, California. “Shoppers who come to these plans in pursuit of lower premiums don’t always understand what they’re getting themselves into.”

Benefits of Buying a High Deductible Plan

Saving money each month is critical for many consumers who are healthy and would rather allocate the extra money toward paying down their student or auto loans or stashing the money away for a rainy day if an emergency arises.

Shoppers who come to these plans in pursuit of lower premiums don’t always understand what they’re getting themselves into.

The monthly savings can also be allocated toward a Health Savings Account, which provides the same tax advantages as an IRA. Only people who have a high deductible plan can open an HSA account at a bank or credit union. The plan must have anannual deductible of $1,300 for individual coverage or $2,600 for a family, according to the IRS. The maximum amount of the contribution is $3,350 for individuals and $6,650 for families.

Consumers can buy their HSA though their employer, but also through the open marketplace. There are a myriad of HSAs out there, but look for the ones that charge no or minimal fees for monthly account maintenance and transactions. Some accounts are more basic and are more akin to a regular savings accounts, but other ones give you the option to choose from various stocks and mutual funds.

“You can choose anything that is on the market,” she said. “They are totally portable, are owned by you and have no affiliation with your employer.”

What’s more, high deductible plans remain a favorite, because they give consumers more control over how much they are spending on healthcare, said Sally Pipes, CEO of the Pacific Research Institute in San Francisco. Since there are now 14.5 million HSAs, research has found that consumers who have chosen high deductible plans and paired them with these accounts has resulted in reductions in health care spending of 15 percent each year, she said.

“If an emergency strikes, the high deductible policy can protect a patient from astronomical medical bills,” Pipes said.

Millennials and Gen-Xers might be able to benefit the most from the combination of the plan with an HSA, especially if their account goes largely used, leaving them with a “sizeable nest egg in their HSA, which they can spend however they like on health care or anything else once they turn 65, she said.

Disadvantages of a High Deductible

Consumers who often have doctor’s appointments or need treatment for a chronic medical condition and need to use prescription drugs on a regular basis should avoid these plans, said Purpura.

Determine if you can pay for the entire annual deductible from your savings in case of an unexpected hospitalization or illness occurs.

“People who are savvy about high-deductible health insurance plans and HSAs can amass thousands of dollars over just a couple years and use that money to cover co-payments or their deductible in the event of a serious medical issue,” Purpura said. “They can use also it to pay for things like glasses or dental care and other things that many standard health insurance plans don’t cover.”

Some workers turned to high deductible plans to defray some of the costs with 46 percent of employees who selected a major health insurance plan with a high deductible of $1,000 or more last year, up from 34 percent who said the same in 2014, according to a recent Aflac survey.

A majority of employees have regretted this choice in hindsight with 52 percent who found the high deductible plans to be a poor choice while 59 percent said the plans were financially detrimental. Millennials expressed the greatest amount of regret with 65 percent who said they disliked the plan.

Individuals who choose plans with higher deductibles should also consider opening an HSA or buying additional voluntary insurance for critical illness, which can cover the cost of deductibles or lower the impact to their budget, said Matthew Owenby, chief human resources officer at Aflac.

In some cases, it is not that consumers prefer high deductible plans, but rather are forced to choose them, because companies are shifting the financial burden onto employees, said Dave Ratcliffe, principal of health and productivity practice at Buck Consultants at Xerox in New York. Now consumers also “have more skin in the game,” he said.

One critical issue when employees select these plans is that they tend to put off doctor’s appointments even though preventative care such as annual checkups are completely covered.

“Employees look at high deductible plans and think they will have high expenses,” Ratcliffe said. “The challenge is to make sure the plan is set up so employees understand preventive care is covered and incentivize employees to seek preventive care.”

Looking for Better Deals

Since 75 to 80 percent of Americans aren’t meeting their deductibles, consumers are looking for better deals, said Vish Banthia, founder and chief medical officer of ZendyHealth, the Los Angeles health care cost comparison company. Some doctors will negotiate on procedures such as getting allergy testing or an MRI, so consumers can save 10 to 80 percent of the cost.

“Up until now, health care has been one of the only industries in which nobody knows the price tag for the medical procedures until you get a super high medical bill after the fact,” he said. “Our website shows you the national average.”

The HSAs can cover certain medical expenses and many common ones include prescription medications, doctor and dentist visits and eyeglasses. Contributions to an HSA aren’t subject to federal income taxes and can be invested like an IRA. The advantage of HSAs is that any unused funds roll over each year and any remaining money can be used for retirement after the age of 65.

Consumers who opted to purchase coverage on the public health insurance exchanges are especially good candidates since most of the purchased plans, including silver and bronze plans under Obamacare are high deductible plans.

“You fund it ahead of time, which means you will get a discount for any medical procedures you need in the future, said Laura Adams, insuranceQuotes.com’s senior analyst said. “It can add up to some substantial savings.”

Major Reasons Why Television Viewing Is Way Down

Fox's "Empire" ATAS Academy Event - Inside

Traditionally, fall premiere week for broadcast television networks has been a sparkling time of peak sampling as millions upon millions of viewers tune-in to new and returning shows.

Save for 16 million viewers gobbling up Fox (FOXA) hip-hop drama “Empire” last week for its second season premiere, a more than 60 percent leap in total viewership since its series debut of 9.9 million viewers in January, according to Nielsen stats, this year’s fall premiere week not only experienced sagging ratings, but fewer male millennial viewers. New primetime shows, from Fox’s Tuesday sorority spoof “Scream Queens” with a 1.7 Nielsen rating in the 18-to-49 adult demographic to Comcast-owned (CMCSA) NBC’s Thursday drama “The Player” with a 1.2 rating, fell limp.

So what are some major reasons TV viewing is down?

Appointment TV is dead. It’s a challenge for the industry.

For one, glut. An estimated 400 scripted shows are expected to be broadcast on TV and online services such as Netflix (NFLX) and Amazon.com (AMZN), up from 211 on the air in 2009, according to The New York Times. Experts say a glut of TV content and viewing platforms as well as a varied range of good and bad shows have thinned out linear TV audiences. “Appointment TV is dead. It’s a challenge for the industry,” said Jim O’Neill, a principal analyst at online video technology company Ooyala, a U.S.-based subsidiary of Australian telecommunications and IT services company Telstra (TLSYY). “It’s not just a situation where [over-the-top content] is the future. OTT is now. The amount of time on live TV is going down, and the amount of DVR TV is going up, and the OTT option is going up. I don’t think network TV will ever be the same.”

O’Neill, who said he grew up before cable TV, when just nine channels existed, sees 2015 as presenting a grander array of choices, both well-written and not. According to Ad Age and Nielsen stats, not only was TV viewing among adults 18 to 24 down 20 percent compared to the first two nights of the 2014 to 2015 season, but male viewership within that age group plunged by about a quarter.

Disney’s (DIS) ABC scored OK with its series premiere Tuesday of the documentary-style reboot “The Muppets,” averaging 8.9 million viewers, but critics panned the show. The New York Post called it a betrayal of late original Muppets creator Jim Henson’s “tender, optimistic vision — a pointless prostitution of a children’s entertainment franchise.” Loosely based on the 2002 film, Fox’s new sci-fi drama “Minority Report” scored a measly 1.1 rating among 18-to-49 adult viewers. Yahoo blasted it as “alternately bad and laughably bad.”

Returning shows also suffered. The season premiere of CBS’s (CBS) “NCIS: LA” earned its lowest ratings yet, a 1.2 among adults, with roughly 7.89 million viewers, compared to last year’s premiere of a 1.9 adults rating. ABC’s “How to Get Away with Murder,” whose star Viola Davis snagged an Emmy this month, premiered its second season with a 2.6 rating among adults, and about 9 million viewers. That’s down from a 3.8 rating when the series premiered last fall, drawing an impressive 14 million viewers.

Swift Impact

Secondly, mobile. With streaming options, cable TV options such as Time Warner-owner (TWX) juggernaut Emmys winner HBO and content viewed through cellphones and tablets, the changing media landscape is having a swift impact. According to Ooyala’s recently released Q2 2015 Global Video Index report, 44 percent of all online viewing is now on mobile devices, increasingly preferred by younger consumers.

“The golden crescent of TV viewers is millennial men, and they don’t want to be told what to watch,” said O’Neill, whose own 25- and 27-year-old sons watch everything from HBO and Showtime to Netflix and Amazon on mobile devices. “They’re fine with waiting a year to watch “The Walking Dead.” TV is still important to them, but it’s on their terms, and that’s the big difference.”

Networks taking advantage of technology and social media buzz can only help boost viewership, added USC Annenberg School for Communication and Journalism assistant professor David Craig, also an Emmy-nominated producer and former programming executive at Disney’s A&E and Lifetime.

“Empire,” the golden child of fall premiere week, with a massive following on Twitter (TWTR) , is the best example of a network doing something right. “If you look at the most successful show on broadcast TV right now, it’s ‘Empire,’‚ÄČ” said Craig. “Creator Lee Daniels was given full license to make the show he wanted to make. The broadcast networks should adopt a creator-centric model for programming. It’s also about building a community in advance, with social media.”

Thirdly, social media.

Millennials immersed in social media is changing the way certain shows become popular while others die on the vine. The migration to HBO and Netflix has now extended to interactive online video and visuals sharing venues such as Snapchat, IAC’s (IACI) Vimeo and Facebook’s (FB) Instagram, said Craig. Ten years after it first launched, Google’s (GOOGL) YouTube has more than 1,500 channels.

“Millennials are now participating in a media ecology. It no longer just represents their lives,” Craid said. “They’re interacting in the space. That’s further enticing millennials away from linear television. People are migrating from users to creators. It’s a radical change.”

Why Millennials and Gen-Xers Face Filing for Bankruptcy

a woman with unpaid bills has...
NEW YORK — Kristina McKinney was left with no recourse when her mother used her identity and rented six apartments during her stint in the army, leaving her on the hook for the unpaid rent.

When the creditors started garnishing her wages, McKinney, 23, who is now a manager at a Walgreens drug store in Colorado Springs, Colorado, faced only two heartrending options — file a police report and send her mother to prison for fraud for the leases she signed over five years or file for bankruptcy. Unable even to obtain a cellphone contract or rent her own apartment because of the debt, McKinney decided her only option was to file for Chapter 7 in January.

“I feel like I did the right thing even though it sucked,” she told MainStreet. “The debt made me look like an irresponsible person.”

“I don’t have that much to my name, but I did it more so that we could survive since I am about to have a baby,” she added.

While many millennials and Gen-Xers may have more debt than assets, they should determine if they need to file for bankruptcy

Seek Counseling Before Filing

McKinney sought the free advice of a free credit counselor from Transformance, a member of the National Foundation for Credit Counseling, which provides free or low-cost credit counseling for consumers.

“She was super nice and talked me through the process,” she said. “She made me feel like I had options and didn’t treat me as though I was stupid.”

In 2011, McKinney’s car was totaled during a car accident, and because she didn’t purchase gap insurance, she still owed $13,000 out of a $23,000 car loan. The auto loan, plus the thousands of dollars she owed the creditors of the six apartment buildings, meant that she would have “been in debt forever,” she said.

“I am not a hateful person, and did not want to file a police report and send my mom to jail,” McKinney said. “The apartment debt made it impossible for me to climb out of debt without filling charges against my mom.”

Consumers are required by law to seek pre-filing bankruptcy counseling, which can “expose them to other options such as a debt management plan, settle with creditors or not pay the debt at all,” said Catherine Carter, a Colorado Springs, Colorado, branch manager for Transformance, a member of the National Foundation for Credit Counseling, which provides free or low-cost credit counseling for consumers.

Deciding Whether to File for Chapter 7 or 13 …

Most consumers should seek the advice of a credit counselor or bankruptcy attorney before they file for Chapter 7 or 13 to learn the consequences of each type of filing on their credit report, said Jim Triggs, a senior vice president of counseling and support of Money Management International, a Sugar Land, Texas-based non-profit debt counseling organization. Filing for Chapter 7 means the unsecured debt will be discharged while filing for Chapter 13 results in a situation where consumers pay their debt for a number of years before having a certain portion of that debt being discharged, he said.

“All of this has a large cumulative negative effect on their credit rating and the bankruptcy will stay on their credit for seven to 10 years,” he said.

When the law changed in 2005, consumers now have a harder time filing for Chapter 7 to have all their unsecured debt discharged. Both private and government-backed student loans aren’t included if consumers file for bankruptcy with very few exceptions.

Individuals who file for Chapter 13 have to pay a portion of their debt back and are typically on a five-year plan, said Carter. Depending on their income and reasonable living expenses, a portion of the debt is paid each month and could be as low as $50 a month.

Consumers should be prepared to gather documents such as paycheck stubs, tax returns and bank statements whether or not they seek the advice of an attorney, said Ryan Dove, a Houston bankruptcy attorney.

“All of these personal documents will be used to help create their bankruptcy documents,” he said. “Some of these documents are required to be filed with the court as a part of the case and/or sent to the bankruptcy case trustee.”

Filing for bankruptcy isn’t for the faint-hearted because the consequences are long-lasting and can impact your credit score for up to 10 years, making it challenging to receive credit with lower interest rates to buy a car or house or obtain credit cards.

Consequences

“Declaring Chapter 7 bankruptcy comes with immediate and long term consequences,” said Bruce McClary, a spokesman for the National Foundation for Credit Counseling, a Washington, D.C.-based non-profit organization. “In the short-term, it becomes challenging to obtain credit approval from prime lenders and impossible to finance at the lowest rates.”

While consumers can be approved for a loan or credit card after a bankruptcy is discharged, the cost of “borrowing becomes steep,” he said. If a consumer’s loans and credit cards become delinquent once again, the options are more limited.

Consumers who wait 24 months after their bankruptcy has been discharged, which means it was accepted by the bankruptcy court, can access credit again from credit card companies and some mortgage and auto loan lenders. Depending on the car dealership, interest rates can be as high as 21%, Carter said.

“Some lenders will consider giving consumers a mortgage or auto loan,” she said. “It can be done, but they pay a really high interest rate. Waiting 24 months is a good guideline for getting any type of credit to receive decent interest rates.”

Rebuilding your credit score slowly is the best course of action because the ramifications are steep. Examine your current your household budget first and seek “entry-level credit options which can be used to establish a new record of timely payments,” McClary said.

“Keep the balance well below the assigned credit limit, monitor your credit and score regularly and look for opportunities to qualify for better credit terms as the score increases,” he said.

Other Options …

A good deterrent to filing for bankruptcy is following through with a debt management plan, which is a plan in which the creditors will accept lower payments, decrease interest rates and stop collection activity including late and over limit fees, Triggs said. This plan allows the consumer to pay off their unsecured debt based upon their income and get out of debt within five years. Consumers should sign up for the plan through a non-profit credit counseling agency.

The consequences for entering this agreement is also severe and means consumers must be ready to change their current spending habits. Consumers are required to stop using their credit cards and close the accounts. In addition, they must make one or two payments to the credit counseling agency monthly and the agency disburses that money to the creditors, he said.

Even though a debt management plan also affects a consumer’s credit score and report, the impact is minimal and a result of the closure of the credit card accounts.

“It’s usually nowhere near the impact that a bankruptcy will have on their credit score and often not much of a negative impact at all,” Triggs said. “Their credit score doesn’t get killed.”

The hard lesson that McKinney learned was “don’t trust everybody and make sure you check your credit report at least once a year,” she said. “It’s tough to be so trusting, especially when it comes to your credit,” she said.

Home Improvement: DIY or Leave It to the Pros?

Invest a little and gain a lot. When it comes to sprucing up the home, millennials are just as likely to renovate their homes as other age groups to help increase the value. In 2014, 79 percent of millennial homeowners decorated, 62 percent renovated and 58 percent made repairs, according to a 2015 Houzz survey.

Not only can remodeling get costly, but also more difficult than you might have thought. So that leaves you two choices: know when to call the pros or when to get your hands dirty and do it yourself.

The most common mistake new homeowners make is that try to do home improvements when “they should really consult with someone,” said Sandra O’Connor, a real estate agent with Allen Tate Realtors in Greensboro, North Carolina.

So how do you know whether to call the pro or DIY? A lot of the answer has to do with your skill level. Taking on more than you can handle can end up to be a costly mistake. Here are three things you can do to help you decide:

Create a budget. It will help whether you have a general contractor planning the renovation or if you are doing it on your own.

Research home improvement projects on websites, such as HomeAdvisor and Houzz, so you have an idea of how long the project will take and how much it will cost you.

O’Connor advised that “no matter how specific your budget is, it isn’t uncommon to discover more expenses. So allow 10 to 15 percent allowance for unexpected surprises.”

Figure out when it is worth it to hire a pro. For instance, don’t mess with plumbing and electrical projects, home improvement experts say.

Hardwood floors are also one for the professionals. “Millennials prefer hardwood floors over carpeting. They think that refinishing the floor is a simple project, but it is actually more complex,” O’Connor said.

If you’re new to home improvement, try doing decorative projects. Repainting, laying carpet, installing a newer front door, changing or adding shutters and landscaping are good beginner projects.

Focus on the return on your investment. Studies show that remodeling your kitchen and bathrooms are at the top.

According to the National Association of Realtors, the national average on a minor kitchen remodel costs $19,226 with an average payback of nearly 80 percent. The average bathroom remodel costs about $16,724 with an average return on investment of 70 percent.

“Across all generations, kitchens and bathrooms are at the top of the renovation list,” said Nino Sitchinava, the principle economist at Houzz.

Retire at 75? That’ll Be the Norm for Today’s College Grads

As if student-loan debt wasn’t enough of a burden for new college graduates. A report predicts that young workers will need to work until they’re 75 on average to save enough for retirement.

Researchers at Nerdwallet, the financial site that published the reportWednesday, blamed rising rents and student debt levels. “Millennials are facing a unique challenge in ever-rising student debt that is really impacting their ability to save early in their careers,” said NerdWallet investing manager Kyle Ramsay.

Meanwhile, the cost of renting a home in the U.S. has risen to its least affordable levels ever, taking up a record proportion of income in most major cities, according to a study from property website Zillow (Z). Renters in the U.S. can now expect to pay around 30.2 percent of their monthly income for rent on average, even more in some high-cost areas like Los Angeles, New York and Miami.

The NerdWallet calculations were made based on a 23-year-old saving 6 percent of his or her salary (the median savings rate for that age group) who graduated owing $35,051, the average student loan debt carried by 2015 graduates.

But there are ways to tilt the balance in the other direction.

You might be laughing now at your friends who moved back in with mom and dad after graduating from college, but they may get the last laugh.

According to NerdWallet’s calculations, if that same new graduate lives at home until age 25, he or she could retire five years earlier at 70. (That’s still eight years later than the current average retirement age.)

“It may not be the best course of action” to move out just because you can, said Deena Katz, a certified financial planner and associate professor at Texas Tech University. “Even if you contribute (while living at home), it will be less expensive than going out on your own.”

Ramsay agrees. “There are expenses you can’t control and there are those that you can and the ability to save on something like rent by living at home is a great option,” he said. If that’s not an option, consider getting a roommate or two.

Lowering your housing costs means you can also put more money toward paying off your student loan debt. There also are other steps you can take to speed up the pay-off process and lower your overall balance.

First, consider all of your repayment options for federal student loans. The Department of Education’s federal student aid website offers seven repayment plans, including some that allow you to tie loan payments to your income and even have some of your balance forgiven.

For two plans — income-based repayment and “pay as you earn” — you’ll generally make payments no higher than 10 to 15 percent of your discretionary income. Remaining balances on your federal loans will be forgiven after 20 to 25 years as long as you’ve made your payments on time. There’s also a public service loan forgiveness program through which the remaining balance on your loans will be forgiven after you’ve made 120 qualifying monthly payments while working full-time for a qualifying employer in sectors like public safety, education or the military.

Katz said such plans are “an excellent idea, particularly if you are prepared to go into certain [public service] programs.”

Another option for lowering your monthly payments is to refinance your loan through a private lender like SoFi, CommonBond or Earnest. If you have had time to build up your credit and still have a lot of debt to pay off, this might be a good option. Most private lenders require proof of steady employment and a minimum credit score of 640.

Some employers are also willing to make a lump-sum payment toward the loan as part of the compensation package if you guarantee them you’ll stay there a minimum number of years.

If you are able to cut back on other expenses, that will also free up money to pay down your debt and start investing for your retirement. Even contributing $10 or $20 a week toward your retirement can make a difference. “You’ve got the wonderful, magical world of compounding, so whatever you save today is worth much more [in the future],” said Katz.

Home Sales Rebound Last Month After August Slump

national association of realtors september home sales
WASHINGTON — Americans snapped up more homes in September, suggesting that the U.S. housing sector remains insulated from global economic turmoil.

The National Association of Realtors said Thursday that sales of existing homes jumped 4.7 percent last month to a seasonally adjusted annual rate of 5.55 million. Buying activity rebounded after slipping in August, indicating that demand for housing continues despite a series of recent economic hits: stock market declines, falling factory orders, a slowdown in China, struggles in emerging nations such as Brazil and Turkey, and stagnation in Europe.

The report adds to the evidence that home sales, and housing activity generally, are trending up.

The real estate market appears to have reached a stable plateau in recent months, aided by mortgage rates near historic lows and steady job gains that have reduced the unemployment rate to a healthy 5.1 percent. Yet first-time buyers remain scarce and relatively few properties are being listed for sale, capping the potential growth of the sector.

“The report adds to the evidence that home sales, and housing activity generally, are trending up,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. “The strength in housing has been offsetting weakness in manufacturing.”

But any further acceleration in sales will depend on more properties coming up for sale.

Sales have advanced 8.8 percent over the past 12 months, while the number of listings has declined 3.1 percent. The housing market contains 4.8 months’ supply of homes, significantly lower than the 6 months associated with a strong market.

Tight inventories have fueled rising home values. The median home sales price was $221,900 in September, a 6.1 percent annual increase.

The rising prices have created affordability pressures that could cap sales growth. Prices have increased at nearly three times the annual 2.2 percent increase in hourly average earnings.

All four geographic regions — Northeast, Midwest, South and West — experienced higher sales last month on a seasonally adjusted basis.

Yet first-time buyers are largely missing from the market.

Only 29 percent of sales last month went to first-time buyers, a percentage that continues to be significantly lower than the historical share of 40 percent. The younger millennial generation, ages 18 to 34, suffers from a shortage of down payment savings as they cope with lower starting salaries and high student debt loads.

A recent survey shows that 20 percent of millennials say they need financial help from their parents to buy a home, compared to just 8 percent of the older baby boomer generation who needed parental assistance, according to the finance company Credit Karma.

Buyers have benefited from low mortgage rates, offsetting some of the cost pressures.

The 30-year, fixed rate mortgage averaged 3.79 percent this week, substantially below the long-term average of 6 percent, the mortgage firm Freddie Mac said Thursday.