Living HAS BECOME UNAFFORDABLE! (EXCEPT FOR THE RICH)

A lot of you who regularly watch my channel sent me this recent story about how the credit card defaults have now surged to the highest level since the Great Recession. And who better to talk about this than me, right? Because I've been talking about stuff like this for the last couple of years. And I want to talk about this not just because it's a concerning thing about our economy, but it also reveals the deeper issues that people are facing right now when it comes to expenses, when it comes to paying for life. And I want to dive into a lot of these things that goes beyond just the credit card debt. So first of all, the credit card companies, they wrote off $46 billion in seriously delinquent loan balances in the first nine months of 2024, which they say is up 50% from the same period just one year ago and the highest level in 14 years. So a 50% increase, guys, in people not paying the bills. I kept wondering why the most popular video I published on this channel was people have stopped paying their bills. Well, I guess we know the answer now. The answer is because it's true. That's exactly what's happening. Now, a credit write-off occurs when a lender decides it's unlikely that their borrower will make good on their debts. So in other words, they've tried to collect that debt from them. It didn't work. And they're saying, you know what? It's probably not going to happen. So we're just going to write this off as a loss. Doesn't mean that the person who owes the money is off the hook necessarily. They can still send you to collections and they can try to get the money from you there. And obviously, it's going to have a major impact on your credit score. But I would imagine people who are not paying their bills like this probably don't care. Now, according to Mark Zandi, he's the head of Moody's Analytics. He says that the high income households are fine, but the bottom third of U.S. consumers are tapped out. And normally, I ignore everything that this guy says. But in this particular case, I believe what he's saying is absolutely true. And notice the key words there, right? The bottom third of the U.S. consumer is tapped out. I believe that the number is actually higher than that. But let's roll with that for a minute and just imagine that's true. One third of the people in this country have no money. One third aren't paying the bills on time. One third are seeing their credit scores deteriorate, you know, eliminating the chances of being able to buy a home in the future or buy a new car or anything, right? So how can we have a well-functioning economy in a situation where one third of people who participate in the economy are basically on a financial cliff and are not going to be able to participate in a way that most people regularly would do? Now, obviously, this sharp rise in default is a sign of how consumers' personal finances are becoming increasingly stretched over the years of high inflation that we have seen. People are leaning on the credit cards to pay bills, but they're not able to pay the credit card bill once it comes in. If they could, then they wouldn't need the credit card to pay their bills that they didn't have the money for to begin with. This is a telltale sign that those credit card debt levels that we've also been seeing climb to record highs that last reported was at $1.17 trillion are guaranteed to continue climbing throughout 2025. There's no sign of this slowing down. Unless everything gets magically cheaper overnight, you're going to see these numbers climb. You have Capital One, JPMorgan Chase, and Citigroup said that as of November of 2024, its annualized credit card write-off rate, which is the percentage of its overall loans, which are marked as unrecoverable, hit 6.1% up from 5.2% a year ago. And take a look at this chart, guys. This shows you the gravity of the situation, okay? People were already kind of not paying their bills even before the pandemic. You could see from 2015 all the way up through 2019, the credit card defaults were on the rise. And actually, the pandemic tampered that down because people got so much free money, right? But it didn't take long, only a couple of years after that stimulus was received, for it to just skyrocket back up beyond where it was before the pandemic. And even though we are not at levels yet that we saw during the GFC, we're getting pretty close. And this might be the year where we actually match it or top it. And the credit card companies are just as much to blame for this as people because the big mistake that credit card companies made during the pandemic is they ended up extending credit card loans to people they normally wouldn't because they go based on your income, right? But because so many people were flush with cash in their bank accounts, they decided to give a lot of these people credit cards because they had money in the bank, as if somehow that means they're going to end up keeping that money. So this is just as much their fault as it is the people who are into this debt. Kind of like what we saw during the housing crisis back in 2008, when a lot of bad loans were given out. And who was responsible for giving those bad loans? Of course, the banks were. They wouldn't have seen nearly as many defaults and nearly as many foreclosures if the lending practices were tighter back then, like they supposedly are now. Which I would argue is not really true. Is it tighter than it was back in 2006? Yeah, it is. But still easier to get a 0% or 1% down mortgage today than it has been in years. And to just give you an idea of just how fast people are spending money, okay? In the middle of 2023, that's when we finally hit the $1 trillion in credit card debt. Everybody, including myself, was announcing that here on YouTube, right? But now we're already at almost $1.2 trillion, right? That means an extra $200 billion has been charged up and racked up in credit card debt just in the past year and a half. The personal debt situation is becoming just as exponential and just as problematic as our government situation. Where they're just taking on more and more debt like there's no tomorrow. And pretty soon, it's going to get to the point everyone's going to be defaulting, including the government. They say that higher balances and interest rates have left Americans who cannot pay off their credit card bills in full paying $170 billion in interest in the past 12 months, ending September of 2024. Obviously, those interest payments have sucked up a sizable amount of people's money from their bank accounts, which is why a lot of people on the lower income spectrum are having a hard time paying their bills. They just had to write down $60 billion over the first nine months of 2024. And they're saying already going into 2025, there's another $37 billion that remains in consumers' cards that is at least one month overdue. So how much of that is going to end up getting written down too? Now, yeah, people say, well, this is just a write off for the credit card companies and then they don't have to pay as much taxes and all this and that, right? But somebody ends up paying that bill. And who is that? Us. The taxpayers. It ultimately ends up coming back to you, right? Because think about it. If these companies get to write off billions of dollars, okay, and that contributes to how much less tax they have to pay, then that just means you as the individual, the regular W-2 earner ends up having to pay more taxes. And then you see the government continue raising taxes on people like you. This is good for the credit card companies, not so good for the average American. And this also brings up a point where the credit card companies and banks that are offering these irresponsible loans, just like they did with the great financial crisis that we had, they should be responsible, right? They shouldn't be able to just give unlimited amounts of credit to people who probably aren't going to be able to pay it back. There needs to be repercussions from them. They shouldn't be able to just write everything down and then use that as a tax deduction at tax time. That's not fair to everybody else who ends up having to foot the bill in the form of higher taxes and every other aspect of their life. And when we're seeing this level of delinquencies already going into the beginning of this year, guys, you can guarantee that this problem is going to continue to snowball down the hill well into the next year. This isn't something that's just going to get fixed overnight, especially when inflation continues to be a problem. The last couple of inflation readings have been consistently higher than where it was predicted to be. Even the Fed has revised up what their inflation predictions are going to be now that we're in 2025. They've realized it's not going to be as low as they originally thought. You know, I have a viewer, too, who writes me regularly about what's going on with the debt collections industry. And he's been telling me the last couple of times he's wrote me that things are busier than ever. You know, they're hiring people, the offices are expanding, and it's to the point where, you know, there's too much work that people can't even handle it. That's how many delinquencies are going into collections now. And another way that we know that this problem, along with all the rest of the economic troubles that we're having, is going to continue to get worse is because of the continued unemployment issues we're having in this country. Now, really, if we go back to May of 2024, it's been harder and harder for people to get a job who have lost a job since then. We take a look at this chart here. This shows the continued claims and the four-week moving average of continued claims from the Department of Labor. And you can see both trajectories have been on the rise since May of 2024, with really no signs of slowing down. And if you look at how much it's up since 2022, we've surpassed those levels by quite a bit now. And here's the thing that we really need to pay attention to, which is the insured unemployment, okay? After someone expires all their unemployment benefits, they become uninsured unemployment, and the Labor Department stops tracking them. So most states, after 26 weeks of unemployment benefits, you fall off. You don't count anymore as being unemployed, even if you are still unemployed, simply because you're no longer eligible to collect unemployment benefits. So when we take into consideration all of those people that have been unemployed for quite some time, then the situation becomes even more dire. And that's where this chart here comes in. This shows the impact of those who are unemployed, but no longer eligible for unemployment insurance. And when we look at the blue line in particular on this graph, we can see it is just skyrocketing right now, because that is the combination of continued unemployment claims, plus the people who have been unemployed for 27 weeks or longer. And that number is just shooting up, guys. And in the past, every time you can see that all these indicators started shooting up, what do you notice? They coincide with those gray lines that are recessions. So similar to the SOM rule about how quickly unemployment is rising, you know, I talked about the SOM rule a lot over this past summer. This is almost a guaranteed indicator that we are heading into a recession right now, at least the official recession, right? Most of us know that the real recession has already begun a while ago, and all of that is evident based on everything we just talked about already. And of course, the sad truth is all of these financially hard times lead to something that people hope that they never have to experience in their life, which is homelessness. Do you think it's a coincidence that we're seeing these credit card delinquencies reach the same level as we saw in 2008, or the highest level since then? Do you think that's a coincidence that that's happening at the same time the homeless rates jump by double digits in 2024? These are all clear indicators that life is becoming too expensive. People can't afford to live anymore. So obviously people are struggling to be able to afford rent, their utilities, their groceries, and all kinds of things like that. And across the US right now, we have more than 771,000 people who live without housing in 2024. And that's just according to one night's count in January, okay? So obviously that was like a year ago. And that's just one night. So that number is probably highly inaccurate. But the startling thing is even though that number is probably highly inaccurate, that number is 18.1% higher than the January reading in 2023 when they counted about 650,000 officially homeless. The January of 2022 reading was 580,000. So you can see this number continues to rise exponentially year over year, just like people's personal debt levels. And with housing affordability where it is right now, which is practically unaffordable for almost everyone, it's no surprise that this is the case. The officials blame it on a combination of a couple of different things. They say it's obviously housing costs, but it's also an influx of migrants and shelters and also natural disasters that have left many areas that used to have homes now don't have homes. Think of like hurricanes, fires, flooding, stuff like that, that has basically wiped out a lot of places to live. And also you got all these sanctuary cities that thought it was a great idea to just take in all these migrants that were pouring in from across the border. Turns out that has hurt us in more ways than one. Those local cities' resources get constrained to the point where they can't help their locals anymore. And then it creates more problems than it solves, which is now the result of that. Denver and Chicago, which were key sanctuary cities, have actually recently ended their migrant shelters. So they're not taking in any more people because they've realized that this is financial doom for their cities. But here's something else that I didn't even think of, is they say because they do these annual homeless counts in January, then you can be sure that it is an under count because in January, pretty much everywhere and throughout the country, it's cold, right? And people seek shelter during this time. So naturally you're going to count far fewer people in January than you would say in the middle of July. Now, the policy makers and all the people in charge say that we need to have a wider safety net for people so that way they don't become homeless to begin with. Obviously, the first thing I think of when I hear that is we need to spend more money from the government, right? Which ultimately means more taxes, like we talked about earlier, that regular people have to pay because the corporations get to write off billions and billions of dollars in bad loans from the credit card companies. Right off the bat, it doesn't sound very appealing to the average American who's working hard just to get by and pay taxes to make sure they don't become homeless. What do they even consider to be homeless? Some people are homeless by choice, right? Just walk through the streets of LA or San Francisco where you see all these people hanging out doing drugs and all of that. Do you think that they want a place to live? They don't because they can't get away with that kind of stuff in the shelters where it's free. They've come out numerous times and said this themselves. Every time I go to California for the summer, I see the news stories about this and it's always the same old thing. They have shelters available, they offer it to people, and then they end up not taking it because they don't want to be in there. They don't want to follow the rules. They'd rather be on the street. I would say, at least my opinion is that if that's the case, then that person should not count as homeless because even though they're technically homeless, they should at least divide it up into two categories. You have voluntary homelessness and involuntary homelessness because I think it's a completely different situation where you have a family that's fallen on hard times and now they're living in an RV parked on the side of the road, right? That's involuntary homelessness. It's not like they're throwing all their money away on gambling or drugs or whatever. They might be, but chances are they've just fallen on hard times and can't afford a place to live anymore. Maybe one of them lost a job, there was a health problem, whatever, right? But if you're squandering the money away on drugs or gambling or alcohol or whatever the case may be, that's a completely different story and even though that person does technically need help, you cannot help someone who doesn't want help or doesn't want to help themselves. That's the problem that a lot of people are facing with this. You can't just force someone to get on board with your program if they don't want to. But I do fully believe that we should be helping the people that want help, people that have fallen on hard times and need to get back on their feet. There should be more of a safety net for people like that. But the resources should all be concentrated on helping people like that and moved away from the people who don't want the help. Stop wasting the money on the lost causes, essentially. I know that might sound harsh to some of you out there listening to this, but let's just get realistic. Our country is broke. Our local governments are broke. They're raising taxes like there's no tomorrow on everybody. And if you want to just keep going with the status quo, the way things are going now, you can guarantee that the taxes are going to keep rising exponentially until we're all homeless. Now, one last tip for the people who are in massive amounts of debt like we talked about at the beginning of this video and are having a hard time getting out of it. Usually, you only have a couple of options. You can either choose to go the bankruptcy option, which has a lot of negative consequences for you well into the future, or you can be more responsible and pay off that debt and find a way to get out of it. And one way that people look to is debt consolidation. Right now, the average American has close to $8,000 in credit card debt, and that's just credit card debt. We're not talking auto loan debt. We're not talking student loan debt. We're not talking mortgage debt, any other type of debt, just credit card debt. So it is a tremendous amount of debt. So the main reason you would want to consider debt consolidation is just because you might be able to get an overall lower interest rate across all of your debts than you had before, which in the end will make it easier to pay them down. And here's how you know if you might be a good candidate for this. If you have between $10,000 and $50,000 in debt, you have a credit score above 680, you have a debt to income ratio below 45%, and you have strong cash flow for payments. Now, right away, when I read off this checklist, it makes me think like, well, if you were already in this good of shape financially besides the debts, you probably wouldn't have so much debt, right? Not necessarily true because some people fall on hard times. Some people also just irresponsible with money as well. And the thing is, guys, if this is you, you should consider doing something like this debt consolidation sooner than later if you're a good candidate for it, because the interest rates on all of these loans, especially credit cards, probably aren't going to be going down anytime soon. So the longer you wait, the more debt you're going to compile in this timeframe. But sometimes it might not make sense to do this, especially if you have an unstable income or you have a credit score that's below 640, then you might be better off doing credit counseling or debt management programs instead. And even if you do decide to go the debt consolidation route, one thing you want to make sure is that the interest rate that you're going to be paying on your debt consolidation loan is lower than what you already have. Because if you do have a bad credit score or something that can potentially cause your interest rate to be higher qualifying for a new loan, you may actually be in a worse situation doing the debt consolidation than just sticking with what you have. So some things you might want to do if debt consolidation is not for you is obviously you need to have a budget and you need to use things like the snowball method to pay off debt, where you pay off your lowest credit card balance first and then you take the money that you were paying for that and put it towards your second highest credit card balance and keep rinsing and repeating that until all your cards are paid off. And in the meantime, you stop using the cards. You can also move your balances to balance transfer credit cards. That's how I ended up getting out of credit card debt myself. It gives you a timeframe, usually 12 months, 18 months, even 24 months, depending on the card, to pay your credit card debt at 0% interest. You pay a percentage of the debt that you owe as a transfer fee when you transfer to the card. So they do make something off of you, but that's a negligible amount compared to the amount of interest you would pay over those next 18 to 24 months. So if you're diligent and you throw a lot of money at the debt after you have 0%, you can pay it down relatively quickly because now your debt is not accumulating more debt month after month in the form of compounding interest. You can also try to negotiate with your lenders to see if you can get any sort of debt forgiveness or see if you can get any of your interest rates lowered, especially if you have been paying on time. You just haven't been responsible with money and you got yourself into too much debt. That's another possibility as well. So I guess what I'm trying to say here is if you're somebody who has fallen on hard times financially and you are one of these statistics or you're on your way to becoming one, you have to do something about it. You can't just sit there and watch the numbers go up and worry about it later because it is one of those situations where the time is of the essence and the sooner you act, the sooner you're going to be able to get yourself out of this problem. You know, part of the reason I talk about all these major issues that we're having in our economy and the real estate market and everything like that is because I want people to hear this stuff and then prevent it from happening to them. That's what I want them to do. And I know a lot of you have written me plenty of emails and comments and things like that telling me this is exactly what you've done since you've started watching my videos, which makes me extremely happy. So if you enjoyed this video, make sure you are subscribed to the channel and if you don't want to wait for my next video to come out, check out this one on the screen right over here and I'll see you in the next one.