Archive for January 31, 2012

Security Guards: Income and Debt

Based on information from a leading internet salary comparative website, as of January 2012, security jobs average around $9 to $16 salary an hour, depending on the inherent hazard of the job, seniority, specialization as well as the state where the security guard is employed. Assuming a security guard has regular work that means a day’s salary is around $72 to $128 or $1,512 to $2,688 a month. It is important to note that the Federal minimum wage is set at $7.25 for security jobs. This may increase or decrease depending on the state but not by much (about $1 to $2). This means that a regularly employed security guard is still earning more than the minimum wage.

Minimum wage for a security guard is set in order to provide each worker with enough income for a sufficient standard of living. This means that for so long as a security guard lives within his or her means, getting into debt is not going to be a problem. And, a relatively comfortable lifestyle is still possible.

That doesn’t mean that being a security guard isn’t hard work of course.  Many people imagine that it’s just a matter of sitting around watching TV and using a video proxy site to browse through Netflix.  This is definitely not the case and it’s often a difficult and tiring job with a lot of stress and responsibility.

What constitutes “living within his or her means?” This does not mean a zero sum income and expense worksheet (income minus expenses equals zero). Rather this means spending a reasonable amount for necessities, utilities, shelter, food, clothing, medicine, etc. making sure to keep a specific amount, around 10% to 30% of the salary as savings or as an emergency fund every month.  Remember, security guard lack job security therefore it is important to save for a rainy day.

A 10% to 30% savings monthly is really not that much. That is why a security guard has to make sure to keep out of debt. This can be done by planning his or her finances properly, taking free financial freedom seminars and getting a part time job if possible. The key really is not to get into debt. However if debt is already a reality then it would be wise to communicate with the lender or creditor to come up with some sort of an arrangement. The best arrangement possible is one that allows payment on installment with little or no interest charged. This is better than avoiding and running away from the debt because on interest alone the debt may balloon to twice the amount within a year. If installment payment is not a possible option then seriously consider filing for bankruptcy, rather than be forced to pay on installment at unconscionable interest rates.

Three Spending Habits That Lead To Debt

Debt isn’t something that just happens coincidentally or accidentally as you go about your daily living. There are certain spending habits that lead to debt. Recognizing these habits now could save a lot of money and stress later. If you want to stop creating more debt and pay off the debt you have, you must eliminate these bad habits.
Governmental agencies have started to advertise a QR Code that can be scanned and give users helpful information on debt management.

1. Spending more money than you make.

The logical part of you thinks it’s impossible to spend $1,200 each month when your paycheck is only $1,000. Spending more than you make is easier than you think. So easy, you might be doing it without necessarily realizing it. Dipping into savings, borrowing from others, and using credit are the primary ways of spending more money than you bring in. You can get away with doing this for a few weeks or months, but soon or later, your hole-digging spending habits will catch up with you. Before you know it, your savings is depleted, your credit cards are maxed out, and you can’t borrow any more money.


2. Spending money you don’t have.

Spending more money than you make is enabled by spending money you don’t have or money you are yet to earn. You spend money you don’t have by using credit cards and taking out loans. When you use these instruments to pay bills and make purchases, you’re creating debt. If you can’t repay the debt each month, it will continue to grow.

You can resolve this bad habit the same way you stop spending more money than you make – by reducing your expenses and relying only on your income to pay for your wants and needs.


3. Using debt to pay off debt.

When you use credit cards to pay off other cards and loans to pay off other loans you’re not paying off anything. You’re just shuffling your debt around and incurring more debt each time you do so. Balance transfers have transaction fees and most loans have some kind of down payment or origination fee. So when you use debt to pay off debt, you end up worse off than when you began.

Using debt to “pay off” debt might be beneficial if you can transfer a balance from a high interest rate credit card to one with a lower limit. However, you have to be careful that the balance transfer fee doesn’t negate the interest savings and that your post-promotional interest rate isn’t worse than your previous rate. Transferring a balance once or twice to take advantage of a great rate is different from continually transferring balances to dodge credit card payments.

With Thanks

The IMF – Not Fit For Purpose Anymore

The IMF and the World Bank were created in a very different world than we live in today.  The emerged in the chaos of 1944 when the world was still very at much at war.    The organisations were intended to promote some sort of economic stability and to encourage free trade and economic cooperation through financial support when required.

It’s role has developed and expanded over the years – especially during the 1980s when it took a much more active role in Global finance by bailing out many countries who were in financial turmoil and facing bankruptcy.    However it was to become much more than some simple lender of last resort, it in fact became the architect of economic policy for most of the countries that needed it’s services.

To obtain the crisis loans, countries had to adopt the stringent economic requirements and policies that the IMF stipulated as terms and conditions.  The power wielded by this huge Financial behemoth in shaping the economies of the world should not be understated.

The problem has been that economic policy run by a financially focused  organisation is not always the best way to run an economy.  One of the main issues is that the policies that the IMF impose (structural adjustment policies) have a single goal – to repay the loans by decreasing spending and reducing debt.

So in the name of debt repayment – countries will have to forsake their populations, cutting spending on things like health and education, throwing out green and sustainable policies in exchange for strict austerity budgets.   As we can see with the Greeks in our current crisis, cutting spending for debt repayments leads to a rapidly shrinking economy – the people pay the price.  In the Third World countries the cost is even greater than for the Europeans, investments in health and education are already at much lower levels than the rest of the world.

The reality is that these debt repayment policies may seem logical to rich Western economies but all they do is increase the inequalities that already exist for the underdeveloped countries.  Shackled by huge debt repayments the policies increase poverty and leave various multinational companies free to exploit both the environment and the workers of these countries.

The truth is that there are opportunities for developing countries to expand their economies.  Boosting communications infrastructure is one great opportunity, there are possibilities for the internet to bring wealth and jobs to all sorts of areas.  Imagine the benefits of having a thousands on Internet based entrepreneurs could bring to areas of Asia and Africa which currently rely on foreign aid.  There are prerequisites of course, besides the big one of infrastructure –  unfortunately digital markets are sometimes difficult to access outside the Western World.  For example you won’t get far in the US without using a USA proxy to bypass Geo Restrictions – here’s an example –  But these obstacles are minor in comparison and could be easily solved through a big global organisation.

The IMF and World Bank may be what the world needed in the post conflict environment they were created in.  However many would argue that they are not fit for purpose for the world we live in today.

The Fundamental Problem of Debt

Not all debt is bad, after all look at the roof over your head – the place you live is probably the result of you have taken on some debt.  How long would we have to save before we could have bought a house outright?  I’m sure my parents would have got kinda of tired of me hanging around their house into my forties.

If you look outside you might see a car, or a truck – perhaps in the corner of the room a nice flat screen TV.  All these may have been acquired by some debt.  How many companies would be in existence today without the ability to borrow money – the firms who employ thousands owe their existence to the ability to borrow money to expand.  There’s a whole lot of stuff in my life from my laptop which I happily sit and watch BBC Iplayer through a proxy – to my lovely house and car – all would have been much more difficult to obtain without debt.

But unfortunately many of the poorest countries in the world are saddled with a different type of debt which is crippling their development and leaving their citizens in poverty.   Much of it wasn’t used to boost a countries economy, it didn’t establish infrastructure improvements or build schools or hospitals.  If this was the case the debt may have been serviced properly on the benefits accrued.  No, much of this third world debt was frittered or simply stolen by whichever tin pot ruler was in charge at the time.  The Western world threw money at countries thinking that would make things right.

There were little benefits to this debt but the repercussions of the repayments have left many countries stranded in a poverty that is impossible to escape.  There are the repayments of course and various conditions attached to the payments – further restricting  the opportunity to invest in their own country.

The basic problem is much of this debt – much of it from the 1970s was a complete failure – the projects usually achieved little or nothing.  We must let these countries have the chance to compete, the shackles of debts from Western inspired ideas should be removed to give them half a chance.


Not debt relief, but a minimal capital requirement among banks is the best solution to avoid a systematic banking crisis.

Since the credit crunch which started with the decline in the US real estate market that impacted worldwide financial institutions. This chain reaction of events resulted in a global financial crisis which have impacted not only the financial sector and US real estate market but has also influenced other sectors. These events have had an impact of economic growth of all companies and have lowered their future expectations for the coming years.

Even though we are currently in a period of lower economic growth with more future uncertainty, in the past decade we have had multiple crises such as the Russian Ruble crisis of 1997 which resulted in the default of the Russian state and fall of Long Term Capital Management, which led a large shockwave across global financial markets.  But also the collapse of the Dot-com bubble around 2001 has led financial markets in distress after a few very prosperous years. The main problem in this case is that banks are strongly intertwined with companies (that borrow money) and the general population (depositors, investors and stakeholders). In simple and plain English it means that when the economy is hit, banks are also hit as the money they can make on the multiplication effect of lending money decreases as people are less eager to borrow money. So this reduces the cash flow of banks as they cannot lend as much money that generates the highest return and at the same time they are more strict in lending money as they tend to strongly investigate the creditworthiness of its lenders as a possible loss of money, due to bankruptcy can be detrimental to a bank’s tier 1 capital requirements.

If we take a trip around the world we find different examples of troubled banks causing a stronger spiraling down economy. In Asia, and to be specific in Japan, we have seen that most companies (conglomerates) are formed around a bank or group of banks which can help improve internal efficiency among companies and the bank(s) but form a risk when they all face the effects of a global downturn. In the US we have seen the case of Lehman Brothers and Bear Stearns who both fell from grace and at the same time hurting other global financial institutions as they are strongly interlinked with each other with mutual fund investments, bank holdings, debt obligation and share ownership. Even Dutch insurance companies, such as Aegon and ING, where strongly affected by the fall of Lehman Brothers. Additionally there were also cases of Dutch financial institutions that fell apart due to the global debt crisis, such as DSB bank, famously known for personal loans (in Dutch: persoonlijke lening ) and mortgages ( in Dutch called ‘hypotheken’ ), which it used to sell to the consumer market. Before its fall, DSB bank was estimated to be worth around 500 million euros.

An almost decade old paper by Mathias Drehman (2002): “Will an optimal deposit insurance always decrease the probability of systematic banking crisis” proposes the use of what we now define as a minimal capital requirement that banks need to maintain to avoid a possible systematic banking crisis. In plain English this means that banks need to keep enough money in their safe to avoid when another bank collapses a chain reaction can be somewhat avoided. Drehman (2002) explains that contagious bank runs can be avoided when the correlation of bank’s portfolio is not strongly correlated with a bank that is in financial distress (minimal capital requirement not in a bank’s safe). This minimum capital requirement we now know as Basel I and especially Basel II (the second of the Basel Accords) made by the Basel Committee on Banking Supervision.

What Debt Relief Method Is Best For The Consumer?

It’s no secret that over the past few years the economy has been in the tubes.  People have been losing jobs, homes and pretty much the will to move on.  What makes matters even worse is that personal credit card debt amounts are at an all time high.  People ended up relying way too much on their credit cards during this terrible recession and are now trapped in a hole.  So which method of debt relief can best serve such people?

Over the years a popular method has been credit counseling.  This plan is aimed at a full repayment to the creditors however the benefit is getting lower interest rates and one monthly payment.  The one payment can help people with the headache of staying on top of the bills, and also helps to speed up the process of getting out of debt.  And getting a lower interest rate can obviously help to save some money.   The main issue with this plan however is that many times the payments to get on a plan like this are either the same or more than what people are used to paying for monthly minimum payments, therefore making it unfeasible for many.

Another option that has helped many people out during such rough times is debt settlement.  Debt settlement is a partial repayment of the actual balance owed.  On many settlement plans people have found themselves saving over half of what they currently owe and will be debt free in a very fast time frame.  The only real downside to this plan is that it will have a negative impact on ones credit report.  You must fall behind on your minimum payments for the creditors to have any desire to negotiate a settled payout for less.

No matter what you do make sure to do something.  Sitting around and hoping the problem will just disappear is not a sound game plan and will only put you and your family into further financial distress.  Contact some companies today and find out which plan will work for you.

A Partial Writedown Of the Debts Incurred By Countries Of The South Is Generous

If the debts are cancelled will the countries of the South immediately apply for new debts? I suspect the answer is ‘yes’. And what then? Will you be asking again in a few years for another write down of the debts? Probably! You can hardly expect banks to suffer a write down of their assets just because a country has borrowed more than it can afford to repay. To think it is to be very one-sided. After all, I have a business producing gifts with the customer’s coat of arms, if I want to buy more equipment to enlarge my business, I can’t turn to the bank in a couple of years and ask them to cancel the debt while I continue in business selling my coats of arms. Get real!

There are already moves to cancel a proportion of country’s debts, enough to bring the debts down to a manageable level so that repayments can be made without undue suffering by the respective country’s people. For me that is enough, and it is generous. At the end of the day it is the banks’ shareholders who have to shoulder the loss, and shareholders are mostly individuals who are saving for retirement; ordinary people who you have no right to ask to bear huge losses because of the bad management exercised by most leaders of Southern countries.