Go Ahead, Pile on the Debt! Have We Reached a “Tipping Point”?

Perhaps you have read the book by Malcolm Gladwell called The Tipping Point.  If you have not, it is worth a read.  There is a lot in it despite being a pretty short read.  In summary, Gladwell points out a number of phenomena that can be traced back to a single, often simple, cause which in turn caused a much larger, and often very drastic, change.  I am oversimplifying a bit, but watching world events, financial market behaviors, and ongoing trade wars and political conflicts, I wonder if we are about to reach a significant “Tipping Point” for the American economy and perhaps the world?

I know that is a broad suggestion, and one that is often associated with being a ‘Debbie Downer’ these days.  Yes, the economy continues to be robust.  Employment is at all-time highs.  New job creation continues apace with wages increasing.  Consumer sentiment is strong and the economy growing. 

Yet I can’t get the enormous amount of consumer debt off my mind.  It hangs like a storm cloud over an otherwise pretty rosy financial picture.  As we all know, though, roses have thorns and sometimes that light we see at the end of the tunnel turns out to be a freight train!

Once again, we find ourselves at record levels of consumer debt.  The New York Federal Reserve just published its report for the second quarter of 2019, and it continues to show that we still seem to have no end to our appetite for personal debt accumulation (read the press release here). 

No surprise, we set yet another record!

Some highlights of this quarter’s report are:

  • The headline from the Fed is “Total Household Debt Climbs for 20th Straight Quarter…”
  • Household debt now stands at a whopping $13.86 trillion.
  • This is a $192 billion increase from the first quarter.
  • The report points out that “Balances have been steadily rising for five years and in aggregate are now $1.2 trillion higher, in nominal terms, than the previous peak (2008Q3) of $12.68 trillion. Overall household debt is now 24.3% above the 2013Q2 trough.”
  • Mortgage related debt stood at $9.4 trillion, a $162 billion increase.
  • Non-housing debt increased by $37 billion in the second quarter
    • New auto loans totaled $155 billion, a $17 billion increase   
    • Credit card balances totaled $868 billion, a $20 billion increase
    • Some good news was that there was an offsetting $8 billion decline in student loan debt.
  • Credit card balances in the 90+ day delinquency range rose to 5.2% from 5.0%.

Unfortunately, an increasingly important part of this debt is from so called ‘shadow banking’ institutions and should cause concern as well.  Consumers that may otherwise not qualify for credit from traditional sources often turn to these institutions to finance their purchases.  That does not help stabilize the debt picture, however.   

Granted, as long as employment stays strong and wages continue to rise consumers can continue to finance their debts.  

Most recently, however, the bond market began to flash warning signals of a potential recession.  Of course, that can force companies to tighten their belts, cause static or negative job and wage growth, which in turn can cause significant financial turmoil.  With little savings, or other financial cushions, to protect consumers during hard times (which surely will come) the “Tipping Point” represented by personal debt will continue to shadow us for a long time.

What can you do now to protect your business?  First, as we have previously suggested, make sure to review your credit policies and stay on top of your receivables.  Make sure that your customer records are as complete and accurate as possible. Finally, make sure to turn your delinquents over as soon as possible for prompt and efficient collections action.  We are here to help.  Let the professionals at A. Alliance show you how. 

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 14 years.

Password Incorrect: Wait…What Just Happened Here?

I received that message again just the other day: Password Incorrect. 

I don’t know about you, but for a moment that message kind of locks me up.  Some passwords are easy to remember as I use them frequently.  Others, not so much.  Sometimes my mind is on auto-pilot and I mistakenly enter another password I frequently use and it does not work.  When that happens, and I cannot recall the right one (brain lock?), I usually fumble around a bit before I find the right one.

Remembering passwords has become even harder in the past few years as companies have implemented even more complex strategies to create ‘hack-proof’ security for customer accounts.  The use of special characters, numbers, upper case, lower case, no use of any prime number (kidding on this last one), and so on, make remembering them all virtually impossible. 

Experts caution us about how we save passwords. Yet, we are urged to change them frequently.  Well, those of you blessed with a much better memory than mine are probably doing just fine. However, in my case, I find myself concerned about saving the password in a bad place and then just waiting for that supreme hack that will rob us of all we own, our children and grandchildren, and our emotional security for generations to come.  Not a pretty picture.

That said, I came upon an article in CNET the other day that essentially tells us that the methodology we have been encouraged to use to create our passwords for maximum security are now basically, well, ineffective. 

Say that again?

Apparently setting up complex passwords comprised of random characters and symbols is not as effective as, say, setting up a password you make up with identifiable and simple characters.

Mind you, I am not talking about using ‘12345’ or ‘password,’ but much less complex and cumbersome than those we are challenged to create today.

Where did this opinion come from?  No less an authority than the so called “father of the modern password,” Bill Burr.

In an article titled “Father of passwords regrets the advice he gave,” CNET writer Chris Matyszczyk writes that Mr. Burr recently has had a change of heart as to what comprises an effective password.

In 2003 Burr recommended that passwords should be made up of an entirely random string of letters and symbols.  This was the best way known then to minimize the chance of a hacker guessing a password.

He has changed his opinion, however, and “It turned out that these are easier for hackers to crack than, say, weird words that you can actually remember. Like ‘gobbledegook.’ Or ‘nincompoop.’”  Please don’t use these, though, as they are only examples from Mr. Matyszczyk.

Why the change of heart?  According to Matyszczyk “Over the years, people seem to have used similar techniques to create their ‘random’ combinations, which made them actually less random.”

Well, then.

Matyszczyk says that we should not be too hard on Mr. Burr.  I agree.  When he wrote that opinion who would have guessed the level of constant hacking that goes on every day, and how successful so much of it is? Random strings of letters and numbers certainly seemed logical and safe.

What to do?

Certainly, do not use simple and easy to guess passwords.  Most sites and apps still require password content to conform to their standards.  We don’t have much choice if the password is required to be complex and as random as possible.

At A. Alliance we pride ourselves on the security of our systems and the protocols we use to protect our client’s data and secure access to our systems. We utilize multiple layers of security to ensure data integrity and do encourage our clients to change their passwords with some regularity and of course advise us when users change and new access credentials need to be created.  However, it is good to know that we can potentially create easier to remember personal passwords that are more secure than originally thought.  Password security, it would seem, does not always go hand in hand with complexity and inconvenience.

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded innorthern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 14 years.

Understanding Your Debt and Managing Personal Finances

Receiving a letter or phone call from a collection agency can be both a scary and embarrassing moment.  It is not uncommon for people to ignore collection letters and phone calls simply because they are uncomfortable with the situation. The truth is no one wants to feel embarrassed; it is no fun at all. (How’s that for some good insight)?Receiving a letter or phone call from a collection agency can be both a scary and embarrassing moment.  It is not uncommon for people to ignore collection letters and phone calls simply because they are uncomfortable with the situation. The truth is no one wants to feel embarrassed; it is no fun at all. (How’s that for some good insight)?

Contrary to common beliefs, there is no “typical” debtor. People from all walks of life and socio-economic classes are susceptible to falling behind on their bills. The inability to pay debts can stem from a variety of causes; job loss, prolonged illness, and unforeseen injuries are three common reasons people cite as the cause of their past-due bills.

Another group of people fall behind simply because they have done a poor job budgeting, or have never been taught the importance of money management.

Regardless of the reason, you’ve fallen behind on your bills and have been contacted by a collection agency, now what?

The first thing you should do: Stay calm.

Remember, you are not alone.  Falling behind on your financial obligations is not uncommon in the United States.   Chances are a neighbor, friend, or family member has also been sent to collections at some point in time.

A reputable collection agency will work with you, not against you.  It is important to acknowledge the collection agency and contact them regarding the debt in question.  As a consumer, you have 30 days to dispute certain facts, so it is important to figure out if this debt is yours ASAP.

Once you have established that the debt in question is, in fact, yours do your best to make a payment in a timely manner.  Not all debts are the same; one bill may be for $60 and another $6,000.  If the balance is low, try to take care of it with one payment.  Paying off an old bill feels good, and it’s one less thing to worry about.

Now for that dreaded debt you simply cannot afford to pay all at once.  For some people this amount may be $600,  for others $6,000.  Whatever the number may be for you, it is important to make an effort to pay down your balance.  Contacting the collection agency and setting up a payment plan can stop the phone calls and letters and potentially prevent your credit rating from being harmed.

A recent poll conducted by Harris Interactive found that 57% of U.S. households lived without creating a budget for themselves.

There are some great budgeting resources available online.  I suggest finding one of these sites (I like Nerdwallet. Here is a great post of theirs called Budgeting 101) and planning out your monthly budget.  You may be surprised to find out how you are spending your money.

If you find yourself behind on your bills or cannot afford to pay them, it is important to be proactive. Rather than sticking your head in the sand, utilize all the resources out there, and work with the agency trying to collect the debt. You may be surprised by how helpful a reputable collection agency can be for you. For more information about paying off your debt check out this great resource: Ask Doctor Debt!

Good luck, and remember… it is never too late to improve your credit rating or personal finances.

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 14 years