Financial Times is reporting today that banks are concerned about auto and credit card loans in addition to mortgages. Here’s the story…
Poor quarterly results from banks across the US over the past two weeks suggest credit problems once confined to high-risk mortgage borrowers are spreading across the consumer landscape, posing new risks to the economy and weighing heavily on the markets.
“There has been a fast sea-change in thinking,” said Rick Klingman, interest rate trader at BNP Paribas. “Stocks are showing some real concern about bank earnings and there are worries about credit in general.”
Now is a good time to keep a close eye on your debt if you aren’t already. You’ll be in better shape if you can rapidly pay down any debt outside of any mortgage and auto loan you have. Anything you can do to bring this debt, particularly high interest credit cards, under control will help you tremendously should the credit crunch expand further.
Also start building up a 6 months salary savings buffer. I know, 6 months sounds like a lot. Set this as your ultimate target and set smaller savings goals for each paycheck. This helps make it reachable. Plus, if you get in this habit you’ll have investment money after you more fluid buffer is built.
The reason I suggest having the salary savings buffer is that companies often start rounds of layoffs when they can’t get the credit to expand, particularly in smaller companies. Watch out for this where you work.
What if you’re already in a crisis mode? I’ve been there myself, twice. I’ll have some posts coming up in the next few days on things we did to work our way through it and I hope they’ll help you.
What do you think? Will the credit crisis affect you or pass you by? Leave a comment with your thoughts.