Friday, March 15, 2013

Cliff Walking and Mountain Moving — Beating National and Personal Debt



When in debt, the natural thing to do is to reduce your expenditure. This not only applies to personal finance, but also, sometimes, to national economies. This is certainly the case of both the US and Egypt, who are both taking measures to reduce national debt. The problem is it affects consumers too.

How bad is each nation’s debt?

The US economy is up against 16.6 trillion dollars of national debt, and the US Government’s planning to tackle it with the long-dreaded sequestration, a combination of income tax increases and government spending cuts. Earlier in the year, the US Government received approval from the Senate on a borrowing extension to pay off interest on debt, meet Social Security obligations and cover government salaries. This had been to stave off the fiscal cliff that loomed before the nation.

Meanwhile, the Egyptian economy’s hopes rest on a 4.8 billion dollar loan from the IMF. The trouble for citizens is this will incur increases in income tax and general sales taxes. Downgraded credit ratings by S&P and Moody’s haven’t helped. Not only that, the Egyptian Government is aiming to cut energy subsidies for industrial and domestic consumers, which could see costs rise.

At the same time, however, the Egyptian Government is contemplating issuing Islamic bonds. Between a low global-interest rate and interest among rich Gulf funds, Egypt could raise between 1 and 10 billion dollars for Egypt by issuing these bonds.

How can US and Egyptian citizens cope with the effects?

Although the Fed has recently painted a promising picture of the US economy, the nation still has large debts to pay, which will affect consumers. Tax increases will put people more out of pocket than before, as will higher energy prices, and generally make money management harder.

One way the people may wish to tackle their debts is with by consolidating them with a personal loan. Credit card usage is becoming more popular now in Egypt, while in the US it’s common to own more than one credit card. Make a successful application for a personal loan and you can pay off several debts at once, like credit card invoices, and only have to make one regular payment per month.

If you find yourself in this position, before taking out a personal loan record all of your expenses. You’ll be surprised at the number of unnecessary purchases you make. With the help of a budget planner, you can calculate how much you can spend each month, and whether you’d be able to make the repayments.

Money saving tips for families

If you do the family shopping, make the most of opportunities to buy in bulk. This is cheaper than buying items separately. And when it comes to clothing your children, if you can hand clothes down to a child’s sibling, you won’t have to buy as many clothes for them.

Meanwhile, if you’re the family bread earner, think about how you travel to work. Maybe it’s cheaper to travel on the bus than by car. If your workplace is within walking distance, why not leave the car at home? If it’s not within walking distance, you could cycle to work instead.

As the US and Egyptians governments seek to reduce national debt, unfortunately, citizens must shoulder some of this burden by paying higher taxes, seeing certain subsidies cut, and cope with a higher cost of living. However, if they hire a personal loan to help manage their debts and money easier, and spend smartly, they can make still enjoy financial good health while their country’s economy returns to fighting fitness.

This post is brought to you by Stewart Donaldson who writes about finance and the UAE.

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