Reality Check: Half Of Households Have No Credit Card Debt

In reality, half of American households have no credit card debt at all and nearly a quarter more have less than $2,200 in credit card debt. In reality, half of American households have no credit card debt and thought that you were ok with your balance, think again. If you???ve ever heard that the average household carries $9,000 of credit card debt and thought that you were ok with your balance, think again.

For many, credit cards are an extension of income and that is when things can go very wrong. But at no time should the place to carry that debt be a credit card. There are both times to have and places to carry debt, even large amounts of it.

There was an article published recently at CreditCards.com with the results of a study fielded by GfK Roper Public Affairs and Media and sponsored by CreditCards.com that was touted as a ???benchmark report [that] delves into every aspect of credit cards??? role in people???s lives: how Americans use, manage, understand, select, and feel about credit cards.???

One paragraph in Taking Charge: America???s Relationship with Credit Cards reads: ???By some estimates, the average American household has over $9,300 in credit card debt. Yet, despite Americans??? concern about their spending habits, few people are willing to own up to their balances: over 90 percent of survey respondents believe they had the same amount ??? or less ??? debt as the average American.???

The report wanted us to believe that everyone either lies about their credit card debt or that they are in denial about it. The response however matches the numbers from the Federal Reserve Board???s Survey of Consumer Finances. More than 90 percent of American households do have less than $9,300 in credit card debt. The respondents weren???t lying or in denial. The question that was asked implied that the average American has more than four times the amount of debt they actually have, so they all said, ???No, I have less.???

When you take all the credit card debt there is and divide it by the number of people who have that debt, you would end up with a figure of around $9,000, giving you, yes, the average credit card debt. But what the average number doesn???t tell you is that if my brother and I are eating a Dilly Bar at Dairy Queen with Warren Buffet and Bill Gates, the average net worth between the four of us is $22.5 billion. In reality, my brother and I have nothing and Warren and Bill have it all. You see the problem with average.

For an update on the numbers, the Federal Reserve Board should conclude this month with their 2007 Survey of Consumer Finances. This survey dates back to 1962, but has been conducted triennially since 1983 to provide a representative picture of what Americans own???from houses and cars to stocks and bonds. It also gives an updated view of how and how much consumers borrow and how they bank. Naturally, the numbers go up, about the same, every year. From 1990 to 2000 debt doubled.

???The results of the survey will fill a gap in our knowledge about the financial circumstances of different types of households," Ben S. Bernanke, Chairman of the Board of Governors of the Federal Reserve System, said in a letter to prospective survey participants. Past study results have been important in policy discussions regarding pension and social security reform, tax policy, deposit insurance reform, consumer debt and a broad range of other issues.

Summary results for the 2007 study will be published in early 2009 after all data from the survey have been assessed and analyzed. Until then, we now have the finalized data from the 2004 survey.

According to the 2004 Survey of Consumer Finance, more than half of all households, 53.8 percent have no credit card debt. About half that number, a quarter of all households, report having no credit card whatsoever. The other chunk, nearly 29 percent of all households, pay off their balances every month.

Of the 46 or so percent of households that carry some amount of credit card debt, the median balance, or the number in the middle, is $2,200. That means that half of the roughly 46 percent of American households that carry credit card debt have less than $2,200 in credit card debt; the other half owes more.

If you have it, you have a problem that needs to be fixed. In other words: it is not normal to have high amounts of credit card debt. About 8.3 percent of them carry $9,000 or more. In other words: it is not normal to have high amounts of credit card debt.

About 8.3 percent of them carry $9,000 or more. If all the numbers from the 2004 Survey of Consumer Finances are understood and interpreted correctly, that would indicate only 23 percent of households have more than $2,200 in credit card debt.

Help is out there. If you have credit card debt admitting there is a problem is the first step, then getting help. Carrying a long-time balance is incredibly costly, and not just in monetary terms.

Everyone must know that their balances should be paid off every month. There are many ways people acquire credit card debt: medical emergency, car breakdown, tuition and books, and impulse buys.

Trading Problems - Maintaining Focus

get rid of the thought and think something else.? I once heard a statement by Rebecca Fine of www.scienceofgettingrich.net that says something along the lines of ?If what you?re thinking about isn?t something that you want to have happen in the next three minutes?

While that?s a great way to live your whole life, and I certainly try to do so, it equally applies to the process of trading, specifically ensuring that we maintain focus during the conduct of our analysis.

Maintaining focus can be difficult. Not only will you face distractions from external sources, such as the phone ringing right during a prime setup, or your partner asking for a lightbulb to be changed, or your children asking for help with their homework, but you also face internal distractions from your negative fear-based trading mindset. These internal distractions may be less obvious to the novice trader, but the results can be devastating for your profitability.

If you have not yet mastered your negative fear-based trading psychology, then you are going to face never ending distractions that divert your focus from the job at hand ? consistent implementation of your trading plan.

Regardless of how these fears manifest within your trading ? complacency, boredom, doubt, procrastination, denial ? they will lead only to inconsistent and unprofessional application of your trading plan. And that cannot lead to long term consistent profits.

How do we deal with this negative fear-based trading psychology? Well, that subject cannot be addressed in one article. I?m currently working on a complete home-study program on the mastery of trading psychology, which will provide you with the tools, strategies and techniques for overcoming these issues.

However in the meantime this statement from Ms Fine provides you with a really simple tool to add to your trading toolkit, to ensure you maintain focus during your analysis despite any internal or external distractions.

The process is similar for both long term traders and short term traders. But let?s talk short term first, because that?s primarily what I do.

As a day trader, your success comes from consistent application of your trading plan. Success comes from conducting analysis on a regular basis throughout the trading session, either on the close of each candle or on a price-alert as price reaches a certain preset level, and then acting appropriately to enter, manage or exit your trades.

What do you need to do to ensure that your focus remains on the process of trading?

Here?s what I do:

1.???Document the analysis and decision making process. Have clearly defined actionable steps that you need to carry out every candle to reach your decision to hold, enter, exit, or adjust your stop loss or profit targets.

2.???Set an alarm to go off prior to every candle. If I trade off 5 minute charts, I have an alarm go off 30 seconds before the close of each candle to allow me to pause and check my thoughts. If my thoughts are not related to the objective analysis of the market and the correct implementation of my plan, then they?re discarded. My focus is then returned to the documented trading process.

This works regardless of timeframe. If I was trading off one hour charts, I?d set an alarm to activate just prior to the close of each one hour candle. If I was trading off one minute charts, I?d still set an alarm to go off just before the close of each one minute candle. If I was just waiting for a price setup at a particular price level, and had no intentions of trading until price hit that level, then I?d just set an alarm for price hitting that target.

Setting an alarm for timeframes of 15 minutes upwards is certainly a great idea, as you won?t necessarily be sitting watching the screen the whole time in-between candles. However, you might ask whether it?s really necessary for very short timeframes, such as one minute charts. The fact is though, that it is necessary, and it does work. It is amazing how often I find my mind wandering elsewhere. More often than not, it?s thinking about something unrelated to my trading plan. The alarm interrupts this thought pattern, and allows a return of thought and focus to what?s important.

Try it, and if you find yourself suddenly wondering what the MACD shows, and it?s not part of your plan, discard that thought ? it?s irrelevant to this trade. If you find yourself suddenly thinking that you need to win this next trade to get back to breakeven, discard that thought ? it?s irrelevant to this trade. If you find yourself wondering where you should go next holidays, discard the thought. Once again, it?s irrelevant. Interrupt any unwanted thoughts, and think something else that will help you trade your plan in a consistent manner.

Oh, and so that you don?t burn out through having an alarm go off every minute for an eight hour trading session, let?s add a step 3:

3.???If you are trading a very short timeframe, program breaks into your session, to get away from the markets. Relax, recharge and refresh yourself, so that you can keep up this pace.

For longer term traders, let?s say someone trading off daily charts, the problems are the same. In your case, you have a process that needs to be followed to come up with your decisions to enter a trade, exit a trade, or modify target or stop levels.

In this case, you still need to implement step one, documented actionable steps that allow for consistent application of your plan. Consider something like a checklist, or flowchart.

You can probably dispense with the alarms, as you only need to complete the process once. However for longer term traders, I?d recommend including statements within your documented process to remind you to check your thoughts, and return them to the process of trading.

Perhaps prefix every step with a documented reminder such as, ?I am a professional trader, and a professional trader trades their plan in a consistent manner?. Then, the act of commencing each step of your nightly analysis, will serve as a regular interrupt to unwanted thoughts, and a return of your focus to the job at hand.

This way, there?s no need to be going and checking other indicators for further confirmation, when it?s not part of your plan. There?s no need to be checking other news sources for further justification of your decisions, when it?s not part of your plan. There?s no need to be emailing or phoning your friends to seek their thoughts on a particular stock or chart, when it?s not part of your documented process. These are actions of people who have lost focus, and whose trading destiny is being led by their fear and greed.

As a professional trader, you simply follow your steps. And use your alarms, or documented checklist steps, to interrupt any unwanted thoughts, and return your focus to the business of trading.

So, if you don?t already have a checklist or flowchart set up for all actions that must be carried out during your analysis, then create one. And place in it reminders to monitor your thoughts, and reject anything that is unrelated to the current task at hand.

And if you day trade, set up an alarm, either price based if you simply wait for price to hit certain levels before making trading decisions, or a countdown timer if your decisions are time-based. Then reject any thoughts that are unrelated to the process of trading. And follow your plan with consistency.

Wishing you happy, and focused, trading,

Lance Beggs.
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