Doug Stephens, MBA

Doug Stephens is a Financial Coach in Dallas, Tx. His specialty is helping clients prosper in the current economy. He is often asked, “What is the new normal?”

The phrase new normalis becoming popular with economists and commentators. It is used to describe the economy moving forward from the current banking crisis and recession. Many people hear this term and wonder if it applies to them and their personal finances. The answer is most certainly YES.

OK. So what are the practical implications for most people? The number one change is that credit will be more difficult to obtain and keep. Lenders have tightened lending standards for new credit. In addition, they are reducing credit lines or dramatically raising interest rates on existing credit. The overall effect is to reduce the lender’s risk and raise profits. For individuals it means that credit that has been readily available in the past may disappear with little warning or may be prohibitively expensive,

Lenders are also engaging in what’s known as chasing down credit lines. This is the practice of reducing the customer’s credit limit on an account as the balance is paid down. The lender that does this gets repaid and reduces risk. Unfortunately, your available credit shrinks during an economic downturn. Experts feel that this practice may also lower your FICO score. Nice huh? You do the right thing by paying off your debts and you get penalized.

Tougher lending standards also means that home buyers won’t be able to borrow more than they can repay. Some people will not be able to obtain a mortgage at all. Home owners may find that properties appreciate more slowly even after the current real estate slump ends. Buying a huge house to “get rich” may not be such a good idea any more. Homes will need to be part of a lifestyle choice rather than being considered solely as an investment.

There are many facets to what may become the “new normal”.  One longer term consideration  may be inflation. With massive government deficits and stimulus programs it is likely that we will see the inflation rate jump at some point. This one factor could be a game changer. It impacts your daily budget, borrowing costs, retirement savings and so on….  Unfortunately, the uncertainty involved with this possibility severely complicates long term financial planning. For this one reason alone you should seek the help of an expert in planning your financial future.

Get financial coaching help if you need it. It is a tiny investment that can change your life.

Doug Stephens, MBA, is a  financial coach serving Dallas-Ft. Worth. He has over 30 years experience in personal and small business finance. He develops personal survival and wealth building strategies for his clients. Doug also coaches beginner and intermediate level real estate investors in all aspects of building a successful property portfolio.

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