Your Financial News Roundup
August 23, 2023
1. Economy: Hardline and centrist Republicans clash over spending cuts; while the average wage Americans are willing to leave their job for nears $80K.
2. Tech: Gaming company Roblox is sued for enabling child gambling; meanwhile streamers are making money by broadcasting their sleep.
3. World: The BRICS meet to set up their own global trading bloc; and Trump and his 18 associates report to Georgia on racketeering charges.
Personal Finance Concept [Part 4/10]: Debt Detox — Payday Loans
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Reset Required: Hardline House Republicans are clashing with their centrist counterparts over how much to cut the federal budget. If they can’t reach an agreement, a government shutdown on Oct. 1 could become a bargaining chip. The hardliners want to cut spending to $1.47T, which is less than the amount pledged in the debt ceiling compromise. Their entrenched stance has angered the centrists who represent swing districts that voted for Biden in 2020. (Reuters)
Our Take: Speaker McCarthy has a slim majority in the House. He will have to balance negotiating with Democrats and the competing energies within his party.
🪜 A Higher Ladder: The infamously tight American labor market still has staying power as the minimum salary job switchers will accept nears $80K, according to the Fed. This new “reservation wage” is the highest on record, reflecting inflation in the labor market and an 8% increase from last year. Overall, the average salary for job offers rose 14% from last year to $69.5K and workers felt better about their compensations and upward mobility across the board. The number of job openings has declined slightly and so has the likelihood of switching jobs, though ~9.5M jobs remain open. (CNBC)
Our Take: Recent labor protests and rising living costs have made workers more open to digging in their heels for higher wages. Time will tell if rising wages can be divorced from inflation, a net good for the country!
🎮 Roblox Gets Sued: 2 Northern Californian mothers filed a class-action lawsuit against gaming company Roblox and third-party sites for enabling child gambling. Roblox does not allow gambling, but the lawsuit claims third-party sites (RBXFlip, Bloxflip, RBLXWild) invited users to play slots, roulette, and gamble with Robux (the Roblox game currency). Both parents argue their kids have lost thousands of dollars to these sites. They believe Roblox has knowingly profited off this illegal activity (by taking a 30% fee on transactions) and could have blocked the gambling sites at any time. Roblox also allows users to buy loot-crates, where a user spends real money to acquire a set of random items. (TechCrunch)
Our Take: The modern gaming space is full of controversial, addictive practices that exploit users for extra revenue. As a result, the E.U. has banned some of these practices, like loot crates.
🛌 Banking In Your Sleep: Platforms like YouTube and Twitch are buzzing with “sleep streamers” who broadcast their sleep for money. Top earner Kai Cenat made a significant sum in a month-long stream, while Amouranth can earn up to $15,000 per stream. This offshoot trend involves viewers paying to disturb the streamer with noises or shocks. However, some, like StanleyMov, have paused due to mental health concerns. Sleep expert Dr. Lindsay Browning equates it to occasional partying – not ideal but manageable. (BBC News)
Our Take: The digital era brings novel ways to monetize everyday activities. Sleep streaming is entertaining but raises concerns about streamers’ well-being and the motivations behind such voyeuristic content.
🧱 The Power Of BRICS: This week, leaders from Brazil, Russia, India, China, and South Africa will meet to create their own economic and trade systems. Due to the USD’s high value against their own currencies, they want to “de-dollarize” by relying on the U.S. dollar less in foreign trade. BRICS wants to launch its own development bank and currency while weakening the U.S.’s economic power. The bloc will be joined by 60+ countries seeking better economic benefits in an alternate system. (CBSNews)
Our Take: The worst case scenario (for the U.S.) is a more multi-polar world, where the U.S. dollar makes up a significant but not dominant piece of the global currency basket — like the British pound and Euro. Overall, the BRICS want a system more favorable to developing countries, though tensions between its diverse members (e.g. India and China) may affect their goal.
🚨The Drama Continues: The first of Trump’s 18 accomplices arrived in Georgia this Tuesday to turn themselves in for racketeering charges related to interfering in the state’s 2020 electoral process. The infamous John Eastman helped Trump attempt to overturn electoral results and supposedly get Georgia’s state senators to appoint fake electors for Trump, making him a central figure. Eastman decried the case, arguing the 2020 election was stolen. Trump announced he would turn himself in on Thursday.
(BBC) Our Take: Trump’s allegations of a rigged election have raised his poll numbers, but looks poised to bring his associates down, if not himself. Facing 78+ charges across 4 separate cases, Trump’s fate is uncertain. But he has transformed into a controversial yet embattled and sympathetic icon to his base of followers.
Finance Concept of the Week
Debt Detox [Part 4/10]: Payday Loans
Common types of debt and how to best tackle them
If you ever need money immediately, a last-resort option to consider is taking out a payday loan. Also known as a cash advance loan or check advance loan, payday loans are meant to cover your expenses until your next payday.
The exact terms and conditions for payday loans vary across state lines. But, they are typically short-term, small loans you must repay when you receive your next paycheck. Most payday loans have a $500 limit and charge high-interest rates in exchange for immediate credit.
How Payday Loans Work
You can take out a payday loan at an in-person location or online. Most payday loan lenders do not require credit checks, making it a viable option for people who have poor or no credit and need money fast. You’ll receive the money either by cash, check, electronically, or through a prepaid debit card.
When you apply for a payday loan, you will need to write a postdated check for the loan amount, including the principal, fees, and interest, guaranteeing the lender will get repaid when your next payday comes around. Alternatively, they may allow you to pay online or via direct debit from your bank account. In other words, you have between 14 and 31 days to pay off your loan from the date you borrowed the funds.
If you don’t have enough money to pay off the loan by the due date, some lenders may allow you to renew or rollover you plan, but this will cost extra. Note that lenders expect you to pay off the loan in one lump-sum payment rather than through installment payments.
Most states set a maximum amount payday lenders can charge you for the loan. This can range from $10 to $30 for every $100 borrowed. If you take out a 2-week payday loan with a $20 per $100 fee, that’s equivalent to an annual percentage rate (APR) of 400%+! In comparison, credit cards typically have an APR of 12 to 30%.
Common Types of Payday Loans
Pros of Payday Loans
- No Credit Checks: Because most payday loan lenders do not check your credit, your credit score will not get impacted by applying for a payday loan. Typically, for credit cards, personal loans, and other forms of loans, lenders pull a hard inquiry on your credit reports to check your creditworthiness, dinging your credit by up to 5 points.
- Access to Immediate Cash: If you are in dire need of funds, a payday loan can act as a temporary lifeline. You’ll get access to funds on the same day or within a short timeframe, which can be beneficial during emergencies.
- Minimum Requirements: Payday lenders typically have lax eligibility criteria compared to traditional banks and lenders. If you don’t qualify for other forms of loans, you may have better luck applying to a payday loan.
Cons of Payday Loans
- Predatory in Nature: Payday loans prey on those who are the most vulnerable. Borrowers who resort to taking out a payday loan typically don’t qualify for other forms of loans from banks, credit unions, and online lenders. They may also come with additional fees, such as origination fees or late payment fees.
- Not Available in All States: Certain states have outlawed payday loans of any kind, including Arizona, Arkansas, Colorado, Georgia, Massachusetts, New Jersey, New York, and more. You’ll need to check your state laws to confirm if they allow payday loans and the regulations for them.
- Short Repayment: Because the repayment period for payday loans is so short, it’s easy to fall behind on your payments and end up having to pay extra charges.
- High-Interest Rates: While most states regulate payday loans, interest rates can run at an average of 400%, though some may even charge as much as 780%. These rates are much higher than those of credit cards and personal loans, making payday loans extremely costly.
How to Manage Auto Loans
- Payday loans may cause more harm than good. Before taking out a payday loan, consider alternatives like personal loans, credit cards, or even borrowing from family and friends.
- If you decide to take out a payday loan, prioritize repayment. Since interest rates are so high, the longer you take to repay, the more you’ll end up paying in interest. Avoid rollovers if possible, as that will extend the loan term and the interest you owe.
- You may need to temporarily cut non-essential expenses to free up more space for loan repayment. This may include reducing discretionary spending on entertainment, subscriptions, dining out, etc.
- If you think you will have trouble paying off the loan, consider looking for ways to earn extra income, such as taking on a part-time job, freelancing, or selling items you no longer need.
What Else Is New?
- If you don’t have plans yet for this Sunday, consider heading to your nearest theater. Movie tickets will be $4 at over 3K locations in celebration for National Cinema Day.
- Gen Z is racking up the most credit card debt, but Gen X has the most overall debt.
- An overwhelming majority of UPS workers ratify a new five-year contract agreement, which includes higher wages and better benefits.
- Following a series of incidents involving Cruise’s robotaxis in San Francisco, California authorities have asked GM to take some of them off the road.
Personal Finance Resources
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