The Debt Disease – A Financial Infestation

America has a debt problem and we all get the blame. Credit firms throw cheap and easy money at people the moment they are old enough to legally sign their names and the show continues for several years till it becomes a heavy burden. Corporate greed, as indicated by complicated interest rate calculations and misleading marketing all come together to fool consumers into thinking they are getting a decent deal.

For those who are lucky, the treatment will merely be a painful realization of their carefree lifestyle as they reel in their spending habits. For those not so lucky, the years ahead will be full of struggle, anguish and regret as they see their homes, cars and other assets snatched away along with dreams of a financially secure life.

It’s easy to blame to government for doing a bad job of regulating the financial sector; for letting banks play around with our mortgages, for letting credit firms charge unfair interest rates; for letting these lenders penalize us when we openly struggle to keep our installments on track.

There is no compassion on Wall Street and that’s not going to change anytime soon.

The virus will keep looking for susceptible victims and the easiest way to protect yourself is to “Say NO to Debt.”

If you have your doubts about debt being a curse, maybe the following shocking figures from GoBankingRates will change your mind:

  • The average American is in more than $225,000 of debt (this figure includes credit card debt, auto loans and student debt, among others)
  • The average auto loan or car loan debt is around $31,000
  • Around 40% of Americans have less than $500 in their savings account.

The report was released in 2013, and in the same year, Credit Card Debt: Younger People Borrow More Heavily and Repay More Slowly, Study Findsco-authored by an Ohio State University economics professor (Lucia Dunn) finds that many young Americans will die in debt if they fail to change their current debt-supported lifestyles. That shocking discovery was apparently not enough to change the spending behavior of consumers because in 2014, consumer debt figures reached an all-time high, as per data released by the Federal Reserve.

Consumer Debt Statistics 1

Consumer Debt Statistics 2

The two graphs show that consumer debt has steadily risen since the 1980s, and that the credit crunch created by the sub-prime mortgage crisis in 2008 only reduced credit card spending momentarily. Come 2009 and credit cards started doing great business again!

 The Student Loans Infestation

Given without any risk assessment based on previous financial records or repayment capacity, student loans keep getting bigger and more difficult to repay, thanks to the current state of the economy. Last year, outstanding student loans amounted to a whopping $1.2 trillion, owed by around 40 million Americans. A simple calculation shows that the average size of one person’s student debt is around $30,000, which is no small amount. If these students fail to get a good job as soon as they graduate, they will struggle to make their payments, which will tarnish their credit scores. (Figures from Experian and Edvisors)

There are plenty of ways students can go through higher education without borrowing a cent, which require lots of resolve and commitment.

The Home Loan Infestation

Many financial advisers believe that mortgages and home loans are good debt because they help acquire assets for a secure future, and so it’s no wonder that mortgages are a common household debt these days. The average mortgage debt is a huge $147,000 (figures from GoBankingRates) and people generally delay paying off their home loans in favor of consumer loans, which carry higher interest rates. Some economists even use the growing mortgage and housing loans figure as a signal of economic growth – meaning, ‘more is good’.

Dear Consumers! There is no such thing as a good debt. Even though you are using that money to put a permanent roof over your head, that house is not yours till you have paid off every cent of your loan. Banks have the right to foreclose your home if you fail to pay up and the roof you thought would keep you safe will suddenly be gone.

Credit Card Debt Virus

The situation is pretty dire in this area. Total credit card debt was around $50 billion (see second graph above) in 2014, which is the highest amount of credit card debt America has ever seen. The economy and its people are heavily dependent on credit cards, and the financial crisis in 2008 hasn’t changed that. Statistics compiled by CreditCards.com (no affiliate link to declare here) shows that on average, every adult that owns a credit card carries a debt on it of around $5,600.

Who gets the blame for this dirty mess, you ask.

Of course, the financial sector and the government not doing enough to protect consumers. But, the responsibility for this also falls on the shoulders of the ignorant consumer. And that ignorance is what this blog will try to alleviate.

Fun Finance Photos

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There’s a funny side to almost everything.

Credit: loansharkfunding.net
Credit: loansharkfunding.net
Credit: grinningplanet.com
Credit: grinningplanet.com
Credit: Myredzebra.com
Credit: Myredzebra.com
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Credit:
credit: picsphotos.net
credit: picsphotos.net
Credit: Marriedtothesea.com
Credit: Marriedtothesea.com
Credit: FunnyTimes.com
Credit: FunnyTimes.com
The risk of making a wrong decision.
The risk of making a wrong decision.
Credit: Glasbergen.com
Credit: Glasbergen.com
All the cool kids are doing it. Credit: Zazzle.com
All the cool kids are doing it. Credit: Zazzle.com
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Why a 401(k) is a better alternative. Credit:
Credit: Strike Debt
Credit: Strike Debt
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It’s tought But not impossible. Credit
credit score history funny comic
The easy way to do it. Credit: Weheartit.com
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Why it’s so easy to get a loan. Credit: Barbara Kiviat
financial literacy education funny image
Everyone needs customized training. Credit: Kulfoto
stock market funny humor donald trump
Credit: Cheezburger.com
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How investors control the world. Credit: Themetapicture
car insurance premium funny photo
And THAT’S what I was talking about. Credit: FunForFuns.com
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The subtle truth. Credit: Bullionisbeautiful.com
Rich money giving charity
Now who’s the liar? Credit: 2damnfunny.com
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Why it’s better to have Plan B worked out in advance. Credit: King St. Cat Hospital
funny toothbrush toilet paper bad job
Why you shouldn’t hate your job. Credit: Yogizone
Baby management and boss funny photo
Full of ‘love’, of course! Credit: Megaleecher.net
dog and cat management
And some bosses never bother to clarify this… Credit: SurferSam.com
funny cartoon government workers
Why the public sector rocks! Credit: Arizona Tea Party
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Insurance is Fun. Credit: Xerxy.com
Cats looking for money in couch, lol cats
EcoCatLady.com
Sales Sign, Funny Business Jokes
Make the offer as enticing as this!
Photo Credit: TheDawgPound.com

Thanksgiving Dinner – Budget DIY

Pumpkin-With-Flower-for-Thanksgiving-Table-Centerpiece-Decorating-Ideas_2

If someone asked me about my favorite holiday, I’d probably go with Thanksgiving, thanks to all the universal nature of the occasion. And since this special day is fast approaching, why not write a blog post about it to share with you all? 

The origin of this holiday goes back to the seventieth century when the first-ever Thanksgiving Day was observed in the year 1621. This event is attributed to a lady named Sarah Josepha Hale who campaigned to have the event recognized as a national day, which is aimed to celebrate domestic tranquility, encourage gatherings for the family and other near and dear ones, and be grateful for all that we have.

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Credit: decorationideas.org

Colors and Textures for Thanksgiving Interior Design Accessories

The most popular dishes on the menu for Thanksgiving dinner are turkey, corn, pumpkin, pies, cranberries, etc., along with chocolate & wine. A must for dinner table is harvest colored scheme of warm yellows, gold, burned reds, browns, oranges, and greens. With a little extra imagination you can create pretty table setting ideas.

Just get some gold glitter glue markers, harvest decorations, gift papers, assorted shape and size beakers or glassware, some fresh or dry flowers, candles and create your own personal and special Thanksgiving décor.

Credit: hometrenddesign.com

Use a collage of colors with fruits, flowers, candles, golden sprayed pine cones and dried corns for a colorful center piece. You can also use autumn flowers such as pink amaranthus, vibrant coral chrysanthemums, white aster and bright color roses for flower arrangement.

Napkin holders can be made using colorful ribbons, tied bunch of fresh or dried herbs, flowers or berries. You may use yellow- orange autumn leaves glued on top of the napkin holders.

For a candle stand you may take a small sized pumpkin, make a hole in the center and insert a colored candle or you may use different sizes of clear glass containers and fill them up with colored grains, lintels, or beans and insert candles.

Tips for Setting a Formal Thanksgiving Dinner

Credit: wellappointedhouse.com
Credit: wellappointedhouse.com

It would be great if you use pumpkin gold, burgundy or any other harvest color tablecloth, which is at least six inches bigger to allow side drops. But then again, if you own a wooden dining table, you need not decorate it further with fabric. Then comes the placement of mats, crockery, cutlery, etc. You may place soup bowls on top of service plates, dinner knife and spoons on the right side of the plate, whereas salad and dinner fork will go to the left.

You may place glasses and goblets on the top right corner of your plates and place welcome cards either on the side or top of them. You can also create your own place card as simple as guest’s name pinned on a small fresh or dried pumpkin or use gold glitter glue to write on an artificial autumn leaf.

Use the above decorations and accessories to pamper your dear ones with a sumptuous Thanksgiving treat.

8 Benefits of a Debt Free Life

Credit: pixabay.com

Who, in this day and age, can honestly say they have lived without borrowing a single cent/penny from a financial institution? Sure, we all borrow money at one point or the other from friends and family, but I’m talking about personal financial debt that we accrue in the form of:

Credit: pixabay.com
Credit: pixabay.com

Are Loans a Luxury?

I’m sure I’m missing a few other types of loans that we come across in everyday life, but you get the idea, right? Our lives seem to lack convenience if we choose to avoid these loans for whichever reason, but the fact is, in more cases than not, loans are a luxury that can easily be sidelined if we try a little harder or show a little patience.

Why not buy a house when you’re in your 50s instead of your 30s? Isn’t that what our parents did? Is it really necessary to get that expensive new car on lease when your old one works just fine? Can’t it wait a couple of years till you save a bit to buy it without a leasing agreement? The same goes for other consumer goods and services like televisions, refrigerators, vacations, and so on. By all means, go ahead and use that credit card, but don’t reach for it if you have doubts about paying your monthly bill in full.

Of course, I’m not talking about people who borrow as a result of emergencies or some other compulsion to meet their true needs. And for the record, when it comes to student loans, I’m against the whole higher education system charging students and arm and a leg to get an education – it’s simply unfair to put that kind of burden on students who should clearly be focusing on their studies and building their careers.

If you don’t fall in the above category, thank your stars and read on to see why it serves your best interest to stay debt-free for the rest of your life.

1. Why Pay Interest?! Why?!

Interest charges on debt represent a lender’s greed for profit, in my opinion. They may say it’s a way to discourage late payment, but in reality, there are better, more socially-conscious, yet economically-acceptable ways of protecting a lender’s interests as well as a borrowers. Whether compounding or simple or any other interest rate calculations are used, they all place borrowers deeper in debt. It’s akin to twisting the arm of a person who already faces hardship paying back a loan. In which world is that fair?

Even if borrowers can afford to pay back the interest-plus-principle in all the required installments, do remember that interest charges are just an extra loss of money, especially if compounding interest is used. Why not keep that money safe in your pocket and look for other interest-free loan alternatives?

2. Keep Your Precious Money To Yourself

This point follows the drift of the last point. As if it weren’t enough that interest rate charges corrode your financial assets, loans come with extra fees, sometimes hidden, to get you to spend more and more. Lastly, everything and anything you buy using a lease agreement costs more than the market price. Everything. Whether it’s a mobile phone or a car or a new television. That can be easily avoided if you save up ahead of time and pay money in a lump-sum at the time of purchase. Why should you pay extra if you can get the same thing cheaper by being a bit patient and organized?

3. Shirk The Stress of Being Indebted

It’s no secret that lenders (be they banks or non-banking financial institutions) will only ‘request’ for their money up until a certain point. These request soon turn into demands and threats, despite there being a valid reason for non-repayment at the borrower’s end. Aggressive loan recovery tactics are not legal in some countries, but they are still widespread. Back in 2010, a wave of suicides took place in India as a result of such vile behavior by micro finance institutions. 

And let’s not forget that the way interest rates are calculated your debt just keeps growing and growing over the years if you fail to keep up with the repayment schedule. Sure, in some cases, irresponsible behavior on the part of borrowers is to blame, but sometimes, it’s a matter of luck. Lenders don’t care much for the difference.

4. Keep a Healthy Credit Score

Some of you may rightly point out that it’s important to use some level of debt to maintain a decent credit score – we did an article about that a few months ago. It’s just one of the manipulative quirks of the financial system we live in. save it for things that matter. So in that light, it is wise to go ahead and use that credit card for minor purchases that you could easily pay back by the end of the month. After all, you need to maintain a good credit rating for favorable features on credit and debit cards, or some other loan you may need down the road.

5. It’s not yours till it’s yours

Surprise! Surprise! That car you took out on lease belongs to the dealer till you pay that last installment. An article the NewYork Times reveals that cars leased under sub-prime conditions come with a special gadget in the dashboard that can be used to disable the car’s engine if the installment payment is late, even by a couple of days. Now this could happen early in the morning when you’re off to drop your kids to school, or while you’re on the highway, in the middle of nowhere. The lender retains control of the car and it’s just a really risky deal to get into.

6. Don’t Be An Impulsive Buyer

Easy credit, which comes in many forms, such as credit cards or enticing personal loan schemes, increases your temptation to buy the things impulsively. It could be that fancy trip to Hawaii, or the latest gaming console, that you just heard about and are dying to purchase! Ideally, you should conduct a price comparison or wait for a discount to get the best value for your hard earned money, but the fact is, access to plastic money increases your chances of impulsive purchasing behavior.

Infrequent impulse buying could be totally harmless, but if it’s becoming a trend, you have a problem at your hands for three reasons:

  • One, you risk getting a raw deal on your purchase – a bit of bargain hunting may have found you a better price or feature list,
  • Two, if you fail to put much thought into your purchases you could quickly deplete your savings,
  • Three, consistently caving into your shopping whims may signal a bigger concern, which we explain next.

7. Avoid The Bumpy Road to Happiness

If you’ve ever read a psychology book, you probably know of the term ‘instant or deferred gratification’, which refers to a person’s ability to cave into or resist temptations to enjoy rewards immediately. Now it’s is natural human instinct to seek immediate pleasure, and but the ability to control this ‘drive’ is necessary to teach us virtues like patience and self-control, which are crucial for a healthy approach to life.

The consumerist culture we live in these days (supported by easily-available debt and limitless advertizing) encourages immediate gratification and the build up of physical possessions, to the extent that life has become a rat race – a constant struggle for ‘more’ instead of ‘optimal’.

One must figure out the real treasures in life and enjoy the anticipation of reward as well as the eventual reward that they are blessed with. This may not be directly linked to the acquisition of debt, but I do feel that the financial sector has given impetus to this rat race that engulfs us all.

I’m not saying acquiring a loan immediately puts you in the ‘instant gratification’ group. All I espouse is a bit of critical thinking before your get into debt for a worthy cause.

8. Be A Good Role Model For Your Children

Parents are the primary role models for their children – they will learn elementary financial, social and familial values through their interaction with you, as I explained in an article over at the Frugal Farmer Blog. Making sound financial decisions, that all financial bloggers will tell you includes staying away from debt of all sorts, will show your kids how to be fiscally responsible.

That’s it for now. What do you think about these ideas? Can you think of any other benefit of staying out of debt. There must surely be a million more.

Halloween – Budget DIY Decor

Old Halloween Costumes From Between the 1900's to 1920's (10)

Halloween’s almost round the corner (31st of October) so we thought we would do a small feature on the spookiest occasion of the year. Before we jump into design and decor ideas for celebrating Halloween, let’s go over the history to get a bit of perspective.

The Creepy History of Halloween

Old Halloween Costumes From Between the 1900's to 1920's (10)
Credit: vintag.es

Did you know this Halloween is also known as “All Hallow’s Eve”, which is the night before “All Hallow’s Day”? This name tells us a bit about the origin of the special day, which was started by pagans as a way of honoring the dead.

The night falls on the last day of Autumn, i.e. the beginning of winter, when people started stocktaking to prepare for the cold winter months ahead. They believed this was the time when physical and supernatural worlds were in close proximity, so the boundary between the world of living and dead became blurred. As a result, this could lead to certain magical/evil events taking place, like ghosts of the dead returning to earth.

To ward off these spirits, people built huge bonfires and sacrificed animals to invoke the help of gods against the supernatural. At the same time, people used this as an occasion to honor saints and pray for the recently departed, who had yet to reach heaven. These departed souls were supposedly wandering about this world until Halloween, which would provide them with a last chance for gaining vengeance upon their enemies before moving onto the next world. To avoid being recognized, they would wear masks and costume to disguise themselves.

These days, we have a bit more fun by wearing disguises, carving pumpkin, trick or treating, sharing stories about ghost, witches, watching horror movies, and setting up bonfires. But some people also observe prayer, fasts and attend vigils or church service.

Interior Design and Decor At Halloween

Credit: countryliving.com
Credit: countryliving.com

Back in those days, candles and lanterns were lit to guide people along the path to places of worship, and to this days, candles and lanterns are used to add to the atmosphere. Since pumpkins were in abundance, lanterns could easily be carved out of their soft skin, usually in the shape of eerie looking faces which look particularly grisly at night.  Even if you don’t have candles, which is highly probable in today’s digital age, make sure the room’s lighting is dull to help create a grim ambiance. Why not add some suspenseful music too while you’re at it?

If you’re motivated enough to create the perfect Halloween’s atmosphere, I would personally recommend using elements of the Country Design style, because its earthy feature would fit wonderfully with the Halloween vein.

Accessories for Halloween

Credit: jaddie.com
Credit: jaddie.com

Homes are decorated with different elements of autumn season, such as corn husks, scarecrows and pumpkins. The collage of imagery of the media has created is overall related to the theme of death, evil, and horror, and hence all decorations follow that idea, especially during trick or treating, when children wear scary disguises, carry lanterns and move from house to house, anticipating a bit of candy and a bit of fright.

Hell parties are held at (supposedly) haunted venues, or ghost tours are conducted across town. Homes and party venues are decorated in gory themes that include decorations of fake cobwebs, scary-looking jack-o-lanterns and images of witches, black cats, ghost, bats, spiders, skeletons, wizard, vampires and werewolves.

Colors and Costumes at Halloween Parties

As far as colors go, it is pretty obvious that bright colors will not do. Though traditional holiday colors are black and orange, you still have a full range of grim colors to choose from, such as dark shades of red, brown and green. Halloween costumes reflect supernatural figures such as ghost, skeletons, witches, monsters and devils, so when it comes to deciding the color, anything goes, except perhaps pink or sunshine yellow.

Food at Halloween

Halloween comes during harvest season for apples, therefore candy apples or toffee apples are common treats (simply roll whole apples in sticky sugar syrup). Other popular food items are candy pumpkin and corns, pumpkin pies and pumpkin breads, and of course, plain juicy apples.

Now that your know so much more about this fascinating holiday, go ahead and start planning the perfect celebrations! Boo!

Credit Bureaus – Risk Assessment Features and Pitfalls

...in the absence of decent credit bureaus...Source: ccparkcity.com

We’ve discussed the idea of credit scores before on this blog – innovations in the way credit bureaus work as well as how to improve your credit score without taking out hefty loans, to name a couple of articles that we shared with you. Today we get into the technical side of operational elements involved in running a credit bureau, or credit rating agency, as they are commonly known.

...in the absence of decent credit bureaus...Source: ccparkcity.com
…in the absence of decent credit bureaus…Source: ccparkcity.com

Risk Assessment Features of a Microfinance Credit Bureau

The whole point of setting up a credit rating agency is to manage risk – the risk of lending to different types of clients, that is. Here are some types of risk assessments carried out by credit bureaus:

  • Risk assessment based on the profession of a borrower – A borrower who already has a low-income yet stable job, or runs a business, may be entitled to a larger loan than a client who has no former experience with credit or borrowing money from financial institutions, or running businesses. Each borrower can build his/her credibility over time in order to become eligible for bigger, or flexible loans.
  • Risk assessment based on use of mobile banking records – Payment histories can be created by tapping into the transaction histories of mobile money accounts (Easy Paisa, M-Pesa, MITRA, Wizzit, which are services in Pakistan, Kenya, India and South Africa, respectively) of borrowers.
  • Detailed credit ratings versus blacklist – The credit bureau can either disclose client names, histories, risk and mathematical credit ratings to MFIs (positive credit bureau) or simply provide the names of high-risk clients (negative credit bureau). In Pakistan and other countries that see moderately high growth in the finance sector as well as high poverty rates, a positive credit bureau would be better than a negative one because it allows financial institutions to analyze detailed information about the poor, and design products to suit their particular risk profiles.

Pitfalls to be Prepared For When Setting Up a Credit Information Bureau

Here are some common pitfalls to be prepared for when setting up and running a credit rating agency in the developing world.

  • A dearth of information about borrowers is a major issue for credit bureau, especially those operating in the micro finance sector, because of the nascence of the sector and varied book-keeping styles.
  • Specialized microfinance credit bureaus (limited to certain towns or cities) may capture the nuances of micro segments in the market, but their data can neither be analyzed nor used by a large number of financial institutions.
  • Containing costs will be difficult considering the small number of large accounts that need to be maintained. Grants and subsidies can be offered to cover costs, as in India.

Despite these obstacles, the development of credit bureaus should be one of the top priorities of any policy that aims to promote the growth of the financial sector in developing countries. It is imperative that the issues related to information acquisition be resolved for efficient functioning.

Aggressive Loan Recovery Practices – Who Gets the Blame?

Credit: loansharkfunding.net

Financial institutions are notorious for using extreme loan recovery practices, regardless of whether the borrower is in the position to pay back the loan or not. Thousands of borrowers/debtors get evicted from their homes thanks for poorly managed mortgage schemes, for which both the homeowners and banks are equally at fault. And thousands more get heckled, pressurized and even harassed by lending agencies, even when these borrowers are unable to repay the money.

Credit: loansharkfunding.net
Credit: loansharkfunding.net

This entire issue of aggressive loan recovery practices is linked to the issue of exorbitant interest rates we see on consumer loans, whether they target middle class or lower class individuals, and let’s not forget that repayment options are far less for people belonging to the bottom of the economic pyramid.

Let’s go back a few years to 2010, when a micro finance crisis in India emerged in the wake of a wave of suicides amongst poor clients. Unable to pay back their loans, recovery officers in the state of Andhra Pradesh had been reported to resort to ‘strong arm tactics’ that led to a rise in clients taking their own lives as a last resort. According to a report by Society for Elimination of Rural Poverty, 54 suicides in the Andhra Pradesh province were a result of harassment by loan officers.

A particularly horrifying story was that of a 16-year old daughter of a client named, Venkatalkshmi. She was “harassed and humiliated” and asked to repay the loan by relying on prostitution. She was wrongfully confined in a house, after which she committed suicide.

Some may say the larger responsibility of loan repayment lies on the client, but there are always two sides to each story. While risks such as moral hazard lie in the client’s domain, lending agencies have a bigger responsibility to ensure the loan is only advanced if repayment is considered a given. However, looking for high growth, many lending agencies (especially micro finance institutions) flock to the same area (causing over-supply of lending programs) and give out multiple loans – setting the foundation for a repayment crisis.

In India, it is clear to see that several factors led to the sector’s decay:

This problem falls into the realm of consumer protection, which obviously needs more emphasis than ever before because in developing countries, clients from low and middle income groups often do not have a good enough grasp of financial concepts to make sound decisions that protect their interest.

Unfortunately, this phenomenon isn’t unique to the microfinance sector and it certainly isn’t unique to India.

Credit collection departments in commercial banks often use derogatory means to recover their funds as well, and traditional money lenders are by far, the worse among the lot because they often work outside the realm of the legal system. I’m not saying the borrowers are not at fault – this behavior of aggressive loan recovery is partially driven by the defiant nature of some borrowers who misuse funds, but the financial institution’s credit approval policies should be able to screen them out and make sound lending decisions.

Over Supply Of Credit – Structural Problem In The Base Of The Economy

Credit: cheezburger.com

While everyone emphasizes the importance of outreach in any financial service offered to the poor, they often overlook the negative implications of excess supply of such tools, such as micro credit, also known as micro finance. Economic theory suggests markets work best if demand and supply are matched, and when there is a shortage or excess of either force, sellers may be left with unsold stock, or buyers may be left with unmet demand.

Credit: cheezburger.com
An over-supply of water versus a shortage of artificial drinks. Credit: cheezburger.com

In the perspective of financial firms offering micro finance services to low income groups, an over supply may be created in an attempt to acquire the maximum number of clients, to theoretically yield society-wide economic gain, but in reality, several problems can occur if supply is not matched with demand.

Over-Supply of End Product

Firstly, let’s consider the micro entrepreneur who wants to start or grow his/her fishing business. For this business (micro institution) to grow at a healthy rate, there needs to be excess demand for the product (whether dried, fried or raw fish). One or two fisheries may be sufficient to serve a small community, but easy access to credit may encourage several people to setup fish selling businesses in one area (assume this is a coastal area with plenty of fish in the ocean). Suddenly, there are 5 or 6 shops selling similar things that nobody wants in the quantity that they are being sold – after all, there is only so much fish one can eat.

As a result, market growth may stagnate, micro enterprises may have to diversify their product line, which is not always an easy task because it requires more investment and knowledge gaining. Those business that cannot compete by lowering their prices or diversifying, may even shut down and these business owners, who borrowed money from credit institutions may not be able to pay back their loans.

This complex interaction of macroeconomics forces in the micro sector has been wonderfully explained in a Kiva blogpost about tomato stalls in the town of Abura in Ghana.

Over-Supply of Credit Itself

From the micro finance bank’s point of view, if there is an over supply of loan packages and other credit-based tools, there will obviously be pressure on loan officers to meet selling targets that lead to profit generation of the bank/institution. (There are, of course, non-profit micro institutions, that do not make profit their first motive, but this point concerns those credit agencies that need to show positive differences to their income statement each year).

Unless proper risk management procedures are in place, an over-supply of credit can lead to sub-optimal lending practices, where the borrower’s repayment capacity is not judged properly in an attempt to boost short-term sales figures. In the worst scenario, multiple lending and poor lending decisions can result in aggressive loan recovery tactics that go hand in hand with high default rates. This not only damages the credit institution itself, but reduces the faith clients and donors put in these banks.

The Silver Lining

The positive side to all this is that it teaches micro entrepreneurs to operate and survive and compete in the capitalist economy. Banks will learn to balance client welfare with their own financial interests, by improving internal controls and adopting client-centered policies to ensure all borrowers manage sustainable businesses. Some financial institutions that deal with low income groups go so far as to impart business training to their clients, which is a rather costly route to follow, but pays off in the long run.

Feel free to read more about the complexities of offering financial services to the poor.

Budget Interior Design – Neutral Color Schemes

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This is the eighth part of a post series on color schemes in interior design and décor. Part seven was about triadic color schemes.

Using Neutral Colors in Your Home Design

Neutral colors are sometimes considered ‘no colors’ or ‘clean colors’, or even ‘base colors’ and refer to colors such as black, grey, white and toned down brown and beiges. If you have been following this blog, you would remember reading about the role of neutral colors in all the different color schemes we have discussed – that regardless of the color combination you choose, you must add a neutral color or two to avoid creating an oppressive color scheme.

But did you know that you can create a room decor that is based entirely on neutral colors only? Of course, you did!

If these neutral colors are handled with care and skill, they can produce exciting results with a brush of sophistication, even though the colors appear bland to begin with. You can add variation and create interest in neutral color schemes by using a range of textures for upholstery, curtains, cushions, and other accessories. Apart from textured fabric, you can cover your surfaces with different types of wood, glass, metals, wallpapers, and so on.

Why Do Neutral Colors Blend With All Other Color Schemes?

As mentioned earlier, these neutral colors are compatible with all types of colors schemes in interior design because they are obtained by mixing complimentary colors so they carry a bit of every shade. This may sound a bit odd but go back to your first few art classes, or even your physics class, and try recall lessons about the ‘color white’ or ‘how light is created’. You probably remember your teacher telling you that the color ‘white’ is created by mixing 7 different colors, which are all found in the rainbow, or the light spectrum. For this reason, everything looks great with white, and even black!

Neutrals can be used to separate and harmonize otherwise incompatible colors in a room design and offer relief from strong colors. These colors can also be used as a background in interior design or a scheme in themselves.

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Credit: willetdesign.com

A sophisticated atmosphere has been created in this lounge by using a neutral color scheme. A modern setting using a glass-top metal table and white table lamps has been used in this home decor.

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Credit: cottagehomedecorating.com

Another sophisticated modern bedroom created by using the neutral color, beige. Different textures are used for curtains and bed linen.

This is the last article of the post series on color schemes. Hope you found them informative because we’ll be back with similar post series in this genre!

Budget Interior Design – Triadic Colour Schemes

Credit: homesynchronize.com

This is the seventh part of a post series on color schemes in interior design and décor. Part six was about split complementary color schemes.

As we’ve discussed in earlier posts, different color schemes are based on different combinations of colors in the color wheel. Here’s a summarized image that we have used previous articles to illustrate the variations.

Credit:
Credit: theoldhouse.com

What is a Triadic Colour Scheme in Interior Design and Décor?

Triadic color schemes in are created by using three colors that are equally spaced from each other on the famous color wheel. The idea probably sounds familiar because we have already discussed two triadic color schemes:

  • Primary colors – these are red, yellow and blue, and equidistant from one another on the color wheel,
  • Secondary – these are orange, green and violet, created by combining two primary colors, hence these too, are at equal distances from one another. (Read about primary and secondary colors, and the effect they have on your home’s decor).

To create a harmonious effect in your home’s decor, you should lower the intensity and values of triadic colors to avoid a cluttered look. If you feel it is not possible to reduce the values and intensities of all three colors, then consider doing so for at least one color, to tone down the overall effect.

Apart from the ones mentioned above (as primary and secondary colors) you can form a triadic color scheme based on lots of combinations, such as red-orange, blue-violet and yellow-green.

Creating a Triadic Color Scheme in Your Home’s Interior

Credit: homesynchronize.com
Credit: homesynchronize.com

The triadic color scheme in this picture shows a lively interior that relies on different values and intensities of the primary colors, red, yellow and blue.  The color yellow has been used to its full intensity (a little too full, for my taste, but perhaps not others) in the walls, and a slightly less bold shade has been chosen for the chair upholstery. Notice that the color blue seen in the upholstery and carpet has been toned down to reduce the sharp contrast that would have resulted is the color was used at its full intensity.

Lastly, light traces of the color red are seen as accessories, to add a bit of softness to the overall room’s impression. Overall, the three colors have been blended well to create a cheerful setting.

The next article talks about neutral color schemes in interior decor and design. Browse through more articles on colors in interior design and decor or sift through different articles about interior design.