UPDATE: Focus on finance

December 5, 2003

Homeowner costs; soaring debt

 

UPDATE

Focus on Finance

By Yvonne Chilik Wollenburg

Jump to:Choose article section...Where can you afford to live? Most expensive states Least expensive states Watch out for ballooning debt . . . . . . but don't fall for quick fix promises No break in college costs

Where can you afford to live?

Monthly housing costs for homeowners take the biggest chunk out of family income in California and Hawaii, according to the US Census data from 2000, the latest figures available, although some Northeast states had higher dollar amounts. Monthly housing costs were $1,636 in Hawaii and $1,478 in California, compared to a national average of $1,088. That represents 26 percent of household income in Hawaii and 25 percent in California, compared to a national average of 22 percent.

Monthly costs include mortgage payments,real estate taxes, hazard insurance, and utilities.

 


Most expensive states

Monthly homeowner cost
Hawaii$1,636
New Jersey1,560
California1,478
Connecticut1,426
New York1,357
Source: US Census Bureau. Figures are medians. 


Least expensive states

 Monthly homeowner cost
West Virginia$713
Arkansas737
Mississippi752
Oklahoma764
Alabama, Kentucky, and Louisiana816

Watch out for ballooning debt . . .

Average credit card and other unsecured debt rose almost 50 percent among clients of Myvesta, a nonprofit consumer education organization, from $52,210 in 2002 to $77,036 in 2003. The average mortgage debt among these clients increased from $168,129 in 2002 to $207,958 in 2003.

Many families, overwhelmed by high mortgage payments, rely on credit cards to make ends meet, but this can be dangerous, Myvesta warns. Often card companies jack up interest rates if customers are late paying their bills. For example, if you had a $2,500 balance on a typical card with a 14 percent interest rate and made only the 2.5 percent minimum payment, it would take you 16 years, and $1,980 in interest to pay it off. But if you miss a payment and the interest rate shoots up to a 29 percent penalty rate or higher, as is sometimes the case, it would take you 101 years and an extra $30,165 in interest to clear your debt.

. . . but don't fall for quick fix promises

If your bills are out of control, don't dig the hole deeper by picking the wrong credit counseling firm, warns the federal government. Some organizations lure customers by promising a quick and easy way to fix credit problems. What they give instead are high fees, but little education or counseling.

Before signing with a credit counselor, follow these tips from the FTC, the IRS, and state regulators:

• Carefully read the written agreement, and look for a detailed description of the services to be performed, payment terms, estimated time to achieve results, and any guarantees offered.

• Watch out for high fees or required "voluntary contributions" and high monthly service charges.

• Call your creditors to make sure they're willing to work with the counseling firm, and follow up to make sure your debt is being paid off.

• Call your local Better Business Bureau to research the firm's record.

No break in college costs

Tuition and fees at four-year public colleges shot up 15 percent for the 2003-04 school year, bringing the average price tag to $4,694, says the College Board, an association of colleges and universities. At private four-year colleges, tuition and fees increased 6 percent, to $19,710. (The average undergraduate, however, pays a lot less than the published figures, thanks to student aid funding.)

Over the past decade, tuition and fees have increased by nearly 50 percent at public universities, and 42 percent at private colleges.

 

Yvonne Wollenberg. UPDATE: Focus on finance. Medical Economics Dec. 5, 2003;80:10.