5 Reasons Why You Should Care About Debt Ceiling Deal

The debt deal brokered over the weekend in last-minute negotiations between the White House and congressional leaders came to fruition on Capitol Hill just in time for Tuesday's deadline.

Bloomfield Patch spoke with local financial expert Kevin VanDyke, president and founder of Bloomfield Hills Financial, about the practical applications of what's happening in Washington, DC.

Here are five things that should resonate with every taxpayer, according to VanDyke:

1. Maintaining interest rates

An expanded debt ceiling will keep interest rates lower. Without a deal, big ticket items for which Americans typically rely on long-term financing, such as cars, homes and appliances, would certainly start to cost more. And quickly. An expanded debt ceiling keeps more money in consumer's hands for all the items mentioned.

2. Hurting house hunters, sellers

The housing market, already soft in Metro Detroit, could have been the biggest loser in this debt debate. Even an increase of 1 percent in the interest rate for mortgages would seriously hamper any recovery in this sluggish and very important sector of the economy.

3. Proposed cuts are key, but not the cure

The cuts discussed in the reported deal reached by congressional leaders are a step in the right direction, but only call for trimming the national debt by $1 trillion over a 10-year period. That's not close to fixing the problem for a nation that spends about $3.7 trillion currently.

4. The China factor

If allowed to continue, the debt crisis would weaken the value of the U.S. dollar, which means products imported from abroad, mainly China, would begin to cost more and negatively influence the purchasing power of every household. China, among the chief owners of American debt globally, could also have begun moving away from backing American securities.

5. Stock market volatility

The impact of missing the deadline on the stock market would be bad, but is not as ominous as recent Gross Domestic Product figures show. The GDP, which measures market value of all final goods and services produced within a country for a certain time period, was recently disclosed as 1.5 percent. Chief economists prefer it closer to 3 percent, and we're already experiencing a negative impact on the U.S. stock market as a result.

Kevin VanDyke was named one of the top three independent financial advisors in Michigan and among the top 1,000 financial advisors for 2011 in the country, according to Barron's. He serves more than 1,000 families and has more than $450 million in assets under management. On Sunday, he was featured on Channel 7 WXYZ and can be contacted via the Bloomfield Hills Financial website.