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Archive for April, 2008

5 Easy Tips To Take Control Of Your Money

Written by Toi Williams on Apr 30th, 2008 | Filed under: Uncategorized

Let’s face it, everyone has times where they spend more money than they intend to or do not save as much money as they should.  Poor money management is the biggest cause of debt and individuals with poor money management skills will have a very difficult time ever getting out of debt.  There are a number of different things you can do to take control of your finances and following some simple tips can make money management much easier.

1. Set Up Automatic Deposits For Your Savings Account
One of the best money moves that you can make is to have a certain amount of money deposited into your savings account on a regular schedule.  Some individuals have their paycheck direct deposited into two separate accounts; the majority of their pay into a checking account and the remainder into the savings account.  This allows individuals to save money without even thinking about it.

2.  Review Your Credit Report Annually
Reviewing your credit report annually will reduce your risk of identity theft and will show you any mistakes that have been made on your credit report that will cause you to lose money.  Mistakes on your credit report can cause lenders to offer you a higher interest rate or even deny credit to you altogether.

3.  Track Your Spending
If you keep track of how much you are spending on items, you are less likely to spend more than you intend.  By keeping track of your spending, you will see which of your weekly purchases are costing you the most money and will be able to see ways to trim your spending while still enjoying the same quality of life.

4.  Keep The Change
One of the easiest ways to save money is to pay for all purchases with a whole dollar amount and pocket the change to be placed into a savings jar or piggy bank.  You would be surprised at how fast the coins will add up and at the end of the year, the money can be deposited into your savings account.

5.  Just Say No To Alcohol In Restaurants And Bars
Want to reduce your dining bill by as much as 40%?  Skip the alcoholic drinks at dinner and order a soda or tea instead.  The price of an alcoholic drink poured by a bartender can be as much as 400% inflated over the actual price of the alcohol and ingredients in the drink.  If you would like to have an alcoholic drink, try to attend the restaurant’s happy hour when the drinks are generally half price or reduced on special.


How to A Avoid Foreclosure When Your Behind on Your House Payment

Written by admin on Apr 30th, 2008 | Filed under: Uncategorized

Several years ago, I was listening to a radio show about personal finance. A woman had called and told the host that her credit card bills were caught up, but she had not eaten in two days. Talk about some seriously messed up priorities. Paying your mortgage payment shouldn’t come before food and your light bill, but it’s the next thing after that you should write a check for at the beginning of the month! If you find your self in a situation where you’re behind on your home, and are close to foreclosure, here are some tips to avoid the unthinkable.

Everyone’s situation is different when it comes to getting caught up on a house which is behind. First we have to determine how close to fixing your financial situation you are. If you lost a job and are starting another one in two weeks, you’ll probably be okay. If you simply cannot afford your house anymore, that’s a wholly another story. You have to be honest with your self as to whether or not the situation will get fixed in a timely basis. If not, you might need to sell your house.

If you’re in a situation where you see yourself coming out of the tunnel and into the light any time soon, call your mortgage company immediately! Since your mortgage was given to you under some very specific terms, those documents will tell you what the mortgage service company will do. So go look in your financial files, grab out your mortgage documents and see what the deal is.

Your lender really does not want to foreclose on your home, it’s a very expensive proposition. If you can get it turned around in a couple of months, they’ll definitely work with you and give you a forbearance agreement. If it’s going to take more than a few months, it might be time for some drastic measures. No, this does not mean go file bankruptcy. Bankruptcy is a Band-Aid solution to the symptom, which is debt, not the cause, which is overspending. Instead, sell stuff, a lot of stuff. This means eBay, garage sales, CashForCDs.com, you name it. Sell so much stuff the kids and pets are hiding because they think their next.

Most people get into this kind of trouble because they just don’t act fast enough, instead they hope the financial troubles will just go away. Get objective help, talk to a HUD approved counseling agency.

Your mortgage servicer can help by offering you a forbearance agreement, which the Freddie Mac website states is “an agreement to temporarily let you pay less than the full amount of your mortgage payment, or pay nothing at all, during the forbearance period.” They often will consider this when you have a lump sum of money coming in the near future.

They can also help by offering a repayment plan, which will require you to pay your mortgage and an additional amount of money to catch up on the back payments. Once all of your back payments are caught up, you will get what is called “reinstatement”, which means that your loan is caught up and you are no longer behind.


Carnival of Personal Finance #150 is Available

Written by admin on Apr 29th, 2008 | Filed under: blog carnivals

The carnival has been posted at Lazy Man and Money, and offers over 100 personal finance blog posts. Some very good reading, perfect for your lunch hour!


Don’t Ignore Your Debt!

Written by Toi Williams on Apr 28th, 2008 | Filed under: mindset

Many individuals that are facing financial hardship are in denial.  They avoid answering their telephones for fear there is a debt collector on the line, avoid opening bills, and do not do anything constructive to correct their situation.  These individuals are committing the worst financial sin there is – ignoring their debt. 

There are many constructive things that you can do to reduce your total debt and restore your credit, as ignoring your debt obligations will not do anything but hurt you further.  Using these solutions are not always pleasant, but they may make the difference for your financial future and the sooner that problems are solved, the sooner that you can get back to rebuilding your life.  There are some do’s and don’t associated with debt relief and following this simple guide will ensure you do not damage your financial history further.

1. Do Talk To Your Lenders – If you are facing an unexpected financial hardship, such as the loss of a job or a medical emergency, do not be afraid to talk to your lenders and explain your current situation.  Many creditors have programs in place to assist individuals facing such a hardship and they can work out an agreement with you to help you through your time of trouble.
 
2. Do Cut Your Spending – The first thing that you should do when facing a financial hardship is to cut your spending on unnecessary items.  If you are having trouble paying your bills, you should not be paying for specialty coffees or gym memberships.  Cut the excesses from your life and spend that money on your debts.

3. Don’t Use Credit Cards – Many individuals turn to using their credit cards to pay for everyday purchases when they are facing a large amount of debt.  Placing all of your purchases on a credit card is not solving the problem and the interest rate on the balance carried on the credit card will only drive you deeper into debt.

4. Don’t Avoid Opening Bills – Avoiding the problem by refusing to open your bills and refusing to answer calls from creditors is not going to do anything but ruin your credit and increase the amount of debt you are carrying.  To get out of the situation that you are in, you will need to know the amounts that you owe to each creditor and create a plan for paying each of these lenders the money that is owed.


Facing Foreclosure? Steps You Can Take To Limit Your Loss

Written by Toi Williams on Apr 27th, 2008 | Filed under: Uncategorized

Many thousands of homeowners are facing the unthinkable.  They are unable to pay their mortgage due to financial hardship or an interest rate adjustment and now they are facing a foreclosure on their home.  The prospect of losing one’s home can be a frightening one, but there are several things that the homeowner can do to limit the pain and regain their footing when facing a foreclosure.

Talk to your lender

Many homeowners make the mistake of not talking to their lender when they run into problems with paying their mortgage on time.  Some individuals shy away from talking to their lender because they are embarrassed about their situation, while other individuals are in denial and thinking that they will be able to fix the issue before they have to deal with a foreclosure.  The truth is that talking to the lender and explaining the dilemma is one of the best ways to stave off a foreclosure.

If there is a temporary hardship that is impeding your ability to pay your mortgage, such as the loss of a job, then the lender may be able to work out an agreement with you that will improve your ability to remain current on your mortgage.  The lender needs to know about your change in circumstance and about your willingness to do what you can to remain in your home.  If you refuse to talk to the lender, they have to assume that you are willfully neglecting your responsibilities and will have no choice but to begin foreclosure proceedings.

Attempt To Sell The Home

In many instances, it is better for the individual to try to sell the home than face a foreclosure and the many years it will take to repair their credit afterward.  If the home is sold for more than what is owed to the lender, the homeowner will get to pocket the difference.  This may be difficult in the current market downturn as many of the homes facing foreclosure are “underwater” (meaning that the homes are worth less than what is owed on the mortgage) and many lenders will not allow the home to be sold for less than what the mortgage is worth.

Be Proactive

One of the best ways to limit your loss when facing foreclosure is to be proactive about your problems and try to solve them as soon as you recognize that there is going to be a problem.  For example, if you are having trouble paying your mortgage now and you know that your adjustable interest rate is going to rise soon, don’t wait until after the rate has risen and you have begun missing payments to try to solve the problem.  As soon as you recognize that you will not be able to make the mortgage payments, get on the phone and talk to the lender about your situation or begin to try to sell the home to limit your loss and avoid foreclosure on the home.


Using a Home Equity Loan for an Emergency Fund

Written by admin on Apr 27th, 2008 | Filed under: Uncategorized

Most mainstream financial advisors will suggest that you should keep some money aside in a special savings account for emergencies. This seems to make sense, say if there’s something such as a car accident, an unexpected medical expense, or something goes wrong in the house, there’s money to take care of whatever needs to be paid for. This way when an emergency does happen, you don’t have to freak out and wonder where the money comes from.

It certainly makes sense to keep some money in cash reserves so that you have money that you can get to on a short notice should you need to, but doing this comes at a price. This is essentially self insuring your self for emergencies. Like all insurance policies, they come with a cost. Putting money away in a savings account for no other purpose than paying for emergencies might not have a visible cost, but you do have to put it in a rather conservative investment so that you can be sure the money is there when you need it. You don’t want to have your emergency fund in mutual funds only for you to have an emergency when the stock market happens to be down! Generally people will put their emergency funds in basic savings account earning 4% or 5% interest.

A lot of people who consider themselves financially savvy think that putting money away in a basic savings account has too much of an opportunity cost for that to make financial sense. They would rather invest that money in something that will have a bit more risk but come with a much better rate of return over a long period of time. Of course they still need some cash available should an emergency happen, so many people get what are called a home equity lines of credit.

Essentially a home equity loan or a home equity line of credit is a revolving loan similar to a credit card. The difference is that your home equity line of credit is a secured loan, it’s a second mortgage. This is why you can get much better interest rates on home equity loans compared to credit cards. If the borrower happens to not pay, the bank can foreclose on the person’s home and recoup their cost.

Is using a home equity loan as an emergency fund a viable alternative to putting money away in a plain old savings account? The answer to that is no. When you are having financial problems, the last thing that you need is another payment and more debt to worry about. Usually the problem is too much debt, and adding more won’t solve the problem.

Usually it doesn’t even make financial sense to invest your money in a mutual fund and then borrow on a home equity loan when an emergency happens. After you pay taxes and pay the interest on a home equity loan, you’re not making that much more money. When you factor in risk for all of the added debt you’re taking on, it’s not worth it at all.

There’s also the damage to your credit score. When you borrow more money, your debt to income ratio increases, as well as your credit utilization, which will be very detrimental to your credit score should you need to be taking out some sort of major loan in the near future.

Using a home equity loans or home equity lines of credit is just not a good alternative to saving money in a high-yield online savings account for an emergency fund. Save money for emergencies, but don’t try to play games with debt to try to get a little better deal. An emergency fund is insurance, not an investment.


Debt Relief Scams: Common Scams People Fall For

Written by Toi Williams on Apr 25th, 2008 | Filed under: scams

One night as you are looking over the endless bills that seem to arrive at your home, a snippet of sound from the television catches your ear. A commercial for a debt relief company is on the television, claiming that they can reduce or eliminate your debt for pennies on the dollar. As a debt strapped homeowner, the offer seems like a life line out of the problems that have been plaguing you and almost seems too good to be true…

For many homeowners, the reality of many debt relief companies is that they are too good to be true. Individuals that use the worst of these companies find that they have paid hundreds, even thousands, of dollars in fees for the company to do absolutely nothing to help them. Many of these companies make extravagant promises that would be extremely difficult, if not impossible, for them to keep, but they are convincing enough that thousands of individuals fall for their tricks every year.

Common Debt Relief Scams

Debt Settlement Programs – There are many debt relief companies that will claim that they can negotiate with your creditors to allow you to pay off all of your debts with one lump sum payment – often as little as 30% of the balance of all of the accounts. This is virtually impossible to do and many individuals find that any payments they make to the company miraculously disappear while the total balance on all of their accounts stays the same.

Non-Profit For-Profit Companies – Some for-profit debt relief companies claim to be a non-profit company to lure their customers into a false sense of security about the company and their mission. The companies that are caught using this practice are prosecuted under the law.

Misleading Charges – Individuals that have had dealings with some of the worst offenders in the debt relief industry have found that money paid towards lowering the balances on their debt accounts have instead been applied to numerous fees that the company has levied against them, often without their knowledge. A common example of this is the $300 referral fee that some of these companies charge to refer you to some other company that can supposedly help you better than they can.

Lower Interest Rate Promises – A number of misleading debt relief companies will offer to lower the interest rate on all of your debt accounts by contacting the lender and renegotiating the rate – after you have paid $500 or more in fees for the work of course. The companies will then disclose that your creditors will not lower the interest rates on the monies you owe them and the debt relief company keeps your fee for their inconvenience.

Complaints against debt relief companies are becoming more numerous each year and the Federal Trade Commission has sued more than a dozen of these companies in the last several years because of misleading business practices. Consumers need to be aware that there is no magic remedy for debt relief and if the claims of a debt relief company seem too good to be true, then there is a good chance that the claims are part of a scam. There are numerous ways for an individual to get out of debt without declaring bankruptcy, but they all require personal responsibility, changing the individual’s spending habits, and time.


Why God Doesn’t Always Answer Prayers About Money

Written by admin on Apr 25th, 2008 | Filed under: Uncategorized

For Christians, prayer is a rather amazing concept. Many discount our faith, but we know that God will listen to us and our concerns, and do what’s best for us. Jesus even tells us in the book of Mark that “Have faith in God, Therefore I tell you, whatever you ask for in prayer, believe that you will receive it, and it will be yours.” If you ask God for something that will help you, He will give it to you. Solomon asked God for wisdom to handle his wealth, and God gave it to him. What are you asking God for?

Let’s ask a hypothetical question. Let’s assume God has some very big plans for you, Perhaps, God has decided you are the person who will save the life of a very important person, or cure a deadly disease. Let us then suppose that you are really depressed and hate life so much that you ask God to strike you down from earth? Do you think he would do it? Only God understands the mind of God, but it’s reasonable to assume that He will do what’s best for you, which is not always what you want.

A lot of people’s worry and concern resolves around money. Money is a frequent issue of prayer for a very great number of people. A lot of people ask God to help them out financially by winning the lottery or by blessing them with a great amount of money. In a recent movie, “Bruce Almighty” a regular man became God and gave everyone everything they wanted, and over a million people won the lottery when he gave everyone what they wanted. Is winning the lottery or just being given a great amount of money with no work the best thing for you? Often times, it is not. God will provide for us, but he will give us what we need, not what we want.

When it comes to money, the Bible says quite a number of things on the subject. In the bible we are told many times not to cosign on loans. We also know that there are no positive mentions to debt in the bible, and he even tells us that the borrower is slave to the lender. The Bible tells us to save money, and to work very hard to get out of debt if you are in debt. God tells us to give ten percent of our income to the local church. God lays out a number of things we should do to use the idea of money in a way that He would find pleasing.

Money makes you more of what you are. The Bible tells us that if God cannot trust us with little tasks, there is surely no way He will trust us with big tasks. If we are not following God’s ways with the money we do have, and most people are not, why would He give us even more of His money to work with? Would he not rather give it to someone who handles money in the way He finds to be pleasing and He knows will do good things with it?

God does not plan for all of us to be filthy rich, and that’s okay. He will provide enough for us to get by, and that’s all we need. Prayers for large sums of money very rarely go answered, because God knows that’s not what’s best for you. If you follow His ways when it comes to money, God will give you more of His money to manage. It’s as simple as that.


Payday Loan Lenders: Why You Should Avoid Them

Written by Toi Williams on Apr 24th, 2008 | Filed under: payday loans

You can find them almost anywhere.  They are present in urban strip malls and stand alone storefronts across the nation and lure many unsuspecting individuals into their clutches.  I am talking about payday loan lenders, one of the most controversial businesses of the last twenty years.

Payday loan lenders can generally be found where the population is less affluent, a place where they say their services are needed but critics claim that they prey upon the working class.  At first, many payday loan lenders opened their shops near to military bases where the majority of the individuals were living on a soldier’s wages.  So many military members fell into the trap of payday lending that there was a new law created prohibiting payday loan lenders from lending to members of the military.

This does not stop the payday lenders from lending to the rest of the nation though.  Most at issue is the interest rate that these lenders charge for their brief loans to the public.  The interest rate for a typical bank loan or credit card is between 5% and 10% annually while the interest rate charged for a loan from a payday loan lender averages between 400% and 800%.

The Trap Of Payday Loan Lending

Many of the individuals that use a payday loan lender get trapped into an endless cycle of debt, where the only way that they can pay off the current loan is to reapply for another loan as soon as the money has left their account for the first loan.  Many of these individuals are already living paycheck to paycheck and use the payday loan lenders because they believe that there are no other lending options available to them.  Unfortunately, many of them are unable to afford to pay off the entire loan when the two or three week loan period is up, so they take out another loan as the payday lender rakes in their 400-800% interest rate payment for each loan.

It is estimated that the average individual using a payday loan lender takes out more than 7 payday loans each year, with a high percentage of the loans occurring back to back.  This indicates that a high number of individuals are unable to repay the original amount and take out a subsequent payday loan to cover the charges for the last loan.  In this way, many payday loan recipients find themselves paying a great deal of money in fees to the lender with no way out of the cycle.

Most financial experts agree that payday loans are a bad idea and that the interest rate is exorbitant for the services that the lender provides.  A number of states are attempting to enact legislation that will cap the amount of interest that a payday lender is allowed to charge at a 36% interest rate, more than ten times less than many of the payday loan lenders are charging now and a rate that they say will cause them to go bankrupt and put them out of business.  Only time will tell what the outcome of that situation will be.


Guest Post: Do-It-Yourself Debt Reduction v. Professional Debt Reduction

Written by admin on Apr 23rd, 2008 | Filed under: consolidation

One of the businesses that is booming right now is that of “credit counseling.” These are professionals who help you with debt reduction through such means as debt consolidation and debt negotiation. The idea is that you can have someone else take all of your debts for you, and roll them into one payment. You pay the professional, and the professional pays your creditors. For some people this works really well. For some, though, do-it-yourself debt reduction is a more desirable choice.

Debt reduction: do-it-yourself

If you are generally an organized person, and you have the discipline necessary, it is possible for you to take care of your debt reduction on your own. But you need a plan that you can stick to. Here are some things you can do to get on track for your do-it-yourself debt reduction:

  1. Figure out your income and your expenses. Tote up everything you earn and everything you spend. You might track your income and expenses for a couple of months to get a better idea. Figure out where everything is going.
  2. Decide where you can cut back. Look at what you have left over each month, and decide what you can cut back on. Are there ways to reduce your grocery bill? Can you eat out only once a month instead of once a week? Find out how much “extra” money you have each month.
  3. List all your debt obligations. Next, armed with the information you have regarding your “extra” money, make a list of all of your loan (this includes credit cards, which are loans) balances and the minimum payments on each.
  4. Pick a debt and apply your “extra” money to it. Your minimum payments should have been listed in step one to make this really work. Pick a debt on your list. I think starting with the lowest balance is a good way to feel as though you are making solid progress. Pay the minimum payment and then apply 75% of that “extra” money toward the debt on top of the minimum.
  5. Go on down the list. After you have paid off the first debt on your list, move to the next. Note that your “extra” money now includes what you used to pay on your minimum payment for your first debt. So, if your minimum on the first debt is $50 and you have $100 “extra” each month, you will put $75 toward the debt, on top of the $50. Your total is $125. When the first debt is paid off, take that entire $125 and apply it to your next debt. You can see where this is going. You’ll start paying off your debt faster and faster.


Professional debt reduction

If you don’t think that you can do the do-it-yourself version, go ahead and contact a professional. Compare fees and costs, though. Remember “credit counseling” is a for-profit business. You will pay some fees for having someone else handle your debts. And you want to be aware that it can affect your credit score. So be prepared for that.

But no matter which route you choose, it is important to remember that you need to change your outlook on debt if you want to live truly debt free. You need to stop amassing more debt and practice discipline in your discretionary spending. And you need to start saving money. After all, whether you do-it-yourself or get professional help for your debt reduction, if you don’t stop spending, you’ll be right back where you started.
Miranda Marquit is an editor for DestroyDebt.com, an informational site about getting out of debt.

Are you facing the danger of bankruptcy? An IVA (Individual Voluntary Arrangement) might be a less serious solution to your debt. Learn about IVAs and other debt solutions from experts in debt advice and put your mind at ease about your financial situation.