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Archive for June, 2010

Want To Get The Most Value Out Of That Car Payment?

Written by Toi Williams on Jun 28th, 2010 | Filed under: mindset

Purchasing a car is often the 2nd most expensive purchase that a person will make in their lifetime, behind purchasing a home.  So it stands to reason that you will want to get the most value possible out of that car payment.  There are some financial rules that you can follow to get the most value out of the money that you are spending for your car payment.

Buy Used
The highest rate of depreciation for a car occurs when a brand new car is purchased and driven off of the lot, typically around 20% of the value of the car  In order to avoid this immediate and dramatic drop in the value of your vehicle, you may want to consider purchasing a certified used car from the auto dealer.  These cars are generally lease returns from people that trade in their cars every couple of years and are inspected for major defects before the cars are resold by the dealer.  These vehicles are typically under warranty for the beginning of the payment turn and can be a great value for individuals that are not concerned about the car that they are driving being a status symbol.

Keep The Car As Long As Possible
The cars built today are built to last for much longer than their predecessors.  With regular maintenance and inspections, a car purchased today could last for 10 years or more with minimal repairs.  As most car payment terms are for 48 month intervals, a person can be free of a car payment and still have a great car to drive for 6 years before they would need to look for a replacement.  Training yourself to choose vehicles that you intend to keep for a long period of time can save you tens of thousands of dollars over your lifetime.

Limit Car Payments To 10% Of Income
Although cars are an expensive purchase, nearly everyone is able to find a car that they can afford if they limit the amount of the monthly car payment to 10% of their take home pay.  If the car that you are looking at will require a payment of more than 10% of your income, you should consider other options, such as an older model vehicle, a smaller vehicle, or a vehicle from a different manufacturer.  This allows you to have more of your pay available for other needs and reduces the chance that a hiccup in your finances will result in the vehicle being repossessed.

Correcting A Credit Report In 7 Simple Steps

Written by Toi Williams on Jun 27th, 2010 | Filed under: credit score

Experts estimate that close to 25% of individuals with a credit history have errors on their credit reports.  The reason that the volume of errors is so large is that the three major credit reporting bureaus process large volumes of information each day, increasing the chance that an error in the information entered or a calculation error can go unrecognized for a long period of time.  In many cases, these errors are severe enough to cause a drop in credit score that causes the person to be denied credit.

It is very important to ensure that all of the information that is contained in your credit report is accurate and if inaccurate information is found, steps to correct the incorrect information should be undertaken immediately.  Mistakes on a credit report become harder to remove the longer they are allowed to stay on the credit report so the amount of time between when the information was entered and when the information is discovered to be incorrect should be a short as possible for the best results.  Here are the steps that should be taken to correct any errors in your credit report.

Prepare Yourself To Go To Court
You should go into the process of correcting your credit report with the realization that you may have to go to court to have the information corrected properly.  Although this outcome is not the most common outcome experienced, keeping your efforts in the proper frame of mind will prevent you from making mistakes that can be costly if you do have to go to court to get the situation corrected.

Keep An Accurate Log
Be sure to keep track of all of the actions that you have taken to try to remedy the situation by writing them down in a notebook or ledger so that you have an accurate record to present if legal action is needed to correct the information in your credit report.  All phone calls, mailings, document submissions, and responses should be entered into this log.

Keep It Professional
Although it may be tempting to scream or rant in frustration, it will not do you any good in the long run.  Remember that the person that you are currently communicating with is not the person that entered the incorrect information and that they are trying to help you in the best way that they know how.  Courtesy will always get you farther than belligerence.

Make The Right Contacts
Be sure that the person that you are communicating with is actually a person that may be able to help you by specifically spelling out your problem and asking them if they will be able to help you.  If they say that there is nothing further they can do to assist you in correcting the problem, ask to speak with their manager or the next person up in the chain of command until you reach someone that will be able to correct the issue.

Send Information By Mail
The laws governing consumer protection state that the credit bureaus must be notified in writing of any inaccuracies in a person’s credit report and that notification, along with any other documentation, should be sent by certified mail.  Sending information by mail allows it to be tracked much more easily than simply providing information over the telephone and having a copy of the information along with a tracking number certifying that the information was sent and received can provide the proof that you need if legal action is needed.

Confirm Everything
Ask for written confirmation for anything that is promised or proposed by the representatives of the credit reporting bureau or the creditor that you are contacting.  If they state that the information on the credit report is being corrected, ask for a copy of the Universal Data Form that is being used to update the information.  Be sure to document the details about the proposal, the contact’s first and last name, when the confirmation was promised, and when the confirmation was received.

Use All Tools In Your Arsenal
If contacting the credit reporting bureaus is not giving you the results that you need, use other options to see if you get better results.  Tactics like contacting the creditor and going up the chain of command, hiring a credit repair company, copying the executives of the credit reporting bureaus on communications with their firm, or writing to the Federal Trade Commission about the issue may produce the desired outcome if no other avenues are working.

4 Actions Guaranteed To Keep You In Debt

Written by Toi Williams on Jun 23rd, 2010 | Filed under: debt relief

Are you trying to get out of debt but are growing frustrated with the lack of progress that you are seeing?  The reason that you may not be seeing results is because old habits are causing you to lose the ground that you are gaining on your financial issues.  There are a number of habits that can work against you when you are trying to get out of debt and being able to recognize these bad habits can go a long way towards securing your financial future.

Transferring Balances To Run Up Credit Cards
Some people are playing a dangerous game of shuffling balances from credit card to credit card with balance transfers without paying down their debt.  Although this may save money on the previous balances by reducing the amount of interest you are paying, continuing to charge items to the credit card that the balance was transferred off of will only drag you deeper into debt.

Neglecting To Monitor Your Credit Report
Nearly a quarter of all credit reports have mistakes on them that could end up costing the person a lot of money in increased interest charges or result in the person being denied credit.  Mistakes on credit reports are common and can be easily remedied if the mistake is discovered and corrected quickly.

Hiding From Creditors
Refusing to face reality and avoiding creditors that you owe will not do anything but postpone the predictable outcome.  If you are facing a financial hardship that is beyond your control, such as the loss of a job, talking to your creditors can give you a temporary reprieve from your payment burden or lower your payments for a specific length of time to help you keep your credit rating intact.

Neglecting To Follow A Budget
It is very easy to overspend without thinking about it, especially when you are bombarded with advertisements to buy the latest and greatest items day in and day out.  Creating a budget that details all of your monthly spending is a great first step, but it means nothing if you do not follow that budget as closely as possible.  There are a number of programs and downloads available on the internet to help you create a budget that will work for you.

Four Super Saving Tips That Anyone Can Use

Written by Toi Williams on Jun 21st, 2010 | Filed under: saving

Saving money is not an impossible task for anyone, regardless of how much money they make.  The actual act of saving money is more mental than physical and it shows in the amount of money that individuals are able to save while thinking positive about the act of saving versus the smaller amount saved by people that view saving money as a chore to be endured.  By having the right attitude and following a few simple tips, you can dramatically increase the amount of money that you are able to save each year.

Eliminate Excuses 
The first task that you must complete is ridding yourself of all of the excuses that you have for not saving money.  There is no reason in the world why you should not be able to save some money in your saving account if you are paying for items not necessary for your survival, such as tickets to the movies, meals from fast food restaurants, or specialty coffees.  Keep in mind that the sooner you begin saving, the more you will be able to save.

Make A Plan
Even the best intentions can fail if you do not have a plan to accomplish what you are attempting.  In order to maximize your savings, you will need to plan a way to eliminate the amount that you would like to save from your every day expenses, especially if you tend to live paycheck to paycheck.  The easiest way to identify areas of your life where discretionary spending can be cut is to make a list of all of the things that you spend money on each month and examine your spending habits to find areas of wasteful spending that can be cut.

Set Some Goals
It is easier to stay on track with your spending plan if you identify some goals that you would like to shoot for.  Common saving goals include having a certain amount of money in your savings account by the end of the year or having a down payment for a home within a certain number of years.  Short term goals provide more motivation than long term goals and reduces the chance that you will become discouraged because you are not seeing results as fast as you would like.

Reduce Your Debt
High interest debt is one of the biggest barriers to saving for most people today.  Eliminating this high interest debt allows you to free up more of your income for other endeavors, such as increasing the amount in your saving account faster.  Any savings plan should include ways to pay down your debt levels and decrease the amount that you are spending in interest payments each month.

For Some Borrowers, Foreclosure Is Not The End

Written by Toi Williams on Jun 19th, 2010 | Filed under: loans

In today’s market of souring home loans in the midst of a persistent recession and record levels of unemployment, banks have foreclosed on many more homes than in any time in recent history.  Some areas of the country have been decimated by wave after wave of foreclosures, leaving whole neighborhoods vacant and abandoned.  The people caught by these economic hard times may believe that after their home has been foreclosed on their ordeal will be over, but many are finding that foreclosure is not the end of their problems.

The Big Issue

At the heart of the matter is that many of the homes across the nation today have dropped in value by a significant amount, leaving many of the people that brought their homes at the height of the housing boom owing more on their home than the home was worth.  In addition, a large number of these people purchased their homes with exotic mortgage loans that were due to reset to much higher payments after several years in the home, thinking that they would be able to refinance the home to a fixed rate or lower rate loan before the payment amount increased.  Unfortunately, they were banking on the value of their home continuing to rise and most were unable to refinance with negative equity in the home.

The Resulting Problem

As lenders have foreclosed on homes across the nation, many of these homes have been resold to other buyers for less than the amount still owed on the mortgage loan that the original owner obtained for the home – also known as a short sale.  In the event of a short sale, the lender has the option to recoup the difference between the amount that the person owed and the amount that the home was sold for from the original borrower.  Imagine the surprise when these borrowers realize that they are still liable for thousands of dollars of payments for a home that they are no longer in possession of.

In many locations across the nation, the lender has the right to recoup the amount between what has been owed and what the home sells for along with numerous penalty fees that are tacked onto the loan amount for missing payments and going through the foreclosure process.  In an example detailed by a local newspaper, one man found that after he lost his home to foreclosure, he still owed his mortgage lender $148,064 because of the difference between what he owed and what the lender sold his home for in a short sale.  Many who find themselves in this situation have no other option than to file for bankruptcy protection.

In the past, lenders rarely went after the individuals whose homes were foreclosed on for the difference between the sale price and what was owed on the home loan because these people rarely had any assets that could help them pay the amount and pursuing these borrowers in court cost a large amount of time and money.  The difference today is that a number of people are simply walking away from homes with values that are underwater to avoid paying significantly more than the home is worth, regardless of whether they could afford to continue making the payments on the home.  With the number of foreclosures across the nation continuing to rise, lenders are determined to get what they are owed, especially if they suspect that the person could continue making their payments but are making a conscious choice to stop paying on their mortgage loan.

Four Simple Solutions For Reducing Energy Expenses

Written by Toi Williams on Jun 17th, 2010 | Filed under: saving

One of the most expensive bills that many people pay each month is their energy bills.  The energy used to power our everyday appliances is a necessary part of civilized life, but with energy costs continuously rising, it is important to limit our energy use as much as possible to avoid astronomical energy bills.  There are many different ways available to reduce your energy usage, resulting in a much lower energy bill.

Turn It Off!

One of the most common reasons for high energy bills is neglecting to turn off energy using items when you are done with them.  From leaving the lights on while you are not home to leaving the television on at night while you are sleeping to leaving the air conditioner running during the day while you are at work, many typical actions that people do not think about are costing them hundreds of dollars each year in additional energy costs.  It is important to get into the habit of turning off household items that are not being used to reduce the amount of energy you are using each month.

Unplug Vampire Appliances

Vampire appliances are appliances that continue to draw energy from wall sockets when they are not in use or even completely turned off using the available switch.  There are many different items that can be considered vampire appliances, including charging units for batteries, cell phones, or laptop computers.  Unplugging these items when they are not being used can reduce your energy bills by as much as 30%.

Wash At Cooler Temperatures

Although most people believe that their clothes need to be washed at high temperatures to get them clean, the truth is that for most items washing at cooler temperatures can be just as effective and will save you money on your energy bills as well.  Reducing the amount of work that your hot water heater is doing each day to heat large amounts of water can result in significant savings that can be used for other household expenses or saved for a rainy day.

Examine Ways To Make Your Home Energy Efficient 

Energy efficiency has become the name of the game for many manufacturers of household products, resulting in a wide variety of options for making your home more energy efficient.  You do not need an energy efficiency expert to know whether you have drafty windows and doorways or whether your home is not insulated correctly.  There are a number of government programs that can be used for making your home more energy efficient and using the options that apply to your circumstances can save you hundreds of dollars every year.

Get The Best Loan To Buy That Home

Written by Toi Williams on Jun 15th, 2010 | Filed under: loans

The current housing market is one of the most favorable for buyers in the last decade and many individuals that are tired of paying rent for a place that they cannot redecorate have chosen to purchase a home instead.  There are large numbers of homes on the market and many sellers are willing to reduce the asking price of the home to increase the chances of selling the home. 

Obtaining a mortgage loan has become more difficult for those with lower credit scores, but if you have good credit and a steady income, many banks are still willing to loan the money needed to purchase a home.  Here are some steps that you can take to ensure that you are getting the best loan possible.

Search For The Best Rate
The interest rate for traditional fixed-rate 30-year mortgage loans are still some of the lowest in history and the low interest rate will save you thousands of dollars in interest payments over the life of the loan.  Different banking institutions may be offering different interest rates to lure customers away from competitors and comparing rates between companies may shave several percentage points off of the amount of interest that you are paying on the loan.  Be sure to examine the rates offered by commercial banks, credit unions, and federal loan programs to see all of the options available to you, which will make it easier to make an informed decision about which loan to apply for.

Get Preapproved
One of the worst feelings in the world is finding the perfect home and then finding out that you do not qualify for a loan large enough to purchase that home.  Preapproval provides a chance for you to fill out the application and discover if there will be any problems or barriers to receiving the loan before getting in too deep with the seller or real estate agent.  The lender will run your credit and examine the supporting documents that you provide and reply with a letter either indicating preapproval or denial.  Then, once you have found the home you desire, you can complete the loan approval process by paying the application fee and verifying your income to the satisfaction of the lender.

Lock In Your Interest Rate
Many lenders will not lock in the interest rate that you will be paying on the loan until 30-45 days prior to closing because interest rates can fluctuate from day to day and most loan interest rates are tied to the going rate.  The final interest rate that is offered to you should be very close to the one that was offered to you during your preapproval process and if the interest rate is dramatically different, you should inquire why.  If the lender cannot give you a good answer backed up by supporting documentation, they may be trying to rip you off and you should find another lender.  In the recent past, there have been many instances of this type of bait and switch documented, so don’t fall prey to unscrupulous lenders because you do not want to push back the closing date by several weeks.

Be Prepared For Unexpected Financial Emergencies

Written by Toi Williams on Jun 12th, 2010 | Filed under: mindset

Unexpected financial emergencies are one of the most common reasons for the accumulation of unmanageable debt.  In many cases, the person was unprepared for any type of hiccup in their financial circumstances and did not have any resources available when a financial problem occurred.  In these cases, the only option available to many people is to borrow the amount of the cost of the financial emergency at double digit interest rates, such as with a credit card or payday loan.  If your options are limited and all of the options have high interest rates, it is very easy for a small financial issue to explode into substantial debt within a short period of time.

The most effective way to avoid these financial disasters is to prepare yourself in advance to be able to handle these issues when they arise.  Here are the best ways to be prepared for a financial emergency.

Start Saving For The Future
Many people get into financial trouble because they do not have any savings in reserve to handle the unexpected when it arises.  Neglecting to have savings available increases the risk that a single financial event can wipe you out completely for years into the future.  Using your savings to pay for any unexpected financial expenses instead of putting the cost on a credit card will end up costing you much less in the long run because you will not be paying interest on an amount that you borrowed.

Record Your Transactions
If you record where your money is going every time you make a payment using cash, checks, debit cards, or credit cards, you will be able to easily identify any problem areas in your spending before they become a larger issue and drain the money that you have.  If you notice large expenditures for frivolous items that are eating up a large portion of your disposable income, you can trim these areas of spending so that you are not wasting money and you have more cash to store in your savings account.

Create A Budget
One of the best things that you can do for financial security is to create a budget and stick to it as much as possible.  An accurate budget will contain the amounts of all of your monthly expenditures as well as budgeted amounts for incidental items such as fast food purchases or entertainment.  This way, you can make sure that your entire paycheck is not spent before you have received it.

The warning signs on the way to financial disaster are easy to recognize once you have learned to identify them and prompt course correction when these signs are spotted can help you avoid calamity.  Unexpected financial emergencies can occur at any time and the best defense against them is to try to be prepared for them.

Do You Have These Credit Card Bad Habits?

Written by Toi Williams on Jun 7th, 2010 | Filed under: credit cards

There are a number of actions that you can take with credit cards that are guaranteed to lead you down a path of debt disaster.  Many people perform these actions without thinking as a normal habit, never realizing that these activities could be causing their debt levels to increase or cause their efforts to pay down their debt to stall.  Being able to recognize these bad habits for the budget busters that they are will help you eliminate these habits from your typical behaviors.

Charging All Of Your Purchases
Many of the people that charge all of their everyday purchases do not track these purchases as carefully as they would with other payment methods, which can lead to overspending easily.  Also, these individuals tend to carry a balance on their credit card from month to month, meaning that they are paying interest each month on past purchases.  This increases the total price of purchasing the item versus paying cash for these same items.

Not Paying Your Bill On Time
Not paying your bill on time can have more consequences than wasting your money on late charges.  Late payments can trigger a dramatic rise in the interest rate charged for using the credit card, often pushing the interest rate above 20%.  Late payments on a credit card can also result in the interest rate of other credit products in your name increasing dramatically underneath a clause in nearly every credit card agreement called a Universal Default Clause.  These increased interest rates can cost you hundreds of dollars in interest payments each year.

Paying The Minimum Due
It is nearly impossible to pay off the balance of a credit card by only paying the minimum each month when the payment is due.  In some cases, the minimum payment marked on the bill barely covers the interest and finance charges that are added to the balance each month, keeping you paying on the credit card for years with little to show for your efforts.  Paying more than the minimum will reduce the amount of interest you are paying each month and will help you pay off the credit card much more quickly.

Opening Store Credit Cards For Discounts
No company is in the business of losing money, so you better believe that you will end up paying more for the store credit card than you will be getting with the discount being offered.  The credit cards can generally only be used at a specific store, causing the consumer to spend more with them and less with competitors, and the interest rates for these credit cards are generally higher than for general purpose credit cards.

Basic Financial Rules For Retirement Saving

Written by Toi Williams on Jun 5th, 2010 | Filed under: saving

One of the most frequently asked financial questions today is “what is the best way to save for retirement?”  Different experts have different opinions on what different individuals should do in their specific financial situation but there are a few financial rules that they agree on and recommend that everyone should use.  Here are the rules of thumb to follow when it comes to retirement saving.

The 10%-15%-20% Rule Of Saving

When discussing retirement savings, it is recommended that you save 10% of your earnings if you plan on downgrading your way of life, save 15% of your income if you plan on maintaining your current lifestyle, and save 20% of your income if you plan on living the high life or retiring early.  The calculations for this rule should include employer contributions as well as your individual contribution.

This rule generally applies to individuals that begin saving for retirement in their early thirties or before.  Individuals that begin saving for retirement at an older age will need to increase the percentage that they are contributing to match the same value at the typical retirement age.  If saving for retirement does not begin until after the person’s 40th birthday, then each percentage will need to increase by 5% to match the same level of comfort.

The Non-Access Rule

The easiest way to get your retirement account to grow is to place it off limits for any spending other than retirement spending.  There are very few good reasons for borrowing against a retirement account and no good reasons at all for cashing out the account before you have retired, so it is best to be firmly in the mindset that retirement savings are for retirement only and will not be used for any other purchase.  This guarantees that you will have the money available when you need it after you have retired.

If you are looking for additional money to pay off debts or to purchase a home, there are many ways to accomplish this without borrowing against or tapping into your retirement account.  Many people choose to work additional hours or obtain a part time job to earn extra money that can be used to pay down debts.  Other individuals choose to reduce their spending in other areas and apply those savings to paying down their other financial obligations.  There are a number of different methods available for obtaining additional cash without touching the money you have saved for retirement.