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Archive for August, 2010

Need A Reason To Check Your Credit Report?

Written by Toi Williams on Aug 31st, 2010 | Filed under: credit score

Over the past decade, credit reports have dramatically increased in importance and ability to affect your daily life.  This piece of personal information holds enormous power over your ability to obtain credit, obtain employment, or obtain a place to live, so it is very important that you know what information is included in your credit report.  Here are the three best reasons to check your credit report.

To Guard Against Identity Theft

In many cases of identity theft, the only reason that the person became aware that their identity had been stolen was because they reviewed their credit report and saw that there were accounts that they did not remember opening on the credit report.  The identity thieves will use the person’s real name and social security number to obtain the credit but will use a false address and other contact information so that there is very little chance of the person becoming aware of the identity theft through contact with the creditor.  By reviewing your credit report regularly, you will be able to quickly identify fraudulent accounts and have them closed before the identity thieves can do much damage to your credit.

To Check For Errors

Experts estimate that nearly one-quarter of all credit reports contain errors that could affect the person’s ability to obtain credit at the best rate they should qualify for.  Mistakes that are found soon after they have been reported to the credit reporting bureau are much easier to fix than mistakes that have gone unnoticed for years before being reported.  The credit reporting bureaus are required by law to investigate reports of inaccurate information on a credit report and if the information is found to be incorrect, it will be removed from the individual’s credit report.

To Review Credit Worthiness

It can be very frustrating to fill out all of the paperwork and provide all of the documentation to apply for credit just to be denied because of the information on your credit report.  Checking your credit report on a regular basis will help you determine your credit-worthiness before you take the time to fill out the application and allow you to estimate the interest rate you should qualify for when you apply for credit.  This will prevent you from applying for credit that you will not be approved for or signing up for a credit product with an interest rate that is much higher than what you should qualify for.

The Best Things To Do For Your Financial Future

Written by Toi Williams on Aug 30th, 2010 | Filed under: mindset

It is important to plan for the future when it comes to your finances because your finances can easily be affected by outside forces.  There is no predicting when a financial disaster will hit, but taking the time to plan for financial emergencies will limit the damage that these events can cause to your way of life and your comfort.  There are a number of actions that can be taken to help yourself prepare for the future and each of these actions will reduce the risk that a single financial disaster will wipe you out financially.

Reduce Your Debt Levels

The single best thing that you can do to prepare yourself financially for the future is to pay down your existing debt, especially high interest debt like credit cards or car payments.  Having a large debt load is one of the most common reasons that people find themselves unable to keep themselves afloat financially and find themselves facing bankruptcy.  People that have high debt levels are more susceptible to financial devastation due to a single adverse event because they do not have the finances available to weather the storm and their access to additional credit is limited. 

The best way to reduce your debt levels quickly is to dedicate a portion of your earnings every paycheck to paying off your debt.  It is important that more than the minimum payment be paid on your credit card to reduce the amount of interest you will be charged for carrying a balance on the card.  Until the credit cards are paid off, they should not be used for any purchases and should only be used for emergency situations after they have been paid off.

Budgeting Is Necessary

You will never be able to get control of your spending without creating a budget that details how much you should be spending and how much you should be saving each month.  This allows you to see where all of your money is going each month and identify areas of spending where spending could be cut without affecting the lifestyle that you enjoy.  This also allows you to dedicate more of your money towards savings as unnecessary purchases are eliminated from the amount that you are spending each month.

When creating a budget, it is important to track all of your expenses to ensure that you are not missing any purchases that could turn out to be budget busters.  Spending items as small as $2 per day in vending machine purchases quickly add up to nearly $500 per year for the average employee.  After the budget has been created, it is important that the spending in the budget be followed to ensure that you do not spend more than you intend on unnecessary items.

Simple Cost Cutting Ideas For Any Situation

Written by Toi Williams on Aug 29th, 2010 | Filed under: saving

Finding additional money to pay bills or to save can be a difficult task for nearly all financial situations, but it is possible for anyone to use some simple cost cutting ideas to increase the amount of income they can keep in their own pocket.  Although cost cutting can be painful, it is the best way to reduce your expenses quickly and free up more money to go towards the payment of debt or emergency funds.

Eliminate Your Trivial Expenses

Small savings are much easier to find than larger savings and can be much less painful when cost cutting.  There are many different ways that can be used to eliminate these expenses, from brewing your own coffee at home instead of purchasing a specialty cappuccino on the way to work each morning to restricting your shopping to sales and clearance racks.  Many people also save money by doing the tasks that they previously paid someone else to do, like mowing the lawn or pressing their shirts.  These small savings can add up quickly if you continue to follow the plan that you have put into place.

Look For Large Expense Reductions

Large expense reductions can be harder to find and way more difficult to implement than smaller expense reductions, but the benefits and savings can be seen much more quickly.  If you are renting an apartment, you may want to see if you can find a smaller, cheaper apartment that is closer to your job to cut down on your rent and your daily commute.  If you have an expensive daily habit, like smoking, you can quit and save hundreds of dollars a year.  If your car is a gas guzzler, then you may want to consider trading it in for a used car that is more economical with gas consumption.  Reducing the cost of these larger expenses will allow you to put thousands of dollars more towards your savings or paying down debt.

Capitalize On Tax Deductions

Many people are unaware of all of the tax deductions they are legally able to claim or do not claim the deductions because they believe that claiming them would require too much paperwork.  In reality, claiming all of the tax deductions that you are eligible for can lower the amount of taxes that you pay by hundreds of dollars each year.  Some of the most common tax deductions that are overlooked include deductions for work expenses, investment losses, and real estate taxes.

These simple solutions for cost cutting can be used by anyone who is looking to reduce their expenses and increase their savings.  Although some of these saving methods can be implemented easier than the others, all will allow you to keep more of your money in your pocket to be used for the things that you decide are important to you.

Debt Collector Issues On The Rise

Written by Toi Williams on Aug 27th, 2010 | Filed under: collectors

The Great Recession has brought out the darker side of some people, notably debt collectors that have been charged with getting delinquent payments from debtors.  As more and more people lose their jobs, have their hours reduced, or have to help out family members, payments for all types of debt are falling further and further behind, prompting companies to contact collection agencies to get the money that they are due.  As the collection agencies become overwhelmed with the number of individual accounts they have to handle, some debt collectors are getting nastier with the debtors they have been contracted to contact.

The Statistics

Debt collector harassment complaints have increased by more than 50% in the last year and are predicted to rise by another 13% by the end of this year.  The Federal Trade Commission, which handles debt collector harassment complaints, received nearly 68,000 complaints last year about the tactics being used by debt collectors to try and get money from people that don’t have it.  Complaints of harassing telephone communications, abusive or inappropriate language, and threats of physical violence are all on the rise.

Industry experts say that the actual collectors are becoming more and more frustrated as they struggle to dig up money from people that are in financial distress and are resorting to tactics that would not normally be used. Complaints of debt collectors using foul language rose 35% in the last year and complaints of threats and violence doubled.  Some debt collectors have even told debtors that they would come to their home and take the money from them in any way that they could.

Understandably, many debtors are scared.  They do not have the money to pay the debt collectors and they are receiving harassing communications on a nearly constant basis.  It is common for some debt collectors to initiate a barrage of phone calls to the debtors, calling back to back for days at a time for months or years.  Most of these techniques being used by the debt collectors are actually illegal under the Federal Trade Commission’s Fair Debt Collection Practices Act.

Actions To Take

If you feel that you have been harassed by a debt collector, there are actions that you can take to end the harassment and hold the debt collector accountable for their actions.  The most important thing is to keep an accurate log of the times and content of the calls and report the debt collection company to the Federal Trade Commission.  They will investigate the case and censure the company if it is found that the complaint is valid.  The debtor can also take the debt collection company to court and sue for harassment and if the debtor wins, the debt collection company will be required to pay any damages associated with the case, including attorney’s fees, court costs, and lost income.

Getting A Mortgage That Works For You

Written by Toi Williams on Aug 23rd, 2010 | Filed under: loans

Purchasing a home is the biggest investment that you can make for your future and is probably the most expensive thing that you will ever purchase.  Obtaining a mortgage for the home can be tricky and choosing the wrong type of mortgage can end up costing you thousands of additional dollars each year.  There are a number of things that should be taken into consideration when choosing a mortgage for your home to ensure that you are getting the best financial product for your needs.

Type Of Mortgage

The first thing that you will need to decide when choosing a mortgage, including self build mortgages, for your home is to choose what type of mortgage you would like to get.  Although the adjustable rate mortgages may seem attractive with their lower initial payments, if interest rates rise you will be paying thousands of dollars more in interest to the lender and your mortgage payments may become unaffordable.  A fixed rate mortgage is preferable to an adjustable rate mortgage because the payments will remain the same for the entire life of the mortgage.

Mortgage Term

The length of the mortgage plays a large part in calculating the amount that you will be paying each month.  Most mortgage lenders will offer a term of 15 years or 30 years for a conventional mortgage and allow the homeowner to pay more than the mortgage amount to pay off their mortgage at a faster rate.  A shorter term for the mortgage will mean a higher monthly payment for the term of the mortgage, but the homeowner will pay less than half of the amount of interest that would be required under a 30 year mortgage term.

Mortgage Payment

A good rule of thumb to follow is that your monthly mortgage payment should not exceed 30% of your monthly take home pay or you may find yourself with a payment amount that you cannot afford.  If the payments required for a 15 year mortgage term is higher than this, you should consider signing for a 30 year mortgage term and put any additional money that you have at the end of the month towards paying off the mortgage earlier.

Mortgages To Avoid

There are some mortgage products that are common today that should be avoided at all costs.  This includes most of the “exotic” mortgage loans, such as interest only mortgage loans.  Many of the people that opted for these products did so because it allowed them to buy more house than they could truly afford through clever accounting techniques and deferring a portion of the required payments.  As these individuals soon found out, these types of mortgages have payments that can skyrocket in the blink of an eye and are very difficult to pay off or refinance.  A fixed rate mortgage loan is the best way to go.

If you’re looking for buy to let mortgages best buys, visit The Mortgage Broker.

When Is Bankruptcy The Answer?

Written by Toi Williams on Aug 21st, 2010 | Filed under: debt relief

Making a decision about declaring bankruptcy is never simple and is not an easy choice to make.  There are many negative connotations and emotions associated with bankruptcy which makes many people think twice about declaring bankruptcy, but in some cases, declaring bankruptcy is the only reasonable answer.  There are a number of things that should be considered when making the decision of whether or not to declare bankruptcy and careful consideration of these factors will help you make the best choice for your financial situation.

The Bankruptcy Process

The first thing that happens when a person files for bankruptcy is all current collection efforts are placed on hold.  This includes collection efforts, foreclosure proceedings, and wage garnishments.  If the person files for Chapter 7 bankruptcy, nearly all of their unsecured debts will be erased, but some of their property may be seized to repay some of the debt.  If the person files for Chapter 13 bankruptcy, then a portion of their debt is erased in return for an agreement to repay part of the debt and they are allowed to keep their property.

In some cases where the person’s income exceeds the median income for the area that they live in, they must meet certain qualifications to apply for Chapter 7 bankruptcy.  If a review of the case shows that the person should be able to repay some of their debts based on their income, then the person will not be able to declare Chapter 7 bankruptcy and will have to apply for Chapter 13 bankruptcy and repay a portion of their debt.

Choosing An Action

Many people arrive at the conclusion that they would be better off filing for bankruptcy after a long and arduous term of trying everything they can to dig themselves out of the financial hole that they find themselves in.  Large debt loads of high interest debt, like credit card debt, are one of the main reasons why people choose to file for bankruptcy.  Other reasons for choosing bankruptcy include high medical bills due to an accident or serious illness, job loss, and divorce.

If you find that your debts exceed your annual income and they would take decades to pay off, then you may be better off filing for bankruptcy and making a fresh start.  This is especially true if your debt is high interest debt.  Also, if you would need to use assets to pay off your debts that would otherwise be protected under a bankruptcy filing, such as the equity in your home or the money in your retirement account, bankruptcy may be your best option.  Be realistic about your current situation and talk to a financial professional that you can trust if you find yourself in a situation where you are considering bankruptcy.

Avoiding Overdrafts – It Is Not Impossible

Written by Toi Williams on Aug 19th, 2010 | Filed under: mindset

If you read any of the recent news about how well people are managing their bank accounts, you would think that it is nearly impossible to avoid overdrafting your bank account and paying hefty fees to your banking institution.  Experts estimate that 1 in 4 checking accounts are overdrawn at least once within the course of a year, so 25% of bank customers are paying the billions in fees associated with overdrafted bank accounts taken in by the banks each year.  Following these tips for avoiding overdrafts will keep you out of that 25% of banking customers paying overdraft charges.

Track Your Money

The easiest way to avoid overdraft charges from your bank is to track all of your deposits and withdrawals for the bank account.  This give you an accurate picture of your financial health at all times and will reduce the chances that you will spend more money than what the bank is showing available in your bank account.  Taking the time to perform this step every time money enters or leaves your bank account will save you hundreds of dollars in overdraft fees.

Pad Your Account

Another way to avoid overdrafts is to pad your bank account by $100 that is not reflected in your checkbook register.  This provides a cushion against overdrafts in the event you neglect to write down a small purchase in your checkbook or an unexpected fee reduces the balance of your bank account.  This can also be used as a savings method, with certain deposits into the bank account not written in the register to prevent the spending of the money.

Link Your Accounts

If you have a savings account or a line of credit with the bank that holds your checking account, you may want to consider linking your accounts together to reduce the cost of overdrafts.  In these cases, the banks charge a smaller fee, typically around $10, to transfer the amount needed to cover the shortfall in the checking account from one of the other accounts.  Of course, this method only works if there is enough money in the other account to bring the checking account balance out of the negative numbers.

Use The Alerts

Many banking institutions now have programs in place where their account holders can sign up online for email or text message alerts when the balance of the bank account is low.  Most of these programs allow the account holder to choose the balance amount that triggers the issuing of the alert so account holders that have large amounts of money regularly going into and out of the bank account can choose a higher balance alert limit to prevent overdrafts.

What The Banks Don’t Want You To Know About Courtesy Overdraft Protection

Written by Toi Williams on Aug 17th, 2010 | Filed under: mindset

If you have a bank account with one of the major banking institutions, chances are that you have been contacted some time in the past month and asked about whether you would like to keep the Courtesy Overdraft Protection active on your account.  Major banking institutions are putting out a media blitz via television commercials and mailings to homes along with charging each of their employees to ask each customer that has not already signed up for the service to indicate their agreement that the service be extended on their accounts. 

Unfortunately, most consumers are not hearing the whole story from the people that are pushing this service.  There are a number of things that the banks do not want consumers to know about Courtesy Overdraft Protection.

Courtesy Overdraft Protection Earns Banks Billions Of Dollars Each Year

A few years ago, many banks realized that they could make tons more money approving debit card overdrafts and charging a fee than they could by turning those transactions down.  Many of the largest banking institutions quietly changed their policies to automatically enroll all of their account holders into this service and made it difficult, if not impossible, to opt out of the service.  As a result, the fees from overdraft charges resulted in a larger and larger percentage of bank profits year after year, fueling large raises and bonuses for those at the top of the management chain.

The Fee Is Typically Much Bigger Than The Transaction That Triggered It

The typical fee associated with Courtesy Overdraft Protection programs range from $27 to $35 per incident.  This fee is paid for each charge that has overdrafted the account, regardless of whether it is a $200 charge or a $5 charge.  As people began to use their debit cards for small, everyday purchases, the number of $35 fees charged for $5 debit card charges skyrocketed, resulting in many individuals unintentionally having to pay $40 for a $5 fast food meal.

Courtesy Overdraft Protection Fees Affect 25% Of Account Holders

In 2008, the Federal Deposit Insurance Corp. conducted a study to find out how many consumers were being affected by the automatic fees generated by Courtesy Overdraft Protection programs.  They found that nearly 1 in 4 checking accounts became overdrawn at least once during the course of the year, resulting in Courtesy Overdraft Protection fees being charged to the account.  Low income individuals, senior citizens, and college students paid the majority of these fees.

Creative Saving Methods That Anyone Can Use

Written by Toi Williams on Aug 14th, 2010 | Filed under: saving

There are many people that neglect to save for a rainy day because saving their money is not as exciting and doesn’t create the same euphoria that spending the money on new items creates.  In order to generate enthusiasm for saving money, you may want to try some creative saving methods that anyone can use to save money in a quick and painless way.  Here are some of the most commonly used creative saving methods.

Bundling Bills

This saving method brings to mind the old practice of saving all of your spare change in a jar, just on a grander scale.  With the bundling bills method, every time a certain unit of currency crosses your hand, such as a $5 or $10 bill, that bill is not spent and is placed into a jar or bank to be saved for a rainy day.  This helps accumulate savings much more quickly than the spare change method and the saved money can be deposited into your savings account once or twice per year.

Account Padding

Account padding is a great way to save without having to put much effort into it.  The account padding method works best when the person uses a checking ledger or personal finance software to keep track of their spending.  Once a month, “write” yourself a check for a particular amount of money in your ledger and deduct that money from the balance of the account without removing the money from the account.  This effectively hides the funds from you, reducing the chance that the money will be spent and adding a cushion to the account to prevent accidental overdrafts.

Personal Fun Tax

Another great way to save money on a regular basis is to charge yourself a personal fun tax whenever you spend money on non-essential purchases.  The easiest way to use this method is to charge yourself a 10% tax on the total price of the purchase, whether it is movie tickets, dining out, or purchasing concert tickets, and immediately pay that money into your savings account.  You will be amazed at the reduction in your spending when you have to think about effectively paying 10% more for the item and will be astounded to see how fast the balance of your savings account grows when you use this saving method.

Tips For Getting Your Finances In Order

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

One of the hardest things for many people to do is get a handle on their financial situation.  This is true for individuals across the spectrum, regardless of age, sex, or income.  The key to getting your finances in order is to become organized enough that you can identify where your money is going and plug the leaks in your financial planning that is draining your cash.

The reason that so many people neglect to take control of their finances is because it seems like a time consuming and tedious thing to do, which doesn’t mesh with our “go at top speed constantly” culture.  It can be difficult to arrange your financial information so that what you need to know is easily accessible and simple to identify, but it can be done with time and dedication.  Here are some tips for getting your financial house in order.

Track All Expenses

You will never be able to take control of your finances if you do not know where your money is going.  Tracking all of your expenses is the first and most important step of getting your financial situation in order and is the easiest way to identify spending excesses.  Most people track the larger items that they consider important, like mortgage payments, utility costs, and credit card payments, but neglect to monitor their smaller spending categories, such as dining out and entertainment, that are the real budget busters.

Start A Budget

Once you have identified and tracked your expenses, it would be prudent to design a household budget that you can stick to.  This supplies you with a spending amount for each category that is manageable, a specific amount for saving each month, and a way to prevent overspending.  Depending on the household, this budget can be very simple and streamlined without many entries or be complex with numerous categories to track.

Use Financial Planning Software

If taking control of your finances is proving difficult, you may need the assistance of financial planning software.  There are a number of different financial planning software programs available online and in retail stores, ranging in price from $0 for the simplest solutions on the internet to over $300 for the more complex programs sold by independent developers and retailers.  It is very important for the person choosing the software program to review the details of the program carefully to ensure that they are getting the best financial planning software for their needs.