By Andrew Housser
For many people, as they age, the term
"golden years" may be a misnomer. More and more people are struggling
with debt, due to the combination of the recent economic recession,
lower income as they age, and increasing health costs.
How tight are budgets? Among those older than
age 75, nearly 40 percent lived below 200 percent of the poverty line
in 2009, with annual income of less than $26,000 for a couple. And older
people are going deeper into debt: In 2007, the most recent year with
data available, people over age 55 had a median debt level of $43,000.
That is 170 percent higher than in 1992. In 2007, families with a head
of household age 75 or over spent 7.7 percent of their income paying off
debts.
If you are concerned that your
parents might be struggling with debt, here are some suggested ways
that you can start to help them get a handle on their financial
problems.
1. Open the lines of communication.
Begin talking with your parents about their
finances before they need help, if possible. Some families find it
easier to open a discussion by mentioning an article they read on the
subject, for example. Or you can ask in the context of a current event.
It can be awkward to discuss your parents' finances, but if you assure
them that you are only wanting to be sure they are taken care of, you
can start the conversation.
2. Determine the need.
Once communication is open, you can start to
determine if your parents are in need of help or not. The first step is
to ensure that your parents have food, shelter and health care.
Especially if you suspect they are charging these expenses to credit
cards, or going without, ask if you can help with these costs, within
your means. Or help them find other resources to help.
3. Check that they are comfortable managing their money.
Many people have trouble managing their
budget after they retire. Even people who live frugally might find that
they simply cannot make ends meet. Other people face real challenges
after they are widowed. If the spouse who handled the bills dies, the
widow or widower might have difficulty coping with their finances on
their own.
4. Decide on how much you can help.
If your parents are in need, are you able to
assist them financially? If so, how much? Can you help with long-term
care or medical costs? What about the cost of paying off debt? Can you
help an elderly parent pay for the cost of assisted living, or would you
prefer your mother or father live with you if they need support? Make a
personal plan, together with your spouse and family if appropriate, to
set boundaries that will let you help your parents, while not going into
debt yourself to do so.
5. Stand on your own two feet.
Some adults are concerned about their
parents' financial lifestyles, but meanwhile, their parents are still
helping to support them. A good step to help parents live within their
means is to ensure that they are not still funding adult children's
lifestyles. Do not rely on your parents to pay for your education,
student loan repayment, care payment, rent, utilities or other costs of
living. Discuss this topic with your siblings as well. To go a step
further, if parents are paying off a son or daughter's student loan, or a
parent loan taken out for the child's education, talk with your parents
to see if you can take on some or all of payments to ease the burden.
6. Consider medical expenses early.
A huge issue for aging people is the cost of health care. Be sure your parents apply for Medicare close to their 65th
birthday. Find out if they have long-term-care insurance, and if not,
if it makes sense for them to purchase it (it is less costly the earlier
you purchase it). It is also possible for children to purchase
insurance for their parents, or save money in a dedicated account to
help with this expense later on.
7. Understand implications of debt on your parents' estate.
Don't panic if your parents have credit card
debt. This is not license for them to build up credit card debt, but do
understand that, to the extent the estate cannot cover the debts,
children will generally not be liable for the debt after they die. (Laws
vary by state, but typically, debts are paid by the estate after a
death.) The major issue caused by debt is your parents' quality of life
and level of worry during their lifetime.
8. Be cautious about co-signing on debt with your parents.
If you co-sign a debt arrangement, and if
your parent does not repay the debt, you will be liable to repay it in
full. As such, approach this decision with a full understanding of the
facts and the risks.
9. Get outside help if needed.
Some families find it is preferable to hire
an outside bookkeeper to help parents with their financial management --
and maintain their privacy. Other families divide and conquer,
splitting up responsibilities among siblings or other relatives.
Community organizations, from churches to nonprofits to social services
organizations, also might be able to help with subsidizing bills,
providing food assistance, or offering community resources. If your
parents own their home, a reverse mortgage can sometimes help, allowing
them to use some of their equity to fund living expenses now. Take the
time to research your options and find help that works for your family.
10. Consider other means of help if their debt is overwhelming.
If parents are unable to pay their debt, are
keeping lights off or skipping necessities to pay debt, or are dodging
collections calls, you might need to investigate alternatives together.
Many potential solutions exist for people struggling with credit card
debt. Some people might qualify for a debt consolidation home equity
loan. Others might benefit from debt management programs that can offer
interest rate reductions, or debt settlement (also known as credit
advocacy) for those in need of significant payment relief and principal
reduction.
Whatever means you choose to help elderly
parents resolve their debt problems, it is well worth opening the
conversation with them. By helping them find better financial footing,
you can both find peace of mind, and help make those later years
"golden" after all.
Source
Thursday, March 15, 2012
Tuesday, March 6, 2012
Take This ID Theft Quiz for National Consumer Protection Week
Hi
everybody, and happy Monday. Depending on where you live, you might be
celebrating Frozen Food Day, Mardi Gras, or If Pets Had Thumbs Day (at
least according to an Internet list of “wacky holidays.”) But one thing
everybody should be celebrating is our 14th annual National
Consumer Protection Week! Running through March 10, this holiday will
shine a national spotlight on consumer safety in the U.S.I thought it would be fun to take a little quiz on identity theft from the Privacy Rights Clearinghouse: Answer to see what your risk is. I myself scored 45—not bad, but I could do better.
___ I receive several offers of pre-approved credit every week. (5 points)
___ I do not shred the pre-approved credit offers I receive (cross-cut shredder preferred) before putting them in the trash. (5 points)
___ I carry my Social Security card in my wallet. (10 points)
___ I use a computer and do not have up-to-date anti-virus, anti-spyware, and firewall protection. (10 points)
___ I do not believe someone would break into my house to steal my personal information. (10 points)
___ I have not ordered a copy of my credit reports for at least 2 years. (20 points)
___ I use an unlocked, open box at work or at my home to drop off my outgoing mail. (10 points)
___ I do not have a P.O. Box or a locked, secured mailbox. (5 points)
___ I carry my military ID in my wallet at all times. (It may display my SSN.) (10 points)
___ I do not shred my banking and credit information, using a cross-cut “confetti” shredder, when I throw it in the trash. (10 points)
___ I throw away old credit and debit cards without shredding or cutting them up. (5 points)
___ I use an ATM machine and do not examine it for signs of tampering. (5 points)
___ I provide my Social Security number (SSN) whenever asked, without asking why it is needed and how it will be safeguarded. (10 points)
___ Add 5 points if you provide it orally without checking to see who might be listening nearby.
___ I respond to unsolicited email messages that appear to be from my bank or credit card company. (10 points)
___ I leave my purse or wallet in my car. (10 points)
___ I have my driver’s license number and/or SSN printed on my personal checks. (10 points)
___ I carry my Medicare card in my wallet at all times. (It displays my SSN.) (10 points)
___ I do not believe that people would root around in my trash looking for credit or financial information or for documents containing my SSN. (10 points)
___ I do not verify that all financial (credit card, debit card, checking) statements are accurate monthly. (10 points)
Ok, now tally up your points. Guess what? Each one of these questions represents a possible avenue for an identity thief. How did you do?
- 100 + points – Recent surveys* indicate that 8-9 million people are victims of ID theft each year. You are at high risk. We recommend you purchase a cross-cut paper shredder, become more security-aware in document handling, and start to question why people need your personal data.
- 50-99 points – Your odds of being victimized are about average.
- 0-49 points – Congratulations. You have a high “IQ.” Keep up the good work and don’t let your guard down now.
Over thirty different agencies are participating in providing great information for consumers this week, including the BBB, so check out National Consumer Protection Week information. Also, sign up for a daily tip from the BBB!
Friday, February 24, 2012
5 Important Lessons about Credit that Most People Learn the Hard Way
By Kris Bickell, on February 19, 2012
Years ago I had a co-worker who had a saying: credit cards don’t come with instructions! How true. On the one hand having a credit card makes buying so easy. Just hand over your card, and worry about paying later. No need to carry cash. No need to carry around your checkbook. No need to even visit a store in person. What could be easier? But on the other hand, having credit also makes it so easy to spend more than you can afford — and get quickly overwhelmed with debt!
Sadly, many people don’t learn about credit until they get their first credit card. They usually don’t learn this type of financial information in school. And they often don’t learn it from their parents either. Sure, they might hear the warnings about only buying what you can afford, saving for the future, and managing your money wisely. But like many lessons in life, we don’t learn how credit works until we experience it for ourselves.
Not that learning lessons first-hand is bad. But when it comes to credit cards, the truth is that avoiding debt problems is much, much easier than dealing with them!
5 Credit Lessons
So, here are 5 credit lessons that most people learn the hard way. No matter how good or bad your financial picture is right now, it’s never too late to learn how to avoid some of problems that come with credit:
1. Getting Credit is Easy at the Beginning
When you are young and just starting out as an adult, getting credit is often quite easy. Back when I was in college I got an American Express credit card BEFORE I graduated — which means before I got a job and started making money. Why would any bank give a college kid credit? Because they knew I would soon get a job and they wanted me as a customer before I knew better. I knew this was a big responsibility, but I should have never applied for the card until I was really ready.
2. The Banks Keep Giving You Credit Even When They Probably Should Not
In a perfect world, the banks would be able to see that you are getting yourself into debt and not keep giving you more credit. But as long as you are making enough money, and as long as you are paying on time, you mean one thing to the banks — profit! So they’ll keep approving you for more and more credit, until one day you’re in over your head. Of course, this is not their fault — it’s your fault for not taking care of yourself. But it is still a hard lesson to learn that the banks don’t care about how much debt you have, they only care about how much money they can make from you.
3. You Control Your Credit
Not the banks. Not the stores. Not your employer. So stop blaming others for your financial problems, and take control. Set a goal. Make a commitment. Write out a plan, then follow it until you achieve your goal.
4. You Don’t Have to Live with Bad Credit Forever (or Even 7 Years).
Typically bad credit — such as late payments, being over your credit limit, accounts that go into collections, and debt settlements — will remain on your credit for 7 years. But there are ways to repair your credit and get the bad credit removed, and you can do it legally and ethically. Just get a good credit repair manual, and follow the instructions. It takes some time and effort, but you can usually get quite a few negative items removed, and improve your credit score.
5. For Many People “Perfect Credit” is an Illusion.
Quote often people will say “I have so much debt I can’t pay it but I don’t want to do anything to ruin my perfect credit.” Well, perfect credit means more than just paying on time. It means not having so much debt you can’t afford to pay for regular living expenses. It means realizing that if you can’t pay, then you shouldn’t be using credit anyway. So this idea of perfect credit just because you pay in time is really just an illusion.
And one final tip — if you end up getting into trouble with too much debt or end up damaging your credit, don’t panic. There are legitimate ways to get out of debt and fix credit problems. But there are no “secrets” that will help you fix either overnight. So don’t fall victim to one of those companies or experts you see on late night TV. If it sounds too good to be true, then it usually is. Consider that bonus lesson #6!
Source
Years ago I had a co-worker who had a saying: credit cards don’t come with instructions! How true. On the one hand having a credit card makes buying so easy. Just hand over your card, and worry about paying later. No need to carry cash. No need to carry around your checkbook. No need to even visit a store in person. What could be easier? But on the other hand, having credit also makes it so easy to spend more than you can afford — and get quickly overwhelmed with debt!
Sadly, many people don’t learn about credit until they get their first credit card. They usually don’t learn this type of financial information in school. And they often don’t learn it from their parents either. Sure, they might hear the warnings about only buying what you can afford, saving for the future, and managing your money wisely. But like many lessons in life, we don’t learn how credit works until we experience it for ourselves.
Not that learning lessons first-hand is bad. But when it comes to credit cards, the truth is that avoiding debt problems is much, much easier than dealing with them!
5 Credit Lessons
So, here are 5 credit lessons that most people learn the hard way. No matter how good or bad your financial picture is right now, it’s never too late to learn how to avoid some of problems that come with credit:
1. Getting Credit is Easy at the Beginning
When you are young and just starting out as an adult, getting credit is often quite easy. Back when I was in college I got an American Express credit card BEFORE I graduated — which means before I got a job and started making money. Why would any bank give a college kid credit? Because they knew I would soon get a job and they wanted me as a customer before I knew better. I knew this was a big responsibility, but I should have never applied for the card until I was really ready.
2. The Banks Keep Giving You Credit Even When They Probably Should Not
In a perfect world, the banks would be able to see that you are getting yourself into debt and not keep giving you more credit. But as long as you are making enough money, and as long as you are paying on time, you mean one thing to the banks — profit! So they’ll keep approving you for more and more credit, until one day you’re in over your head. Of course, this is not their fault — it’s your fault for not taking care of yourself. But it is still a hard lesson to learn that the banks don’t care about how much debt you have, they only care about how much money they can make from you.
3. You Control Your Credit
Not the banks. Not the stores. Not your employer. So stop blaming others for your financial problems, and take control. Set a goal. Make a commitment. Write out a plan, then follow it until you achieve your goal.
4. You Don’t Have to Live with Bad Credit Forever (or Even 7 Years).
Typically bad credit — such as late payments, being over your credit limit, accounts that go into collections, and debt settlements — will remain on your credit for 7 years. But there are ways to repair your credit and get the bad credit removed, and you can do it legally and ethically. Just get a good credit repair manual, and follow the instructions. It takes some time and effort, but you can usually get quite a few negative items removed, and improve your credit score.
5. For Many People “Perfect Credit” is an Illusion.
Quote often people will say “I have so much debt I can’t pay it but I don’t want to do anything to ruin my perfect credit.” Well, perfect credit means more than just paying on time. It means not having so much debt you can’t afford to pay for regular living expenses. It means realizing that if you can’t pay, then you shouldn’t be using credit anyway. So this idea of perfect credit just because you pay in time is really just an illusion.
And one final tip — if you end up getting into trouble with too much debt or end up damaging your credit, don’t panic. There are legitimate ways to get out of debt and fix credit problems. But there are no “secrets” that will help you fix either overnight. So don’t fall victim to one of those companies or experts you see on late night TV. If it sounds too good to be true, then it usually is. Consider that bonus lesson #6!
Source
Thursday, February 9, 2012
Tuesday, January 31, 2012
How Important is a Budget?
The first thing we did when we decided to get out of debt was reevaluate our
budget. We knew that we had to change the way we spent our
money before our financial situation could change.
The amount of information out there on budgeting is overwhelming. There are lots of trite and obvious articles out there (like this one) that give such groundbreaking (and condescending) advice as “Incurring debt is easy but getting out of debt is not.” or “Reducing the luxuries will always be the best place to start for you to make some real savings with the least impact on your lifestyle.”
I’ve even read articles recently discouraging people from budgeting because, “You know you should budget, but you also know you’re not really going to do it.”
I vehemently disagree with this logic. The NUMBER ONE reason people are in so much financial trouble right now is that they are not willing to put in the work and sacrifice needed to save money, wait for purchases, or do without some things altogether. The simple act of budgeting is like an athlete training and developing discipline. At some point you have to be willing to do the hard and boring things if you want to make changes and improve your situation.
I will say that, in the previously mentioned article, the author goes on to talk about the idea of an “Anti-Budget” – a worksheet listing all the things you have to pay subtracted from your income, leaving you with what he calls a spending allowance. In my mind, that is a budget, so what he’s really doing is just trying to present the idea of budgeting in a different way. That’s good.
Back to our family’s budget. When we started reevaluating our finances, we had two assumptions:
“Rock bottom” for us still meant spending more than we earned, so we knew something had to change. When we decided to get this debt taken care of – whatever the cost – we started cutting mercilessly: turning off cable, selling a car (only paying for gas and maintenance on one vehicle has saved us more than we imaginged it would!), even cutting a few important things – like piano lessons for the kids – for a short time. A lot of these changes won’t be permanent, but paying off our debt is more important to us (short- and long-term) than having these luxuries that just a few months ago seemed like necessities.
Income
When I realized that “income” did not have to equal “salary,” that was a game-changer for me. Instead of relying solely on the salary from mine and my husband’s jobs, we started trying to think of other ways we could earn money during the month. Clothing that we normally would have (tried to) sell in a garage sale, we started putting up on eBay (and getting three times a garage-sale price). We sold over half of the Wii games that our kids no longer played. Things that had been lying around the house, taking up space, now became valuable.
My point in saying all of this: If you want to badly enough, you can always find something to do to make more money. Whether it’s selling stuff or teaching an instrument or a hundred other possibilities, don’t wait for someone to give you the money you “deserve” – go out and get it.
I’ve written more about our family’s budgeting philosophy. When we dealt with these two areas, budgeting because a lot less overwhelming. It’s still hard – and it takes discipline to stick to it. When financial crises come, the single best first step in tackling them is to have a written budget that will show you where your money is going. If money isn’t tight, your budget can probably be a lot less formal than ours is, but even then it’s still important to, as Dave Ramsey says, “Tell your money where to go, so you don’t have to wonder where it went.”
Source
The amount of information out there on budgeting is overwhelming. There are lots of trite and obvious articles out there (like this one) that give such groundbreaking (and condescending) advice as “Incurring debt is easy but getting out of debt is not.” or “Reducing the luxuries will always be the best place to start for you to make some real savings with the least impact on your lifestyle.”
I’ve even read articles recently discouraging people from budgeting because, “You know you should budget, but you also know you’re not really going to do it.”
I vehemently disagree with this logic. The NUMBER ONE reason people are in so much financial trouble right now is that they are not willing to put in the work and sacrifice needed to save money, wait for purchases, or do without some things altogether. The simple act of budgeting is like an athlete training and developing discipline. At some point you have to be willing to do the hard and boring things if you want to make changes and improve your situation.
I will say that, in the previously mentioned article, the author goes on to talk about the idea of an “Anti-Budget” – a worksheet listing all the things you have to pay subtracted from your income, leaving you with what he calls a spending allowance. In my mind, that is a budget, so what he’s really doing is just trying to present the idea of budgeting in a different way. That’s good.
Back to our family’s budget. When we started reevaluating our finances, we had two assumptions:
- There’s no way we can decrease our current expenses – we’re already at rock bottom.
- There’s no way we can increase our income – that’s beyond our control.
“Rock bottom” for us still meant spending more than we earned, so we knew something had to change. When we decided to get this debt taken care of – whatever the cost – we started cutting mercilessly: turning off cable, selling a car (only paying for gas and maintenance on one vehicle has saved us more than we imaginged it would!), even cutting a few important things – like piano lessons for the kids – for a short time. A lot of these changes won’t be permanent, but paying off our debt is more important to us (short- and long-term) than having these luxuries that just a few months ago seemed like necessities.
Income
When I realized that “income” did not have to equal “salary,” that was a game-changer for me. Instead of relying solely on the salary from mine and my husband’s jobs, we started trying to think of other ways we could earn money during the month. Clothing that we normally would have (tried to) sell in a garage sale, we started putting up on eBay (and getting three times a garage-sale price). We sold over half of the Wii games that our kids no longer played. Things that had been lying around the house, taking up space, now became valuable.
My point in saying all of this: If you want to badly enough, you can always find something to do to make more money. Whether it’s selling stuff or teaching an instrument or a hundred other possibilities, don’t wait for someone to give you the money you “deserve” – go out and get it.
I’ve written more about our family’s budgeting philosophy. When we dealt with these two areas, budgeting because a lot less overwhelming. It’s still hard – and it takes discipline to stick to it. When financial crises come, the single best first step in tackling them is to have a written budget that will show you where your money is going. If money isn’t tight, your budget can probably be a lot less formal than ours is, but even then it’s still important to, as Dave Ramsey says, “Tell your money where to go, so you don’t have to wonder where it went.”
Source
Thursday, January 19, 2012
Meet Fee-Fighting Vigilante Molly Katchpole
She took on Bank of America and then Verizon over fees By Minda Zetlin
If it weren't for Molly Katchpole, we might all be paying some sort of fee for using our debit cards.
In October 2011, Bank of America announced its intention to charge some customers who used debit cards $5 a month for the privilege, and several other large banks said they planned a similar move. It was Katchpole, a recent college graduate working two part-time jobs, who posted a petition on Change.org demanding that the bank rescind the fee that forced the bank to change plans.
"The American people bailed out Bank of America during a financial crisis the banks helped create. And now your bank is profiting," read the petition. Four-and-a-half weeks and 306,000 signatures later, Bank of America announced it was canceling its controversial fee.
Fast forward to Dec. 29, 2011, when Verizon Wireless announced it would begin charging customers $2 for making one-time credit or debit card payments online or over the phone using its automated system. The move was intended to force customers into using its auto-pay option instead. This time, instead of weeks, it took less than a day for Verizon to reverse its course. The mobile giant changed its mind after another petition posted by Katchpole collected more than 160,000 signatures in less than 12 hours.
CreditCards.com caught up with Katchpole to talk about her motivations and her personal finance philosophy.
CreditCards.com: What inspired you to start the petition against the Bank of America debit card fee?
Molly Katchpole: I was hanging around online reading the news, and saw Bank of America was planning this new fee in early 2012. They didn't really give any explanation, and I couldn't think of any except that they wanted more profit. So I went to Change.org. I had signed a couple of petitions there and knew they'd had a lot of victories in the past. I wrote up a petition, it went up and within a couple of days it had tens of thousands of signatures.
After about a week, I closed my bank account. The media really liked that, and I started getting a lot of press attention for it. I think I became the face of the whole thing. Sometimes when there's a lot of customer upheaval, there's no face to it, but I think that's what I was.
After about two and a half weeks, a Bank of America executive called me up. He wanted to explain the fee to me, and we talked on the phone for about 25 minutes. It was a weird conversation because I didn't really believe anything he said. It all sounded very scripted.
CreditCards.com: What explanation did he give?
Molly Katchpole: He said that they wanted to be more transparent with their fees. But that's not an actual reason. They're trying to be more transparent with their fees so they're announcing this one, but it doesn't explain the fee itself. To be honest, I think Bank of America handled the whole situation very poorly. It took them a while to say anything at all. It was like a train wreck for them.
After a month, three other big banks that had been [intending] to impose a debit card fee backed down, and after three more days, Bank of America backed down, too.
CreditCards.com: What do you think made it possible for you to have such a huge effect?
Molly Katchpole: Change.org was wonderful because it has a huge email list. It's a way to reach a lot of people who sign petitions. Occupy Wall Street was going really strong at the time and that had a lot to do with it. Bank Transfer Day, a movement for people to transfer their accounts from big banks to community banks or credit unions had been announced, so that certainly helped. You had hundreds of thousands of people leaving their banks. They were getting awful press.
It also had a lot to do with the timing. They had just raked in $2 billion of profit the previous quarter. And a lot of people in America are in a really bad slump right now, deeply in debt or with their houses underwater. I don't think they were expecting the amount of backlash they got.
CreditCards.com: With Verizon Wireless, it took less than a day for the company to cancel its plan to impose its $2 billing fee. And it appears the phrase that scared them out of it was "Molly Katchpole."
Molly Katchpole: I would love to think that! But people were extremely upset. The petition I put up was doing even better than the Bank of America one had. A lot of people say that big companies don't pay attention to that kind of stuff. They absolutely pay attention. When I talked to the Bank of America executive, he said they noticed my petition the first day or two that it was up.
A petition is a concrete collection of people who are upset. You don't have to look on Twitter or Facebook to see how many people are upset, although you can do that, too. But Verizon could see over 160,000 people had signed the petition. I think that definitely had something to do with their decision. Verizon was also being investigated by the Federal Communications Commission over the fee.
CreditCards.com: You had two part-time jobs at the time the Bank of America fee was announced. What were they?
Molly Katchpole: I was a nanny. I was also working for a political public relations firm, which was just me and one other woman. It was really great, but it was freelance and it varied each week.
CreditCards.com: Do you think working for that PR firm gave you insight into how to do this?
Molly Katchpole: No. And when I was in college, I didn't study anything that had to do with politics. My degree is in art and architectural history. But I was always an activist at heart, and I've been using Twitter for a long time. I've been using social networks and the Internet since I was in middle school. I think my generation is programmed to use the Internet for this kind of stuff.
CreditCards.com: So anyone could do what you did?
Molly Katchpole: Yes. I really want people to do it, but we need to be strategic and not go after every single thing. There's something to be said for writing down how you're feeling about something. If you look at the petitions, I list why the fees are wrong. I think that's an effective approach. We need to be able to mix emotions with facts and hard lines of reasons. We need to be as strategic as these companies are being.
CreditCards.com: What are you doing now?
Molly Katchpole: I'm a fellow at a nonprofit called Rebuild the Dream. I'm on a team that creates campaigns and petitions. I'd been following Rebuild the Dream since it started and had applied for a fellowship but not heard back. Then I did hear back at the end of the first petition -- I think maybe they saw it -- and they hired me as a fellow.
CreditCards.com: What is your own personal finance philosophy?
My personal finance philosophy all along has been to live below my means. So just because I can afford to go out every day and get coffee at Dunkin Donuts, or go out to eat two nights a week, doesn't mean that I should. I learned that from my parents.
Molly Katchpole: That's a really interesting question that I've never been asked. I absolutely do! I grew up in a working, middle-class family and learned a lot from my parents. My mother was excellent at handling our money and my parents had beyond perfect credit. They knew how important it is to be as financially independent as possible.
When I was in high school, I always had a job. When I was in college, I had a work-study job as part of my financial aid. I worked in the summers. My personal finance philosophy all along has been to live below my means. So just because I can afford to go out every day and get coffee at Dunkin Donuts, or go out to eat two nights a week, doesn't mean that I should. I learned that from my parents. Our vacations were always a lot of fun. We would go to Vermont and have a little cabin for a week, but it was never extravagant.
My dad's a machinist and my mom's a physical therapist's assistant. There weren't tons of extras, but we lived very comfortably. I'm worried that people in my generation who are working those types of jobs might not be able to do that.
CreditCards.com: Do you have a lot of student debt from college?
Molly Katchpole: I have a 15-year repayment and $60,000 in debt. That sucks, and I don't necessarily think it should be that way, but that's how it is for me right now.
I've been at my job since the end of November, so I'm still in a grace period for paying back these loans, and am trying to save up money so I can pay them back. I have two private student loans and unsubsidized and subsidized Stafford federal loans. On one of my student loans, I owe $180 a month, and on the other $190 a month. I think when I consolidate my Stafford loans they will total about the same. If you pay a little more each month, it goes straight to principal. So I made the decision that I'm going to make it a nice and easy round number: $200 a month for each of those loans. That way, I can reduce the principal more quickly.
CreditCards.com: If you could imagine the perfect job for you to be in 10 years from now, what would it be?
Molly Katchpole: Working to uphold the working and middle class and make sure they don't wither away is really, really important to me. I'd like to be able to do that.
I would also really like to be a teacher. Actually, there are a lot of different things that I'm interested in and am feeling it all out right now. I don't know where I'm going to be in 10 years. And I'm OK with that.
Source
If it weren't for Molly Katchpole, we might all be paying some sort of fee for using our debit cards.
In October 2011, Bank of America announced its intention to charge some customers who used debit cards $5 a month for the privilege, and several other large banks said they planned a similar move. It was Katchpole, a recent college graduate working two part-time jobs, who posted a petition on Change.org demanding that the bank rescind the fee that forced the bank to change plans.
"The American people bailed out Bank of America during a financial crisis the banks helped create. And now your bank is profiting," read the petition. Four-and-a-half weeks and 306,000 signatures later, Bank of America announced it was canceling its controversial fee.
Fast forward to Dec. 29, 2011, when Verizon Wireless announced it would begin charging customers $2 for making one-time credit or debit card payments online or over the phone using its automated system. The move was intended to force customers into using its auto-pay option instead. This time, instead of weeks, it took less than a day for Verizon to reverse its course. The mobile giant changed its mind after another petition posted by Katchpole collected more than 160,000 signatures in less than 12 hours.
CreditCards.com caught up with Katchpole to talk about her motivations and her personal finance philosophy.
CreditCards.com: What inspired you to start the petition against the Bank of America debit card fee?
Molly Katchpole: I was hanging around online reading the news, and saw Bank of America was planning this new fee in early 2012. They didn't really give any explanation, and I couldn't think of any except that they wanted more profit. So I went to Change.org. I had signed a couple of petitions there and knew they'd had a lot of victories in the past. I wrote up a petition, it went up and within a couple of days it had tens of thousands of signatures.
After about a week, I closed my bank account. The media really liked that, and I started getting a lot of press attention for it. I think I became the face of the whole thing. Sometimes when there's a lot of customer upheaval, there's no face to it, but I think that's what I was.
After about two and a half weeks, a Bank of America executive called me up. He wanted to explain the fee to me, and we talked on the phone for about 25 minutes. It was a weird conversation because I didn't really believe anything he said. It all sounded very scripted.
CreditCards.com: What explanation did he give?
Molly Katchpole: He said that they wanted to be more transparent with their fees. But that's not an actual reason. They're trying to be more transparent with their fees so they're announcing this one, but it doesn't explain the fee itself. To be honest, I think Bank of America handled the whole situation very poorly. It took them a while to say anything at all. It was like a train wreck for them.
After a month, three other big banks that had been [intending] to impose a debit card fee backed down, and after three more days, Bank of America backed down, too.
CreditCards.com: What do you think made it possible for you to have such a huge effect?
Molly Katchpole: Change.org was wonderful because it has a huge email list. It's a way to reach a lot of people who sign petitions. Occupy Wall Street was going really strong at the time and that had a lot to do with it. Bank Transfer Day, a movement for people to transfer their accounts from big banks to community banks or credit unions had been announced, so that certainly helped. You had hundreds of thousands of people leaving their banks. They were getting awful press.
It also had a lot to do with the timing. They had just raked in $2 billion of profit the previous quarter. And a lot of people in America are in a really bad slump right now, deeply in debt or with their houses underwater. I don't think they were expecting the amount of backlash they got.
CreditCards.com: With Verizon Wireless, it took less than a day for the company to cancel its plan to impose its $2 billing fee. And it appears the phrase that scared them out of it was "Molly Katchpole."
Molly Katchpole: I would love to think that! But people were extremely upset. The petition I put up was doing even better than the Bank of America one had. A lot of people say that big companies don't pay attention to that kind of stuff. They absolutely pay attention. When I talked to the Bank of America executive, he said they noticed my petition the first day or two that it was up.
A petition is a concrete collection of people who are upset. You don't have to look on Twitter or Facebook to see how many people are upset, although you can do that, too. But Verizon could see over 160,000 people had signed the petition. I think that definitely had something to do with their decision. Verizon was also being investigated by the Federal Communications Commission over the fee.
CreditCards.com: You had two part-time jobs at the time the Bank of America fee was announced. What were they?
Molly Katchpole: I was a nanny. I was also working for a political public relations firm, which was just me and one other woman. It was really great, but it was freelance and it varied each week.
CreditCards.com: Do you think working for that PR firm gave you insight into how to do this?
Molly Katchpole: No. And when I was in college, I didn't study anything that had to do with politics. My degree is in art and architectural history. But I was always an activist at heart, and I've been using Twitter for a long time. I've been using social networks and the Internet since I was in middle school. I think my generation is programmed to use the Internet for this kind of stuff.
CreditCards.com: So anyone could do what you did?
Molly Katchpole: Yes. I really want people to do it, but we need to be strategic and not go after every single thing. There's something to be said for writing down how you're feeling about something. If you look at the petitions, I list why the fees are wrong. I think that's an effective approach. We need to be able to mix emotions with facts and hard lines of reasons. We need to be as strategic as these companies are being.
CreditCards.com: What are you doing now?
Molly Katchpole: I'm a fellow at a nonprofit called Rebuild the Dream. I'm on a team that creates campaigns and petitions. I'd been following Rebuild the Dream since it started and had applied for a fellowship but not heard back. Then I did hear back at the end of the first petition -- I think maybe they saw it -- and they hired me as a fellow.
CreditCards.com: What is your own personal finance philosophy?
My personal finance philosophy all along has been to live below my means. So just because I can afford to go out every day and get coffee at Dunkin Donuts, or go out to eat two nights a week, doesn't mean that I should. I learned that from my parents.
Molly Katchpole: That's a really interesting question that I've never been asked. I absolutely do! I grew up in a working, middle-class family and learned a lot from my parents. My mother was excellent at handling our money and my parents had beyond perfect credit. They knew how important it is to be as financially independent as possible.
When I was in high school, I always had a job. When I was in college, I had a work-study job as part of my financial aid. I worked in the summers. My personal finance philosophy all along has been to live below my means. So just because I can afford to go out every day and get coffee at Dunkin Donuts, or go out to eat two nights a week, doesn't mean that I should. I learned that from my parents. Our vacations were always a lot of fun. We would go to Vermont and have a little cabin for a week, but it was never extravagant.
My dad's a machinist and my mom's a physical therapist's assistant. There weren't tons of extras, but we lived very comfortably. I'm worried that people in my generation who are working those types of jobs might not be able to do that.
CreditCards.com: Do you have a lot of student debt from college?
Molly Katchpole: I have a 15-year repayment and $60,000 in debt. That sucks, and I don't necessarily think it should be that way, but that's how it is for me right now.
I've been at my job since the end of November, so I'm still in a grace period for paying back these loans, and am trying to save up money so I can pay them back. I have two private student loans and unsubsidized and subsidized Stafford federal loans. On one of my student loans, I owe $180 a month, and on the other $190 a month. I think when I consolidate my Stafford loans they will total about the same. If you pay a little more each month, it goes straight to principal. So I made the decision that I'm going to make it a nice and easy round number: $200 a month for each of those loans. That way, I can reduce the principal more quickly.
CreditCards.com: If you could imagine the perfect job for you to be in 10 years from now, what would it be?
Molly Katchpole: Working to uphold the working and middle class and make sure they don't wither away is really, really important to me. I'd like to be able to do that.
I would also really like to be a teacher. Actually, there are a lot of different things that I'm interested in and am feeling it all out right now. I don't know where I'm going to be in 10 years. And I'm OK with that.
Source
Thursday, January 5, 2012
1099-C surprise: IRS tax follows canceled debt
Forgiven credit card debt may be taxable income
By Connie Prater
If you thought your money woes ended last year when you settled that credit card debt, think again.
Avoiding 1099-C tax problems
What you should know: Have you negotiated with a creditor to pay less than you owe on a credit card debt? The IRS considers forgiven or canceled debt as taxable income.
What to do: Experts advise consumers to seek tax advice before negotiating credit card debt settlements to avoid a "surprise" tax hit from cancellation of debt.
For many consumers with debt problems, after the debt collector leaves their lives, the taxman arrives.
Months after successfully resolving credit card debts, consumers have received 1099-C "cancellation of debt" tax notices in the mail. Why? The U.S. Internal Revenue Service considers forgiven or canceled debt as income. Creditors and debt collectors who agree to accept at least $600 less than the original balance are required by law to file 1099-C forms with the IRS and to send debtors notices as well. Taxpayers must report that "income" on their federal income tax returns.
"A lot of people don't realize they have any tax issues at all when they are going through this," says Alison Flores, a researcher at The Tax Institute at H&R Block, the nation's largest tax preparation service. "They say 'I'm really poor, I'm broke and I can't pay my bills. How can you consider this income?'"
It is, according to the Internal Revenue Code. For example, a person with $10,000 in credit card debt who negotiates to pay only $6,000 of the balance would have $4,000 in forgiven debt income. That $4,000 must be reported as "other income" on Line 21 of the 1040 tax form. Depending on the amount of debt forgiven, the taxpayer's income level, deductions and other factors, the consumer could face a sizable tax bill come mid-April.
Surprise tax problem
The problem: Many consumers have no clue what the 1099-C forms are, and some may be trashing the cancellation of debt notices because the forms are sent by creditors or debt collectors with whom they thought they no longer had business. Still others are not filing the 1099-Cs with their federal income tax returns -- putting taxpayers at risk for IRS audits, penalties and fines. Consumer credit counselors and tax attorneys say few consumers are aware of the tax implications of settling to pay a lesser amount than they owe in credit card debt.
"It's truly something that consumers need to be aware of, as they are often blindsided by it," says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, a nationwide group of nonprofit credit counseling agencies. "Just when they think the debt monkey is off their back, here comes the IRS obligation."
The number of "surprise" tax problems is growing as the amount of bad debt rises amid a nationwide credit crisis.
According to the IRS, the number of 1099-C cancellation of debt forms filed with the federal government by creditors and debt collectors nearly tripled between 2003 and 2009. The IRS received fewer than 1 million forms in 2003 and more than 2.673 million in 2009 The projected number for 2010 is 2.8 million (see chart). The IRS expects to get 3.1 million debt forgiveness forms by 2012. Part of the spike may be due to the rise in mortgage foreclosures, but a major portion of it is also attributed to credit card debt.
Negotiating with creditors, debt collectors and debt buyers to pay a fraction of the amount owed is a common practice in the industry, often accomplished through third-party agents such as consumer credit counselors or debt settlement specialists.
"Debt buyers are willing to negotiate a discount, sometimes at a very significant discount off the entire balance, to settle the debt," says Barbara Sinsley, general counsel for the 600-member Debt Buyers Association (DBA International), a trade group of companies that buy and sell portfolios of debt from banks and other creditors.
Seek advice immediately
Consumers who receive the 1099-C cancellation of debt forms should immediately take them to a tax preparer or tax adviser, experts say.
"Make sure your tax preparer understands the rules related to these type of activities," says Mark Steber, vice president of tax resources for Jackson Hewitt tax preparation service. "Ask to talk to an office manager. Tell them 'I need to see someone who understands this type of situation.'"
Taxpayers may qualify for one of several exclusions that allow them to reduce taxable income from canceled debts. If the exclusions apply, they must file an IRS form 982 in addition to the 1099-C.
"Theoretically, you have income if you don't meet one of the exceptions," says Eric L. Green, a tax attorney with the Convicer & Percy law firm in Glastonbury, Conn.
The exclusions include debts discharged during bankruptcy and debts of consumers who are insolvent (meaning their liabilities exceed their assets) prior to the cancellation of debt. However, the exclusion applies only up to the amount by which consumers are insolvent. That means if $5,000 in debts were forgiven and liabilities exceeded assets by $2,000, then the $2,000 would be excluded as income. "The remaining $3,000 would be reported under other income," says H&R Block's Flores.
Debt resolution tax tips
* Consult with a tax adviser before finalizing debt settlement agreements to find out the potential tax implications. Ask for a tax preparer who is knowledgeable about 1099-Cs.
* Clarify with the creditor or debt collector the exact amount that will be declared on the 1099-C form.
* Be aware that the 1099-C is coming. Don't throw it away. Take it to your tax preparer.
* If there is a dispute about the amount reported on the form, contact the creditor or debt collector immediately to resolve the matter. Ask for a corrected 1099-C form.
Homeowners who default on mortgage loans may also qualify for exclusion of their foreclosures under the Mortgage Forgiveness Debt Relief Act, which took effect Dec. 20, 2007, to help homeowners caught in the mortgage crisis. This provision applies to debt forgiven in calendar years 2007 through 2012.
Other exclusions are for certain farm debt, student loans and real property business debts.
Informing consumers
Much of the surprise element of the 1099-C cancellation of debt forms could be eliminated, say tax preparers, if all creditors and debt buyers routinely informed consumers that there could be tax ramifications when settling debts for discounted amounts.
At Wells Fargo, one of the nation's five largest credit card issuers, all settlement-offer letters include disclosure of possible 1099-C implications, according to Lisa B. Westermann, assistant vice president of public relations for Wells Fargo Card Services. Other credit card issuers did not respond to requests for information about their policies.
"The bank doesn't tell you," says Green, the Connecticut tax attorney. "From the bank's perspective, it's not their job to give tax advice."
Says Sinsley from the debt buyers group: "There is no current law that says that a debt buyer must disclose that a 1099-C would be forthcoming after the settlement of debt."
She says debt buyers have been sued for the unlicensed practice of law after giving consumers advice on resolving their debts. It's something she advises her members to avoid. "A debt buyer is not the consumer's financial planner," she says. "Everybody's financial situation should be discussed with a tax adviser."
Knowing the amount of forgiven debt to be reported to the IRS would help consumers plan ahead, Sinsley says. "When they are negotiating the settlement of the debt, the consumer can discuss with their tax adviser what consequences there would be in exchange for the settlement of the debt," she says. "If the consumer is settling a debt, and they know the settlement is X and the forgiveness is Y, they can go to their tax preparer and say, 'If I do this, what is my tax impact?'"
The IRS has released numerous publications and bulletins about 1099-Cs, IRS spokeswoman Theresa Branscome says. However, many of those publications have focused on mortgage forgiveness rather than credit card debt.
Check the figures
Another tip from tax preparers: Make sure that the amount of canceled debt listed on the 1099-C form is accurate.
"Make sure that you agree with the numbers," says Steber from Jackson Hewitt. "They can include interest on the debt that hasn't been paid for a while." If there is a discrepancy, Steber says, "you better go back and talk to them now and find out what it is."
Another potential problem: receiving a 1099-C before the debt is actually paid off. According to Lauren Saunders, managing attorney for the National Consumer Law Center, creditors have sent cancellation of debt forms to consumers at the point that the credit card issuers charged off the debt and sold it to debt buyers. "The consumer is potentially liable both for taxes on supposedly forgiven debt while continuing to be liable for the debt," Saunders says. "We've had calls about that situation. Seems like you can't have it both ways: Either you forgive it or sell it but not both."
Consumers who receive 1099-Cs in error may request that creditors or debt buyers send corrected forms to the IRS, but the situation leads to confusion and complications for consumers, according to the law center.
Several tax advisers called the 1099-C requirements unfair to consumers trying to overcome mountains of debt. Others say the tax rule is further proof that there is no free ride and consumers who borrow money must be prepared to live up to their financial obligations.
The bottom line on 1099-Cs, says tax attorney Green: "Be aware and prepare for it. When you receive that form, go immediately to a tax adviser. Don't ignore it. That has real dollars and cents consequences."
By Connie Prater
If you thought your money woes ended last year when you settled that credit card debt, think again.
Avoiding 1099-C tax problems
What you should know: Have you negotiated with a creditor to pay less than you owe on a credit card debt? The IRS considers forgiven or canceled debt as taxable income.
What to do: Experts advise consumers to seek tax advice before negotiating credit card debt settlements to avoid a "surprise" tax hit from cancellation of debt.
For many consumers with debt problems, after the debt collector leaves their lives, the taxman arrives.
Months after successfully resolving credit card debts, consumers have received 1099-C "cancellation of debt" tax notices in the mail. Why? The U.S. Internal Revenue Service considers forgiven or canceled debt as income. Creditors and debt collectors who agree to accept at least $600 less than the original balance are required by law to file 1099-C forms with the IRS and to send debtors notices as well. Taxpayers must report that "income" on their federal income tax returns.
"A lot of people don't realize they have any tax issues at all when they are going through this," says Alison Flores, a researcher at The Tax Institute at H&R Block, the nation's largest tax preparation service. "They say 'I'm really poor, I'm broke and I can't pay my bills. How can you consider this income?'"
It is, according to the Internal Revenue Code. For example, a person with $10,000 in credit card debt who negotiates to pay only $6,000 of the balance would have $4,000 in forgiven debt income. That $4,000 must be reported as "other income" on Line 21 of the 1040 tax form. Depending on the amount of debt forgiven, the taxpayer's income level, deductions and other factors, the consumer could face a sizable tax bill come mid-April.
Surprise tax problem
The problem: Many consumers have no clue what the 1099-C forms are, and some may be trashing the cancellation of debt notices because the forms are sent by creditors or debt collectors with whom they thought they no longer had business. Still others are not filing the 1099-Cs with their federal income tax returns -- putting taxpayers at risk for IRS audits, penalties and fines. Consumer credit counselors and tax attorneys say few consumers are aware of the tax implications of settling to pay a lesser amount than they owe in credit card debt.
"It's truly something that consumers need to be aware of, as they are often blindsided by it," says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, a nationwide group of nonprofit credit counseling agencies. "Just when they think the debt monkey is off their back, here comes the IRS obligation."
The number of "surprise" tax problems is growing as the amount of bad debt rises amid a nationwide credit crisis.
According to the IRS, the number of 1099-C cancellation of debt forms filed with the federal government by creditors and debt collectors nearly tripled between 2003 and 2009. The IRS received fewer than 1 million forms in 2003 and more than 2.673 million in 2009 The projected number for 2010 is 2.8 million (see chart). The IRS expects to get 3.1 million debt forgiveness forms by 2012. Part of the spike may be due to the rise in mortgage foreclosures, but a major portion of it is also attributed to credit card debt.
 |
Debt forgiveness leads to rise in 1099-C filings
Canceled and forgiven debt may be taxable income for
some consumers. According to the IRS, the number of taxpayers filing debt cancellation forms nearly tripled between 2003 and 2009. The IRS estimates the volume of filings will continue to climb into 2012, when they will hit a projected 3.11 million. Source: Internal Revenue Service, Analysis and Statistics, Office of Research, Forecasting and Service Analysis |
"Debt buyers are willing to negotiate a discount, sometimes at a very significant discount off the entire balance, to settle the debt," says Barbara Sinsley, general counsel for the 600-member Debt Buyers Association (DBA International), a trade group of companies that buy and sell portfolios of debt from banks and other creditors.
Seek advice immediately
Consumers who receive the 1099-C cancellation of debt forms should immediately take them to a tax preparer or tax adviser, experts say.
"Make sure your tax preparer understands the rules related to these type of activities," says Mark Steber, vice president of tax resources for Jackson Hewitt tax preparation service. "Ask to talk to an office manager. Tell them 'I need to see someone who understands this type of situation.'"
Taxpayers may qualify for one of several exclusions that allow them to reduce taxable income from canceled debts. If the exclusions apply, they must file an IRS form 982 in addition to the 1099-C.
"Theoretically, you have income if you don't meet one of the exceptions," says Eric L. Green, a tax attorney with the Convicer & Percy law firm in Glastonbury, Conn.
The exclusions include debts discharged during bankruptcy and debts of consumers who are insolvent (meaning their liabilities exceed their assets) prior to the cancellation of debt. However, the exclusion applies only up to the amount by which consumers are insolvent. That means if $5,000 in debts were forgiven and liabilities exceeded assets by $2,000, then the $2,000 would be excluded as income. "The remaining $3,000 would be reported under other income," says H&R Block's Flores.
Debt resolution tax tips
* Consult with a tax adviser before finalizing debt settlement agreements to find out the potential tax implications. Ask for a tax preparer who is knowledgeable about 1099-Cs.
* Clarify with the creditor or debt collector the exact amount that will be declared on the 1099-C form.
* Be aware that the 1099-C is coming. Don't throw it away. Take it to your tax preparer.
* If there is a dispute about the amount reported on the form, contact the creditor or debt collector immediately to resolve the matter. Ask for a corrected 1099-C form.
Homeowners who default on mortgage loans may also qualify for exclusion of their foreclosures under the Mortgage Forgiveness Debt Relief Act, which took effect Dec. 20, 2007, to help homeowners caught in the mortgage crisis. This provision applies to debt forgiven in calendar years 2007 through 2012.
Other exclusions are for certain farm debt, student loans and real property business debts.
Informing consumers
Much of the surprise element of the 1099-C cancellation of debt forms could be eliminated, say tax preparers, if all creditors and debt buyers routinely informed consumers that there could be tax ramifications when settling debts for discounted amounts.
At Wells Fargo, one of the nation's five largest credit card issuers, all settlement-offer letters include disclosure of possible 1099-C implications, according to Lisa B. Westermann, assistant vice president of public relations for Wells Fargo Card Services. Other credit card issuers did not respond to requests for information about their policies.
"The bank doesn't tell you," says Green, the Connecticut tax attorney. "From the bank's perspective, it's not their job to give tax advice."
Says Sinsley from the debt buyers group: "There is no current law that says that a debt buyer must disclose that a 1099-C would be forthcoming after the settlement of debt."
She says debt buyers have been sued for the unlicensed practice of law after giving consumers advice on resolving their debts. It's something she advises her members to avoid. "A debt buyer is not the consumer's financial planner," she says. "Everybody's financial situation should be discussed with a tax adviser."
Knowing the amount of forgiven debt to be reported to the IRS would help consumers plan ahead, Sinsley says. "When they are negotiating the settlement of the debt, the consumer can discuss with their tax adviser what consequences there would be in exchange for the settlement of the debt," she says. "If the consumer is settling a debt, and they know the settlement is X and the forgiveness is Y, they can go to their tax preparer and say, 'If I do this, what is my tax impact?'"
The IRS has released numerous publications and bulletins about 1099-Cs, IRS spokeswoman Theresa Branscome says. However, many of those publications have focused on mortgage forgiveness rather than credit card debt.
Check the figures
Another tip from tax preparers: Make sure that the amount of canceled debt listed on the 1099-C form is accurate.
"Make sure that you agree with the numbers," says Steber from Jackson Hewitt. "They can include interest on the debt that hasn't been paid for a while." If there is a discrepancy, Steber says, "you better go back and talk to them now and find out what it is."
Another potential problem: receiving a 1099-C before the debt is actually paid off. According to Lauren Saunders, managing attorney for the National Consumer Law Center, creditors have sent cancellation of debt forms to consumers at the point that the credit card issuers charged off the debt and sold it to debt buyers. "The consumer is potentially liable both for taxes on supposedly forgiven debt while continuing to be liable for the debt," Saunders says. "We've had calls about that situation. Seems like you can't have it both ways: Either you forgive it or sell it but not both."
Consumers who receive 1099-Cs in error may request that creditors or debt buyers send corrected forms to the IRS, but the situation leads to confusion and complications for consumers, according to the law center.
Several tax advisers called the 1099-C requirements unfair to consumers trying to overcome mountains of debt. Others say the tax rule is further proof that there is no free ride and consumers who borrow money must be prepared to live up to their financial obligations.
The bottom line on 1099-Cs, says tax attorney Green: "Be aware and prepare for it. When you receive that form, go immediately to a tax adviser. Don't ignore it. That has real dollars and cents consequences."
Thursday, December 29, 2011
Some Tips For A Frugal New Year’s Eve Party
by Mrs. Not Made of Money
After the stress of the holidays, there’s nothing better than hosting a New Year’s Eve bash to help you cut loose and have some fun. What won’t relieve stress, however, is having to begin the new year by facing leftover bills from your party. Vow to start your new year on the right foot by throwing a killer New Year’s Eve party that doesn’t break the bank. Here are a few tips I have for saving some money on your party:
Free Invites
Saving money on your party can begin as soon as you start inviting folks. Forget spending any of your previous party fund on invitations and postage. Instead, send out your invitations electronically with websites like Evite.com. I love that I can track my invitees responses and send updates about the party to everyone at once.
Inexpensive Eats
Since New Year’s Eve parties tend to start later in the evening and ramp up until the clock strikes midnight, you can skip the elaborate dinner you might have prepared for a Christmas or Thanksgiving party. All you really need to provide for a New Year’s Eve party are great appetizers. Scour the frozen food aisles at your supermarket (or whip up your own) for simple appetizers that you can stock up on. At the party you can give your appetizers a little extra glamour by placing them on festive trays or dishes.
Drinks You Can Afford
You could easily spend a small fortune trying to stock up on different types of beverages for a New Year’s Eve party. Alcoholic drinks can require many different types of liquor to create them. In addition, you might want to have something on hand for your guests who don’t drink alcohol. Before you know it, your beverage list can get out of control. Instead of trying to guess what drinks your guests might want, choose a “signature” drink for the evening. Then you can focus your shopping on making sure you have enough supplies on hand to keep everyone’s glass full for the big moment at midnight.
Entertainment on the Cheap
Hiring a band or renting karaoke equipment is sure to blow your party budget out of the water. Fortunately, with the advent of mp3 players, you can probably get your hands on some great music without spending a dime. Chances are that you have a friend or two who already has quite a collection of music at his disposal. Ask him if he’d mind providing the music for your little party.
Stunning Décor for Next to Nothing
To decorate your home for your New Year’s Eve party, all you really need to do is pare down your Christmas decorations. As you take down your Christmas tree, be sure to keep your strings of lights handy. Then, string the lights throughout party central. Use lots of metal or glassware to give the lights something to reflect off. The resulting effect will be glamorous without being too over the top. Then, dim the room lights and turn up the music.
Reader Questions:
Are you hosting a New Year’s Eve party this year?
If you are do you have any money saving tips to share?
Source
After the stress of the holidays, there’s nothing better than hosting a New Year’s Eve bash to help you cut loose and have some fun. What won’t relieve stress, however, is having to begin the new year by facing leftover bills from your party. Vow to start your new year on the right foot by throwing a killer New Year’s Eve party that doesn’t break the bank. Here are a few tips I have for saving some money on your party:
Free Invites
Saving money on your party can begin as soon as you start inviting folks. Forget spending any of your previous party fund on invitations and postage. Instead, send out your invitations electronically with websites like Evite.com. I love that I can track my invitees responses and send updates about the party to everyone at once.
Inexpensive Eats
Since New Year’s Eve parties tend to start later in the evening and ramp up until the clock strikes midnight, you can skip the elaborate dinner you might have prepared for a Christmas or Thanksgiving party. All you really need to provide for a New Year’s Eve party are great appetizers. Scour the frozen food aisles at your supermarket (or whip up your own) for simple appetizers that you can stock up on. At the party you can give your appetizers a little extra glamour by placing them on festive trays or dishes.
Drinks You Can Afford
You could easily spend a small fortune trying to stock up on different types of beverages for a New Year’s Eve party. Alcoholic drinks can require many different types of liquor to create them. In addition, you might want to have something on hand for your guests who don’t drink alcohol. Before you know it, your beverage list can get out of control. Instead of trying to guess what drinks your guests might want, choose a “signature” drink for the evening. Then you can focus your shopping on making sure you have enough supplies on hand to keep everyone’s glass full for the big moment at midnight.
Entertainment on the Cheap
Hiring a band or renting karaoke equipment is sure to blow your party budget out of the water. Fortunately, with the advent of mp3 players, you can probably get your hands on some great music without spending a dime. Chances are that you have a friend or two who already has quite a collection of music at his disposal. Ask him if he’d mind providing the music for your little party.
Stunning Décor for Next to Nothing
To decorate your home for your New Year’s Eve party, all you really need to do is pare down your Christmas decorations. As you take down your Christmas tree, be sure to keep your strings of lights handy. Then, string the lights throughout party central. Use lots of metal or glassware to give the lights something to reflect off. The resulting effect will be glamorous without being too over the top. Then, dim the room lights and turn up the music.
Reader Questions:
Are you hosting a New Year’s Eve party this year?
If you are do you have any money saving tips to share?
Source
Monday, December 19, 2011
Millions Getting Fourth Credit Score
WEST PALM BEACH, Fla. -- Millions of Americans are about to get a new credit score.
A company called Core Logic announced it will be putting out something called a Core Score. Much like the three established credit reporting companies, this score will attempt to rank a consumer’s financial history. But the Core Score aims to be much more comprehensive.
"It can really hurt you because it takes into consideration, again, everything you've ever done, if you've ever missed a rent payment, a car payment, if you've had payday loans," said Andrew Bernstein of DebtHelper.com.
Bernstein said the company looks at court records and factors homeowner association and condo board liens. It also looks at wage garnishments, alimony payments even a missed utility payment. What is also different about the new Core Score, Bernstein said, is that credit troubles don’t disappear after seven years.
"Even a bankruptcy only stays on between seven and 10 years," said Bernstein. "But with this new Core Score, that will be on there for life."
Bernstein said the new score could actually be quite beneficial to those who haven’t owned property or a car because it will be able to give a person a credit score, thus giving them access to a mortgage or car loan.
"In a way, I think it's good because if you're missing those bills, it's just as easy to turn around and miss important, credit-bearing bills," said Amanda Fetscher, while shopping at a Lake Park Target.
At first, it's expected the score will only be used when consumers attempt to get a mortgage or car loan. It's expected to be more widely marketed in the coming years. Landlords and employers might even use it when making renting and hiring decisions.
Source
A company called Core Logic announced it will be putting out something called a Core Score. Much like the three established credit reporting companies, this score will attempt to rank a consumer’s financial history. But the Core Score aims to be much more comprehensive.
"It can really hurt you because it takes into consideration, again, everything you've ever done, if you've ever missed a rent payment, a car payment, if you've had payday loans," said Andrew Bernstein of DebtHelper.com.
Bernstein said the company looks at court records and factors homeowner association and condo board liens. It also looks at wage garnishments, alimony payments even a missed utility payment. What is also different about the new Core Score, Bernstein said, is that credit troubles don’t disappear after seven years.
"Even a bankruptcy only stays on between seven and 10 years," said Bernstein. "But with this new Core Score, that will be on there for life."
Bernstein said the new score could actually be quite beneficial to those who haven’t owned property or a car because it will be able to give a person a credit score, thus giving them access to a mortgage or car loan.
"In a way, I think it's good because if you're missing those bills, it's just as easy to turn around and miss important, credit-bearing bills," said Amanda Fetscher, while shopping at a Lake Park Target.
At first, it's expected the score will only be used when consumers attempt to get a mortgage or car loan. It's expected to be more widely marketed in the coming years. Landlords and employers might even use it when making renting and hiring decisions.
Source
Wednesday, December 14, 2011
Credit cards: How to avoid getting tricked this holiday season
Dec 2 (Reuters) - 'Tis the season to charge it.
Pay a little now, finance the rest with credit cards. If you're like a lot of people, that might sound like a good deal for holiday shopping. "We spend more in this five-week week period than in the collective 47 weeks that lead up to it," says credit expert John Ulzheimer.
Yet your option to pay the full amount that is due for the billing period -- the smart thing to do -- may not be the most prominent one displayed on your credit card statement. And when you go online to pay your bill, the minimum payment box might already be checked.
Even sophisticated consumers can fall into the minimum payment trap, according to Linda Salisbury, a Boston College professor who studied consumer behavior when paying credit card bills. She surveyed hundreds of people on the subject.
Using actual credit card payment data collected by British researchers as well as her own research, she says consumers appear to be drawn to paying less than they might have when they see a "minimum payment" amount on their bill.
Credit experts say you need to resist the draw to pay low and instead shell out for as much as you can afford in order to break the hold of card debt. That attraction to pay less, Salisbury says, has a greater impact on people who have the money to pay the bill, because they could afford to pay the full amount, but don't, and end up spending money on interest instead.
The impact of paying the minimum is significant. An example: If you have $10,000 in debt on card with a 10 percent interest rate and a bank that requires a minimum payment of 4 percent of the balance (initially $400 a month), it would take about 10 years to pay off that card if nothing more was charged. Increase your payment to $800 a month and it would take 14 months and save you nearly $2,000 in interest.
That impact is even greater on those who accept the tempting store credit card offers being constantly dangled in front of them, with those cards typically carrying interest rates at 20 percent and higher.
New York City bankruptcy lawyer Daniel Gershburg says he sees the psychological pull to pay the minimum by clients all the time.
"They believe that because they're making this tiny payment every month, they are above water, when, in actuality, they're not," he says. "It's really a huge problem because consumers then spend so much more and pay so much more in interest because of this unrealistic sense of security that a minimum brings with it."
You might think that the calculations on your statement showing how long it will take to pay off your credit card debt would motivate higher payments. But that hasn't been the case, Salisbury says. "We were surprised that the additional cost and loan payoff information didn't have a positive effect."
The federal CARD Act, which took effect in 2010, is responsible for the disclosures we now see on credit card statements -- how long it will take to pay off a balance if you pay the minimum as well as how much you'd have to pay monthly to retire your debt in three years. There are also plenty of online calculators out there, such as what you can find onthat let you change scenarios to see just how much a difference a bigger (or smaller) payment can make.
"Give it a try the numbers can be scary," says Bills.com president Ethan Ewing: "The minimum monthly payment is a costly way to pay down your balance, and can effectively lock you into a lifetime of debt."
The Consumer Financial Protection Bureau says 70 percent of consumers surveyed say they have noticed new credit card disclosures on their bills. But fewer than one-third say this caused them to make bigger payments or stop charging up their cards.
A bit of good news for holiday shoppers with good credit who are intent on paying off their debt: A resurgence of card offers featuring introductory balance transfer interest rates that last a year or more (Citiis offering 21 months). Some of the offers are fee-free. Others charge up to 3 percent of the balance, that could be hefty -- $600 if you transfer $20,000.
Source
Pay a little now, finance the rest with credit cards. If you're like a lot of people, that might sound like a good deal for holiday shopping. "We spend more in this five-week week period than in the collective 47 weeks that lead up to it," says credit expert John Ulzheimer.
Yet your option to pay the full amount that is due for the billing period -- the smart thing to do -- may not be the most prominent one displayed on your credit card statement. And when you go online to pay your bill, the minimum payment box might already be checked.
Even sophisticated consumers can fall into the minimum payment trap, according to Linda Salisbury, a Boston College professor who studied consumer behavior when paying credit card bills. She surveyed hundreds of people on the subject.
Using actual credit card payment data collected by British researchers as well as her own research, she says consumers appear to be drawn to paying less than they might have when they see a "minimum payment" amount on their bill.
Credit experts say you need to resist the draw to pay low and instead shell out for as much as you can afford in order to break the hold of card debt. That attraction to pay less, Salisbury says, has a greater impact on people who have the money to pay the bill, because they could afford to pay the full amount, but don't, and end up spending money on interest instead.
The impact of paying the minimum is significant. An example: If you have $10,000 in debt on card with a 10 percent interest rate and a bank that requires a minimum payment of 4 percent of the balance (initially $400 a month), it would take about 10 years to pay off that card if nothing more was charged. Increase your payment to $800 a month and it would take 14 months and save you nearly $2,000 in interest.
That impact is even greater on those who accept the tempting store credit card offers being constantly dangled in front of them, with those cards typically carrying interest rates at 20 percent and higher.
New York City bankruptcy lawyer Daniel Gershburg says he sees the psychological pull to pay the minimum by clients all the time.
"They believe that because they're making this tiny payment every month, they are above water, when, in actuality, they're not," he says. "It's really a huge problem because consumers then spend so much more and pay so much more in interest because of this unrealistic sense of security that a minimum brings with it."
You might think that the calculations on your statement showing how long it will take to pay off your credit card debt would motivate higher payments. But that hasn't been the case, Salisbury says. "We were surprised that the additional cost and loan payoff information didn't have a positive effect."
The federal CARD Act, which took effect in 2010, is responsible for the disclosures we now see on credit card statements -- how long it will take to pay off a balance if you pay the minimum as well as how much you'd have to pay monthly to retire your debt in three years. There are also plenty of online calculators out there, such as what you can find onthat let you change scenarios to see just how much a difference a bigger (or smaller) payment can make.
"Give it a try the numbers can be scary," says Bills.com president Ethan Ewing: "The minimum monthly payment is a costly way to pay down your balance, and can effectively lock you into a lifetime of debt."
The Consumer Financial Protection Bureau says 70 percent of consumers surveyed say they have noticed new credit card disclosures on their bills. But fewer than one-third say this caused them to make bigger payments or stop charging up their cards.
A bit of good news for holiday shoppers with good credit who are intent on paying off their debt: A resurgence of card offers featuring introductory balance transfer interest rates that last a year or more (Citiis offering 21 months). Some of the offers are fee-free. Others charge up to 3 percent of the balance, that could be hefty -- $600 if you transfer $20,000.
Source
Thursday, December 8, 2011
10 Easy Tips to Save Money this Christmas
Want to learn how to save money on gifts this Christmas and not feel like a Scrooge? According to this year’s National Retail Federation holiday survey, the average American will spend close to $700 this season on gifts, cards, decorations, and the like. This is one time when you want to be below average — way below. In fact, if you are in debt, just say no to gift buying this holiday. There is absolutely NO reason for you to go further into debt buying gifts for others. There are 13.6 million Americans who are still trying to pay off holiday debt from last year. Don’t join them by digging yourself into a deeper hole.
If you are going to buy gifts this year, the key to avoiding a holiday season that drains your bank account is to start planning early. Here are the top 10 money saving tips for steering clear of holiday debt and starting the new year in better financial shape:
1. Plan it. Before you shop online or enter the chaos of the shopping mall, take 10 minutes at home to create a spending plan that lists who you need to buy for and how much you will spend.
2. Use discounted gift cards. How would you like $100 worth of gifts for $80? You can purchase discounted gift cards for hundreds of online/offline retailers including the Apple Store, Radio Shack, Sears, Home Depot, and others. Discounts are usually 5-30 percent off the face value of the card. Check out GiftCardRescue.com and GiftCards.com.
3. Use social media. Before you start shopping, start following your favorite retailers on Twitter and Facebook. Many companies offer discounts exclusively to their Twitter followers and Facebook friends. A quick search of their recent posts may reveal money-saving discount codes.
4. Barter via online chat. When you’re shopping online, look for a “chat” or “live help” button. Tell the customer service rep you’d like to shop with them but you want a 15 percent discount. Ask them to check with their manager or you will abandon your shopping cart and click over to their competitor. This won’t work all of the time, but when it does it will save you money.
5. Find discount codes. I never buy anything online without trying to find a discount code first. I’ve literally saved hundreds of dollars and it doesn’t take more than a minute. Simply go to RetailMeNot.com, SecretPrices.com, and FreeShipping.org to pull up all of the available discounts for your store. Use the discount code during the checkout process to get free shipping or to save 20 percent or more.
6. Get cash back. If you’re going to spend hundreds of dollars this year on gifts, you might as well try to get a few bucks back. I’ve used ebates.com (affiliate link — all proceeds will go to charity) for some time and have received several rebate checks.
7. Bring on the envelopes, chuck the credit cards. Leave your credit cards and debit cards at home. Allocate an amount of money for each gift, and put that money in separate envelopes marked with the recipients’ names.
8. Give group gifts. When exchanging presents within large groups of people, even “token” gifts can really add up. Try a “white elephant” exchange, a secret Santa strategy, or going in with co-workers on a gift for your boss.
9. Make a promise that you won’t buy anything for yourself. When you’re shopping for gifts, it’s easy to be tempted to buy for yourself. Make this season about others, not you — and remember that the items you want will likely be less expensive during the after-season sales.
10. Avoid the “10 percent off, buy more” phenomenon. Stores often offer great deals when you sign up for their credit cards, but beware the high rate of interest these cards charge and ask yourself if you’ll really be saving money in the long run. And don’t spend more than you intended just because you’re now getting a discount on your purchase.
If you follow these money saving tips, I guarantee you will put more green — and less red — into holiday shopping this year.
Source
If you are going to buy gifts this year, the key to avoiding a holiday season that drains your bank account is to start planning early. Here are the top 10 money saving tips for steering clear of holiday debt and starting the new year in better financial shape:
1. Plan it. Before you shop online or enter the chaos of the shopping mall, take 10 minutes at home to create a spending plan that lists who you need to buy for and how much you will spend.
2. Use discounted gift cards. How would you like $100 worth of gifts for $80? You can purchase discounted gift cards for hundreds of online/offline retailers including the Apple Store, Radio Shack, Sears, Home Depot, and others. Discounts are usually 5-30 percent off the face value of the card. Check out GiftCardRescue.com and GiftCards.com.
3. Use social media. Before you start shopping, start following your favorite retailers on Twitter and Facebook. Many companies offer discounts exclusively to their Twitter followers and Facebook friends. A quick search of their recent posts may reveal money-saving discount codes.
4. Barter via online chat. When you’re shopping online, look for a “chat” or “live help” button. Tell the customer service rep you’d like to shop with them but you want a 15 percent discount. Ask them to check with their manager or you will abandon your shopping cart and click over to their competitor. This won’t work all of the time, but when it does it will save you money.
5. Find discount codes. I never buy anything online without trying to find a discount code first. I’ve literally saved hundreds of dollars and it doesn’t take more than a minute. Simply go to RetailMeNot.com, SecretPrices.com, and FreeShipping.org to pull up all of the available discounts for your store. Use the discount code during the checkout process to get free shipping or to save 20 percent or more.
6. Get cash back. If you’re going to spend hundreds of dollars this year on gifts, you might as well try to get a few bucks back. I’ve used ebates.com (affiliate link — all proceeds will go to charity) for some time and have received several rebate checks.
7. Bring on the envelopes, chuck the credit cards. Leave your credit cards and debit cards at home. Allocate an amount of money for each gift, and put that money in separate envelopes marked with the recipients’ names.
8. Give group gifts. When exchanging presents within large groups of people, even “token” gifts can really add up. Try a “white elephant” exchange, a secret Santa strategy, or going in with co-workers on a gift for your boss.
9. Make a promise that you won’t buy anything for yourself. When you’re shopping for gifts, it’s easy to be tempted to buy for yourself. Make this season about others, not you — and remember that the items you want will likely be less expensive during the after-season sales.
10. Avoid the “10 percent off, buy more” phenomenon. Stores often offer great deals when you sign up for their credit cards, but beware the high rate of interest these cards charge and ask yourself if you’ll really be saving money in the long run. And don’t spend more than you intended just because you’re now getting a discount on your purchase.
If you follow these money saving tips, I guarantee you will put more green — and less red — into holiday shopping this year.
Source
Wednesday, November 23, 2011
BBB Black Friday Tip Sheet
It’s time to start planning your Black Friday, that special day after Thanksgiving when retailers gear up to offer their best. Better Business Bureau past experience tells us that all deals are not created equal and the fine print is often the most important thing. Before you head out the door for a block buster and get caught up in the frenzy, the BBB offers the following tip sheet to help you save time and money.
Tip 1 – Know before You Go.
In the coming weeks many retailers will release their Black Friday deals online, in social media and other publications. Research where the sales are and make a list of your gift priorities to compare prices and plan your day of deals. Since many advertisements will begin before the actual sale, build up a coupon collection as soon as possible. Remember to bring ads with you on Black Friday just in case the price is not what you expected.
Tip 2 – Don’t Fall for False Advertising.
Despite BBBs effort to advance trust in the marketplace, some companies will resort to advertisements that are untrue, misleading, deceptive, or plain fraudulent. Black Friday advertising will be abundant and BBB urges consumers to watch for red flags.
Many consumers have experienced frustration and lost money they can’t afford to lose after being lured by prices too good to be true, bait and switch ads designed to bring you in but push you toward more expensive items, fine print return policies, final sales, and deals that end before the day is done. To protect you on Black Friday, BBB advises consumers not to believe all they see or hear without doing their own research to confirm the claims being made. For details and help to decipher truth in adverting, consumers can review BBB's code of advertising.
If you find advertising you’d like the BBB to investigate tell us more by emailing info@upstatenybbb.org.
Tip 3 – Maximize Advance Alerts.
Do you have favorite retailers? Now is a good time to sign up for their email alerts and “like” their Facebook page. BBB Accredited Businesses and other stores are working to reward your loyalty and you may get a jump on special offers.
Tip 4 – Set up Your Reward Cards.
Have you ever stood in line with out your store rewards card? You either missed out or the clerk may have handed one over. Black Friday deals may have strict restrictions with no sharing allowed. Make sure you have reward cards with your favorite stores and keep them with you. Check your credit card rewards program as well for special points that could add up on Black Friday.
Tip 5 – Shop with Trust.
If you find a deal – don’t just jump at the first chance to get it. The BBB recommends doing your research on the business – know how long they’ve been in business, look into their customer service track record, check them out at bbb.org. If you have concerns about the type of gift or the right fit – make sure you ask about their return policy too.
Tip 6 – Comparative Shop Online.
There are dozens of Black Friday websites that claim to capture the best deals around and they can really help you do your comparative shopping online. Before you pick your favorite site, the BBB recommends that consumers find a reputable site that’s not a fly-by-night operation by checking them out at bbb.org and see what others say about the site through an online search.
If you decide to buy online there are a host of security measures to abide by, among them to Start with Trust and know you are dealing with an experienced, reputable retailer; confirm that the site is secure and be certain you have a phone number and physical address should problems arise with your order.
Tip 7 – Look for QR Codes.
They’re square, black-and-white and funny looking – but they can take you straight to a deal. QR stands for Quick Response codes and they’re popping up in many ads and print materials. Several BBB Accredited Businesses use them to help you Start with Trust and they can bring you directly to a special offer or a BBB Business Review. Before you can scan one and view the offer - you’ll have to install a QR app reader. Most newer smart phones are equipped to scan QR codes and if you’re a mobile shopper you could really have some fun.
Tip 8 - Shop Small
Save your gas money and your time when you stay close to home. The Better Business Bureau is encouraging consumers to support small businesses in their community on Small Business Saturday, the day after Black Friday. Check your neighborhood retailers for their weekend deals and gain some goodwill by knowing you’ve done your part to help them thrive during the holidays. Although a price match may not be applicable for some items - your neighborhood store may be able to guarantee a price for you – even if you decide to buy later.
Tip 9 - Check Return and Exchange Policies.
All bets can change for Black Friday deals which means the store policies can change too. Make sure you know what the return and exchange policy is for your Black Friday special and that a return is even possible – especially if you’re buying online. Final sales, a very short return window (like before December 25th) or in-store or online only credit could leave you with deal gone wrong.
Tip 10 – Shop Safely.
While getting a deal is important, there are ways to shop safely without putting yourself or your wallet in jeopardy. The Better Business Bureau advises consumers to take their time and plan ahead for the best rewards.
· Make a list and prioritize where you should go and when.
· Bring friends into the mix to help sort through your options, two cars can go in two directions making it easier to get limited quantities and some pals will even wait in line as you trade off shopping in the stores.
· Remember to get gift receipts and keep them organized for those moments when the thought wasn’t quite enough.
Source
Friday, November 18, 2011
AICCCA Says Consumers Need a Plan to Avoid Red Tuesday™
Fairfax, VA – November 17, 2011 – Black Friday is almost here, followed closely by Cyber Monday,
both of which bring sales that are hard to resist. The Association of Independent Consumer Credit
Counseling Consumers says that consumers who are going to advantage of these sales need to be
aware that a Red Tuesday could be the result of charging their holiday expenses.
Consumers are expected to spend an average of $704.18 on holiday related expenses for 2011
according to the National Retail Federation. Charging that amount on a credit card with an
interest rate of 18 percent and making only a five percent minimum payment each month would take
almost four years to repay. Add $233 in interest charges during that time and consumers will find that
their 2011 holiday expenses cost close to $1,000.
.“Red Tuesday is a real possibility for consumers who do not take the time to plan,” said Dave Jones,
president, Association of Independent Consumer Credit Counseling Agencies.
In order to avoid a Red Tuesday in 2012, AICCCA offers the following tips for Black Friday
and Cyber Monday spending:
Write it down. Look over the ads and make a list before you shop, whether online or in person. A
complete list makes it easier to walk away from impulse buys.
Pay with cash. For Black Friday shopping, determine the amount of money you have on hand to spend and take only that amount of cash with you when you shop. Be sure to leave your credit cardsat home so that when you run out of cash, you will have to stop.
Do your homework. For Cyber Monday shopping, search for free shipping and coupons. Be sure to
shop only at sites you trust. Credit cards are actually a safer option for online shopping. To avoid
incurring interest charges and adding to your debt load, charge only the amount you can pay in full as
soon as the bill arrives. If you go over that amount, try to charge no more than what you can pay off in
90 days or less.
If your Tuesday is red, contact an AICCCA member at 866-703-8787 or visit http://www.aiccca.org/.
AICCCA: Founded in 1993, Association of Independent Consumer Credit Counseling Agencies
is a national membership organization established to promote quality and professional delivery of credit
counseling services. AICCCA and its members are focused on financial education, efficient processes
and advanced technology to best serve clients and creditors. AICCCA members are independent
nonprofit agencies that advocate for debtors, annually counsel millions of consumers nationwide
and provide debt management services to consumers with excessive unsecured debt. To
contact an AICCCA member agency call (866)703-TRUSTAICCCA (866-703-8787) or visit
http://www.aiccca.org/.
both of which bring sales that are hard to resist. The Association of Independent Consumer Credit
Counseling Consumers says that consumers who are going to advantage of these sales need to be
aware that a Red Tuesday could be the result of charging their holiday expenses.
Consumers are expected to spend an average of $704.18 on holiday related expenses for 2011
according to the National Retail Federation. Charging that amount on a credit card with an
interest rate of 18 percent and making only a five percent minimum payment each month would take
almost four years to repay. Add $233 in interest charges during that time and consumers will find that
their 2011 holiday expenses cost close to $1,000.
.“Red Tuesday is a real possibility for consumers who do not take the time to plan,” said Dave Jones,
president, Association of Independent Consumer Credit Counseling Agencies.
In order to avoid a Red Tuesday in 2012, AICCCA offers the following tips for Black Friday
and Cyber Monday spending:
Write it down. Look over the ads and make a list before you shop, whether online or in person. A
complete list makes it easier to walk away from impulse buys.
Pay with cash. For Black Friday shopping, determine the amount of money you have on hand to spend and take only that amount of cash with you when you shop. Be sure to leave your credit cardsat home so that when you run out of cash, you will have to stop.
Do your homework. For Cyber Monday shopping, search for free shipping and coupons. Be sure to
shop only at sites you trust. Credit cards are actually a safer option for online shopping. To avoid
incurring interest charges and adding to your debt load, charge only the amount you can pay in full as
soon as the bill arrives. If you go over that amount, try to charge no more than what you can pay off in
90 days or less.
If your Tuesday is red, contact an AICCCA member at 866-703-8787 or visit http://www.aiccca.org/.
AICCCA: Founded in 1993, Association of Independent Consumer Credit Counseling Agencies
is a national membership organization established to promote quality and professional delivery of credit
counseling services. AICCCA and its members are focused on financial education, efficient processes
and advanced technology to best serve clients and creditors. AICCCA members are independent
nonprofit agencies that advocate for debtors, annually counsel millions of consumers nationwide
and provide debt management services to consumers with excessive unsecured debt. To
contact an AICCCA member agency call (866)703-TRUSTAICCCA (866-703-8787) or visit
http://www.aiccca.org/.
Tuesday, November 15, 2011
Say Sayonara to These 8 Bad Shopping Habits
Whether you love to shop or find the whole thing a drag, you’ve likely developed some bad habits that are costing you money and time. Sometimes shopping itself can be a bad habit, especially during the holidays when events like Black Friday and Cyber Monday encourage impulse buying.
While changing your buying behavior takes more than a tip sheet, there are some problems that can be fixed without your ever missing them. Consider taking the “never-again” pledge and see how much you can save by ditching the following seven shopping habits.
1. Don’t Double Up With BOGOs
Buy-one-get-one-free offers require you buy two of a product, so ask yourself a few questions before going for the second item. Do you have enough storage space? How long before you’ll actually use the product? What if you don’t like the first half of the deal; will you just trash the second?
2. Resist Checkout Impulse Buys
Put on your blinders while waiting in supermarket lines. Merchants place tempting items directly in your line of sight — like tabloid newspapers — so you’ll grab and stash them in your cart. Check out “9 Ways Supermarkets Suck You In” for more sneaky strategies to avoid.
3. Nix Extended Warranties
Clerks selling electronics, appliances and other big-ticket items are often trained to push extended warranties. These upsells cost far more than they’re worth, since most of these products already come with manufacturer warranties for at least the first year. Extended warranties also can be difficult to cash in on, should the product break down.
4. Avoid Gift Wrap Services
Gift wrapping and gift boxes, particularly those purchased online, usually cost far more than they’re worth. Pick up your own supplies at the dollar store and get out the tape. Better yet, recycle gift bags you’ve received in the past, or consult Martha Stewart’s “Gift-wrapping Ideas” to re-purpose common household items for a truly unique approach.
5. Forgo Store Credit Cards
Merchants offer savings when you sign up for their credit cards, but you’ll ultimately pay through the nose via interest rates and potential late fees. For some reason, just applying for these cards also dings your credit rating. Just say no and, instead, buy cheap gift cards from websites like GiftCardGranny for your preferred merchants. You can save anywhere from 10 percent to 50 percent and still buy the merchandise you want at the card’s face value.
6. Don’t Drink and Shop
There’s usually a healthy mark-up on drinks sold in store coolers. If you’re the type that needs a bottle of soda or water to make it through a dreary shopping trip, plan ahead and bring your own from home.
7. Prevent Gift Card Waste
According to an article on Kiplinger.com, American households have an average of $300 in unused gift cards collecting dust in their wallets, purses and sock drawers. Holding onto gift cards is a costly habit, one which can be remedied by exchanging them for cash on Gift Card Exchange Day. Scheduled for Dec. 26, this one-day online event serves as both a reminder and a resource to trade gift cards for greenbacks, with resellers competing for your unwanted bounty.
8. Dodge Daily Deals
Daily deal sites like Groupon and LivingSocial make saving look easy, and as a result make spending even easier. Thanks to overzealous deal purchasing, there’s now an entire industry made up of merchants who buy your unused daily deals for resale. If you habitually purchase daily deals and rarely use them, consider going cold turkey for a while.
As a consumer and money-saving expert, Andrea Woroch dissects retail trends and provides smart shopping and money-management tips to help Americans save more. She has worked with top news outlets across the country including NBC’s Today, Good Morning America, New York Times, USA Today and Kiplinger Personal Finance. For better buying tips and personal finance advice, follow Andrea on Facebook and Twitter or check out her website atwww.AndreaWoroch.com.
Source
While changing your buying behavior takes more than a tip sheet, there are some problems that can be fixed without your ever missing them. Consider taking the “never-again” pledge and see how much you can save by ditching the following seven shopping habits.
1. Don’t Double Up With BOGOs
Buy-one-get-one-free offers require you buy two of a product, so ask yourself a few questions before going for the second item. Do you have enough storage space? How long before you’ll actually use the product? What if you don’t like the first half of the deal; will you just trash the second?
2. Resist Checkout Impulse Buys
Put on your blinders while waiting in supermarket lines. Merchants place tempting items directly in your line of sight — like tabloid newspapers — so you’ll grab and stash them in your cart. Check out “9 Ways Supermarkets Suck You In” for more sneaky strategies to avoid.
3. Nix Extended Warranties
Clerks selling electronics, appliances and other big-ticket items are often trained to push extended warranties. These upsells cost far more than they’re worth, since most of these products already come with manufacturer warranties for at least the first year. Extended warranties also can be difficult to cash in on, should the product break down.
4. Avoid Gift Wrap Services
Gift wrapping and gift boxes, particularly those purchased online, usually cost far more than they’re worth. Pick up your own supplies at the dollar store and get out the tape. Better yet, recycle gift bags you’ve received in the past, or consult Martha Stewart’s “Gift-wrapping Ideas” to re-purpose common household items for a truly unique approach.
5. Forgo Store Credit Cards
Merchants offer savings when you sign up for their credit cards, but you’ll ultimately pay through the nose via interest rates and potential late fees. For some reason, just applying for these cards also dings your credit rating. Just say no and, instead, buy cheap gift cards from websites like GiftCardGranny for your preferred merchants. You can save anywhere from 10 percent to 50 percent and still buy the merchandise you want at the card’s face value.
6. Don’t Drink and Shop
There’s usually a healthy mark-up on drinks sold in store coolers. If you’re the type that needs a bottle of soda or water to make it through a dreary shopping trip, plan ahead and bring your own from home.
7. Prevent Gift Card Waste
According to an article on Kiplinger.com, American households have an average of $300 in unused gift cards collecting dust in their wallets, purses and sock drawers. Holding onto gift cards is a costly habit, one which can be remedied by exchanging them for cash on Gift Card Exchange Day. Scheduled for Dec. 26, this one-day online event serves as both a reminder and a resource to trade gift cards for greenbacks, with resellers competing for your unwanted bounty.
8. Dodge Daily Deals
Daily deal sites like Groupon and LivingSocial make saving look easy, and as a result make spending even easier. Thanks to overzealous deal purchasing, there’s now an entire industry made up of merchants who buy your unused daily deals for resale. If you habitually purchase daily deals and rarely use them, consider going cold turkey for a while.
As a consumer and money-saving expert, Andrea Woroch dissects retail trends and provides smart shopping and money-management tips to help Americans save more. She has worked with top news outlets across the country including NBC’s Today, Good Morning America, New York Times, USA Today and Kiplinger Personal Finance. For better buying tips and personal finance advice, follow Andrea on Facebook and Twitter or check out her website atwww.AndreaWoroch.com.
Source
Friday, November 4, 2011
Tips on saving money on groceries
If you've been to a grocery store lately, you know that meat, dairy products, cereal, coffee and soda have all seen double-digit price increases in the past 12 to 18 months. Even worse, there are more hikes predicted.
This year's wild weather and roller-coaster oil prices are partly to blame. And unless things stabilize, shoppers are looking at food prices being 3 to 4 percent higher next year, said Michael Swanson, an agricultural economist at Wells Fargo.
When prices climb too high, thrifty consumers can always find alternatives, said Bea Krinke, a registered dietitian in St. Paul, Minn. But quitting a favorite food is rarely easy, even if you treat yourself once a month as Krinke suggests.
If deprivation isn't on your menu, Twin Cities supermarket gurus — Carrie Rocha of Pocketyourdollars.com, Karen Gunter of Creativecouponing.com and super shopper Kim Crumb of Bloomington, Minn. — suggest how to save on five budget-busting foods. Their best tip? Keep track of prices on 10 to 15 of the staples you regularly buy so you can recognize a good deal when you see one.
If you'd rather beat the price hikes instead of waiting for a sale, now is the time to buy peanut butter and popcorn. Both are expected to rise by 25 to 30 percent in the near future. Luckily, both have a long shelf life.
Bacon
Why so high?
With the price of feed rising, the hog industry has cut back on production to prevent losses. Not as many pigs, not as much bacon.
How to save:
— Choose other pork products that are on sale, such as pork loin, or skip it all together.
— Buy on sale at stores with double coupons.
— Stock up when it's on sale, typically before Thanksgiving, Christmas and Easter, and then freeze excess.
Substitutes:
— Buy sausage or breakfast links, which are cheaper than bacon, a premium pork product.
— Try turkey bacon, Bacon Bits or soy-based bacon pieces.
Beef
Why so high?
"The export market is on fire in China, Korea and Mexico," said Swanson.
Less inventory here means higher prices.
How to save:
— Look for items with a "reduced for quick sale" sticker. Ask the meat department when reduced items are put out. Freeze or cook immediately.
— Embrace smaller portions. It's an easy way to reduce beef consumption and eat more healthfully, said Krinke.
— Buy better cuts of meat for less at Costco or sign up for your grocer's weekly e-mail for savings and a coupon.
Substitutes:
— Chicken, pork and turkey are often cheaper. Stock up on turkey at Thanksgiving and freeze.
— Tenderize cheaper cuts of meat with acidic marinades, such as Italian dressing, or chop meat into small pieces and put in a slow cooker.
— Get protein from whole grains such as quinoa or soy and dairy products.
Cereal
Why so high?
A large portion of corn supplies is now being diverted to ethanol. Oats and wheat prices are higher.
How to save:
— Clip cereal coupons that are featured in the circulars, or print coupons from Smartsource.com, Coupons.com, Bettycrocker.com, Pillsbury.com or other company websites.
— Buy in bulk at warehouse clubs or co-ops.
Substitutes:
— Experiment with store brands, especially corn flakes or other standard fare.
— Mix cheaper store brands with brand-name cereal.
Mllk
Why so high?
Exports are at an all-time high, said Swanson, due to an expanding middle class in countries such as Mexico, Philippines and Egypt.
How to save:
— Try neighborhood gas stations, convenience stores and pharmacies that use milk as a loss leader.
— Freeze milk for use in cooking. (Most people don't like drinking milk after it's been frozen.)
Substitutes:
— Check the price on powdered milk. It's cheaper, and it's fine for use in recipes.
— Gradually train yourself and your kids to drink a mixture of powdered and regular milk.
Cheese
Why so high?
Prices have doubled in the past year and coupons are scarce.
How to save:
— Buy in larger quantities at warehouse clubs.
— Shred and freeze cheese when on sale. Shredded cheese tends to freeze better than blocks.
— Shop for cheese in the dairy case, not the deli or the specialty cheese case, where prices are higher.
Substitutes:
— Experiment with reducing the amount of cheese on a pizza, for example, to what's palatable for you, said Krinke.
Soda pop
Why so high?
It's the higher cost of corn syrup, aluminum, plastic and transportation.
How to save:
— Watch for Pepsi coupons. Now that Coke is winning the soda wars, Pepsi is fighting back with discounts.
— Stock up around holidays, when discounters and supermarkets sell 12-packs for less than $3 and 24-packs are about $6.
— Mix cheaper generic colas in 2-liter bottles with brand-name stuff.
Substitutes:
— Make your own at home with the do-it-yourself kits from SodaStream at Amazon or Bed, Bath & Beyond.
— Mix sparkling water with flavorings or apple, lime, orange or grape juice.
Source
This year's wild weather and roller-coaster oil prices are partly to blame. And unless things stabilize, shoppers are looking at food prices being 3 to 4 percent higher next year, said Michael Swanson, an agricultural economist at Wells Fargo.
When prices climb too high, thrifty consumers can always find alternatives, said Bea Krinke, a registered dietitian in St. Paul, Minn. But quitting a favorite food is rarely easy, even if you treat yourself once a month as Krinke suggests.
If deprivation isn't on your menu, Twin Cities supermarket gurus — Carrie Rocha of Pocketyourdollars.com, Karen Gunter of Creativecouponing.com and super shopper Kim Crumb of Bloomington, Minn. — suggest how to save on five budget-busting foods. Their best tip? Keep track of prices on 10 to 15 of the staples you regularly buy so you can recognize a good deal when you see one.
If you'd rather beat the price hikes instead of waiting for a sale, now is the time to buy peanut butter and popcorn. Both are expected to rise by 25 to 30 percent in the near future. Luckily, both have a long shelf life.
Bacon
Why so high?
With the price of feed rising, the hog industry has cut back on production to prevent losses. Not as many pigs, not as much bacon.
How to save:
— Choose other pork products that are on sale, such as pork loin, or skip it all together.
— Buy on sale at stores with double coupons.
— Stock up when it's on sale, typically before Thanksgiving, Christmas and Easter, and then freeze excess.
Substitutes:
— Buy sausage or breakfast links, which are cheaper than bacon, a premium pork product.
— Try turkey bacon, Bacon Bits or soy-based bacon pieces.
Beef
Why so high?
"The export market is on fire in China, Korea and Mexico," said Swanson.
Less inventory here means higher prices.
How to save:
— Look for items with a "reduced for quick sale" sticker. Ask the meat department when reduced items are put out. Freeze or cook immediately.
— Embrace smaller portions. It's an easy way to reduce beef consumption and eat more healthfully, said Krinke.
— Buy better cuts of meat for less at Costco or sign up for your grocer's weekly e-mail for savings and a coupon.
Substitutes:
— Chicken, pork and turkey are often cheaper. Stock up on turkey at Thanksgiving and freeze.
— Tenderize cheaper cuts of meat with acidic marinades, such as Italian dressing, or chop meat into small pieces and put in a slow cooker.
— Get protein from whole grains such as quinoa or soy and dairy products.
Cereal
Why so high?
A large portion of corn supplies is now being diverted to ethanol. Oats and wheat prices are higher.
How to save:
— Clip cereal coupons that are featured in the circulars, or print coupons from Smartsource.com, Coupons.com, Bettycrocker.com, Pillsbury.com or other company websites.
— Buy in bulk at warehouse clubs or co-ops.
Substitutes:
— Experiment with store brands, especially corn flakes or other standard fare.
— Mix cheaper store brands with brand-name cereal.
Mllk
Why so high?
Exports are at an all-time high, said Swanson, due to an expanding middle class in countries such as Mexico, Philippines and Egypt.
How to save:
— Try neighborhood gas stations, convenience stores and pharmacies that use milk as a loss leader.
— Freeze milk for use in cooking. (Most people don't like drinking milk after it's been frozen.)
Substitutes:
— Check the price on powdered milk. It's cheaper, and it's fine for use in recipes.
— Gradually train yourself and your kids to drink a mixture of powdered and regular milk.
Cheese
Why so high?
Prices have doubled in the past year and coupons are scarce.
How to save:
— Buy in larger quantities at warehouse clubs.
— Shred and freeze cheese when on sale. Shredded cheese tends to freeze better than blocks.
— Shop for cheese in the dairy case, not the deli or the specialty cheese case, where prices are higher.
Substitutes:
— Experiment with reducing the amount of cheese on a pizza, for example, to what's palatable for you, said Krinke.
Soda pop
Why so high?
It's the higher cost of corn syrup, aluminum, plastic and transportation.
How to save:
— Watch for Pepsi coupons. Now that Coke is winning the soda wars, Pepsi is fighting back with discounts.
— Stock up around holidays, when discounters and supermarkets sell 12-packs for less than $3 and 24-packs are about $6.
— Mix cheaper generic colas in 2-liter bottles with brand-name stuff.
Substitutes:
— Make your own at home with the do-it-yourself kits from SodaStream at Amazon or Bed, Bath & Beyond.
— Mix sparkling water with flavorings or apple, lime, orange or grape juice.
Source
Friday, October 21, 2011
7 ways to protect your credit rating during unemployment
Losing a job is bad enough, so minimize the damage to your credit By Jodi Helmer
In the midst of polishing your resume, scouring job boards and meeting with recruiters, it's easy to stop paying attention to your credit score.
But taking steps to protect your credit during a period of unemployment will make it easier to recover from the financial setback and may even help you land a job.
For one thing, even if you're not looking at your score, your prospective employer may. In 2010, 60 percent of members of The Society for Human Resource Management ran credit checks on at least some potential hires, up from 25 percent in 1998.
Experts suggest you follow these seven tips to safeguard your credit score if you're unemployed, or if your job situation is shaky:
1. Consider payment protection: In exchange for a fee, payment protection insurance puts your payments on hold for a predetermined period of time. It's offered on debts such as credit card balances, car loans and even mortgages.
"You won't qualify for payment protection after you lose your job, so research the options now," advises Rodney Anderson, author of "Credit 911: Secrets and Strategies to Saving Your Financial Life."
Read the fine print so you know exactly what protection you're getting and how much it costs.
2. Request a credit report: Before you send out resumes or schedule interviews, order a copy of your credit report from each of the three major credit bureaus. You're entitled by law to one free one per year if you get them through AnnualCreditReport.com .
"Knowing the details of your credit report can help you explain any possible red flags during an interview," says Anderson.
According to the Fair Credit Reporting Act, you're also entitled to a free credit report if you are unemployed and searching for work.
If there is something in error on your credit report, you can have it corrected. Or if there is something accurate but possibly damaging to your chances of finding a job, the three major credit bureaus -- TransUnion, Equifax and Experian -- allow you to write a 100-word letter, explaining the circumstances to anyone who requests your report.
3. Stick to cash: Without a regular paycheck, it can be tempting to charge everything from groceries to a new interview suit with plans to pay the balance later.
"If you pay with cash, you tend to be more disciplined about how much you're spending," explains Deborah McNaughton, president of Professional Credit Counselors Inc. and author of "The Essential Credit Repair Handbook."
The other benefit to using cash to cover expenses: It ensures you have available credit in case of an emergency.
Just be sure the bills in your wallet did not come from a cash advance on your credit card. Cash advances come with additional fees and higher interest rates, which are charged beginning the instant you take the cash.
4. Meet the minimum: When your credit card bill comes in the mail, focus on making the minimum payment, not paying down the overall balance.
"You need to maintain your cash reserves," says Leslie Linfield, executive director of the Institute for Financial Literacy. "Now is not the time to try to pay off your credit card balances."
Make sure to make minimum payments on time. Some credit card issuers will report even slightly late payments to the credit bureaus, which will hurt your credit score.
"Depending on your score, one 30-day late payment can drop your score as much as 100 points," adds Anderson.
You can resume your goal of paying off credit card debt after you land a new job.
5. Communicate with creditors: If you're having trouble making your monthly payments, pick up the phone.
Linfield suggests calling creditors to find out about financial hardship programs. Often, creditors will agree to lower interest rates or set up more affordable payment plans.
"Creditors want to work with you," she says. "They have programs you will never know about unless you call."
Don't be embarrassed to admit that you are struggling to pay your bills. Linfield notes that in a time of chronic unemployment, creditors receive these calls all the time.
Making the call before your accounts go into collections is essential for safeguarding your credit score.
"Once your account is turned over to collections, your credit score will take a huge hit," she says.
6. Defer debts: The easiest debts to defer during a period of unemployment are student loans. Call your lender and ask for an "economic hardship" deferment, which allows you to postpone payments and stops interest from accruing on the principal while you're unemployed.
"If you have been unemployed for at least 30 days, start the deferment process," says Linfield.
Linfield is quick to point out that deferment has no impact on your credit score because deferred debt is not reported to credit bureaus as missed or late payments.
You may also be able to defer your mortgage or car payment for 30 to 90 days, giving you a bit of breathing room if things are tight. Call your lender to ask about your options.
7. Stop shopping for credit: When you lose your job, it might be tempting to apply for new credit cards to ensure you have as much available credit as possible in case of emergency. Anderson cautions against this approach.
"The chances of getting approved for a credit card when you're unemployed are not very good and every inquiry [on your credit report] can ding your score," he explains.
Applying for additional credit cards also increases the likelihood you'll accrue more debt and be unable to afford the payments when the bills come in.
Following the tips won't ease the pain of unemployment, experts say, but they will keep trouble from infiltrating into another area of your financial llife.
Source
In the midst of polishing your resume, scouring job boards and meeting with recruiters, it's easy to stop paying attention to your credit score.
But taking steps to protect your credit during a period of unemployment will make it easier to recover from the financial setback and may even help you land a job.
For one thing, even if you're not looking at your score, your prospective employer may. In 2010, 60 percent of members of The Society for Human Resource Management ran credit checks on at least some potential hires, up from 25 percent in 1998.
Experts suggest you follow these seven tips to safeguard your credit score if you're unemployed, or if your job situation is shaky:
1. Consider payment protection: In exchange for a fee, payment protection insurance puts your payments on hold for a predetermined period of time. It's offered on debts such as credit card balances, car loans and even mortgages.
"You won't qualify for payment protection after you lose your job, so research the options now," advises Rodney Anderson, author of "Credit 911: Secrets and Strategies to Saving Your Financial Life."
Read the fine print so you know exactly what protection you're getting and how much it costs.
2. Request a credit report: Before you send out resumes or schedule interviews, order a copy of your credit report from each of the three major credit bureaus. You're entitled by law to one free one per year if you get them through AnnualCreditReport.com .
"Knowing the details of your credit report can help you explain any possible red flags during an interview," says Anderson.
According to the Fair Credit Reporting Act, you're also entitled to a free credit report if you are unemployed and searching for work.
If there is something in error on your credit report, you can have it corrected. Or if there is something accurate but possibly damaging to your chances of finding a job, the three major credit bureaus -- TransUnion, Equifax and Experian -- allow you to write a 100-word letter, explaining the circumstances to anyone who requests your report.
3. Stick to cash: Without a regular paycheck, it can be tempting to charge everything from groceries to a new interview suit with plans to pay the balance later.
"If you pay with cash, you tend to be more disciplined about how much you're spending," explains Deborah McNaughton, president of Professional Credit Counselors Inc. and author of "The Essential Credit Repair Handbook."
The other benefit to using cash to cover expenses: It ensures you have available credit in case of an emergency.
Just be sure the bills in your wallet did not come from a cash advance on your credit card. Cash advances come with additional fees and higher interest rates, which are charged beginning the instant you take the cash.
4. Meet the minimum: When your credit card bill comes in the mail, focus on making the minimum payment, not paying down the overall balance.
"You need to maintain your cash reserves," says Leslie Linfield, executive director of the Institute for Financial Literacy. "Now is not the time to try to pay off your credit card balances."
Make sure to make minimum payments on time. Some credit card issuers will report even slightly late payments to the credit bureaus, which will hurt your credit score.
"Depending on your score, one 30-day late payment can drop your score as much as 100 points," adds Anderson.
You can resume your goal of paying off credit card debt after you land a new job.
5. Communicate with creditors: If you're having trouble making your monthly payments, pick up the phone.
Linfield suggests calling creditors to find out about financial hardship programs. Often, creditors will agree to lower interest rates or set up more affordable payment plans.
"Creditors want to work with you," she says. "They have programs you will never know about unless you call."
Don't be embarrassed to admit that you are struggling to pay your bills. Linfield notes that in a time of chronic unemployment, creditors receive these calls all the time.
Making the call before your accounts go into collections is essential for safeguarding your credit score.
"Once your account is turned over to collections, your credit score will take a huge hit," she says.
6. Defer debts: The easiest debts to defer during a period of unemployment are student loans. Call your lender and ask for an "economic hardship" deferment, which allows you to postpone payments and stops interest from accruing on the principal while you're unemployed.
"If you have been unemployed for at least 30 days, start the deferment process," says Linfield.
Linfield is quick to point out that deferment has no impact on your credit score because deferred debt is not reported to credit bureaus as missed or late payments.
You may also be able to defer your mortgage or car payment for 30 to 90 days, giving you a bit of breathing room if things are tight. Call your lender to ask about your options.
7. Stop shopping for credit: When you lose your job, it might be tempting to apply for new credit cards to ensure you have as much available credit as possible in case of emergency. Anderson cautions against this approach.
"The chances of getting approved for a credit card when you're unemployed are not very good and every inquiry [on your credit report] can ding your score," he explains.
Applying for additional credit cards also increases the likelihood you'll accrue more debt and be unable to afford the payments when the bills come in.
Following the tips won't ease the pain of unemployment, experts say, but they will keep trouble from infiltrating into another area of your financial llife.
Source
Friday, October 14, 2011
Get Out of Debt: 6 Steps You Need to Take
One of the most important financial lessons that you can learn is that debt is prison. Indeed, when you are paying interest on your debt, that money is going straight into someone else’s bank account — and you receive nothing in return. Plus, paying that interest makes it harder to pay down the principal and to reduce your debt. Even though it might be difficult to get out of debt, it is doable. Here are the steps you can take to get out of debt.
1. Really Decide that You are Committed to Getting Out of Debt. The first thing you have to do is decide that you are really committed to getting out of debt. You need to truly want to change the way you do things, and get serious about paying down your debt and getting on the path to financial freedom. Without the commitment to get out of debt, you are likely to give up.
2. Stop Adding to Your Debt. Take a look at your budget, and figure out how you can better live within your means. Before you can effective tackle your debt problems, you need to stop making purchases with debt. Look at your spending, and cut back on the unnecessary items so that you are living within your means.
3. List all of Your Debts. Next, list all of your debts. List the balances, minimum payments and interest rates. Decide on an order to pay them off. Many people like the “debt snowball” method. You take that lowest balance debt, and concentrate on that first. This method is psychologically rewarding, since you see success faster, and are encouraged to keep going. Others, though, prefer to start with the debt with the highest interest rate, since it will save more money in the long run, since you will get rid of the most expensive debt faster.
4. Decide How Much You can Put Toward Debt Pay Down. Now that you have prioritized your debt list, it’s time to figure out how much money you can put toward your debt pay down. Honestly evaluate your spending, and look for places to cut back. You should be able to find waste in your spending, and, instead of spending it on frivolities, put it toward paying off your debt. Pay the current minimum on all of your debts, except the one at the top of your list. Put your debt pay down amount toward that debt. The more you can put toward it, the better.
5. Look for Ways to Earn More to Speed Up the Process. If you want to speed up your debt repayment process, you can look for ways to earn more money. Start a side hustle. Get a part-time job. It’s only for a little while. If you can put your debt repayment efforts into overdrive, you can be free that much sooner — and you will reap the benefits.
6. Acknowledge Your Successes. You can stay motivated when you acknowledge your successes and take time to reward yourself. Don’t go big though — you want to stay out of debt. But you can hold a little celebration, or you can retire each debt in a creative way. Buy a small treat, or cook your favorite dinner at home. Be sure to mark each milestone, and get excited about your next step toward success.
Source
1. Really Decide that You are Committed to Getting Out of Debt. The first thing you have to do is decide that you are really committed to getting out of debt. You need to truly want to change the way you do things, and get serious about paying down your debt and getting on the path to financial freedom. Without the commitment to get out of debt, you are likely to give up.
2. Stop Adding to Your Debt. Take a look at your budget, and figure out how you can better live within your means. Before you can effective tackle your debt problems, you need to stop making purchases with debt. Look at your spending, and cut back on the unnecessary items so that you are living within your means.
3. List all of Your Debts. Next, list all of your debts. List the balances, minimum payments and interest rates. Decide on an order to pay them off. Many people like the “debt snowball” method. You take that lowest balance debt, and concentrate on that first. This method is psychologically rewarding, since you see success faster, and are encouraged to keep going. Others, though, prefer to start with the debt with the highest interest rate, since it will save more money in the long run, since you will get rid of the most expensive debt faster.
4. Decide How Much You can Put Toward Debt Pay Down. Now that you have prioritized your debt list, it’s time to figure out how much money you can put toward your debt pay down. Honestly evaluate your spending, and look for places to cut back. You should be able to find waste in your spending, and, instead of spending it on frivolities, put it toward paying off your debt. Pay the current minimum on all of your debts, except the one at the top of your list. Put your debt pay down amount toward that debt. The more you can put toward it, the better.
5. Look for Ways to Earn More to Speed Up the Process. If you want to speed up your debt repayment process, you can look for ways to earn more money. Start a side hustle. Get a part-time job. It’s only for a little while. If you can put your debt repayment efforts into overdrive, you can be free that much sooner — and you will reap the benefits.
6. Acknowledge Your Successes. You can stay motivated when you acknowledge your successes and take time to reward yourself. Don’t go big though — you want to stay out of debt. But you can hold a little celebration, or you can retire each debt in a creative way. Buy a small treat, or cook your favorite dinner at home. Be sure to mark each milestone, and get excited about your next step toward success.
Source
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