Category Archives: Debt and Financial Advice

Handling Insurance and Estate Settlements

Suddenly becoming a widow is devastating enough.   It takes a while, perhaps, to get over the shock and grief and to begin thinking clearly again.

However, if your husband had a life insurance policy and you are the beneficiary, no matter how large or small the amount might be, it’s crucial to your financial future that you have a clear plan on how to handle that money.

Too many financial mistakes have been made in the name of ignorance and poor planning, and too many financial windfalls have been totally lost and misappropriated simply by following bad advice, or worse, no advice.

If the insurance settlement is $600,000 or over, it will need to be probated by a local court, no matter what the will says.  Once this is reported to the court, it becomes public record and all bets are off.  You will have every investment salesman hounding you for your money.

Even if it’s less – perhaps $50,000 – you must still understand how to manage these funds so they will continue to work for you for years to come.

Before paying off your house, buying a new Mercedes, or taking a Mediterranean cruise with all your friends, you need to understand the ramifications of every dollar you spend from then on.

For stay at home moms who have never managed money or even worked, $50,000 can sound like a lot of money.  It’s not.  If you are lucky enough to receive even more – let’s say $300,000 – this is where problems start.  Too many women waste the money with shopping sprees that weren’t possible before, and bad investments that will never produce returns.

Here are some simple Don’t’s to follow when you receive your check:

  • Don’t tell anyone you have this money.  No one.  Especially someone who might want to borrow it.  If anyone asks if you’ll be OK, say “Yes”.  That’s all they need to know.
  • Don’t go buying any big ticket items unless they are absolutely mandatory.  You might be OK buying new kitchen appliances, but you don’t really need that new Rolex, right?
  • Most insurance companies will automatically establish a money market checking account for you, using your insurance funding.  You will get interest.  Leave it there.  Don’t transfer it anywhere for now.
  • This may seem cruel, but don’t overspend on the funeral.  Funeral directors will ask how much your insurance check will be (mainly to make sure they will be paid).  If they find out it’s a considerable amount they will try to add on useless services that add no value but cost a fortune.
  • Don’t schedule any appointments with anyone who wants to sell you any type of investment opportunities.  These people are on commission and are only concerned with one thing: their own commission.

Leave that money alone until you feel you can start to make rational decisions.  Once you’re feeling better, get in touch with a certified financial planner, a CFP.  These people must be licensed by the state and their actions are regulated and monitored.  They are experts in financial management.

He will go over your current financial situation in detail.  He won’t try to sell you anything.  He will, however, be able to give you good advice on how to manage your insurance settlement so that it will work for you going forward.

A CFP does not work on commission; he usually charges an hourly rate.  He is not going to try to steer you in the direction of a particular fund or investment opportunity that he has anything to do with.  Yes, he may recommend certain investments, but his recommendation should only be based on his knowledge of that investment and how it relates to your financial situation.

After meeting with him you must understand his advice and, most important, you should like him and trust him.  If you have any doubts, meet with another planner.  When someone is going to tell you how to spend your money, you need to be comfortable with his recommendations, and in agreement with these decisions.

How to Save – For Now and the Future

Saving money can be one of the most difficult tasks for so many reasons.  Whether your paycheck and your bills just don’t allow for much of anything to be put away, or you are an impulse shopper and spend every penny that comes your way, saving can seem impossible.  Either way, it needs to be done, and it’s never too early – or too late- start.

Women have historically had a very different view on saving money.  For many, their goal is to get married, have children, and stay at home to raise them.  They entrust their financial well being to their husbands.   This usually entails joint accounts, joint portfolios, and joint retirement strategies.  All too frequently this turns out not to be a wise strategy.   Whether you get divorced or find out your husband is using up all the money  (maybe he bought that sail boat that you didn’t agree to?), you need to protect yourself.

Whatever your marital status or your personal financial status, you need to learn how to take care of yourself.    A proper and effective financial plan will depend upon your current financial situation.  This plan is fluid and can and will change as your income, job status, marital status, etc., changes throughout life.

If you don’t have a significant amount of assets to depend on (investments, property, dividends, etc.) then start small and follow these easy steps.

  • Don’t keep all your money together, even in a checking account that gives interest.  Have two separate accounts: one to spend, one to save.
  • Don’t invest in anything where you can lose money unless you can afford to.   If your financial future is in question, refrain from further deposits into 401(k)s and IRAs until an independent financial advisor can review your investment portfolio and make sure you have a limited amount of risk.   Investing is great, but investing poorly can be financial suicide.
  • Stay liquid.  Don’t put yourself in a position where your only cash is tied up in retirement accounts that penalize you for early withdrawal.
  • Get rid of cash value life insurance and buy a term policy.  Cash value policies only give you a 3% return on your investment while the insurance company takes the rest.  Why make them richer?  Don’t mix insurance with investments.
  • Bank CDs had a bad reputation up till recently because of their rate of returns.  However, they are now gaining in popularity because even though their returns are still low, they are guaranteed.   Unlike investing in stocks and bonds, a CD won’t decrease in value.

Now that you have an idea of where to put your money, look at your cash flow and decide where the money will come from to start saving.  Even if you’re broke at the end of the week, there is always a way to find something to put away for later.

Using an Excel spreadsheet or even a more detailed program like Quicken, start keeping track of where all your money goes each day.  Record your morning coffee, lunch, ice cream at the park for the kids, a magazine, and the milk and eggs you bought on the way home.   Record bills paid by check or cash.  It’s important to keep track of every penny you spend; don’t just record “$20 cash withdrawal”.   That doesn’t explain what you needed the money for.

Do a separate sheet for things you charge.  These charges will have a major impact on your monthly bills.

Do this for two weeks.  Your cash expenses should equal your income to within less than a dollar if you  do this faithfully.

When you review these summaries, you will be amazed at what you see!    Most women are shocked at the amount spent on coffee, lunches, unnecessary luxuries for the kids ($150 sneakers??), and even grocery store purchases.

Figure out what you can live without.  For instance, a $10 a day latte addiction and $100 a week for lunches should be items that get revised immediately.

Once you figure out what you can save each week, then save it!  Take exactly what you save and put it in that separate account you opened and make sure you are the sole account holder.  It has nothing to do with trust; it has everything to do with self preservation and necessity.   If you have reduced your lattes to one a week and reduced restaurant lunches, take that $75 or so and put it away.  Immediately.  Don’t spend it on something else!

No savings plan will work unless you are thoroughly committed.  Even if you can only put away $5 a week, keep doing it.  If you give up, you are essentially giving up on yourself.

Financial Advice for Women: What to do if You’re Suddenly Single

For decades women have been fighting for equality.   But for all the “progress” that we have accomplished, most women are still in the financial dark ages when it comes to separation and divorce, and even becoming a widow.

The hardest hit group is the stay at home moms who either never worked or quit their jobs / careers once they started a family.   They are totally dependent on their husbands’ income, and most women never give this total reliance a second thought during the marriage.   Hubby goes to work, the bills get paid, the wife and kids have what they need, and probably plenty of luxuries as well.  The thought that all this could be gone in a minute never enters their mind.

Until it happens.  Hubby decides he wants a divorce, for whatever reason, moves out, and leaves you and the kids.   Besides your fragile emotional state to deal with, what is your financial picture?    Most stay at home moms unfortunately learn the hard way that their financial picture is grim indeed.

Sure, you might be used to heading to the ATM machine to get some cash, or buying whatever you need whenever you need it – groceries, gas, clothes, etc.   But what happens when you learn  that there are only a few dollars left in the bank?   And the credit cards have been closed?    What happens when you find out he left you with nothing?

Forget what your friends tell you about “the law says this” and “the law says that” when it comes to who is entitled to what during a divorce.  If the “law” entitled you to anything at all, we wouldn’t need divorce attorneys.   In a divorce – you get what you each agree to.  Period.   There isn’t a lawyer or a judge who is going to force anyone to give you a penny – certainly not in time to eat and pay the mortgage.   If you think you need to fight for money, it will cost a bundle.  And it will take months, if not years, to see any of it.

What should you do?   The entire situation should have been anticipated and prevented with some financial planning.   Life Rule number 1:  Once you reach adulthood, never put yourself in a position where you are totally dependent on another person – no matter who that might be.

Proper planning and prevention is certainly the better solution.   Follow these guidelines in order to minimize possible financial issues before you do find yourself with no husband and no financial resources you can depend on:

  • If you have absolutely no income of your own, find one!   Stop thinking that there will always be money around at your disposal.   Find something you can do at home, go back to the career you had before, or think twice about quitting your job and giving up your career just to have kids.
  • Take some money and put it in a liquid account (one that you can withdraw from immediately without penalty) under your name only.    Make deposits regularly.
  • Do not have joint credit card accounts.  You are jointly responsible for paying credit cards even if you don’t use them.  If he leaves you, you are only responsible for your personal credit cards, not his.  If he is on any of your credit accounts as an authorized user, you can call and remove him immediately.   You cannot do this with joint accounts!  One person cannot remove the other.
  • Do make certain that all household utilities are in both names.  Yes, you’ll need to pay them if he leaves, but don’t think he’s going to pay them just because they might be in his name only.  They need to be in both names so that you can call if there is a problem.  If your name isn’t listed, you can’t discuss billing, changes, add on services, etc.   You also need to be able call if he has your services cancelled (yes, he could!) and you will need to be able to call to turn them back on again.  If they don’t know you, you have a major problem.
  • If you really have no income, chances are you have a joint bank account.   This means you both have equal access to the funds.   All too often women are shocked to find that all the money is gone when hubby announces he’s leaving – and there is nothing you can do.
  • If you are the one who is considering a separation, be prepared before discussing the possibility with your husband.   Make sure you have your safety fund, your credit cards are squared away, and you are totally financially prepared for the aftermath.  Do not make the assumption that he will provide for you after the split.  Forget what you think he’s legally responsible for.  Don’t think that you’ll “manage” with sums of money you believe he should give you:  mortgage, car payments, school tuition for the kids, etc.   If you can’t handle these bills starting immediately, step back and re-examine your financial position.   Stop relying on his input!  It’s going away, one way or the other!

Everyone starts a marriage or long term relationship with the best outcome in mind.  But proper planning includes disaster planning, no matter what.   Whether you are planning for hurricane season in Florida, or long term care insurance for your old age, you need to plan for every possibility life can throw at you.   Don’t assume, don’t take for granted, and don’t depend on others!

How to get rid of credit card debt

If you’re tired of aimlessly paying into the black hole that is your credit cards, there’s good news: a little planning and dedication is all it takes to undo years of balances, leaving you hundreds of extra dollars per month to spend or save as you please.  Preparation and payment are the only two parts to this process, and while you’ll have some flexibility in how you pay off your credit cards, the prep work is the same for everyone.

Before Making Payments

For each card you have, you’re going to have to call that credit card company.  No one likes to do it, but remember that it’s for your benefit.  Once you have customer service on the line, ask them to reduce your APR (Annual Percentage Rate).  While companies are less likely to lower your rate today than in the past, any reduction could mean hundreds of dollars in savings.

If you only have one credit card, your prep work is done; however, most people have several cards at a minimum.  It’s time to consolidate by shifting balances from high interest rate cards to ones with lower rates.  You can even ask for a limit increase to help accommodate the transfer.  If all goes well, you may be able to eliminate one or more cards, not to mention additional hundreds of dollars in interest, before you even start paying.

After preparing your cards for payment, determine in advance which cards you’ll keep and which you’ll cancel.  As a general rule, keep no more than two credit cards.  Get rid of every department store card, even if you use it responsibly, and make sure that the two cards you keep are from different companies (Visa, MasterCard, American Express, Discover).  This is to protect you in the unlikely event that a merchant doesn’t accept credit cards from all of the major companies.

Paying Off Credit Cards

There is plenty of flexibility in how you reduce your credit card balances.  Not every plan is for everyone, so make sure you choose the method you think you would be able to maintain.  The first two payment plans incorporate the snowball effect, which states that you will pay a set amount towards your credit cards each month, even as the number of payments is reduced.  As you progress, the payment total remains constant while the number of cards decreases, accelerating the process.   The third plan is designed to slowly increase cash flow each month and does not incorporate the snowball effect.  Remember to cancel your cards as they’re paid off; don’t give yourself a chance to dig a new hole.

Rate-based Payments

If you have multiple credit cards, the card with the highest APR is doing the most damage to your pocketbook.  Focus your monthly payment on the worst offender and make the minimum payment on your other credit cards.  When that card is paid off, take a moment to rejoice then repeat the process with the new worst offender, continuing with each card until all your balances are at zero.

Divide and Conquer

Rather than focus on the credit card with the highest APR, concentrate your payments on the card with the lowest balance first, making minimum payments on all your other cards.  This isn’t as efficient as the plan above, but there is no feeling like knocking off a couple of smaller credit cards before tackling one with a much larger balance.  If your preparatory work went well, there’s even a good chance that your small balance cards will be the ones with the highest APR.

Slow and Steady

This is the least efficient method to pay off your credit cards and will take the most time, but it has one short term advantage the others don’t: Over time you’ll spend less on credit cards and increase your cash flow.  Each month, make the minimum payment on each card plus a predetermined amount, like $20.  As the months progress, continue to pay the minimum plus your predetermined amount.  Your credit card balances will decrease and so will your monthly payments.

When it comes to paying off your credit cards, you should choose the plan that gives you the best chance for success, whether it’s the most efficient method or not.  Eliminating credit card debt is more a marathon than a sprint, and the only wrong way to pay off your cards is to not try.

College Financial Advice

Financial Advice for College Students 

Attending university can be an exciting, novel adventure with many new experiences on the forefront. For many, it is the first time living on their own and managing all their expenses.  Paying for the entire university experience may seem like a daunting task, considering the large investment, associated costs and limited earnings during that time.  What knowledge is essential to managing finances during this time? Should you get a credit card? There are ways to make more effective use of the money you have, save money on your current expenses and make more money during the year.

Making your money work for you

A little planning goes a long way in making the most of your current financial situation.  Not all students have the same expenses or savings, thus comparing yourself with your neighbors may not be the best financial plan.  Getting a plan, developing your own rules and rituals, and crunching your own numbers will make you a financially responsible individual.

  1. Place your money in an account which allows access but pays the highest interest rate around.  Even 1% more can make a huge difference at the end of the year, negotiate a better rate for yourself.  If you have more money than you need for the school year, place it in a term deposit where you may not have access during a specified time and can make an even higher interest rate.
  2. Know your tax benefits and use them wisely.  Check with an accountant regarding the tax benefits of attending school full-time or part-time in your country.  Tax savings can sometimes be transferred to another family member or carried forward to another year.  Discuss your specific situation with a tax accountant.
  3. Calculate the benefits of living at home, commuting, residence or an apartment.  Factor in actual cost, maintenance, furnishings, travel time and cost.  Consider the location, ease of travel, safety, ease of studying and the possibility of an additional renter.
  4. Apply yearly for tuition credits, scholarships, grants or loan gifts. Contact your student financial services area on campus for the most current information for your area of study and geographical location.
  5. Carefully plan your courses before enrolling to ensure they meet your degree requirements, offered in a time that is optimised for your learning and are an area of interest for you. The cost of withdrawing from courses can add up and loose time in your quest to achieve your degree, lengthening your semesters of study prior to graduation.
  6. Draft a budget for the year.  Include costs such as tuition, books, lab fees, student fees, etc…   Your University or college can help you determine the actual costs for the year.  Keep track of all your expenses and know where your money is going.  If you splurge in one area, then make up the difference in another area.  Simply keeping track of your expenses will make you more aware of your purchases and likely curb the impulse buying.
  7. Do your shopping at a discount by purchasing used items if you need to furnish a new place.  Perhaps your parents are looking to purchase new furniture or household items, giving you first choice and saving you money.  If you need alternative sources for inexpensive household items, consider garage sales, want ads, second-hand stores, online classified ads like Kijiji or Myused.  Buying needed items at a discount will make your money available for other possible expenses.
  8. Make a list of cost-reducing ideas.  Have an ample list of activities and fun outings that are moderately priced or free to allow your money to go farther.  Check out campus events as these tend to be reasonably priced.  Join the campus fitness facilities as this encompasses many services for a great price, and helps to keep in shape and meet other like-minded individuals.  Take as many of your meals as possible from home or your room.  It may be worth your while to invest in a small fridge and microwave to make inexpensive meals yourself in residence.  Check out the communal kitchen if one exists.  Even a few meals a week can add up to big savings.
  9. Try to make your summer earnings last the year.  If necessary, consider a part-time job that does not interfere with your study schedule.  Look on campus for easily accessible jobs related to your field of interest.  Consider seasonal work near Christmas or study breaks such as during Christmas or study week.

Do’s and don’ts of credit

Getting your first credit card can be exciting and confusing as most students are inundated with credit requests from major credit companies.  Are you ready for a credit card and do you need one?  Your answers will determine when the time is right for your first card.  You may be ready if you can consistently pay off your credit card in a responsible manner.  Do you need a credit card for the convenience while traveling, ordering on-line, tracking your spending or the simplicity of paying off one monthly bill? Now is the time to build your credit rating as it will follow you throughout your financial career.

  1. Select your credit company wisely, and attempt to negotiate a better interest rate, yearly fee and credit limit.  How?  Call the company on the phone, let them know of your multiple offers and see what they can do for you to entice you to choose their company.  It may help to speak to a supervisor who has the authority to change these limits, depending on the company.
  2. Understand the fine print.  When your bill says to pay by a certain date, the company wants the payment to have been received not sent by that date.  Ask at your local bank the amount of time it takes for your creditor to be paid and subtract that amount form the due date, and add a day or two.  This becomes the new due date.
  3. Pay your all your bills on time, including credit, rent, utilities (internet, phone, water, heat, electricity).   Plan on paying off your entire bill monthly and only spend what you actually have.  The interest rate charged by credit companies is usually in the double digits.  If you have charged more than you have available, consider a loan or credit line from your bank which can be obtained at a much lower rate, usually prime plus a fixed rate depending on your history with the bank/credit score.  This would allow you to pay off your card, and make more of your money available to pay off the principal rather than just the interest. In any event, paying at least the minimum monthly payment will count as a payment, covering mainly the interest.  By calculating the actual payment of the bill using only the minimum monthly payment, you will reveal the interest costs and the principal paid out over a lengthy time period, usually several times more than the initial bill itself.
  4. Contact your creditor in case of difficulty for payment.  They may be able to wave fees or reporting your file if you can make immediate plans to pay.
  5. Obtain a copy of your credit report yearly and challenge any inaccuracies.  By law the credit bureau must remove items that were contested if they do not respond within a 1 month period.
  6. Limit the amount of credit applications or credit card cut ups that happen in a six month period.  Anything more than 1 hard inquiry on your credit report can lower your rating.
  7. Limit your spending to less than 30% of your credit limit as otherwise it can lower your credit rating.  If you need to spend more and have a good repayment record for at least six months, contact your credit card company and request a larger credit limit.
  8. Don’t spend more than you have and get in a pattern of paying off only the monthly payment.  Worse would be to start missing payments, as these will be permanently marked on your credit record, available for all perspective leasors, sellers and employers to consult.

Who is looking at your credit rating or FICO score?

All banks, lenders and creditors look at your past history to determine what kind of financial responsibility you have shown in the past.  It is calculated on your past credit history with loans and credit cards.  Did you miss even once?   The lower your number is, the worse your credit rating.  Aren’t sure what your rating is?  Consult a reputable credit bureau such as Equifax.  Some employers, housing, utilities and cell phone companies consult your credit score as well to determine what kind of risk you might be.  The better your rating, the better your terms for credit limit, interest rate, deposits required for rental damage deposits.  In short, all terms are subject to negotiation.  Maintaining and improving your credit rating should be a key in your financial planning.

Debt Settlement Advice

As basic expenses rise and salaries stay the same, more people are struggling to pay off debt.  If you face unpaid debts and dread the telephone ringing, you are not alone.  With the easy extension of credit over the past two decades, debt settlement has become a big business.

What Is Debt Settlement?

Debt settlement refers to debts being charged-off by banks, financial institutions and other lenders.  Although debt settlement has been going on for centuries, the concept became popular as credit standards relaxed during the 1980s.  Loose lending practices and economic recessions caused people to face looming debts with no resolution in sight.

Lenders decided to hire special staff to negotiate with borrowers who had defaulted on loans and credit card payments.  Charge-offs help lenders recover a portion of the funds owed rather than lose all or most of them should the borrower claim bankruptcy.  Often borrowers can settle debts owed for anywhere from 25 percent to 70 percent of the original debt owed.

Why Are Debts Referred To As “Good” or “Bad”?

Often debt is referred to as “good” or “bad”.  Long-term investments are considered good debts.  Taking a mortgage to buy a home is an excellent example.  Homes typically appreciate in value so buying your residence is also a good investment.  Another example is financing a college education.  If you learn more, you will earn more so you can repay your student loans.

Bad debt refers to financing consumable goods and services.  Credit card debts and car loans are examples.  If you buy necessities such as food and gas on your credit cards, you are accumulating even more bad debt.  Bad debts should be paid off first as they usually charge the highest interest rates.

What Are The Stages Of Debt?

Late payments are referred to as delinquencies on your credit report.  Three major credit bureaus, Experian, Equifax and Transunion, maintain your credit records.  Late payments are measured in increments of thirty days.  When you are thirty, sixty and ninety days late, it is reported to all three major credit bureaus.  After that, payments are put together in a ‘ninety days or more category’ and deemed to be seriously late.

If your payments are sixty days late or more, notices are sure to appear on your credit report.  These negative statements will stay on your credit report for up to seven years.  When accounts remain ninety days late or more, they are put into collection.  Lenders inform you in writing they are looking to collect their money.  The original lender usually writes off the debt and gives it to their collection department or a collection agency to pursue it.  Charge-offs, collections and delinquencies stay on your credit report for seven years, even if the balance owed is paid off.  The debt will be marked as satisfied, which improves your credit record.

Debt Settlement Advice – How Bad Can Debt Get?

Lenders have a number of resources to attempt to collect their money.  They can turn your account over to a collection agency to negotiate a settlement of your debt.  If a judgment is entered against you, a wage garnishment can occur.  A portion of what you owe is automatically deducted from your wages.  In a foreclosure action, the house is taken back to pay all or part of the mortgage owed.  When a car is repossessed, it is taken back to satisfy a portion of the loan owed.  Exempt property from garnishment and repossession varies from state to state.  Liens are put on certain property to cover money you owe.  If you attempt to sell this property it is a fraudulent conveyance punishable by law.  Debt settlement is definitely a better option.

Why Should I Review My Credit Report?

You are entitled to a free credit report annually from each of the three main credit bureaus.  Simply contact each of the credit bureaus to request your report directly.  It is not necessary to pay a fee for a copy of your credit report or commit to a credit monitoring service.  Once you get your credit report, review it carefully.  Look for inaccuracies and verify current valid debts.  When you know what you really owe, you are in a better position to negotiate debt settlement agreements.

How Do I Negotiate Debt Settlement Agreements?

Consider a few ways to effectively negotiate debt settlements on your own:

  • Be confident with debt collectors.  Usually collectors want to catch you off guard.  Always get a name, telephone number, account number, credits and total amount owed from the caller.
  • Remain reasonable during all conversations with debt collectors.  Even if the caller gets aggressive, stick to your own personal financial agenda and never get angry.
  • Offer to pay down debt with an amount you can afford.  Debt collectors will try to get you to pay more because that’s their job.  Stay calm as you explain you also need to cover basic expenses such as housing and food.
  • Contact lenders before they contact you.  If you know you’ll be late with a credit card or loan payment, call them before they get a chance to call you.  It gives them no reason to continue to call you for an answer when you contacted them already to provide one.

Are There Standards That Debt Collection Agents Must Follow?

The actions of collection agents are governed by the Federal Trade Commission (FTC).  Collection agents cannot threaten false legal actions against you or say they will put you in prison.  They can only call between the hours of 8 AM and 9 PM.  Collection agents cannot curse at your or insult you, even if you use inappropriate language.  If a collection agent acts improperly, tell them you are recording the call and informing the FTC.  If collectors call your job, send a certified letter to tell them they must cease calling your boss or other contacts.

Debt Settlement Advice – Are There Really Fake Debt Collectors?

Fake debt collectors are a growing problem as more people face looming debts.  “Zombie debts” refer to old debts sold to collection agencies who try to collect them.  A debt collector might be looking for someone different but once you admit to the debt, it belongs to you.  Always verify the debt and check your credit report to see if it’s yours.  If you ever took out a payday loan, you may even be subject to debt collectors attempting identity theft.  Never give out personal information over the phone unless you know you’re dealing with someone legitimate.

Should I Work With A Debt Settlement Agency?

Debt settlement companies are a last resort as they charge fees for their negotiation services.  Try to do it yourself or hire an attorney to negotiate on your behalf.  According to Deanne Loonin, staff attorney with the National Consumer Law Center (NCLC), “”I’ve never seen a [debt settlement] company that’s given a straight answer.”  Jenna Keehan, executive director of the U.S. Organizations for Bankruptcy Alternatives (USOBA) admits, “I have seen every kind of [fee] model you can think of.  It’s very confusing.”

Usually fees for debt settlement companies are anywhere from 15 percent to 25 percent of the total debt or debt savings.  Some debt settlement companies charge a monthly fee for the duration of the payment program.

If you owe money, debt settlement is inevitable.  Contact your creditors sooner rather than later to workout an agreement what works for everyone.

Divorce Financial Advice 101

If your marriage is not working out as you planned, a divorce may be the only solution.   The price of divorce can be costly both financially and emotionally so you may want to seek marriage counseling first.  When all efforts fail and a divorce seems inevitable,  make sure your financial affairs are in good order before you get started.

Consult With An Attorney Before You Take Action

Often initial consultations are free or low cost and are worth their weight in gold.  Speak with an attorney to find out your legal rights under current laws.  If you committed adultery or another marital violation or were the victim of one, make sure to discuss it openly with a lawyer to avoid losing everything in an ongoing battle.

Do Not Leave The Marital Home

Leaving the marital home can mean losing your ground when it comes to residing at the premises.  You may not be able to return to the martial home until the court makes a decision to divide the property, which could take a year or more.  When you leave the marital home, you may lose your right to collect alimony or be required to pay alimony yourself.  Stay at the marital home until you discuss viable options with an attorney.  If you have a violent spouse, protect yourself and your children.  Call the police if a domestic violence situation arises, get an order of protection at family court and talk to domestic violence organizations to find out the best ways to stay safe.

Protect Your Real Property

If you own your marital home, make sure to protect this valuable asset.  File a lis pendens with the deeds office at the county where the real property is located.  Third parties are officially put on notice you have an interest in the property so it cannot be sold secretly without your knowledge.

Community Property States

Do you reside in a community property state?  In a community property state, assets acquired during the marriage are usually equally divided.  There are nine such states including Arizona, New Mexico, Wisconsin, California, Idaho, Louisiana, Washington, Texas and Nevada.  In other states, the law is based on equitable distribution.  This means the distribution may not be necessary equal but based on tangible and intangible facts as determined by the court.

Evaluate and Gather Your Assets

Do inventory of your assets.  Prepare a checklist to evaluate what assets you both have.  Consider these:

–         house

–         automobiles and trucks

–         boats and jet skis

–         furniture

–         major electronics

–         retirement plans, IRAs

–         possible cash value of life insurance policies

–         mutual funds, stocks and bonds

–         company stock options

–         back vacation pay accumulated during the marriage

–         outstanding loans to other entities or people

–         family business

–         antiques or valuable artwork

–         large tools

Once you know your overall assets, figure out what it will cost to live on your own.  Tally expenses for housing, food, day care, clothes and basic activities.  Verify your salary and your spouse’s salary.  Determine the items you need and amount of money required to sustain an acceptable lifestyle after divorce. Consider getting a legal injunction to restrain your spouse from getting rid of property covered in the order until a final divorce settlement is made formally regarding distribution.

Protect Your Credit Rating

Get a copy of your current credit report so you know where you stand.  Figure out your joint and individual debts.  Often marital debts are split down the middle and paid off accordingly during a divorce settlement. Avoid maxing out credit cards so you are financially strained and unable to get credit in the future.  Seek debt consolidation advice if your debts exceed your ability to pay.  Close joint accounts and open separate accounts in your own names.  Make sure the name of the responsible party appears on all utility bills.

Consult With An Accountant To Ensure Fair Distribution of Assets

You may also want to consult with an accountant to answer pertinent financial questions.  Who will be eligible for the year’s tax exemptions?  How are IRAs handled?  Should you file taxes under the innocent spouse rule so you aren’t liable for your former spouse’s tax liabilities?  Will capital gains apply to the sale of your home? Get answers to pertinent questions about your pension, tax status and liabilities from an accountant or attorney.  Enlisting the advice of a professional can save you significantly in the future.

Know Where Your Money Will Come From

Know where you will get money after your divorce is final.  Consider all sources of income including your employment, alimony, child support and liquidation of marital assets.  Assume a lifestyle you can comfortably afford.

Never Take The Money and Run

Emotional upset, frustration, anger or financial constraints may tempt you to “take the money and run”.  Don’t do it because it will put you in a worse position in the end.

Consider Mediation As An Affordable Alternative

For couples with few assets, mediation can be a viable and affordable alternative.  Rather than paying attorneys fees, both parties agree to air their concerns before an impartial mediator.  By negotiating amicably, couples can save thousands of dollars on legal fees while protecting their interests during a divorce.  When significant property distribution and child custody issues are concerned, it is wise to seek the counsel of an attorney specializing in matrimonial matters.

Communication is key to financial success during a divorce.  Talk to attorneys and accountants about your legal and financial rights.  Speak to your spouse to see if you can reach common ground with minimal intervention.  Discuss your situation with trusted friends and family members to get their emotional and financial support.  Be honest with creditors and take care of your obligations.  Constantly review your credit report and personal financial status to make sure you’re in good standing.  With proper planning, you can be in a positive financial situation after your divorce.

Credit Card Debt Advice

With the constantly rising cost of utilities and food, it is more difficult to make ends meet.  When people fall short on cash for their basic expenses, often they use credit cards to cover them.  After using credit cards to pay for several situations, you may find yourself drowning in bills that become difficult to handle.   Consider this credit card debt advice to avoid a tangled financial web.

  1. Pay off your credit cards every month.  When you pay off  credit cards in full, you avoid high interest charges incurred by carrying a monthly balance.  Your credit rating soars because of your timely payments.  You save significantly in interest, over the limit fees and related charges for carrying a balance on credit cards.
  2. Be aware of interest rates, terms and conditions on your credit cards.  Read the fine print.  Find out if interest rates charges are for an introductory period and what the rate will be after that.  Some credit cards increase the interest rate if you make one untimely payment.  Membership fees can add up if they are charged both annually and monthly.  Get credit cards with the best terms and conditions so you pay the least interest and fees.
  3. Pay off high interest credit cards first.  If you have credit card debts, start paying off the highest interest rate ones first.  Get rid of high interest credit cards that cost you the most for carrying a balance.
  4. Carefully review your financial statements every month for accuracy and updates.  Sometimes errors are made or inaccurate charges come up on your credit card statements.  Review your statements every month to make sure everything is correct on your credit cards.
  5. Do the math, create a budget and learn to spend less than you earn.  Basic math works when it comes to resolving credit card debt.  Write down everything you owe and create a realistic budget based on your current income.  Learn to spend less than you earn by cutting back on certain expenses.  Spending less than you earn gives you money to save and enjoy rather than becoming a slave to credit card debt.
  6. Negotiate for lower interest rates.  Brace yourself, be brave to face rejection and persistently negotiate with your credit cards for lower interest rates.  Let them know you have offers for a card with a lower interest rate but would prefer to remain their customer.  Call more than once and actively pursue the opportunity to get a lower interest rate on the credit cards you already have.
  7. If you think you are overextended and your credit rating may be suffering as a result, take advantage of free credit report services.  You can request a free copy of your credit report every year.  If you are turned down for credit, you are provided with a reason and a way to obtain your free credit report to verify it.  Check your credit rating and look for inaccuracies on your report.  Improve your credit rating by paying off debts and removing any errors from your credit report.
  8. If you’re in over your head, seek credit counseling.  There are free credit counseling agencies who assist you in consolidating your debt.  Often they charge a fee in the form of a monthly payment to them which is also used to pay off all your debts.  The debts are usually negotiated to a lower amount and interest is no longer paid.  This can  help you get out of debt by making one simple monthly payment rather than struggling to keep up with multiple credit card payments.
  9. Consider a personal loan or a home equity loan to consolidate credit card debts.  Talk to your bank or mortgagor about a personal loan or a home equity loan to consolidate your credit card debts.  You will pay a lower interest rate and only have one easy monthly payment to maintain.
  10. Use a lower interest credit card to pay off high interest credit card debts.  Use a credit card that charges a lower interest rate to pay off one with a higher interest rate to save money over time.
  11. Double up your payments. If you are unable to take out a loan, start doubling the amount of your monthly payments to pay off your debts more quickly.
  12. Make extra payments. Similar to tip number 11, make extra payments whenever possible. Every little bit counts over time. If you get a tax rebate or government credit, put a little bit extra on your credit card debt. $5.00 or $10.00 is better than nothing when it comes to paying off credit card debt.
  13. Cut up your credit cards and only keep two.  Close your credit card accounts, pay off the balances and only keep two with the lowest interest rates and best terms.  Credit cards are a convenient way to pay for travel and emergencies but you only need two to do it.  Trying to keep up with several payments is confusing and you can wind up incurring costly late charges if you miss one.
  14. Actively seek financial freedom.  Along with solid credit card debt advice, always continue to pursue financial freedom.  Have a business enterprise on the side to earn extra income and pay off debts.  Your little enterprise may continue to grow so you are out of debt, saving money and experiencing greater financial independence.

Take advantage of credit card debt advice as soon as you begin using credit.  While credit can be a helpful tool, if you become overextended you can destroy your credit rating or even wind up bankrupt.

Financial Advice for Young People Is Summed Up in a Four Letter Word: Save!

With gas at historic highs and everything costing more money, young people are asking for help in droves.  Credit card companies receive more applications for credit by young adults and teens today than ever before.   But financial planners advise: avoid credit at all costs and instead do your best to save.

That’s right, in today’s complex financial world the best strategy comes down to some simple four letter words: plan and save.

Both planning and saving can be hard to do, but if you start doing both at a young age, you’ll find the process habit forming.  It is possible to plan for what you need, save money, and pay cash for it, and the benefits in the long run can spell the difference between financial success and a lifetime of debt.

The recent sub prime mortgage “crisis” is a perfect example of credit run amok, and yet credit card companies seek out young people with promises of “building credit.”  Experts say a more accurate description of what credit cards do is “create a nation of debt.”

The best financial advice for young people is to work hard, live within that income, plan for what you want, and save to buy it.

“It’s easy to walk into a store and say, ‘I want that!’  It’s a little harder to say, ‘I want that, and if I save $30 a month, I can get that in four months,’ but that’s what young people should be doing,” says Guy Cumbie, CFP, a financial planner in Fort Worth.

Saving money is no easy task, but there are some simple strategies that work

for just about everyone.  Some specific financial advice for young people can be found in these five tips:

  1. Pay yourself first.  Most young people spend their paychecks faster than they get them.  If the first person you pay is yourself – with an automatic deduction straight into a savings or investment account, you’re taking care of number one.
  1. Shop for bargains and invest the difference.  The people with the most money know this secret.  Never pay retail, and watch for sales on things you need.  Young people are in the age of consumption, needing everything from furniture to transportation.  If you’re careful to plan for what you want and need and never buy on impulse, you can save money on what you’re buying and put the “savings” away.
  1. Cut out the frills.  A trip to the gourmet coffee shop can cost $5 a day, $10 if that includes an afternoon trip for an iced drink.  At $5 a day, five days a week, you’re spending $1300 a year on coffee – even more if you occasionally treat a friend.  Cutting out just two days a week at the coffee shop could net $520 in savings in just one year, and chances are you wouldn’t miss that latte two days a week.
  1. Participate in company sponsored savings programs.  Many employers offer retirement and savings programs, ranging from traditional 401(k)s to innovative health savings plans.  Since many of these savings programs offer company “matches” for participation, maximizing your contribution to these programs when offered is like getting free money.
  1. Watch for fees, shop for the best deal, and look for savings in everything you do.  From television and electric companies to cell service providers, options abound.  Periodically it makes sense to contact your service providers and a few of their competitors to make sure you’re getting the best deal.  If you’re not using all your cell minutes, look for a cheaper plan.  Cutting your cell bill by $15 a month nets you $180 in savings in just one year.

Simple strategies in the “plan” and “save” categories, worked habitually over time can make a huge difference in your spending, wealth accumulation, and financial stability, so the bottom line best advice for young people is, “Save first, buy later.”

Debt Consolidation: The Pros and Cons

When you look at the financial status of the average person, the statistics are grim: the average adult in North America today carries $38,000 in consumer debt (credit cards, lines of credit, auto loans, etc.); according to the US statistics, in recent years, more people filed for bankruptcy than graduated college; and the most common reason given for divorce today is money and money fights. Obviously, getting control of debt is crucial in today’s society.

The old proverb states “the borrower is slave to the lender”, and breaking those chains can be difficult. One of the more common and most heavily advertised methods is debt consolidation—the process of lumping all your debt (or at least a significant portion) together and paying one payment instead of many.

There are many ways to consolidate, but none are without risk. One of the more popular debt consolidation methods for home owners is a Home Equity Line of Credit, or HELOC. The concept is simple—borrow a sum of money (in some cases up to 125% of your home’s value) using your home as collateral. Use that money to pay off credit cards, auto and student loans and any other money you owe (or go on vacation). Now you have just one “low” payment (low when compared to the multiple payments before).

The risk comes in when Murphy (with his fancy laws) comes knocking on your door. When you are unable to make the payments as the bank would like, instead of sending your account to a collection agency, the bank takes the keys to your house as repayment of the loan, leaving you not only broke, but homeless as well.

An alternative to borrowing money to repay borrowed money is to sign up with a debt consolidation service. There are dozens of these services waiting to help you lower your monthly payments. In some cases, they will work with your creditors to lower your interest rates and in some very special cases, your balance as well. You write a check to them and they distribute the money to your creditors.

But risks abound when adding a middle man. The Better Business Bureau’s reports on these companies are full of complaints—from credit card companies coming after the debtors for the difference in monthly payments to paying a firm over $5000 over 12 months, and then being surprised when his creditors call and say they haven’t received a single cent in a full year.

Using a debt consolidation service can act as a gray mark on your credit report—whether or not it is negative depends on who is reviewing the report. That means it may end up costing you more in the long run if you decide to borrow money again. Many times, after getting information from the debt consolidation service, you can cut a better deal with your creditors yourself. You wouldn’t have the convenience of one payment, but you wouldn’t have to deal with the middle man.

If, after weighing all the pros and cons, you do decide to use a “credit counseling” debt consolidation service, there are a couple things to remember.

First, don’t do anything until you get EVERYTHING in writing. “Everything” includes 1) your monthly payment, 2) a breakdown of the monthly payment to each creditor, 3) a complete payoff schedule (how long it will take to completely pay off your debt—assuming you did not get into more debt in the process), 4) assurances that each creditor has signed off on the deal, and 5) a detailed outline of the company’s liability if the above-mentioned terms are not met.

Second, before you send your first consolidation payment, call all your creditors to double-check they’ve signed off on the deal. You may have to speak with someone in a higher department (such as the in-house collection department) to find someone with some “power.”

Thirdly, when you’re on the phone verifying compliance, make sure to request that you get a statement each month to confirm the debt consolidation service is living up to their end of the deal and sending the correct payment to the correct creditor each month.

With those three things in place (making sure that the consolidation service knows that they will be held responsible if the conditions are not met, you are ready to send the first check.

The biggest risk to all of these consolidation approaches is that none of them address the real problem: the person in the mirror that accumulated all that debt to begin with! While consolidation works mathematically, what usually happens is that you end up using the extra space in the budget to rack up more debt. That means that if you are planning to consolidate, you also need to plan your spending. There are dozens of financial self-help resources out there, but if you don’t have a direction, you’ll end up back where you were with twice the debt.

So what should you do with the extra room in your budget? Well, pay off debt! Whether you have a HELOC, go through a service, or negotiate yourself, use at least half of your saved money to make extra payments on your debt. You’ll get everything paid off faster and in a few years when you’ve paid your $38,000, you can truly unlock your ultimate wealth-building tool—your income.