9/30/2010

Myths about Debt and Marriage

Credit Cards.com is a great website to learn about all the little gotcha's of credit.  Recently we found this Q&A from one of their blogs "To Her Credit".  She provides the truth about four myths of marriage and credit:

Myth No. 1: As long as credit cards are in your spouse's name, you're safe.

Myth No. 2: If you move out, for purposes of community property laws, the marriage is over.

Myth No. 3: In divorce, he'll have to pay for things he bought.

Myth No. 4: If a divorce court says one spouse has to pay off a debt, the other spouse can stop worrying about it.

Check out the article and know the truth about how your spouses credit can impact you!  Visit To Her Credit and tell us what you think!

Cash Cushion How to Guide from the Fool's School

Motley Fool, a website dedicated to investor education, has developed a great "how-to" on developing your own cash cushion for yourself.  Since the unexpected expenses happen in everyone's life, we might as well plan for them.  It soften's the blow in the long run. 

If you are like most people, there is more month than money and so the preparations get thwarted from the get-go.  We need the extra help to get started.  Motley Fool makes getting started easy by presenting a four step plan.  Check out the article here.

Let us know what you think.  Have you gotten started building your cushion?  What strategies did you use?

Understanding Financial Reforms

In the news we hear lots of talk about Financial Reform with politicians and political pundits coming out either in favor or against for one reason or another.  It is great to know opinions particulary from our leadership about the reform, but what are the true facts and how can we know what Financial Reform means to us?  To help us, Consumer Action has prepared a Financial Reform Fact Sheet containing a summary of the federal legislation recently signed into law. Financial Reform Summary

This link provides a PDF document written in easy to read language on the major provisions of financial reform and what they mean for you. This reform was passed as to strengthen consumer protection of
financial products and services, limit taxpayer liability for financially risky banks, and prevent or stop the spread of unfair and deceptive practices. Major provisions include:
  • Creation of a Consumer Financial Protection Bureau
  • Mortgage reform with greater protection and disclosures for consumers
  • Assistance for foreclosure prevention
  • Access to free credit scores in certain circumstances
  • Permanent protection of up to $250,000 of bank deposits
  • and many others
This summary can help you to develop your own opinion on financial reform and whether it is good for you.  Read it for yourself and let us know what you think.

More People Liquidate in a Tough Economy

The U.S. Courts reported that as of June 30, 2010 that Chapter 7 filings are up 25% for the 12 month period over the same period ending June 30, 2009.  This is compared with Chapter 13 filings up 10% for the same periods.  The total number of bankrupcy filings both personal and business were over 1.5 million filings the largest since bankruptcy abuse provisions went into effect. So what does this mean?

It would seem that more people are not able to demonstrate an ability to repay their debts in bankruptcy and are opting for a liquidation of assets in order to get out from under the burden of their debt.  No one wants to relinquish their possessions, but this filing is usually used only as a last resort.  The impact of a bankruptcy filing can hinder your ability to obtain credit and even to get a job or insurance. 

It is no wonder with the number of unemployed individuals even though Virginia is among the states with better prospects for employments still unemployment figures for the state are higher this year than last.
Most families build a budget based on the presumption that employment will continue uninterrupted.  Making plans for job loss and/or disability (even while you hope it never happens) helps you to be able to continue meeting your obligations even when the unexpected occurs.  Let's face it, who hasn't had an unexpected expense occur this year alone?

Planning ahead while you are still employed can save you the long-term devastating impact of lost or reduced wages.  Financial Planners recommend between three to six months of savings at a minimum to carry you through an emergency.  If we are honest, most of us would have to admit we don't have that kind of savings, but here is the secret - start small and build your savings over time and don't touch it until a true emergency arises.  Because true emergencies are rare, your savings will build over the years to be a cushion of security when you need it most.

The best way to start that nest egg is to make savings automatic.  Have a portion of your paycheck directed to your savings account even before your net pay is deposited to your checking for bill payment.  You will never see the deposit and you can build your spending plan on the rest once the savings plan is addressed.  Contact your payroll department today and start saving for your future.

Co-ops That Can Save You $$$

How much do you spend on buying lunch each month?  Consider the average cost of lunch is between $5 - $6, the average person can be spending up to $120 each month just for lunches.  That does not include any dining out you may do as a family in the evenings and on weekends!  Ouch!

I know a lot of people recommend bringing lunch from home as one solution for saving lunch dollars and that can certainly save some dough, but I recently came across a strategy that can make lunch both interesting and save you some big bucks!  Co-op.

By forming a group of co-workers who are adopting a thrifty attitude like you, you can each take turns providing a meal for lunch and save $$, enjoy the company and have interesting dishes to boot!  How does this work?  Let's say you have 4 friends, each friend brings lunch one day of the week with enough to feed all five.  You take one turn per week.  Average cost of lunch - $20.  Consider what you would have paid by eating out - $30.  You have already saved $10 for the week and $40 (now don't forget to put that savings away for your savings goals).

Expand on your group to 20 friends and you can purchase lunch just once per month and have tasty meals all month long.  To feed your friends you spend $50 (including bottled water to drink).  You have now saved $70 per month over your old plan ($50 if you ate cheap).  Now how much faster will you reach your savings goal with an extra $50 in your savings account?

Consider this - $50 per month over the course of a year is $600 extra to apply to your savings goals!  Write and let us know how you have saved for your goals.  Together we can come up with some creative ways to save.

9/29/2010

Build Your Score with Secured Credit

In the world of credit, there are unsecured loans and secured loans.  Traditional credit cards are unsecured loans (and cards) have no collatoral (item of value) attached to them.  The loan is offered based on the borrowers past history of payment (and the interest rates and available credit are also adjusted based on your past history).  The credit card company takes a risk of not being repaid and having no item they can repossess that can be used to repay the outstanding debt.  They can send your account to collections and damage your credit report, but there is no guarantee they will be repaid.

For people who may not be eligible for a traditional card for one reason or another, a secured card may be a great way to establish repayment history.  The issuer has full guarantee of repayment as the credit line is limited to the amount that is deposited into a reserve account. 

In order to establish a secured credit account you must first open a savings account, also known as collateral account, with a card issuer for an initial amount from $300 or $500 up to $5,000 or $10,000. The credit line can be equal to the amount deposited or at a percentage of it. As purchases are made on the card, the funds are not deducted from the account and the funds will stay in the collateral account as long as the card holder makes monthly payments for at least the minimum amount. Some credit card issuers may pay interest on the deposits.

Like regular credit cards, purchases are billed every month and there will be interest charge on any outstanding balances after each grace period. Many secured credit cards may require an annual fee and one-time setup fee. A secured credit card functions like any other credit cards and there is no difference in the appearance of a secured credit card and a regular one.

Who Needs a Secured Credit Card?

If you are establishing credit and don't have a payment history listed on your credit report to begin with, a secured credit card can be helpful in establishing that record of payments (think about it, why would a credit company want to loan money to someone that hasn’t proven they can pay OR hasn’t paid in the past).  Applying for a secured credit card can be easy and fast when personal funds are used to guarantee the repayment of future credit card bills. Because a secured credit card works the same way as a regular credit card in terms of using it for purchases and paying monthly card bills, over time the card holder can establish a positive pattern of card uses by paying back on time. Ultimately, the data collected by the card issuer is reported to credit card bureaus and good credit will be reflected in the credit report (and in turn will raise your credit score). Moreover, after a certain period of time, such as a year, based on the card holder’s responsible use of the secured credit card, the card issuer may switch to issuing a regular, unsecured credit card.

A secured credit card certainly isn’t for everybody. But it can be a great tool to help establish credit or develop good credit habits. I’ve even wondered if it’s not one of the better ways for a person to first get a card. Think of it, if you know you’re money is on the line you will have a great incentive to develop good spending and paying habits. Since your money is on the line, you are less likely to engage in impulsive spending choices. 

Have any of our savers tried the secured credit cards?  If so, let us hear from you!

9/27/2010

Americans May Not be Prepared for Retirement Expenses

Employee Benefit Research Institute (EBRI) recently completed their annual Retirement Confidence Survey for 2010.  Key findings indicate that "Americans’ attitudes toward retirement have clearly tracked the economy the last couple of years,” said Jack VanDerhei, EBRI research director and co-author of the survey.  “Unfortunately, while their attitudes are stabilizing, their preparation for retirement is not. A distressing number of people have no savings at all.”

While Americans may not be increasing their savings toward retirement, they have indeed adjusted their expectations for the age they will discontinue working with 24% of workers indicating that they will postpone their retirement from their anticipated retirement age one year ago.  Over 33% of those surveyed indicate that they will retire after age 65 (compared with 11% in 1991). 

Additionally, less than half (48 percent) are confident that the will have sufficient money to take care of their medical expenses in retirement - the lowest percentage in 10 years.   Eleven percent reported being very confident which is down from 20 percent in 2001.

EBRI Retirement Confidence Survey