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11 Technological Changes That Will Rock Your World

Man leaping with joy Rev 1Anyone over the age of 30 has already witnessed one technology that has reshaped our world and that is, of course, the Internet. And with the Internet has come social media such as Facebook, which has more than 1 billion users. Then there’s Twitter with its 6000 Tweets per second. Yes, that’s per second.
In the past 10 years we have also seen the emergence of the home wireless network where our homes now have an average of five devices connected to it. The Nest thermostat saves us money by learning our living patterns and adjusting our heat or air conditioning accordingly. It, too, can be connected to a home wireless network router and then adjusted remotely, provide energy reports and automatically get software updates.

But if you think this is all pretty great, you ain’t seen nothing yet.

There is a concept called disruptive technology. What this basically means is that a new technology comes along and disrupts or replaces an existing technology much as smart phones displaced landlines in many homes. The next big things may not disrupt existing technology so much as add to it. Here are 10 technological changes coming in the next five years that will rock your world. We leave it up to you to decide whether they are disruptive or just new.

1. The cloud has only just begun

You may have already taken advantage of cloud computing by storing your data or photos in the cloud. But as the Carpenters sang, it’s only just begun. The real power of the cloud is that it offers easy access to an unlimited amount of computing power at crazy, cheap prices. The cloud will eventually replace libraries with the exception of those that store historic documents. The day could come when you’ll be able to order custom-made shoes simply by putting your foot on your touchscreen. And you may be able to eventually access videos of experts that will help you with everything from repairing that big screen TV to which golf club to choose.

2. You will be able to hook your brain to your computer

This isn’t as far-fetched as it might sound because it’s already possible for a computer to type by monitoring the brain’s electrical activity. Technology will continue to advance and it will soon be possible for people with disabilities to operate their wheelchairs just by thinking about it.

3. Super analytics will put a panel of experts in your phone

Another of the next big things to come is super-analytics. This will be much like having a brain in the cloud. Analytics will sift through incredibly huge streams of data in real-time to come up with patterns or to answer specific questions. Google Future Trends and social media analysis are already a result of super analytics. But just think. Your golf coach could instantly match your mechanics to the world’s top golfers. Or on a more pedestrian level, analytics could search through audios and videos and provide the exact quote you need or help you with discussions on related topics.

4. We will mine metals from brine

New chemical processes are making large-scale desalinization economically feasible. In turn this will allow the mining of metals from brine or wastewater. This will not only be a new source of these metals but will also help our environment by cutting down on the need for mining.

5. Hadoop or big data technology will diagnose you

Hadoop is capable of scooping out a large amount of data, spread it across low-cost computers and then analyze it affordably and quickly. This technology has already made possible applications on Yahoo, Facebook, eBay, LinkedIn, Google and Zynga and many others. As an example of this, biomedicine applications could crawl the records of millions of patients as well as medical journals instantly to find just the right treatment or to even diagnose your illness. Or it might eventually create a personalized shopper for you that would be able to always find the best deals. How exactly does Hadoop work?  Here’s a video courtesy of National Debt Relief that explains Hadoop …

6. Nanostructured carbon composites will save create huge savings

How these composites are created is way too technical to discuss here. Suffice it to say that composites created from nanostructured carbon are lighter, stronger, more conductive and cheaper than their conventional counterparts. When cars are made from carbon fiber reinforced composites they will be 40% lighter, stronger and a lot easier to recycle than older models. This will make it possible to realize huge energy savings.

7. You’ll be able to talk to your house and it will talk back

Coming soon are very tiny, low energy sensors you will be able to attach to everything inside and outside of your house. There are already several of these available from Zigbee, Z-Wave and 61opan. They can run for many years on the same battery and will be attached to things such as railcars, traffic lights and your keys. Plus, they can be programmed to give you information. You will never again get stuck in a traffic jam because the traffic lights will reroute you. You will be able to attach a voice commands to just about anything. So the day could come when your dryer tweets you that it’s done and your clothes are ready

8. You will print your own computer mouse

There are now 3-D printers available at fairly reasonable prices. But the day will come when there will be a 3-D printer in every house just as there is now an inkjet or laser printer. Just imagine that instead of running to the hardware store to pick up that bolt or wrench you suddenly need, you could print out a copy using your 3-D printer. You say your child’s having a fit because she’s lost her favorite toy? No problem. Just print out another one. In fact, you’ll eventually be able to print out just about anything you can think up.

9.  There will be wearable electronics adapted to your body

There is already Fitbit, Apple’s iWatch, Microsoft Band and others. However, today’s technology that they be paired with a smart phone. A few years from now this will no longer be the case. You’ll have wearable electronics on your body, embedded in your clothes and even under your skin. These devices will track information such as your heart rate or stress levels so you will have real-time feedback about your health. This alone could save hundreds of thousands of lives by alerting people to a coming heart attack so they could go to the nearest hospital or clinic for treatment and never suffer the heart attack.

10. We will have safer, healthier cancer fighting drugs

If you’ve ever had a relative or friend treated for cancer you know that the toxic chemicals contained in chemotherapy can have serious side effects like nausea, extreme weakness and hair loss. But it’s believed that by 2025, the drugs used to treat cancer will be more exact and more precise and have fewer side effects. Drugs that are more targeted can bind to specific proteins and anti-bodies to cause a very specific action. When you pair this with our advancing knowledge of gene mutations, this is bound to mean better treatments for cancer.

11. Biodegradable packaging will replace those nasty plastic bags

In the very near future almost all packaging will be made from cellulosic materials that seem like plastic but are actually made from plant matter. This will make packaging biodegradable and better for the environment as they will replace the plastic bags currently used in grocery stores.

Everything You Need To Know To Deal With Nasty Debt Collectors

stressed old manWhat’s worse then being seriously in debt?

It’s being seriously in debt and having to deal with debt collectors.

The problem is that these people usually work on a commission basis and have a quota. If they want to get paid and keep their jobs they must collect money from you –by hook or by crook, which is an old English phrase that means by any means necessary. And trust us. Debt collectors will use any means necessary up to and including threatening to go to your employer or your relatives, to take you to court, to have you arrested or to sue you.

“I’m mad as hell”

If you’re one of the millions of Americans being harassed by debt collectors you may have reached the point where you’re like the character Howard Beale in the movie Network and are saying to yourself, “I’m mad as hell and I’m not going to take this anymore.”

Well, you’re right. You don’t have to take being pressured by debt collectors anymore. You have rights and when you know what they are you can either stop any more phone calls or at least negotiate favorable settlements of your debts.

The first thing to do

First of all, a debt collector has to be able to prove the debt is actually yours. We live in a nation of more than 330 million people, many of whom have the save names and have done business with the same companies. Last I looked there were at least 30 other people just on Facebook with the same name as mine and isn’t John Smith, Bob Jones or Tom Brown.

So the next (or first) time a debt collector calls, make him prove the debt he’s trying to collect is yours. You can ask him for the name and address of the original creditor and the exact amount you owe. If the collector is unable to provide this information, he has five days to send you a written notice with the information you’ve requested. You could also dispute the debt by writing a letter to the collection agency asking that it verify the debt. This could mean requesting a copy of the statement showing your balance, a copy of the original credit agreement or any other information you deem pertinent. Once the collection agency receives your letter it has 30 days to respond during which time it is not allowed to contact you.

If the debt is really yours

If the debt collector is able to prove the debt is yours, you have a couple of choices. First, you could try to settle it for less than you owe. One thing the debt collection agency doesn’t want you to know is what it paid for the debt. In most cases the original creditor (think bank or credit card issuer) bundled up a bunch of debts it had written off and sold them to the collection agency for pennies on the dollar. If your original debt was for $500, the collection agency mighjt have paid five dollars or even less for it. This means there is room to negotiate. You could offer to settle the debt for, say, $50. The collector can then either accept your offer or make a counter offer. In either event the odds are that you’ll be able to settle the debt for much less than its face amount.

Make the collector stop calling youDebt collector hollering into mic

A second alternative is to make the collector stop calling you and then just wait to see what happens. Yes, you read that right. You can make the collector stop calling you. In fact, all you need to do is write and send his agency a cease and desist letter. You can find samples of this letter by clicking on this link. Be sure to send the letter certified and return receipt requested so that you can prove the collection agency actually received it.

If the collection agency does indicate that it received your letter (which it may not do) it can contact you just one more time to either acknowledge it won’t be contacting you again or to inform you what legal action it will take next such as suing you.

If you’re lucky

Once the collection agency has stopped contacting you, start holding your breath to see what it does next. If you’re lucky it will simply go away and you won’t hear from it again. If it’s a big debt you may not be so fortunate. The agency might sue you or sell your debt to yet another collection agency, which would then start harassing you.

Get an attorney

A third alternative is to hire an attorney to represent you. Of coarse, you wouldn’t want to do this unless it was a very large debt as you will have to pay the attorney somewhere between $100 and $500 an hour for his or her services. But once the debt collector knows you are being represented by an attorney, he will generally stop calling you and will contact your attorney instead. This means the debt collector must know your attorney’s name and contact information. If you do have an attorney and receive a call from a debt collector make sure you tell him that that you are being represented by an attorney and that he should start contacting him or her and not you.

Understand your rights

Assuming a worst-case scenario – that the collection agency continues to harass you over the debt – it’s important to know what it can’t do. This is covered in a law passed by Congress several years ago called the Fair Debt Collection Practices Act (FDCPA). It sets out what a debt collector can and can’t do. The most important things it can’t do are …

  • Call you prior to 8:00 AM or beyond 9:00 PM unless you give the collector permission to do so
  • Contact your employer unless your debt is past-due child support
  • Call you where you work if he knows your employer doesn’t want you to be contacted there
  • Send you a postcard or envelope that clearly indicates it had been sent by a debt collector
  • Call your neighbors, friends or relatives about the debt in order to embarrass you into paying it
  • Use an envelope or post card that makes it appear that it came from a court or government agency
  • Call you frequently during a relatively short amount of time as this constitutes harassment and harassment is illegal under the FDCPA.
  • Force you to accept collect calls from the agency
  • Swear or insult you when you’re talking or threaten to ruin your reputation or have you jailed
  • Try to collect more than your debt unless the contract it has with the creditor allows this

What to do if the debt collector violates the FDCPA

If the debt collector does any of the things listed above, you could file a complaint with the Consumer Finances Protection Bureau either online or by calling (855) 411-CFPB (2372). You can report any problems you’re having with a debt collector to your state’s attorney general. You might also be able to sue the debt collector in your state’s or federal court. If you are successful you could win up to $1000, which is not a huge amount but you would also win a lot of self-satisfaction in having beaten the collection agency.

10 Things That College Admission Counselors Won’t Tell You

student with a notebook and calculatorIf you’re a high school senior or even a junior the time is near – when you’ll need to apply for admission to the colleges or universities of your choice. You’ll also soon to need to fill out the dreaded FAFSA or Free Application For Federal Student Aid. While the deadline for submitting the FAFSA is not until June 1, the earlier you complete and submit it the better. And, yes, you need to fill it out and submit it even if you don’t intend to get any federal student aid. The reason for this is your FAFSA will be sent to all the schools where you apply for admission and it will be used in determining whether to award you a scholarship, a work-study grant or some other form of financial help.

There are other things you need to know besides the importance of filling out your FAFSA and here are XX that college admission departments just won’t tell you.

1. It pays to be nice to your teachers

Given today’s skepticism about the value of GPAs and test scores, there are admissions department that are weighing more heavily on the recommendations from high school teachers and counselors. And it when it comes to recommendations the most useful ones are the ones that show that you’re intellectually curious and that you contribute to class discussions.

2. We only sound as if we were exclusive

Admission was offered to less than one-third of the applicants in 2013 by 100 US colleges. This can make a school look “exclusive” and it is believed that some schools try to manipulate this rate. The way they do this is by encouraging high schoolers to apply for admission even though they have no intention of intending. In addition, some schools count incomplete applications to increase their applications-to-acceptances ratios.

3. Politics can play a role

Whether we like it or not, the NACAC says that about 33% of colleges and universities consider race as a factor in accepting students. Some of our states have banned racial admission preferences but their schools have been accused of using workarounds against those bans. Unfortunately or fortunately – depending on your parents – one practice that is usually considered legal is “legacy.” This is where the kids of wealthy alumni or powerful lawmakers get special considerations in the application process.

4. We don’t trust it

In this era of “helicoptering” parents, many schools worry that the essays submitted by some students weren’t written by them. The way they weed out ghost writing is by asking students to supply other pieces of school writing that were graded by a teacher. One retired dean of admissions said that “if the essay looks like it was written by Maia Angelou but the school work looks as if it came from Loman, this will definitely raise eyebrows.

5. We prefer students that can pay full price

How many college freshmen come from outside of the US? In 2013 it was 10%. Colleges love these people because most of them pay full tuition. At publicly funded state schools, the higher tuition charged out-of-state students often works to subsidize the education costs for those who live in the state. As an example of this, the in-state tuition at the University of California – Berkeley is $13,000 a year. But for an out-of-state student or foreign resident, tuition is about $36,000 a year.

6. We need you more than you need us

Would you like to do some negotiating when it comes your tuition? This year the number of high school graduates leveled off at 3.2 million. And it’s expected to stay at that level until about the year 2020. As a result, more colleges will be chasing fewer students. If you are accepted to more than one school, you may be able to do some horse-trading on the cost of your tuition. In fact, you could view it as about the same as if you were to go to an automobile dealer and try to negotiate a better rate for a new car.

7. We laugh that you obsess over class ranking

Less than 20% of admissions counselors think of class rank as being “considerably important.” However, it is more likely to come into play at larger schools where it’s just not possible to do detailed reviews of applicants.

8. You could be admitted but not stay admitted

One sad fact is that about 22% of colleges and universities revoked at least one admission offer in 2009, which is the most recent year that was studied. The most common reason for these were final grades followed by disciplinary issues and then lying about application information. For that matter, the postings put on social media have prompted some universities to reconsider their offers.

9. All grades are not equal

Have you taken college prep courses? If so, the grade you got in them will probably be given more weight than other grades. The reason why schools are becoming more skeptical is due to what’s known as “grade inflation.” The College Board, which is the organization that administers the SAT has research showing that the average GPA for all high school seniors increased from 2.64 in 1996 to 2.90 in 2006 despite the fact that SAT scores remained about flat. This was seen as proof that there are teachers using grades to reward good effort instead of achievement.

10. Were wondering about the SAT

For almost as long as anyone can remember the SAT has been the big benchmark in forecasting how students will handle college-level work. However, today many people argue that the SAT gives wealthier students an unfair advantage as they could afford those pricy test prep classes. In fact, around 800 of America’s 2800 four-year colleges now consider the SAT to be optional. The NACAC endorsed a study done recently that looked at the performance of 123,000 students that had been admitted to college between the years 2003 and 2010. What this study found is about 30% of the applicants had not taken either the SAT or ACT … and that there was no significant difference in college GPAs or graduation rates between those who took on of these tests and those that took neither.

Young black college graduate with tuition debt, horizontalTo borrow or not to borrow, that is the question

Another decision you’ll have to make besides choosing a college or university is how to fund your education. Generally speaking about 50% of students graduating from college needed to borrow money to pay for their educations. Of course, it’s much better if you don’t have to borrow the money and can start plus, life after college free of debt. If this is just not possible, be sure to get federal student loans and not private loans. Student loans have a number of advantages over private ones, such as the ability to change payment programs. For example, instead of staying in the Standard 10-year Repayment program you could switch to Graduated Repayment where your payments would start low and then gradually increase every two years. This can be a real boon if you’re just starting out in your career and are a low earner. Or you could choose one of the income-driven repayment plans such as Pay As You Earn that would tie your payments to your disposable income. Plus, federally backed student loans also offer options such as loan forgiveness, deferment and cancellation that are normally not available in private loans.

Should You Go Social To Consolidate your Student loans?

Video thumbnail for youtube video How To Be A Smart Credit Card UserIf you don’t think student loans have become something of a crisis, consider this. There are now more than $1 trillion outstanding in student loan debt. The reason for this is fairly simple. Approximately 20 million Americans go to college each year and of that 20 million, close to 12 million or about 60% borrow annually to help cover the costs of their educations. Seven out of 10 college seniors (71%) that graduated last year had student loan debts that averaged $29,400 per borrower. And debt at graduation (combining federal and private loans) increased an average of six percent each year from 2008 to 2012.

Going social

Are you laboring under the weight of student debts totaling $20,000, $30,000 or even more? If so, there could be help available through a relatively new entity named SoFi (Social Finance, Inc.). It is dramatically different than any other institution offering debt consolidation loans in that it is more of a social community as it consists of a network of 550 colleges and universities and offers loans only to those that are an alumnus of one of these schools.

How SoFi does business

SoFi is based on peer-to-peer lending. It promotes itself as a leading edge marketplace that connects high quality borrowers with alumni investors. SoFi offers rates that are lower than conventional loan consolidation companies because it’s certain that its borrowers will repay the community that backed them. As of this writing SoFi had fixed and variable rate loans beginning at an interest rate of 3.625% (with Autopay) and with terms of five, 10 and 15 years.

More than just a lender

SoFi is also different from conventional lenders in several other ways. As an example of this it offers unemployment protection. When a member becomes unemployed SoFi will pause her or his payments and even help the person find a new job. In addition, SoFi provides complementary coaching for its members to help them reach their career goals. It also helps its members find jobs and creates opportunities for entrepreneurs. In fact, qualified applicants that are interested in creating a new business can get their payments deferred for six months, access to a cohort of like-minded entrepreneurials and professional mentorship.

The negatives

Becoming a member of SoFi may sound very attractive. However, you need to be aware that there are some negatives. First, as you have read you must be an alumnus of one of its 550 member schools. A second negative is the eligibility requirements. To get a loan from SoFi depends on a number of factors, such as your credit score, that you can show a strong monthly cash flow and that you’ve had a solid employment history. A third negative is that SoFi will consolidate federal student loans together with private loans, which many experts consider to be a no-no. The reason for this is that once these loans have been consolidated, you lose all the benefits that come with federal student loans such as forgiveness, cancellation, deferral and the multiple repayment programs available.

Young black college graduate with tuition debt, horizontalYou can’t borrow your way out of debt

Finally, as a wise man once said, you can’t borrow your way out of debt. If you were to consolidate, say, $30,000 in student loans via SoFi you would still owe $30,000. Plus, you would have a fixed term and fixed monthly payment with no ability to change your repayment plan should that become advisable. It is for these reasons that many student loan borrowers opt to restructure their federal student loans rather than consolidate them.

Repayment options

What many borrowers don’t realize is that there are a number of repayment options besides 10-Year Standard Repayment. One of the most popular of these is Graduated Repayment. This can be a very attractive option for young people who are still low earners as the payments start low and then gradually increase every two years.

Income-based Repayment

There are also several repayment programs for federal loans that are based on your income. One of these is Pay As You Earn. You may have read about this program when president Obama recently signed an executive order that made about 1.6 million more people eligible for it. The best feature of this program is that it caps your monthly payments at 10% of your discretionary income. In addition, if you make your qualifying payments and have a remaining balance after 20 years it will be forgiven. Alternately, if you work for a public service organization you might be able to earn loan forgiveness after just 10 years.

Eligibility requirements

To be eligible for Pay As You Earn you must have one of the following types of loans.

  • Direct Unsubsidized Loans
  • Direct Subsidized Loans
  • Direct Consolidation loans that were not used to repay any plus loans that were made to your parents
  • Direct Plus loans made to graduate or professional students
  • Subsidize Federal Stafford loans
  • Unsubsidized Federal Stafford loans
  • FFEL PLUS Loans made to graduate or professional students
  • FFEL Consolidation loans that were not used to repay any PLUS loans made to parents
  • Federal Perkins Loans

Do you know what types of loans you have?

If you’re typical and have multiple student loans you may not actually know which types you have. If this is the case you will need to go to the Department of Education’s student loan database (https://www.nslds.ed.gov/) where you can learn what types of loans you have, when the funds were disbursed and how much you currently owe.

Your payments under Pay As You Earn

Generally, your monthly payment amount under Pay As You Learn will be a percentage of your discretionary income, which will be different depending on the plan and when you took out your federal student loans. To determine if you’re eligible you must also calculate your discretionary income as defined under this law. Without getting technical, suffice it to say that the way you determine this is by taking your gross income and then subtracting 150% times the federal poverty line.

Income-based Repayment

If you are ineligible for Pay As You Earn Repayment there are two other income-driven options. The first is Income-based Repayment. This is essentially the same as Pay As You Earn except your monthly payments would be capped at 15% of your discretionary income.

Second, there is Income-contingent Repayment. It is much like Income-based Repayment except it is only available under the Federal Direct Loan Program. Like Income-based Repayment your monthly payments would be a percentage of your discretionary income.

However, its monthly payment is usually higher than those under Income-based Repayment. In fact, it can be higher than the payments you are probably now making under 10-Year Standard Repayment.

The downsides of income-driven repayment programs

While one of these income-driven repayment programs could be a good choice it’s important to understand that they do have their negatives. For one thing you will pay more total interest over the life of your loan. Second, you will be required to submit updated information on the size of your family and your income to your loan servicer every year. If you do not do this, your monthly payments will no longer be based on your income and any unpaid interest will capitalize. Third, only Direct Loans are eligible and finally if you have a portion of your debt forgiven after the 10 or 20 years, you may have to pay taxes on it.

In summary

If your objective is to get lower monthly payments through loan consolidation, SoFi could be a good choice. Of course, this assumes that you would be eligible for one of its loans. If so, you would probably end up with a lower monthly payment than what you have now and might be able to get your loan paid off quicker. Plus, you would be eligible for the “extras” offered by SoFi including unemployment protection, career support, career services and its entrepreneur program.

If you would not be eligible for a SoFi loan or if your goal is to pay off your student loans without borrowing more money, a better option would be one of the income-driven repayment programs available through the Department of Education. You could end up with a lower monthly payment and would still be eligible for loan forgiveness, cancellation, deferral and the ability to change repayment programs should the need arise.

Are Student Loans America’s Biggest Rip-off?

frustrated womanEveryone needs to go to college, right? Right. If you want any sort of job today – up to and including clerking or being an executive assistant – you’re told you need a college degree. On the other hand, some people believe that the whole idea that everyone needs to go to college is nothing more than ill-founded social engineering much the same as the idea in the early 2000s that everyone should own a house.

What this has lead to

Most young people who buy into this idea do not have enough money to pay today’s super-inflated college costs. The solution? They borrow the money. This year’s college students graduated owing an average of around $29,000 only to discover that due to the poor job market they have less of a chance than ever of actually getting a good job in a field commensurate with their degrees.

Young and naive

The problem begins when 18 and 19 year olds sign up for student loans without realizing that they’re agreeing to a relationship that’s more unbreakable then a mortgage. Plus, their debt usually starts relatively small with a loan of maybe just $3,000 or $4000 — but then four years later, surprise! That $3,000 has somehow ballooned to $20,000 or more.

Why college costs so much

The reason why colleges cost so much now has very little to do with the quality of the education they offer. In most cases it’s because the schools are building extravagant athletic facilities, hotel-type dormitories and other such embellishments and hiring big name professors as they race to become “prestige” schools. Why do schools raise their tuition and fees year after year? One reason is because most states are cutting back on financial aid to their schools. The other is the “easy money” that’s available through student loans that has become a huge subsidy for the education industry. In fact, in the last six years it spent between $88 million and $220 million lobbying the government. The cost of tuition at both private and public schools is rising faster than almost anything else in the US — energy, health care and even housing. Between the years 1950 and 1970 if you sent your child to a public university it would cost you about 4% of your annual income. Now, in 2010, it accounts for 11%. Moody’s recently released statistics that tuition and fees rose 300% versus the Consumer Price Index between 1990 and 2011

The secret behind the curtain

What the federal government does not want you to know is that it makes an enormous profit under the federal student-loan system — an estimated $184 billion over the next 10 years. Some critics of student loans say that it’s nothing more than a boondoggle paid for by super-inflated tuition costs and driven by the government-sponsored and predatory lending system. A second little secret is that the Department of Education (ED) actually profits if you default on your loans. This is because it makes money on students that default. It’s estimated that the ED collects an average of 100% of the principal on these loans, plus an extra 20% in fees and payments.

Debt collector hollering into micDefaulted loans may be turned over to debt collectors

There’s a third dirty, little secret of student loans that if you do default, your loan will likely be turned over to a debt collector. Student loan debt collectors have powers that would make a dictator envious. They can garnish everything from your tax returns to Social Security payments and from wages to disability checks. If you default on a loan you can also be barred from the military, lose professional licenses and suffer other serious consequences that a private lender could not possibly throw at you.

Interest rates are irrelevant

While you may think you’re getting a good deal when you take out a low-interest student loan, nothing could be further from the truth. The reforms that Pres. Obama was able to make in 2010 eliminated the possibility that interest rates would double permanently so it was nice that this was avoided. It was at least theoretically a good thing when the president took banks and middleman out of the federal student-long game so that all loans now come directly from the government. But interest rates are largely irrelevant. Is not the cost of the loan that’s the problem. It’s the principle – due to those staggeringly high tuition costs that have been soaring at two to three times the rate of inflation. This is very reminiscent of the way that housing prices skyrocketed in the years before 2008. And look what happened to the housing market.

The truth about Pres. Obama’s recent executive order

Pres. Obama recently issued an executive order that would make more people eligible for the Pay As You Earn repayment program. If you have what’s termed a “partial financial hardship” your monthly payments would be capped at 10% of your discretionary income. However, you would be required to document your income every year meaning that your monthly payments could increase or decrease annually. Also, it would take you much longer to pay off your loan, which means you would end up paying more interest. This could be of some help if you have the right kind of federal loans and have had trouble repaying them. However, all of these reforms really do nothing to attack the basic problem, which is your balance or the amount of money you owe. There are people well into their 50s who are still paying on their student loans. As of the first quarter of 2012, people under the age of 30 had the most borrowers (14 million) followed by the age 30 to 39 group with 10.6 million who owed on their student loans. In the category of age 40 to 49 there were still 5.7 borrowers and 4.6 million in the age 50 to 59 category.

What should you do?

The whole student loan thing may be a rip-off but that doesn’t mean you should just walk away from yours. As noted above, there is a serious price to be paid if you default on your loans. If you have not already done this, you need to go to the National Student Loan Database System (NSLDS) and check up on your federal loans – how much you owe and to whom. Once you’ve done this you will need to make a plan for paying off your debt as quickly as possible. There are a number of different repayment options available in addition to the aforementioned Pay As You Earn program. For example, there is Extended Repayment, Graduated Repayment and three other Income-Based Repayment programs. It can be seriously confusing and you might need help, If this is the case, National Debt Relief offers a program  designed to help people find the best debt relief program given their student loan debts. It’s a consultation service where we match your specific situation to the best debt elimination program. We take into consideration factors such as your employment, financial capabilities, amounts owed, types of loans and salary. We then recommend what we believe will be the debt relief program given your circumstances. We even prepare all of the paperwork necessary to get you into the new repayment program. This service requires just a one-time payment that we put into an escrow account. There are no other fees or charges. And we don’t take your payment out of the escrow account until you’re totally satisfied with the repayment program we’ve recommended and the paperwork we’ve prepared. In the event you are not satisfied with one or the other, we refund your money. So, this is basically a no-lose proposition.

Congratulations On Graduating From College! Now, Send Us $33,000

Graduation cap with moneyIn the past month millions of young Americans graduated from college. However, most of them didn’t receive just a diploma.

They also received a bill – probably from the US government – regarding their student loans.

According to one recent study, the average student graduated in 2014 owing $33,000 in student loans. Those who had government-subsidized loans weren’t required to pay anything on them while they were still in school. But now, or at least in six months from now, it will be time to pay the piper. And if you owe just $20,000, you can look forward to making a $200 a month payment for the next 10 years to erase that debt.

Start a to do list

If you’re typical, you may not even have a job yet. Or you may have to complete an internship before you get an actual diploma. So what do you need to do about your student debts? First, you need to sit down and put together a to do list. Again, if you’re typical, you didn’t have a single loan. You had multiple loans at different interest rates. Before you do anything else, get your loans and your books in order. The Consumer Financial Protection Bureau has a tool on its site (www.consumerfinance.gov) that can help you get your student loans organized. It also offers some information about repayment options including income-based repayment programs that are available if you have federal student loans.

Determine what types of loans you have

Once you’ve written down a list of your loans, you need to determine their types as they could be federally subsidized, unsubsidized or private loans. Go to the site National Student Loan Database System and look for your loans. Then click on each one to see who services the loan – or the company that will be collecting payments from you. It’s possible that your loan servicer could be a different company from your original lender. Also, keep in mind that the system will show only your federal student loans and not any private student loans.

When November rolls around

If you graduated in May, your first payment or payments will be due in November. Make the payment(s) even if you have not yet received a coupon book. The government considers you to be in default on a federal loan the day after you miss a payment. This would mean an increase in your interest rate and possibly some penalties. In the event you go 90 days without making a payment on a federal loan loans, it will be reported to the three credit bureaus and will have a seriously negative effect on your credit score. It’s also important to understand the payments are not necessarily credited the day they are received. So if your payment is due the 15th of the month, it would be best to make sure it gets to your lender no later than the 12th.

Your grace period may not be six months

Most federal student loans come with a grace period of six months. The reason for this is to give you time to find a job, get on your feet and get ready to start repaying your loans. However, that grace period kicks in any time you drop below half-time status in your school. As an example of this, if your status changed to less than half time in the fall of 2013, it doesn’t matter how many courses you’re taking now. Your six-month grace period began then and the clock is ticking. On the other hand, if you had a Stafford loan and return to at least half time status within 180 days, you will preserve your a six-month grace period.

Perkins loans have a nine month grace period and then another six-months after most periods of deferment. If you have a Graduate PLUS Loan you would have something the equivalent to a grace period every time your in-school period ended. If your parents have a Parent PLUS Loan made on or after July 1, 2008, they could ask for the same. But they won’t automatically get a grace period the same as you would.

Given all this, it’s not uncommon for some students – especially those who have taken off a semester here and there – to have some loans in grace status while others are due for payment the minute they graduate.

Document everything

You need to monitor your loans to make sure that your payments are credited on time. If you discover a discrepancy, you can’t fix it with just a phone call. You’ll need to start documenting everything in writing. In fact, the best idea is to use the loan servicers’ online payment platform to target your payments against specific loans whenever possible.

To consolidate or not to consolidate?

If you feel overwhelmed by the idea of having to make half dozen different payments every month to a half dozen different loan servicers, there is an alternative. It’s a Federal Direct Consolidation Loan. If you were to choose this option, you would then have to make just one payment a month and to just one lender. While this can be a very tempting alternative, it’s nothing to rush into. The problem is that if you take out one of these loans you may lose some of the benefits that came with your original ones such as a low interest rate that significantly reduces the long term cost of your debt. For example, your current loans might have an average interest rate of 4%. But the interest rate for a Direct Consolidation Loan is the weighted average of the interest rates on the loans that you’re consolidating rounded to the nearest 1/8th of 1%. If you’d like to know what your interest rate would be on a Federal Direct Consolidation Loan, here’s the formula.

Step 1:
Multiply each loan by its interest rate to obtain the “per loan weight factor.”
Step 2:
Add the per loan weight factors together.
Step 3:
Add the loan amounts together.
Step 4:
Divide the “total per loan weight factor” by the total loan amount and then multiply by 100.
Step 5:
Round the result of Step 4 to the nearest higher one-eighth of one percent if it is not already on an eighth of a percent.

Alternatives to paying off student loansman chained to debt

While it may be in your best interests to just buckle down and start making payments on your student loans, there are some alternatives available. One of these is called loan deferment; another is loan forbearance. It’s possible that you could qualify for a loan deferment given circumstances such as being enrolled at least half-time in an eligible postsecondary school, in a full time rehabilitation program, experiencing severe economic hardship or serving in the military on active duty during a war or other military operation. (Note: you can find more information about student loan deferment by clicking on this link)

You might be granted a forbearance if you are unable to make your loan payments because of financial hardship or illness, if you’re serving a medical or dental internship or the total amount you owe each month on your Title IV student loans is 20% or more of your total monthly gross income. In addition, there are some other criteria where you might qualify for forbearance and you can get information on them by clicking on this link.

Loan cancellation

It is also actually possible to get a student loan canceled. This means you would not be required to pay anything on the loan and, in fact, might receive a refund for any payments you had made.

As you might expect, the criteria for getting a loan canceled are very limited. They are:

1. You die or are disabled
2. Your school falsely certified that you would benefit from the education and you don’t have a GED or high school diploma
3. You didn’t get a refund where appropriate
4. Your school closed
5. You work in certain occupations after graduation (like teaching or some public service jobs)

Good help is available

National Debt Relief recently launched a program that will help borrowers find a debt relief program for their student debt. It provides a consultation service that will match your specific student loan situation, employment conditions and financial capabilities with the right debt elimination program. It will also help with the paperwork that will allow you to enter into such a program. National Debt Relief charges only a one-time time flat fee that will be placed in an escrow account. There is no maintenance fee or additional charges. They will only withdraw your payment once you’re satisfied with the paperwork and the debt relief program you were recommended.

5 Things You Think About Retirement That Are Probably Wrong

Happy old couple looking at a cameraIf you’ve been salting away money for 20 years or more, looking forward to those golden years of retirement, there are undoubtedly some things you think you know that are not entirely true. In fact, if you’re not careful you could retire and then learn that some of your fundamental beliefs were flawed. Here are five areas where most retirees just don’t know as much as they think they do.

1. I’ll work until I’m 70

One of the most critical factors is determining how much you need to have saved before you begin withdrawing money is when you’ll retire. If your idea is to delay retirement so that you will have more money available, it may not work out the way you have planned. For example, some 22% of workers recently surveyed said that they don’t expect to retire until they reach age 70. Unfortunately, only about 9% of retirees actually got to age 70 before retiring. The Employee Benefit Research Institute has also determined that a large number of retirees stop working earlier than they had planned for negative reasons. In the EBRI’s most recent survey, 49% of those queried retired early but 61% of them said it was due to a health problem or disability. Many others reported that they had been forced out by their companies or because of a health problem suffered by their spouses or another family member. On a brighter note, 26% of those who retired early told the EBRI that they had done so because they could afford to.

Of course, the downside to this is the fact that if you retire earlier than you had expected, you’re probably going to have less money available to begin withdrawing. For that matter, you may even have to sign up for Social Security sooner than you had anticipated, which can yield a smaller monthly check.

2. I’ll just go back to work

The EBRI also reports that retirees often find it tough to get new work. While roughly 66% of retirees said they plan to work in retirement only about 27% actually found work. The problem is that the same factors that make it tough for older workers to find jobs is also true of retirees. If you were forced to retire, you will likely seek reemployment that requires the same job skills. The problem is that most retirees are not well equipped to compete with younger, more socially savvy employees. Plus, employers aren’t eager to “pay the price” for experience. In fact, experience can be a negative these days, especially in the technological sector.

If you do find work you may learn that it pays much less than you’re used to earning. While there are almost always jobs available in the hospitality and food service industries – even for older workers – these jobs often pay no more than $10 or $11 an hour. People who are used to pulling down $70,000 a year or more may find it very difficult to take one of these jobs given their low pay. However, depending on your circumstances you might find it best to swallow your pride and take one of those jobs as it could mean an extra $800 a month (less taxes), which could go a long way towards making your life easier and more comfortable.

3. I’m going to buy a second home

What is a mistake, very expensive and a hassle? In most cases it’s buying a second home. We know that the dream of many retirees is to have a second home to live in part time that would eventually become their primary residence. However, most advisors have one word for this: “Don’t.” In many cases you could stay for less at the Ritz-Carlton than a second home and would have none of the problems of neighborhood disputes, frozen pipes and volatile housing values. The challenge of maintaining a house gets magnified as you age and become less able to maintain one house let alone two. You could probably find a company or handyman to do much of that maintenance and those repairs for you, but you would need to factor this into your retirement planning. Good handyman where we live command at least $25 an hour. This means that just one day’s worth of fixing things around the house, painting or repairing a stuck toilet could cost you as much as $175.

4. Medicare will cover all my healthcare costs

Do you believe that once you pass age 65 that health costs will no longer be a major burden? Well, that’s not even close to reality. The federal health insurance program, Medicare, covers just on the average of about 48% of an enrollee’s health costs. This is according to the Kaiser Family Foundation. For example, there are many routine costs Medicare usually doesn’t cover. This includes eyeglasses, hearing aids and dental care. These are areas where it’s easy to rack up huge bills totaling thousands of dollars for something such as a root canal. Plus, you will still need to pay deductibles that can quickly run up the tab when you’re dealing with a chronic or serious illness. But none of this is even the biggest problem. It’s that Medicare doesn’t cover the cost of a long-term care facility or of home healthcare aides. What you will likely find is that you will need a Medicare supplemental insurance policy that’s usually known as Medigap insurance. The average Medigap premium, according to Kaiser, was $2200 a year in 2010. But, of course, premiums change by age. As an example of this, 80-year-olds pay 52% more than 65-year-olds. This makes it critical to budget the cost of a Medigap policy into your retirement years. But do be aware that even Medigap policies won’t cover nursing home care.

5. I have a realistic budget

As you plan for those golden years a big part of that planning is determining how much money you’ll need. This almost always focuses on generating the income you need to sustain your current standard of living. When many people budget for retirement they work off the assumption that they will end up spending less when they are no longer working. It is true that lower taxes and the end of contributing to a retirement account will reduce the amount of income needed. Unfortunately, what many advisers have found is that retirees don’t account for a general rise in out-of-pocket spending – especially those who retire when young and healthy. These people have more time to go out, travel, golf and shop. This creates the risk of putting a hole in the nest egg that can never be repaired as once the money is gone it’s almost impossible to replace. A little “extra expense” such as $1000 worth of plane tickets to Bimini might not seem like much of a big deal when you’re still earning money. But when you’re living off your retirement savings, that’s $1000 that you just can’t easily replace.

So what’s the answer? The key, according to most retirement counselors, is to build extra room into the budget. The way that you do this is by putting together a spreadsheet of how much you’ve spent each year for the past few years before you retired and then adjust for an increase in hobby or travel expenses. Of course, as you grow older, you will also need to allow for increased medical costs.

We used to teach a class where we taught the four levels of conscious competence that begins with “unconscious incompetence (you don’t know what you don’t know)” and ends with unconscious competence. The problem for many people planning for retirement is that they are conscious incompetents in that what they think they know is wrong. But with some extra foresight and planning, it is still possible to retire and enjoy those golden years you’ve been looking forward to for so long.

10 Things It’s Important To Know Before Choosing Debt Settlement

woman looking at documentsIf you’re seriously in debt and by that we mean you owe $10,000, $15,000 or more, you’re probably lying awake at night wondering how in the world you’re ever going to get out from under that burden. Fortunately, you have several alternatives such as a debt consolidation loan, consumer credit counseling, debt settlement or filing for bankruptcy. While you might be familiar with debt consolidation loans or even consumer credit counseling, you might not exactly understand what debt settlement is and whether or not it would offer you a good way out of that debt burden. If this is the case, here are things you need to know about debt settlement.

1. What exactly is debt settlement?

Debt settlement is sometimes called debt negotiation or debt arbitration. It’s where your lenders accept less money than you actually owe but agree to treat the debt as paid in full.

2. How a debt settlement program works

The way a debt settlement program works is that when you sign up, you make monthly payments to the debt settlement company, which is deposited into a trust account. You are then not required to make any more payments to your creditors. Only you can manage your trust account and you do this through a secure login. When you have deposited enough money into your account, the debt settlement company will begin negotiations with your creditors.

In these negotiations, the debt settlement company will work with your creditors or collection agencies to settle your debts for sums that are acceptable to both you and your creditors. Once the settlement company has settled on an amount with your creditors, you then pay off the settlement either in installments or as a lump sum. Debt settlement usually means a substantial reduction in the amount of your outstanding debt. However, how much of a reduction that you get will depend mostly on how good the debt settlement company is.

Here’s a short video that explains a bit more about debt settlement and how much of a reduction you could expect based on the type of your debt.

3. When it makes sense to choose debt settlement

  • There are certain circumstances where debt settlement makes sense. They are:
  • You can’t pay your bills
  • You have unsecured debts
  • You could repay if your debts are reduced
  • You’re thinking of declaring bankruptcy
  • You’re five to six months behind in your payments

4. Debt settlement is legal

There is nothing at all that’s illegal about debt settlement. In fact, it is one of the most popular options for paying off debts. Unfortunately, there are swindlers that have made money off people struggling with debt. Fortunately many of them have been shut down because of their failure to comply with state and federal laws.

5. Why lenders accept debt settlement offers

If a lender accepts a debt settlement offer it is forgiving a part of your debt. This means it’s losing money on the deal. So why would a lender agree to work out a debt settlement? It’s because they are smart people. They understand that when your finances are in very bad condition, you could decide to file for bankruptcy. In this case, your creditors would recover very little if any money from you. This makes debt settlement a better deal for them because they will get back at least a significant part of what you owe.

6. The biggest pros and cons of debt settlement

The biggest pro of debt settlement is that you will have your debts reduced and you will no longer have to put up with debt collectors. In addition, debt settlement can help you avoid the hazards of bankruptcy, which can be severe. As an example of this, if you were to file for a chapter 7 bankruptcy, your credit score would probably drop by 180 to 200 points, you will have a tough time getting any new credit for two to three years and the bankruptcy will stay in your credit report for 10 years.

The biggest con to debt settlement is that your credit score may drop although it won’t be as severe as if you had filed for bankruptcy. The reason for this is that any time you don’t pay back the full amount of the debt, your lenders will report the account as “paid as agreed” or “paid as settled” to the credit reporting bureaus. And this will stay in your credit report for seven years. However, if you’re already having a serious problem with debt, this might not be that big a negative.

7. How long  debt settlement usually takes

How long it would take you or a debt settlement company to settle your debts will depend on how many debts you have, the type of debts and the amount of money you would have to pay for your settlements. In general, debt settlement programs require two to three years. However, the more you owe, the longer it will take. For example, if you owe $10,000 or more, it might take you two to four years to complete your program.

8. How to know you would be eligible for debt settlement

Debt settlement isn’t for everyone and although it can be beneficial, not everyone will qualify. However, it is likely that your lenders will agree to settle your debts if you have defaulted on a loan, are continuously missing payments and have some source of income. You would also likely be able to have your debt settled if you have a very large amount of debt and are facing a financial hardship.

9. Why choosing a debt settlement company could be better than doing it yourself

You might be able to do debt settlement yourself, depending on what kind of person you are. You need to be patient, a good negotiator and able to understand complicated legal documents. Plus, you must have the cash available to pay for any settlements you are able to negotiate because that’s one of your chief bargaining tools – that if the lender will settle with you for less than you owe, you will send immediate payment. If you don’t have the requisite cash on hand to pay for your settlements or if you don’t feel that you would be good at negotiating with lenders, your best option would be to turn your debts over to a professional debt settlement company.

10. How to select  good debt settlement company

There are numerous debt settlement companies available via the Internet but as noted previously, some of them are swindlers. Here are some tips that could help you select a good and ethical one.

  • Does the company require you to pay an upfront fee? It is actually illegal for debt settlement companies to charge upfront fees but some will try. Avoid them at all costs.
  • How much does the debt settlement company charge? Ethical debt settlement companies will tell you upfront how much they charge for their services. If fact the good ones won’t charge you anything until they have settled your debts to your satisfaction and presented you with a payment plan that you approve.
  • Read reviews. There are reviews available of all the top debt settlement companies. Check them out to make sure that most of the reviews are positive. Some of them will be negative as that’s just the nature of the business – it’s impossible to make everyone happy when it comes to money and debt.
  • Check with the Better Business Bureau. The top debt settlement companies will be members of the Better Business Bureau and will have a rating of at least an A.
  • Make sure it’s licensed in your state. Not all debt settlement companies are licensed in every state. Be sure to check to make sure the company you’re thinking of using is licensed in your state.
  • Be certain to understand your contract. Your contract with a debt settlement company should be clear and easy to understand. If the one you’re offered is complex, complicated and difficult to understand you should either take it to a friend or an attorney for help or find another company.

Need To Cut Your Spending Dramatically ? Here Are Nine Can’t-Miss Strategies

Scissors cutting $100 billUnless you’re part of that lucky 1%, you probably get in trouble with your spending periodically. Or maybe it’s because you’ve lost your job, are underemployed or there’s just some other reason why money is very tight. Whatever the reason, if you find that you have to drastically reduce your spending, here are nine strategies that could help. If you implement all or most of these and your income stays constant, you shouldn’t have to think much about your finances going forward.

1. Cut discretionary spending

The first and maybe most important strategy is to review your budget. There are undoubtedly places where you could cut back. For example, could you reduce the number of cable channels you get? Could you eat out less? Do you need to buy as many snacks from those vending machines at work? This may sound simple but these kinds of expenses can add up to a lot. The website LivingSocial did a survey of 4000 Americans and discovered that the average family goes to restaurants or fast food places 4.8 times a week. Another survey of 1005 adults discovered that American consumers were having lunch at restaurants at an average of almost twice a week and spent about $10 every time. Whichever might be true for you, if you put a halt to eating out this could save you nearly $100 a month or maybe even more.

2. Negotiate

You say you don’t want to eliminate your cell phone or cable services? Then you should at least be able to talk your way to a better price, particularly if you can convince that provider that you are thinking of dropping your service. The secret here is to tell your provider’s customer service representative that you’re thinking of going to a competitor. He or she will probably send you on to a customer retention specialist and this person is almost certain to offer you some concessions.  Here’s a short video with some good tips for negotiating with credit card companies to get your interest rates reduced.

 

3. Plan ahead

One of the reasons that many of us overspend is because we fail to think about what will be happening during the next week. We might have no idea as to what to cook for dinner so grab fast food at the last minute. Or maybe we forgot about a wedding or birthday party and have to rush out at the last minute to get a gift and we spend a lot more than we had thought we would. Planning meals in advance and using coupons will definitely reduce your grocery costs.

4. Reduce your fuel costs

Gassing up our vehicles can take a big chunk out of just about anybody’s budget. As an example of this, my wife filled up her car yesterday and it cost nearly $50. If you go to a site such as Gasbuddy.com or Gaspricewatch.com you will find the least expensive gas in your area. Also, if you stop to think about it you could combine errands, use public transportation, drive less or use a bicycle. The California Energy Commission once calculated that if you are a commuter you could save about 30% on your gas expenses if you carpool in place of driving to work. Given the fact that the average household spent $2912 on gas in 2012, a 30% savings would translate into $70 a month or more.

5. Downgrade your insurance

It could pay to contact your insurance sales representative for a review of your coverage, as you might be eligible for a downgrade. As an example of this if your car is getting old and especially if it’s paid for you might be wasting money by paying for both collision and comprehensive insurance. The collision insurance covers your car in the event you’re in an accident. On the other hand, liability insurance is if you damage another car and comprehensive insurance is to get your car repaired if it’s damaged in some way besides an accident. What’s typical is that you buy comprehensive and collision insurance as a package. But it’s not a necessity. If your car is older and hasn’t kept anything close to its original value, you might want to redo your policy. You should also go online to a site such as Esurance.com and do some comparison shopping. Automobile insurance is just as competitive as the car business and it’s likely that you will be able to get the same or even better coverage for less by switching to a different insurer.

6. Lose one of your vices

You’ve probably read that cliché about not getting that drive-through coffee every day. But your vice might be something different. For example, according to Survey Analytics the typical consumer pays more than $1200 a year buying beer. Also, the American Lung Association says that the average price of a pack of cigarettes is now $5.51. If you smoke a pack a day, you would save $167 in a single month if you gave up smoking. And you’d save a little more than $2000 over the course of a year. Do you gamble? You should be able to cut back on that. Or you might have a fairly innocent habit like soft drinks where you could drink fewer cans and save money.

7. Pay down your debtdebt pit with ladder

You might not be saving money due to your debt. We’ve seen reports that the average household carries $7123 just in credit card debts. If this is you and if you were to pay off that debt without incurring more debt a few months later, you’ll ultimately save money. Here’s an example of this. If you owe $500 in debt at 10% interest on a credit card, you’ll run up $50 in interest — assuming you don’t pay off your balance — and then the next month you will owe $550. Do nothing and next month and you’ll owe $605. What this boils down to is that if you eliminate debt – especially the kind that accumulates interest quickly – you will have a lot more money left over to save.

8. Get organized

If your finances are kind of chaotic you could get them better organized. We’re not talking budgeting here. It’s just things as simple as determining when your bills need to be paid. If you stay on top of your finances, you should start saving money pretty quickly. For example, you pay a late fee anytime you have a late credit card payment.

This might be just because you accidentally threw away the credit card statement and couldn’t remember your due date.

When you have a late fee, you get a negative mark on your credit report, your credit score will likely go down and lenders will see you as a greater risk. In fact, some credit score experts say that just one late payment could drop your score by as many as 40 points.

9. Review those auto-pay subscriptions

Also make sure you review your subscriptions – particularly those that are on automatic pay. Do you have a gym membership that’s on auto pay but you haven’t seen the gym in four months? You need to eliminate that subscription. Do you pick up fast food habitually because you feel that you’re too tired to cook? Or do you buy snacks out of vending machines at your workplace, which are costing you twice as much as if you bought them with you from home? All these could easily be more than $100 a month or more than $1000 a year. And that’s serious money.

5 Conventional Ideas About Money Management You Might Want To Forget

stressed old manThere are a number of ideas about money management that you may have been taught over the years – either by your parents, a teacher or books you read. Of course, some of these are still true. For example, Ben Franklin’s old adage about, “a penny saved is a penny earned” is still true although it might be updated to something along the lines of, “$10 saved is $10 earned” as pennies just don’t seem to be as important today as they were in Ben’s days. But there are some long-time beliefs about good money management that are no longer valid because the financial landscape here in the US has changed so much.

As an example of this, the average interest-bearing checking account today offers 104% more interest income than the typical savings account. So “a penny saved is a penny earned” might better be stated, as “a penny put in a checking account is a penny earned.” In addition, there are other long-held beliefs about money that are no longer true and here are four of them.

1. Depreciation makes it better to buy a used vehicle than a new one

It has long been said that it’s better to buy a used car or truck than a new one because of depreciation. The old adage is that once you drive that vehicle off the dealer’s lot, it drops thousands of dollars in value. However, there is data shwoing that the average new car loan charges approximately 15% less interest than the average loan for a used car. Plus, this same data shows that if you plan to keep that car or truck for just three years, you’d be better of leasing. To put this another way, it’s best to begin your car shopping process with an open mind and to do a lot of comparison-shopping so that you will know exactly how to proceed.

2. It’s better to borrow from a bank

This also is no longer true. While banks used to be a prime source for vehicle loans – whether for a new or used car or truck – credit unions today are a better source. While these institutions used to limit their membership to certain people such as employees of a particular company or members of a certain union, many of them are now open to the public. They generally offer vehicle loan rates that are 40% lower than national banks. And those small local banks usually charge 30% higher rates than the national banks.

3. FHA loans are the best choiceStreet of residential houses

While loans from the Federal Housing Administration (FHA) used to be the best choice for many homebuyers, this is not necessarily the case today. If you have a really good credit score and a high down payment, you’ll save more with private mortgage insurance versus an FHA loan.

4. Small businesses should have business credit cards and business checking accounts.

Just a few years ago, it made the most sense for a small business owner to get business credit cards and a business checking account. However, unlike consumer credit cards business credit cards are not protected by the CARD Act (the Credit Card Accountability Responsibility and Disclosure Act of 2009). This means that the companies that issue business credit cards can raise their rates on existing balances just about whatever they want. In addition, business checking accounts are no longer really very competitive. They may have more features but they also charge 20% higher fees than standard checking accounts and offer 84% lower interest rates on the average then consumer accounts.

5. You don’t need to teach your teens about personal finances

Teenagers didn’t used to have a lot of spendable income. Most existed on allowances or small allowances supplemented by whatever they could earn in part-time jobs. Today, however, teenagers are big-time consumers. In fact they spent nearly $91 billion just in 2011 alone. Unfortunately, very few of them are not saving for college or for any other long-term goal, nor do they understand basic financial terms. For example, in one survey more than 75% of 16- to 18-year olds said they were financially savvy but only 20% knew what a 401(k) plan was and a mere 32% understood credit card interest and fees and how they work.

Since only four states require require high school students to take a course on personal finance, this burden falls on their parents. As you might guess, this comes with its own issues, as the whole subject of personal finances tends to make kids’ eyes glaze over. Plus, many parents are uncomfortable sharing information about the family’s finances or don’t know how to effectively communicate about money in ways that their children will understand. If you’re the parent of a typical teenager you probably hear a lot of, “why can’t I have that (fill in the blank).” It can be tough to respond to this question in a way that not only stops the child’s nagging but also makes for a lesson about your money values. In fact this is much harder than just saying, “no.”

Share the reason

The best way to handle this is to try to let your teenager know your reasoning for why you won’t allow that purchase. This can go a long way towards determining their values about money even if you simply say that the item is too expensive or that all of you in the family don’t buy anything just when you want it. Your teenager might not like either of these answers but he or she will eventually begin to appreciate that you at least explain why you are making the choice that you did.

Have an allowance

Also, if you don’t give your teenager an allowance you should. This can be a very good tool for teaching money values to your kids. If you introduce the allowance as a sort of paycheck and make them responsible for purchasing things on their own as well as saving for long-term goals, this can help establish good money management fundamentals. And while you might not want to use that bedtime story to discuss Roth IRAs, you could turn some of life’s little moments into teaching opportunities. For example, the next time your teenage daughter asks for a new pair of shorts you might turn this into a short discussion of budgeting and of deferring today’s wants in order to achieve a longer-term goal such as a new pair of Uggs. This is another reason why giving a teenager an allowance makes good sense because it forces him or her to make decisions.

We know of some parents who deposit money into their child’s savings accounts every month, which the child can then access via a debit card. Most teenagers learn very quickly that when the balance in that savings account falls to zero, they’re through for the month. These parents tell us that this eliminates much of the arguments over money because when the child runs out of money he or she knows it’s because of the way they managed it. Most learn how to do a better job of managing their money after just a few months and these are lessons that can help them throughout their lives.

Don’t bail them out

Finally, if your teenager runs out of money, don’t bail him or her out. This is tough but is one of the most important lessons you can teach your children. If your teen becomes overextended on credit – despite your best efforts, you need to take a firm stand. Let him or her experience the consequences of having made bad financial decisions. It’s much better to help your child take responsibility for the $500 debt now then a $5,000 debt later in life.

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