National Debt Relief - BBB Accredited Business - Get Relief From Unsecured Credit Card Debt, Medical Bills And Student Loans

What Happens If You Just Ignore A Debt Collector?

man shouting at phoneIf you’ve ever had a debt turned over to a collector you already know how bad things can get. We’ve heard stories of people who were hounded multiple times a day – both at home and at work – had their relatives contacted and were dragged into court. Unscrupulous debt collectors can and will make a debtor’s life miserable until he or she finally gives in and pays up.

The dirty, little secrets of debt collection

Why will most debt collectors stop at nothing until they get your money? The first dirty little secret of debt collection is that most collectors are paid on commission. If they spend several hours hollering at you, threatening and harassing you without colleting anything they’ve basically worked free. What this means for the collector is that the bigger the bill the better. In many cases the agency will get a bounty of 10% to 50%, which is usually split with the collector. Top collectors can earn as much as $10,000 a month.
The second dirty, little secret of debt collection is that agencies generally buy debts for pennies on the dollar. In other words, the collection agency might have purchased your $1,000 debt for $20 or less. This gives the collector room to negotiate and still earn his or her commission. This means that in many cases, you could probably settle that $1000 debt for $500 or less.

You  can run but you can’t hide

Today’s technology has had two impacts on debt collection – one good, one not so good. First, if you have any kind of caller ID you can check your incoming calls and if it appears to be from a debt collector, just ignore it. That’s the good part. The bad part is that it’s almost impossible to run away from a debt collector – even by changing your phone number.

In the event you have a debt you feel you just can’t pay, you could stonewall the collector by ignoring all of his calls. Legally speaking, you do have the right to ignore a debt collector but it’s important to understand that this doesn’t make the debt go away.

A number of different scenarios

If you decide to ignore a debt collector, there are several different scenarios that can occur. First, the collector could just leave you alone. Maybe he simply can’t find you and has quit trying to track you down. While this could happen, it’s not something to count on.

Your credit will suffer

When you have a debt go to collection, your credit score will be seriously damaged. It will appear on your credit reports regardless of whether you try to work with the debt collector or not. However, if you do talk with the collector, you at least have the opportunity to explain what the problem is and to try to work something out.

The debt could grow

Just because you don’t pay on a debt doesn’t mean that the interest will go away. Depending on the contract that the collector has with the creditor and your state’s law, the agency may be able to add interest and collection costs to your debt. Some debtors have reported that their debt actually doubled over time.

You may be bounced from one agency to another

Just as lenders sell debts to collection agencies, the agencies sell debts to one another. If the first collector that contacts you is unsuccessful at collecting the debt, it could wind up at a different agency. And this could happen multiple until you give up and pay the debt.

People you know may be contacted

In the event that the debt collector tries to reach you and is unsuccessful, the law allows him to reach out to third parties such as your neighbors, relatives or your employer – but only to find you. The law doesn’t allow a collector to disclose the fact that you owe a debt or to discuss your finances with other people. However, it can still be very embarrassing if the person the collector called starts asking you pointed questions like, “why did this collection agency contact me?”

You could be sued

If you fail to communicate with a debt collector it may leave the agency with no option but to sue you. While it is possible to successfully defend a debt collection lawsuit, it’s very difficult. And if the agency is successful in court, it can get a judgment entered against you. This in turn would allow the collection agency to garnish your wages or even go after your bank account.

The stress will increase

Trying to dodge a debt collector can leave you feeling very stressed out. It can be scary or frustrating to talk with a debt collector but the alternative – which is not to talk to him – can be just as stressful. If you call the debt collector, this is the friendliest aspect of debt collection because at that point he will want to work with you to try to resolve the debt. The bottom line is that if you have an unresolved collection account, try to decide on your approach and then pick up the phone – or write a letter – so you can put the debt behind you. Also, because collection accounts have such a dramatic impact on your credit score, it’s a good idea to get your free annual credit report to see whether or not you have any outstanding collection accounts. You should also be sure to monitor your credit scores every month.

Tips for negotiating with creditors

If you take a call from a debt collector, he or she will have no interest in why it is that you can’t pay the bill. But if you’re in a hardship situation, the collector does need to know this and what it is you’re doing to get back on track. You should have a story ready and then stick to it. This could be just a few sentences that you can use consistently when you talk to a creditor. For example, “I was very ill, out of work for two months and now I am trying to get caught up.” Or “my husband was laid off and I’ve taken a significant cut in pay. He’s looking for a job so we can catch up but we don’t have any money right now.”

Don’t be a drama queen

You’ll get nowhere with a debt collector if you lose your temper. It’s important to stay calm and not lose your cool. If you find yourself losing your temper, just tell the collector you will need to talk with him later and then hang up. In the event that you have to talk with that collector again, tell him you would like to record the conversation. This usually keeps collectors on their best behavior.

Ask the right questions

If the collector threatens to sue you or that you’ll lose some property if you don’t pay up, ask for specifics: “When will I be notified of the lawsuit?” Or “When will the money be taken from my bank account?” Some of these threats may be a illegal and the more information you have the better.

Be sure to take notes

Whenever you talk with a collector, have a pen and paper handy so that you can take notes. Be sure to write down the name of the person you talk with, what was discussed and when you talked. This will not only take much of the emotion out of the deal but you will also have a record if the collector broke the law when attempting to collect from you.

Know exactly what you can afford to pay

Sit down with a notepad or spreadsheet and go over your expenses and income very carefully. Figure out exactly what you could afford to pay and agree to pay only a realistic amount. In general, if you can come up with a lump sum amount to resolve the debt, you’ll get the best settlement. If you can’t do that, you may have to agree to a payment plan. In this case, you’ll probably pay more over time. If you do agree to a payment plan, make sure you know the total amount you will be required to pay.

Deal with creditors and not collectors

What’s best is to try to work out an agreement with your creditor or creditors before your bill(s) is sent to collection. If you make late payments this will affect your credit score and credit reports, but collection accounts will do even greater damage. You should know that it’s a myth that so long as you are paying something towards a debt it can’t be turned over to a collection agency. Also, understand that once a debt is sent to collection, you have no choice but to deal with the collection agency.

Get it all in writing

If you do agree to a payment arrangement or settlement agreement, get everything in writing before you pay a cent. If not, the terms can change and it will be your word against that of the collection agency. There have been many cases where consumers were hounded for balances they thought they had resolved years before.

Finally, here is a video courtesy of National Debt Relief with some good tips for dealing with debt collectors.

To Rent or To Buy A House – That Is The Question

House and calculator and credit scoreYou’ve probably heard that old expression that “good things come in small packages.” That’s often true. It doesn’t take a very large package to hold a diamond engagement ring or a TAG Heuer watch. On the other hand, there are some very good things that come in very large packages and one of them is a house. But whether you’re single or married, there’s always the age-old question of whether it’s better to rent or to buy.

We favor buying because that’s basically the way we were raised. If you’re an American, the American dream has long been to own your own home. This desire really bloomed after World War II when our soldiers came home, got married and started having children. Builders such as Levitt began building houses (Levittown) that the average person could afford and that’s what many of our vets chose to do.

But as we learned from the mortgage meltdown of 2007 that left so many homeowners underwater, homeownership today is not the same as 40 or 50 years ago. The American dream may still be alive but before you plunk down $20,000, $25,000 or more to buy a house, it’s worth taking the time to determine whether that makes the most sense for you or whether you should be renting.

Price of the house

The price of the home that you would buy is not the only factor in making a rent versus buy decision but it’s a very important one. There is a simple formula that the more a house costs the bigger the down payment that will be required and the higher your monthly payments will be.

As an example of this a $250,000, 30-year mortgage will have a monthly payment of around $960 –not including taxes and insurance. Change that to a $300,000 mortgage and the monthly payment goes to approximately $1520. (Note: Both these examples are based on a mortgage at 4.5% APR.)

How long will you be there?

If you believe you will be living in the same place for five years or less, you’d probably be better off renting. The reason for this is because the longer you stay in the house the more years there will be for your upfront fees to be amortized – or spread out. As an example of this, suppose that your upfront fees totaled 3% (not including the down payment). If you were to stay in that house for five years your fees would amortize at the rate of $1500 a year (3% x $250,000). But if you were to stay there for 10 years, the fees would go down to $750 a year.

How much can you afford to put down?young family smiling

A 20% down mortgage means a $250,000 house would require a down payment of $50,000. If you were able to get a mortgage at 10% down, you would still be required to come up with $25,000 cash. As an alternative to this you might be able to pay mortgage insurance or get a government guaranteed loan. An FHA loan program has looser credit criteria than a conventional mortgage and requires only a 3.5% down payment. Plus, the seller pays most of the closing costs.

While this may sound pretty good there are some definite caveats. To qualify you would need to show two years of steady employment with a stable or increasing income, along with a minimum credit score of 620, no more than two 30-day late payments over the past two years, no foreclosures in the past three years, no bankruptcies in the past two years and your mortgage payment will need to be no more than about 30% of your gross pre-tax income. You will find that there may also be some limits on how much you can borrow based on where you live. And finally, you will be required to pay a premium of up to 1% of the loan amount at closing and a monthly premium of up to .9% of the loan amount each year.
If you’d like to know more about FHA guaranteed mortgages, here’s a short video with some good information – courtesy of National Debt Relief.


The costs of maintenance

One thing you never have to worry about when you rent is maintenance and repair costs. One person summed up this issue very succinctly by saying, “owning a home is like having a big hole in the ground that you keep shoveling money into but that never gets filled up.” Ask any homeowner and he or she will tell you that maintenance and repair costs simply never end. The minute after you’ve spent $1,000 to have your house repainted you learn that your entire roof needs to be replaced at a cost of $5000. As a general rule, you should have the equivalent of at least three to six months of your gross salary put away just to cover these kinds of costs.

The good news and bad news of property taxes

Renters never have to pay property taxes – at least not directly. On the other hand, homeowners are required to pay property taxes every year. You would have to check with your county assessor to determine your tax rate but assuming a rate of 1.35%, your property taxes would be $3470 for the first year. In most cases, this tax, along with homeowners insurance, will be tacked onto your monthly payment and then paid by your mortgage holder. As you can imagine, this will increase your monthly payment substantially. However, in most cases you will be able to write off your property taxes on your income taxes, which could be a good help whenever April 15th rolls around.

The house as an investment

It’s also important to understand that in the final analysis, buying a home is an investment. Like other investments, you need to make sure that it will grow in value over time. As a general rule, houses here in the US increase in value at the rate of 3% per year. Given today’s economy, that’s a pretty good return on investment. But if you were to pick the wrong neighborhood, borrow more money than you can afford or not take into consideration the costs of repairs and maintenance, you could very well see the value of that investment decrease. There are still hundreds of thousands of American homeowners that are underwater – owing more than their homes are worth. This is just not a position you would want to find yourself in.

The joys and pitfalls of renting

We’ve already mentioned what might be the biggest joy of renting, which is no repair and maintenance costs. You won’t ever have to to pay property taxes and your renters’ insurance should be much less than homeowner’s insurance as you would be covering only your possessions and not the structure itself. Your security deposit would be much less than the down payment you would be required to make if you were to buy and your upfront fee would consist of just your security deposit and a month’s rent in advance.

The biggest downside of renting is, of course, the fact that you’re always at the mercy of your landlord. A good landlord will take care of all maintenance and repairs in a timely fashion and basically leave you alone. But do make sure if you decide to rent that you read your lease very carefully. We have a friend who was recently kicked out of her townhouse by her landlord who decided she wanted to sell the unit. As is true of many things in life, it’s always “buyer beware” or this case, “renter beware”.

Which would be best for you?

Of course, this is a decision that only you can make based on your financial circumstances, how long you intend to stay in your house, how much of a down payment you could afford and your comfort level. Some people are simply happier when they live in their own homes while others are just as happy to rent. The important thing is to take into consideration the factors we’ve covered in this article and make a decision that will leave you feeling the most comfortable and in the best financial shape.

How To Calculate The Money Factor When Choosing A College

Man having financial problemsIf you or your child is headed towards the senior year of high school, congratulations! The majority of high school is now behind you. But there’s something big coming your way and it’s called choosing a college. So, where do you think you would you like to be – near the ocean, close to great skiing, in a small town or living the urban life?

Questions to ask yourself

While an important question when choosing a college is where would you like to live for the next four or five years an equally important one is which school or schools offer an education that would fit best with your career plans. In other words, if you believe that you seriously want to be a veterinarian, you’d probably be better off not going to a school that offers only a liberal arts education. Conversely, if your dream were to teach history at the college level, a school with a strong liberal arts bias would be a much better choice than one that includes the word Technology in its title. Of course, you cannot separate any of this from the fact that some schools may accept you and others may not. If you or your child is carrying a straight 4.0 average, has been active in extracurricular activities and a student athlete, the odds are that he or she will be accepted by most schools. But if he or she has been carrying a B average and not an athlete, some of those letters may be ones of rejection.

The money factor

Finally, there is the inescapable fact that college costs money. While it’s hard to figure this all out, a good way to start is by creating a spreadsheet using information from the financial aid offices of the schools you or your child is considering. This should include a column for tuition, room and board, books and fees, transportation, cell phone fees and miscellaneous expenses. Of course, your vertical column will consist of the various schools being considered. Once you’ve filled in this information you should have at least a rough idea of what a year at each of the schools will cost.

Half the equation

Determining what a year of college will likely cost you is only half the equation. The other half is calculating how you will pay for it. This typically will begin in January of next year when you fill out the Free Application For Federal Student Aid (FAFSA). You will need to complete this form even if you don’t think you’ll be applying for federal student aid because virtually every college in the nation uses it to determine what if any aid it will offer you or your child. As an example of this, you will need to have the following documents or information available in order to fill out your FAFSA. • Your Social Security number (it’s important that you enter it correctly on the FAFSA!) • Your parents’ Social Security numbers if you are a dependent student • Your driver’s license number if you have one • Your Alien Registration Number if you are not a U.S. citizen • Federal tax information or tax returns including IRS W-2 information, for you (and your spouse, if you are married), and for your parents if you are a dependent student: o IRS 1040, 1040A, 1040EZ o Foreign tax return and/or o Tax return for Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, the Marshall Islands, the Federal States of Micronesia, or Palau • Records of your untaxed income, such as child support received, interest income, and veterans non-education benefits, for you, and for your parents if you are a dependent student • Information on cash; savings and checking account balances; investments, including stocks and bonds and real estate but not including the home in which you live; and business and farm assets for you, and for your parents if you are a dependent student Finally, here courtesy of National Debt Relief, is an overview of the FAFSA and information as to why it’s critical you and your parents complete one.

 Before you take out a loan

One staggering statistic we read recently is that the average college student graduates owing around $30,000 in student loan debts. If you would like to keep your child from graduating this much in debt, be sure to ask the schools that he or she is considering for their Financial Aid Shopping Sheets. This is a form developed by the Consumer Financial Protection Bureau (CFPB). It’s now being used by more than 2,000 schools and is designed to provide parents and students with good information and a clear set of facts before they sign up for any student loans.

A helpful website

The CFPB has a section on its website titled “Paying for College.” You might take the numbers from the spreadsheet you developed on college costs and plug the information into this website to see comparisons of first-year college costs – three schools at a time. This will also show what you might owe in student loan debts when you graduate. Even if you have not yet received any financial aid offers from any schools, you should be able to use it to at least make estimates. You can also tweak the numbers by changing factors such as living in off-campus housing rather than in a dormitory and then how that choice would affect how much you might need to borrow in student loans.

What kind of aid might you receive?

Naturally, the best kind of aid to receive is the kind you don’t have to pay back. If you or your child is a stellar athlete, he or she might qualify for an athletic scholarship. And while academic scholarships are difficult to obtain, there is always that possibility. Beyond this most schools offer other aid in the form of work grants, grants-in-aid and what’s called work-study programs. In addition, the US Department of Education (ED) offers free financial aid in the form of Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), Federal Work-Study Programs, and Teacher Education Assistance for College and Higher Education (TEACH) Grants. It’s also possible that your state offers some forms of financial aid. Where we live there are Denver Foundation Scholarships and Boettcher Scholarships that cover the full costs of a four-year education. There are more than 30 other scholarships available to students in our state including one for young men and women who were golf caddies

A one-word recommendation

When it comes to borrowing money to pay for college, we have a one-word recommendation: Don’t – unless there are simply no other viable alternatives. Beginning life after college owing $20,000, $30,000 or more is sort of like having a millstone around your neck. It will limit many of your financial choices for at least the first three to five years after you graduate. You might find you have to take a job you don’t like very much just so you can pay on your student loan debts. And if you’re in a field where you will need a graduate degree, you would likely end up piling more debts on top of those debts.

The one word to avoid at all costs

If you are forced to take out student loans there is one word you want to avoid at all costs and it is the word default. You are considered to be in default on a student loan the day after you miss a payment. Yes, just one day and one payment. Ninety days after this, your lender will report your default to all three credit bureaus, which will have a dramatically negative affect on your credit score. It’s even possible that your debt will be turned over to a collection agency and trust us when we say this is something you just don’t want to see happen. Debt collectors have a reputation that’s well earned for being totally pitiless when it comes to collecting a debt. In addition, if you have a default on your record within the past three years you could find it impossible to buy a house using a FHA (Federal Housing Administration) guaranteed loan.

Not an easy decision

As you have read, there are a number of different factors that go into choosing a college or university, not the least of which is money. Many students today are electing to spend their first two years at a community college and then transfer to a four-year private or public school. This is a way to cut college costs considerably and yet still graduate from a “name” school. For that matter, many other students are choosing to get their undergraduate degrees from middle-of-the-road state schools and then use the money they saved to get their graduate degrees from more prestigious colleges or universities.

If student loan debt is already a problem

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.

Are You Smarter About Personal Finance Than 16-Year Olds?

woman thinkingOne company recently tested 16-year olds on their knowledge of personal finance with some everyday questions about savings, tax, currency exchange and utilities. Almost a third of those tested scored 43% or less in this test.

Test yourself

Here are the seven questions that were asked. See how many you can answer correctly (answers at the end of this article).

1. Kat paid $5,000 for a car in April 2009. In the first year, the value of the car depreciated by 10%. In the second year, the value of the car depreciated by 15%. How much can Kat sell the car for in 2011?

2. Bob is paid $37,465 a year. His personal tax exemption is $6,000 for the year. If Bob’s income is taxed at 22%, how much income tax does he pay in a year?

3. Leonie has $2500 to invest for four years and can choose between two different savings accounts. Account One pays 3.7% simple interest paid out at the end of each year. Account Two pays 3.4% compound interest paid at the end of each period (year). Which account would give Leonie more interest over the four-year period?

4. Jenny wants to buy a new TV but is $300 short. She sees an advertisement for a loan offering $300 for eight months with a monthly repayment of $50. If she takes the loan, how much extra will she have to pay?

5. Andrew pays his electricity bill monthly. His current charge is $0.046040 per kWh. Last month he consumed 1201 kWh. If next month he reduces his electricity usage to 1100 kWh, how much money will he save?

6. Rachel is going on vacation in Spain and needs to change $300 into euros. The change kiosk in the airport charges 0.6% or $6.73 to change money whichever is the greater. How much will changing her money at the airport cost Rachel?

7. Sophie was left $6,000 by her grandfather and decides to invest the money for two years. Her bank offers her a choice of two savings accounts. Account One pays 3.1% on a monthly basis. Account Two pays 3.25% annually. Which account will give a higher closing balance with no withdrawals?

Understanding personal finance is critical

You’ll see in a few moments as to whether you’re smarter than a 16-year old about personal finance. I certainly didn’t know much about personal finance when I graduated from college and got married. I had worked fairly constantly since I turned 16 and about all I knew was that you should spend less than you earned. Of course, when I was in college I didn’t always follow that dictate. There were many times when I ran out of money before I ran out of month. I did finally learn the importance of spending less than I earned but it took several years for me to learn some of the important basics of personal finance.

1. Learn your spending patterns

The first step in becoming good at personal finance is to determine how you spend your money. I learned that the only effective way to do this was to track our spending for at least four weeks. This meant keeping track of not just the big stuff like rent and groceries but also the very small stuff right down to a candy bar I had at work. I did this the old school way with a notebook and a pencil. Today, thanks to all of the smart phone apps available, this is much easier. For example, if you were to choose it would not only track your spending for you but also categorize it so that you would be able to see exactly what you spent in areas such as groceries, dining out, utilities, clothing, hobbies, transportation, healthcare and so forth.

2. Compare this with your income

Once you see what you spent in the past month you need to compare this with how much you earned. When you do this you might be in for either a shock or pleasant surprise. The pleasant surprise would be if you spent less than you earned and had extra money to save or invest. The shock would be if you find that you spent more than you earned. If this is the case, you will need to review all of your spending categories with an eye towards determining where you could make cuts. As a rule, most people find the easiest places to reduce their spending are groceries, clothing, entertainment and dining out.

3. Save more by creating goals

Most people find that it’s tough to save money just for the sake of saving money. What’s better is to create one short- and several long-term goals. As an example of this, your short-term goal might be to take a nice vacation to Florida next spring while your long-term goals might be to buy a new car or to save enough for a down payment on a house. Whatever goals you create, you might spreadsheet them so that you will be able to see the progress you’re making towards realizing them. This can be a great incentive to stay on track in your saving.

4. Read books about personal finance

Assuming that you don’t have a financial mentor, the best way to get a better understanding of personal finance is to read some books. We like The Money
Book For The Young, Fabulous And Broke by Suzy Orman; the classic Think and Grow Rich, by Napolean Hill; Get Rich Carefully, by Jim Cramer; Rich Dad, Poor Dad, by Robert Kiyosaki; and today’s best-selling book on personal finance (according to Amazon), The Total Money Makeover, by Dave Ramsey.

5. Get a mentorcouple talking to a professional

The best way to learn about personal finance is to get a mentor – someone who has been there and has learned how to manage, save and invest money. If you’re fortunate, this person could be your father, an uncle or a cousin. Barring this, you’ll just need to be on the lookout for someone who is a successful money manager, who is well to do and would be willing to mentor you. Just make sure that you don’t come off as too “needy.” In other words, don’t pester that person with several financial questions every day. When you have a question about personal finance, write it down and start a list. Once you have a half dozen or more questions, you could then ask that person to sit with you for a half an hour or an hour to answer them. But try to not do that more than maybe once a month.

The answers to our seven questions

If you’ve been chomping at the bit to see whether or not you’re smarter about personal finance than a 16-year-old, here are the answers to the seven questions we posed at the beginning of this article.

1. $3825
2. $6,922
3. Account #2
4. $100
5. $4.65
6. $18
7. Account #1

So how did you do?

If you were able to answer all seven of these questions correctly, give yourself a big gold star. And congratulations! You’re officially smarter about personal finance than the 16-year-olds who were tested on these questions. On the other hand, if you were able to correctly answer only two or three of them, you need to get to work and read some of the books about personal finance that we listed above. Think of it this way. It might take you several weeks to read one of those books but it could make the rest of your life a lot better. If your personal finances are not currently under control, this would help you better manage them. You would be saving money each month towards your important goals. And it’s likely that this would take much of the stress out of your life.

Why A Reverse Mortgage Could Be Your Best Friend or Your Worst Enemy

House and calculator and credit scoreFor many years a reverse mortgage was seen as a last resort for older people who had a lot of home equity but were cash poor. Today, it’s about to become a mainstream financial strategy. Or at least that’s what financial service firms and federal regulators are hoping for. But you should be cautious about jumping in and understand that it could be a very good friend or a very bad one.

The basics of a reverse mortgage

A reverse mortgage is one that lets you borrow against your home equity once you are 62 years old or older. The money can be taken as monthly payments for as long as you occupy the house, as a lump sum, as advances through a line of credit or some combination of these.

Good news

The good news is that a reverse mortgage doesn’t have to be repaid until you move or die. To be eligible for a reverse mortgage you must own your home free and clear or you must pay off all existing liens with proceeds from the reverse mortgage. In the event you have an existing mortgage balance, you will pay it off completely with the proceeds from the reverse mortgage at time of closing. Generally speaking, there are no credit score requirements to get a reverse mortgage.

How much could your borrow?

The amount that you can borrow on a reverse mortgage generally depends on four things – the current interest rate, your age (the older the better), government imposed lending limits and the appraised value of your home.

How a reverse mortgage could be your best friend

There are several important pros to a reverse mortgage. For one thing, it’s easy to qualify for one, as there are no income requirements or any credit score requirements. Second, a reverse mortgage allows you to stay in your home. A reverse mortgage would allow you to pay off any existing mortgage so that you would never again have to make mortgage payments. Just as important, a reverse mortgage can never get “upside down.” This means your heirs would never be personally responsible for anything more than what the home sells for. Your heirs that inherit the house would be able to keep any remaining equity after they pay off the balance of the reverse mortgage. The proceeds from a reverse mortgage are not taxable and the interest rate could very well be lower than traditional mortgages and home equity loans.

Past problems

These mortgages have had many problems. In particular there has been some very misleading marketing and inappropriate lending – at least according to the Consumer Financial Protection Bureau. In response to this, there are now federal rules that went into effect recently. One of these reduces how much of your home’s value you can borrow against. This new legislation also requires lenders to make sure that you can cover the upkeep of your home, as this is where many older couples ran into problems. They used the money for a better lifestyle, forgetting that their homes required upkeep. When a major problem occurred such as needing to replace the roof, there just wasn’t enough money to cover the cost and they were forced to take out new loans.

How a reverse mortgage could be your worst enemyhands chained while holding coins

For one thing, a reverse mortgage has the same fees as a traditional FHA mortgage (see more details below) but are higher than conventional ones because of the insurance costs. These costs includde FHA mortgage insurance and an origination fee. Between the higher interest charges and the upfront fees you might be surprised at how little money you actually get. While it’s your equity, the bank will get a lot of it.

Second, your heirs might not get the house. With a reverse mortgage the loan is paid off when the house is sold. This means your heirs won’t get the house. However, it is possible for them to keep it if they pay off the reverse mortgage after your death. However, as a rule this means that the money will come out of your estate, which will reduce the total amount that your children and grandchildren will get. If you hope to leave a legacy, this can be a real negative.

A third con is that if you move out you will have to repay the loan. The fact is that the only way you can keep from having to repay the loan is by staying in the house. You will be considered to have “Moved out” if you haven’t lived in your house for a year. This includes if you moved into a long-term care facility. This means if you are no longer able to stay in your home, you must start repaying that reverse mortgage – at a time when money is likely tight for you. This can put a strain on any budget.

It’s important to keep in mind that you will still be responsible for maintaining your home and paying its costs. You will need to pay property taxes, your homeowners insurance and for regular maintenance on the house. Even if you can get a reverse mortgage big enough to cover all these expenses, this can still make for a difficult situation.

Finally, the balance of the reverse mortgage loan gets larger over time while the value of the estate or inheritance might decrease. While your Social Security and Medicare will not be affected, Medicaid and other need-based government assistance programs can be affected if you withdraw too much funds and do not spend them in one month. Finally, reverse mortgages are not well understood by most people. Fortunately, there is independent reverse mortgage counseling available that can help.

Making these loans more appealing

The financial service companies have tried to make these loans more appealing. One Columbia Business School professor said that “home equity is the key to Americans’ retirement security, so it’s crucial to responsibly offer reverse mortgages.”

Standby credit

Some financial advisors are even promoting reverse mortgages as a sort of standby credit. These are not like home-equity lines of credit that can be frozen during a financial crisis. In comparison, reverse mortgages will always stay open. If you leave the mortgage untapped, your credit line will actually grow each year by the interest rate you are charged. This makes it a great way to build a hedge against future financial needs.

Approach it carefully

You do need to approach a reverse mortgage carefully given the stakes involved. Here’s how:

Weigh the costs

If you were to get a reverse mortgage on a $500,000 home, you could pay $2500 for mortgage insurance, $3000 in closing costs and a $6000 origination fee. Given these steep upfront costs, this makes it even more important to take a hard look at other resources. For example, do you have a cash-value life insurance policy you could tap? Or could you trim your spending?

You would have to pay these closing fees even for a line of credit that you don’t use. In this case, there would at least be a peace of mind knowing that you have a sure source of cash and don’t have to sell if times get tough.

Make sure you will be staying put

If you think that you will be in your home for many years, than a reverse mortgage could make sense. Just remember as you age, you might want to make a move. For example, you might decide you want to be closer to your kids or grandkids. While a reverse mortgage may no longer be something of a last reboot sort, it’s still a tough call.

Here’s Budgeting Advice From Four Top Money Experts

business man looking tiredThere’s an old saying that opinions are like belly buttons – everybody has one. A lot of people also have opinions about budgeting. If you’re lucky you might have gotten budgeting advice from your mother or father. If so it probably consisted of things such as “have an emergency fund,” “don’t spend more than you earn” or the old standby “a penny saved is a penny earned.” And while this is all good advice, the best comes from the real experts – people who have been there, done that and learned from bad experiences about good budgeting.

It’s great to earn money and the fact is the more the better. But what’s just as important is how you spend it. Even if you’re pulling in big bucks but spending it all recklessly, you’re on your way down a very slippery slope. No matter how much or how little money you have, budgeting how you spend it is one of the most critical skills you can learn.

Here are four top money experts each with a piece of advice that could help you do a better job of budgeting.

Cut back 10% in family spending – Suze Orman

You may be familiar with Suze Orman. She first became well known for her book The 9 Steps to Financial Freedom and for a time had her own TV program on CNN. She also had a six-episode TV series America’s Money Class with Suze Orman on the OWN Network. Suze’s budgeting tip is to cut your spending by 10%. This is enough of a reduction that you should start to see your savings pile up very quickly, which would make it easier for you to pay back any debts and cover your actual important expenses.

The good part according to Orman is that 10% is not enough of a cut that you will feel as if you are depriving yourself or your loved ones of anything. As an example of this if you’re used to spending $100 on movies and gaming every month and trim that amount down to $90, this is not going to cause mass angst.

Overbudget for groceries – Dave Ramsey

Dave Ramsey has had his own radio show for many years and has made numerous TV appearances. He is a financial author, radio host, television personality, and motivational speaker who may be most famous for having developed the snowball strategy (see the video below) for getting out of debt. Dave’s advice is to overbudget for groceries. He believes that when most of us put together a budget, we don’t consider our grocery bill at all. Even if we do, we tend to severely under budget. So while we may think that we’re putting $100 into savings every month, $80 of that is probably actually going to buy things that we forgot to calculate in our grocery budget.

His advice is that next time you go to the grocery store, keep all of your receipts and then add them up at the end of the month. Make sure that you include the times that you ate out because even though fast food can hardly be considered food, it still technically is. Then after you have added up all those receipts, add $50 to the total – just in case. That will be your real grocery budget and if you go under it, that’s terrific. Going under is always better than going over.
In the event you’re having a problem with debt and wonder about the snowball strategy for becoming debt free, here’s a video courtesy of National Debt relief where Dave explains it.

Look to the past for inspiration – Rick Adelman

Richard Leonard “Rick” Adelman is a retired professional basketball player and coach. He coached for 23 seasons in the NBA (National Basketball Association) and just retired as coach of the Minnesota Timberwolves. His advice is that when you’re putting together a budget you need to go back in time – obviously not too far back. But you should go back at least a year, find your bill history and then add everything up. If possible try to find receipts from your extracurricular activities such as dining out or movies and add them to the final tally. This should give you an excellent idea of how much you will spend this year and you could then budget accordingly.

Of course, if something serious has changed in the past year such as a new higher mortgage, or heaven forbid, septuplets, you need to adjust for that. But if your life has remained essentially the same since a year ago, this would be a great way to prepare for the present.

Have “Magic” spending jars – Gail Vaz-Oxlade

Gail Vaz-Oxlade is a financial writer and TV celebrity who lives in Canada. She is the host of the Canadian television series Til Debt Do Us Part, Princess and author of the book Money Moron. Gail says that she has been told over and over by people that they don’t know how to budget regardless of how many articles or books they’ve read, how many worksheets they downloaded off the Internet or how many times they’ve tried – they just can’t do it. However, once she started the show Till Debt Do Us Part and introduced the concept of “magic” spending jars, many people are now able to budget successfully.

So what are “magic” spending jars? What these are is that once you’ve budgeted for your fixed expenses and your important variable ones such as food, debt payment and gas, take the money you have for clothing, entertainment, travel, dining out and other similar ventures and put it in a jar. You then use the money in the jar only when you are partaking in those fun events. That way you’ll no longer find you’re surprised by suddenly being broke because you just had to get 10 toppings on that pizza.

Just in case you’ve never made a budget

If you’ve never actually sat down to create a budget the advice from these top money managers might be interesting but sort of like listening to a speaker lecturing in Spanish when you don’t understand a word of that language. If this is you, here are some quick tips for creating your first budget.

1. Track your expenses.

Go back and read what coach Rick Adelman said about digging out your old bills. That’s a good start but you really need to know what you’re doing now, which means tracking your spending for at least 30 days. There are numerous smart phone apps available that will make this easy. We happen to like because it’s free, easy-to-use and a great budgeting tool. If you use Mint to track your spending it will then categorize it for you so you can see exactly where your money is going.

2. Create categories.

If you’re not using an app or some financial software to track your spending that will automatically organize it into the categories, you need to do this next. Here is a list of some major categories as a starting point. Naturally, you’ll want to tailor this to your own spending meaning that you may need to add and subtract some categories.

• Home
• Utilities
• Food
• Family obligations
• Health and medical
• Transportation
• Debt payments
• Entertainment/Recreation
• Pets
• Clothing
• Investments and savings
• Miscellaneous

3. Divide by three

Once you have your spending divided into categories, you need to group them as follows: fixed expenses, variable expenses and extracurricular expenses. Your fixed expenses will be those that are the same every month such as your mortgage payment or rent, your utility bills, your auto loan(s), credit card debts or a personal loan. Variable expenses will be those that you know you have virtually every month but that very in cost. This would typically include groceries, clothing, investment and savings and transportation. Finally, ‘extracurricular” expenses would be those that you don’t have to spend money on such as dining out, entertainment and clothing.

4. Add up your fixed and variable expenses

Add up your fixed and variable expenses and compare this total to your monthly income. If they exceed your monthly income, you will have to make some radical changes. You’ll need to take a hard look at your variable expenses to see where you could make cuts. Your objective should be to get your spending down to at least 10% below that of your monthly income. The categories where people generally find it easiest to reduce their spending is groceries, clothing and transportation.

If making these cuts still isn’t enough to get you to at least 10% below your monthly income, you’ll have to become more radical. You may have to move to a cheaper house or apartment, trade in your car for a less expensive one or find ways to reduce those credit card debts.

5. Be flexible

Once you develop a budget, don’t think of it as something hard and fast that can never be altered. You will need to continue tracking your spending and then make adjustments based on what you learn. For example, you could find that no matter how hard you try you simply can’t get a month’s worth of groceries for the $400 you had budgeted. So increase your grocery budget accordingly and then find some other category where you could reduce your spending to make up for the money you’ve added to your grocery category. In other words, don’t think of your budget as something engraved on stone. Think of it more as a game plan.

Want To Save Money With An All-inclusive Vacation? You Need To Know These 10 Facts

What To Do During Your Pre-Retirement YearsHave you ever vacationed at one of those all-inclusive resorts? We have and it can be pretty cool. We’ve liked the fact that you don’t have to budget for meals and some excursions though we’ve always had a pay for our drinks. This brings us to 10 things that an all-inclusive-resort won’t tell you.

1. It’s probably not really all-inclusive

If you have dreams of flying down to Mexico or to a Caribbean island leaving your wallet behind at home, you need to dream again. The idea of an all-inclusive resort was originated more than 60 years ago by Club Med. Its concept was to charge you just one price for food and accommodations. That idea worked so well with vacationers that there are now hundreds of such resorts around the world. For that matter, some luxury hotels and cruise lines have also embraced this business model. But it’s important to understand that the term “all-inclusive” doesn’t really mean everything. You might think of it as “all-inclusive” but with an asterisk. This is because at some resorts the only things that are all-inclusive will be some basic activities and food. Of course, the more upscale the perk, the more likely it is that you will have to pay for it. As an example of this even Club Med now charges extra for things like motorized water sports and spa treatments. Of course, paying for those extras can still be a pretty good deal if it actually includes a lot.

2. An All-inclusive trip may not be cheaper than a regular vacation

The advertisements for all-inclusive vacations typically emphasize that it’s cheaper than arranging your own hotel, meals and excursions separately. But do the math and you may find that an all-inclusive vacation isn’t necessarily the cheapest way to go. Here’s an example of what we mean. There’s a luxury resort in the Dominican Republic that has a four-night “Prone to Play” all-inclusive package that includes drinks, meals, horseback riding, access to non-motorized sports and other activities – starting at $723 a night, based on double occupancy. In comparison, this resort’s standard, non-inclusive package starts at $187 a night for double occupancy. You would have to really pile on the extras to drive up your bill to that all-inclusive price.

3. Unless you like iced tea, you’ll pay more for your drinks

If you’re eyeing an all-inclusive cruise, you may find lower prices but they may come with more limited choices, especially when it comes to food and beverages. As an example of this, one cruise line charges $49 a person a day for its beverage package – that is if you want, beer, wine and mixed drinks. If you don’t buy this package, you will be limited to iced tea, water, regular coffee, lemonade and juice. And if you choose the beverage package, you might have to purchase it for every day of your cruise.

4. Construction could be part of the “all-inclusive”

If you don’t call in advance and ask what’s going on in a resort you could arrive to find out that it’s undergoing construction or renovations. Before you book that vacation you should go to a travel website such as Oyster, Trip Advisor, Zoover or Holiday-Check where you would find information about renovation and construction projects and other potential drawbacks to a dream vacation.

Senior man enjoying tropical vacation5. You may be drenched with extra fees as well as sunshine

Even cruise ships and resorts that are truly all-inclusive often have some extra charges you need to be aware of. As an example of this, some of the cruise lines charge extra for Internet access. There may also be a “resort fee” or “convenience fee.” These are common in the hotel industry and can be as much as $30 a night. The hospitality companies justify these fees by saying that they pay for things like access to the gym, the pool and the Internet.

6. You will tip us whether you are aware of it or not

If you’ve ever taken a cruise, you will know that most cruise lines automatically charge gratuities for their dining and stateroom staff, which is usually about $11.50 per guest per day. However, at some of the all-inclusive resorts such as Club Med, the staff will actually refuse tips as they are already part of their pay. Other resorts will say that while tipping isn’t required they do see it from time to time.

7. Good luck getting a refund even if there’s a hurricane

In some cases, the term “all-inclusive” could include a hurricane. This is especially true in the Caribbean where the hurricane season runs from May until October. If you run into a serious storm, getting a refund can be difficult. There are some Caribbean resorts where your reservation will include a hurricane “guarantee” that means a refund. But this may apply only when there are hurricane-force winds as defined by the US National Weather Service and if it directly hits your resort and interrupts your activities. And even if your resort suffers a direct hit while you’re there, the refund won’t include the cost of your flights.

8. Your travel agent will love you

All-inclusive vacations can be good for travel agents as well as for the resorts. The commissions from these vacation spots can range from 8% to 16%. Plus tour and package reservations (that’s the category that includes all-inclusive resorts), accounted for 31% of US travel agent revenue last year or $10.2 billion. Critics of all-inclusive resorts say that these higher commissions incentivize travel agents to book their trips even if they aren’t the best deal for their customers. What the travel agents say in response is that those commissions don’t come out of the travelers’ pockets because they are paid by the resorts.

9. A low price might equal a low-end experience

If you check travel deal websites, especially for trips within two months of when you plan on traveling, you may find some very deep discounts on all-exclusive cruises and resorts. However, seasoned travel agents will tell you that these deals are often inexpensive for a reason. In fact, the lowest prices tend to appear during hurricane season, for rooms that don’t have really good views or at inconvenient times for families to travel. Before you start searching the internet for deals on an all-inclusive vacation, be sure to check out all the resorts’ website prices as a baseline. And you should definitely contact the resort or the cruise line to confirm what will really be included in a special rate. You could also call the booking company and ask for an explanation of its customer-satisfaction policy.

10. Local color may not be included

An all-inclusive resort may not be the best option if you’re the kind of person who likes to explore other communities and cultures. The reason for this is because all-inclusive resorts tend to offer so much shopping, dining and activities onsite that you may be cut off from the culture of the surrounding country. For that matter, the all-inclusive strategy doesn’t benefit the local economy period. So, if your dream vacation includes sightseeing nearby towns, mingling with the locals, exploring hidden beaches and coves and shopping in quaint, little stores, then an all-inclusive vacation may not be your best bet.

As you can see, all-inclusive resorts and cruises may not be all-inclusive at all. And they may not be your cheapest option. Talk with your travel agent or go online and do your research before you book an all-inclusive vacation. You might actually be able to do better by booking your hotel and excursions and paying for your food yourself. Plus, it might give you a better opportunity to see and experience the local culture.

11 Things Every Parent (And Student) Needs To Know About Student Loans

National Debt Relief now offers Student Loans ConsolidationThere you are the proud parent of a son or daughter who’s been accepted to college and is all excited at the prospect of beginning a new phase in his or her life. Or maybe you’re the son or daughter yourself and you just can’t wait for August to roll around. But have you all calculated what it’s going to cost for four years of college and exactly how you’re going to pay for it.

1. Get Your FAFSA in early

The first thing you need to know is that it’s critical to get your Free Application for Federal Student Aid or FAFSA in as early as possible. If you are counting on student aid you should have already submitted it to the federal government as well as to the school or schools you child chose. The reason for this is because most colleges offer financial aid on a first-come, first-served basis. Schools have a limited amount of funds and once they’ve distributed them, that’s it. No matter how worthy your child might be, if you get your FAFSA in late, he or she could miss out on getting any aid at all – outside of a federal or private loan.

2. Understand the different types of federal loan available

There are three types of federal loans available. The first is a Federal Direct Loan. The second is a Federal Perkins Loan. And the third is a PLUS loan. A Federal Direct loan comes directly from the federal government (the Department of Education.) A Perkins Loan comes from the college or university of your child’s choice and is needs based but subsidized by the federal government. And finally, a PLUS loan also comes from the federal government but it could be your loan and not your child’s.

3. Learn how much you or your child could borrow

If your child is dependent on you and is a first-year undergraduate student he or she can borrow up to a maximum of $5500. The limit for a second year undergraduate student is $6500 and for third year students and beyond, the maximum is $7500. There are other maximum limits for independent students and graduate students and you can learn them by clicking here.

4. Be happy if you get a Financial Aid Shopping Sheet

If you’re lucky, your child’s school will provide you with a Financial Aid Shopping Sheet. This is a relatively new form that will give you a good idea of the school’s net price. It’s the cost of attendance – room, board, tuition, books etc. minus grants, scholarships, work-study and loans. You might think of this document as the school’s discounted sticker price. Unfortunately, about two thirds of all colleges don’t make your net price very easy to understand. In fact, you may have to contact the school’s department of student aid to learn exactly what his or her college will cost.

5. Be aware that you will need to submit a new FAFSA every year.

Like it or not, you will be required to fill out and submit a new FAFSA every year. The government and your child’s school will then once again determine the amount of aid he or she will receive.

6. Watch out for the term “renewable”

If your child does receive financial aid from his or her school, be sure to watch out for the term “renewal.” What this means is that the aid is subject to being renewed every year. Many people have gotten excited when they learned their child had received $5000 in student aid only to later discover that it was for just one year and that it’s renewal will be contingent on the child’s grades.

7. Know the difference between subsidized and unsubsidized loans

There are two types of Federal Direct Loans — subsidized and unsubsidized. Loans that are subsidized are those where the federal government pays the interest charges so long as you or your child is in school. These loans are needs based meaning that you must prove you have a financial need. Unsubsidized loans are ones where you pay interest while in school but there are no eligibility requirements. If you get a subsidized loan, the school will determine how much you can borrow, Also, subsidized Direct Loans are available only to undergraduates that are in school at least half time.

8. Understand you can’t transfer a Direct PLUS Loans

To be eligible for a a PLUS loan you must be a graduate or professional degree student and enrolled at least half-time at an eligible school in a program that would lead you to receiving a degree or certificate. Or you could be the parent (biological, adoptive, or in some cases, stepparent) of a dependent undergraduate student that’s enrolled at least half time at a participating school. Note: if you take out a Direct PLUS Loan in your name, you cannot transfer it to your child at some future date. If the loan is in your own name, it’s yours and you will be required to repay it.

9. Know that a federal student loan is like forever

It used to be said that there were two things in life that were constants – death and taxes. Today, you could add a third to this, which would be student loans. They are unlike any other form of loan in that they cannot be discharged by a bankruptcy (except in very special circumstances). Once your child takes out a student loan, he or she will be required to pay it off in full. Period. There are some very limited ways to get a federal student loan deferred, canceled or forgiven but generally speaking once the funds from a federal loan have been disbursed, you or your child will be on the hook for repayment. And the federal government is not at all forgiving. If your child’s loan goes into default, he or she could end up having their wages garnished or could fall into the clutches of one of those awful debt collectors.

10. Be relieved to know there are tax benefits

The one good news about student loans is that they do come with some tax benefits. For instance, there are two income tax credits that can help offset the cost of your child’s education. The American Opportunity Credit would allow you to claim up to $2500 per student per year for the first four years of school as your child works towards a degree or similar credential. Second there is the Lifetime Learning Credit that allows you to claim up to $2000 per student per year for any college or career school.

If you took out student loans for yourself, your spouse or your dependent, you can take a tax deduction for the interest that you paid on it. This applies to all loans (not just federal student loans) that are used to pay for higher education expenses. The maximum deduction is capped at $2500 a year.

11. Realize that there are to save for your child’s education

While it may be too late for this there are two ways to save for your child’s education that have positive tax benefits. The first of these is the Coverdell Education Savings Account that allows you to save as much as $2000 a year for your child’s educational expenses. Second, most states offer Qualified Tuition Programs (also known as 529 plans. This would allow you to either prepay or save up to pay for your child’s education-related expenses. Then when your child is in school and you begin withdrawing money from your account to pay for his or her expenses, it won’t be taxed.

Here, courtesy of National Debt Relief is a video with more information about 529 plans and how you could use one to help pay for your children’s education.

Three Questions To Test Your Personal Finance IQ

writing on a checkDo you believe you have a high personal finance IQ? Well, if so you can consider yourself to be both smart and well informed. The COUNTRY Financial Security Index found that most Americans just don’t know much when it comes to personal finance. When people were asked about financial facts, this survey found that they would need to devote more time learning about finances if they want to get a decent grade on their report cards.

Here are three of the questions that were asked in this survey. See if you can answer all three correctly. If so, we’ll give you an A on the test.

1. What’s the percentage of your income you should spend on housing?

If you answered 30%, go to the head of the class. Most experts say that you should stick to about this amount so that you don’t become overextended and end up as what’s referred to as “house rich and cash poor.”

Unfortunately, just one in three or 31% of the people that took this test answered the question correctly. That means 69% of us are unaware as to how much we should spend on housing and the impact it has on our financial future. If you didn’t know the answer to this question, don’t despair. You can talk to a real estate agent to get the information you need to buy what will probably be your biggest investment – your housing – to make sure you’re not buying too much. The downside of devoting too much of your income to buying a house is that you may not then have enough money left for retirement and personal savings.

Here’s a video where a mortgage professional explains how she would calculate how much a person could afford to spend on housing including factors such as the down payment.

2. Will you have enough money to retire and live your same lifestyle if you save 10% of your income annually?

The answer to this question is probably not. A comprehensive retirement plan is like a three-legged stool. It’s based on three things – contributions from your employer (in the form of a pension or 401(k)), personal savings, and Social Security. If you are the beneficiary of a really generous employer program and live a modest lifestyle, then saving 10% of your income might be enough. But this is generally not the case for most of us.

How did Americans do on this question? Forty-four percent either agreed that saving 10% a year would lead to a comfortable retirement or were not sure whether it would or not. Men (30%) answered yes more than women (18%).

Also, 43% of those surveyed said that saving for their kid’s college education was more critical than their own retirement savings. And only 30% of Americans were able to tell the differences between a traditional and Roth IRA. Thirty-two percent answered incorrectly and another 30% just weren’t sure.

Why is saving for retirement more important than for your child’s education? The simple fact is that you can borrow for college but not for your retirement. As a general rule, saving for retirement should come first. However, Americans often put a priority on education expenses.

3. Is it better to have less money taken out your paycheck for taxes throughout the year or to get a large tax refund?

The majority (59%) of those surveyed got this question right. It‘s better financially to have less money withheld for taxes. You might think it’s great to get a large refund check in April or May but this is a very costly way to save. This is due to the interest you lose throughout the year plus the things you could have done with the extra money you would get on each paycheck. The good news is that 59% of Americans got the question right; the bad news is that 41% got it wrong. And this is still an important number. In addition, even fewer Gen Y people (46%) said it was better to have fewer taxes withheld. Twenty-six percent were either ensure as to how much they should have in emergency savings or guessed a number that was much less than what’s recommended, which is four to six months of living expenses.

What you don’t know is costing you money

You can be a genius, a rocket scientist or a nuclear physicist but if you don’t know about personal finance, it’s very likely costing you a significant amount of money. If you want to have a secure future, it’s important to improve your financial literacy. You will find it much easier to achieve both your short and long-term financial goals if you know how to prioritize your savings and your spending.

Speaking of saving

If you don’t think that saving money is vitally important to a good financial future, you could take a lesson from Jay Leno who just retired from hosting the Tonight Show. Jay was interviewed recently by Jerry Seinfeld and asked about his secret to making sure that he always had enough money in the bank. It was simple. Jay said just don’t spend it. When he hosted the Tonight Show, Jay earned more than $30 million.

And he saved every penny of it.

So how’s Jay living?

Jay does standup comedy nonstop, week in and week out – even while he was hosting the Tonight Show. Combining that money with his endorsements meant that Jay made about a cool $15-$20 million a year. This is the money he used to live, eat and amass his incredible collection of motorcycles, cars trucks and airplanes. And he’s been doing this since he was a kid. In fact he always had two jobs. He would live off the income from one and bank his salary from the other. This not only ensured that he had money put away just in case but it also instilled in him the lifelong habit of saving that he follows to this very day. For that matter, Jay will likely keep his Tonight Show money stashed away as he is still touring full-time as a comedian.

It’s not just for multimillionaires

Jay’s savings habits are not just for multimillionaires. You could do the same thing. We know it’s tough to find one job let alone two. But it’s doable. You can then do as Jay has done and that’s use the money from one of your jobs to pay your bills, buy groceries and just plain live your life, while you stick the income from the other job in the bank and forget that it’s even there. You might be shocked at how quickly this can add up.
Here’s an example. If you got a second, part-time job for 20 hours a week at $10 an hour, that’s about $150 after taxes that you could stash away every week. This means that after taxes you would have about $7800 saved in a year. Having $7800 in a savings account would be an incredible safety net given the fact that almost anything can happen at any time. But even more importantly, you’d be doubling that $7800 every year at that job or a comparable one.

If you can’t work a second job

We understand that not everyone can take on a second job. Your current job may be so time-consuming or stressful that there’s just not enough of you left over to work another 20 hours a week. But even at that there’s ways to make money and stick it away into savings. One of the best is freelancing on the Internet. There are a huge number of websites that will pay money for various services such as editing, blogging, creative writing or acting as a virtual assistant. Regardless of what you’re an expert in, you should be able to find a site that will pay for your help. And you could do this all at home since its online – in a coffee shop – or any place you can access the Internet.

Rent out a room

If you have an extra room in your house that you’re not using or an insulated basement you could rent it out and bring in several hundred dollars a month. Of course, you’ll want to make sure that the person to whom you are renting is reliable and will pay the rent every month.

But whether it’s through a second job, freelancing on the Internet or renting out a room, if you save 100% of that income it will be easy and more productive than you might imagine. Of course, you may not be able to amass a stable of expensive automobiles like Leno but you should be able to live comfortably, knowing that there is food on the table your expenses are paid and that extra work will keep you and your family secure for many years to come.

Four and A Half Simple Steps Towards Getting A Financial Education

Smiling couple with laptop

There are studies showing that millionaires spend an average of 8.4 hours a month planning and managing their finances. Would you like to be a millionaire? Are you spending eight or more hours a month managing your finances? The mistake many people make is just not devoting enough time to their personal finances. What you should do is set up a recurring date on your calendar for your Money Date. That means allocating about one hour or so a week, which certainly isn’t very much when you consider how important your finances are. When you have your Money Date you should update your family budget, review any expenses you have that are upcoming and pay your bills though you should, of course, automate as many of them as you can. Finally, be sure to review your checking and savings accounts for accuracy and discuss any other financial matters that are pressing.

You could actually make your Money Date fun. You might dance, light candles, listen to music or do whatever it is that would make personal finances fun for you. The reason for this is that the more fun it is, the more likely it is that you will continue to have Money Dates and consistency is what’s critical.

2. Spend 20 minutes a week reading about personal finance

Most experts say that it would be a mistake for you to try to learn all about personal finance at once. Instead, you should break up your learning into palatable chunks. As an example this, allow 20 minutes a week (in addition to your Money Date) to read about personal finance. Just choose just one topic a week and read about it until you understand it thoroughly and then move on to something else. For example, if you would like to learn more about managing credit card debt, you might get the book “The Total Money Makeover” by Dave Ramsey. Among other things, this book will teach you what Dave calls the “snowball” technique for paying off debt. This is where you organize your debts from the one with the lowest balance down to the one with the highest. You then do everything possible to pay off that credit card with the lowest balance while continuing to make the minimum payments on your other debts. Once you have that first debt paid off, you will have extra money to pay off the debt with the second lowest balance. In addition, Dave’s book will also teach you how to save money and create a budget. If you work your way through this book in small chunks, you’ll master at least one thing about personal finance a week.

3. Find a mentor

As you begin to learn about topics such as saving, spending, credit, debt, retirement strategies, investing and so forth, choose people you admire and think of as smart money managers to be your mentors. While there is a lot of financial talk out there, most of what your family members and friends tell you about money is probably wrong. Instead, talk to your mentors and other entrepreneurs that you know that are successful in handling their finances. Be sure to ask them about both their successes and failures.

You can actually learn from the mistakes of others. In turn, this can help you avoid a lot of financial mishaps. Do keep in mind that discussing money can be a sensitive thing for many people. This means you should start small and then try to work your way up into more in-depth conversations. And always thank people for their advice.

4. Test out strategies

Most successful business people learned that the best way to determine if a business idea will work or not is to test it out. When it comes to your personal finances, you should follow the same philosophy. The fact is that some financial strategies work better for some people than others. Think about budgeting as an example. There are dozens if not hundreds of different ways to budget your monthly your expenses and income but you really won’t know what works best for you until you give it a try. You might attempt some different budgeting systems and then discover, as have many people, that the best solution would be a spreadsheet you custom design yourself – based on your needs, your income and your life style.

5. The one-half step

I titled this article “4 1/2 Steps Towards Getting A Financial Education” because there is actually a fifth step but I realize it’s not for everyone. It’s to hire a Certified Financial Planner. A Certified Financial Planner could not only mentor you but he or she would also help you stay on track on your financial journey. Regardless of where you stand financially, it takes dedication and commitment and continued financial education to succeed. If you can afford a Certified Financial Planner and if you believe that he or she could help you better understand personal finance and remain on track in terms of your commitment and dedication, then this could make sense for you. However, if you’re just starting out on your financial journey and you don’t have much money, then you might be better off following the first four simple steps towards a financial education and holding off on hiring a Certified Financial Planner for a few years.

A new free tool called Manilla

A free tool that could help you on your financial journey is Manilla. It would make it easier for you to manage your  bills and other accounts on your mobile, tablet and desktop called Manilla. It’s from the Hearst Company and is free. It’s a secure digital mailbox service where you store all your financial documents. Manilla even includes a Bill Share tool that could help you during next year’s tax season, as it will eliminate the need to gather and organize all of your documents before the April 15 deadline.

Kiplinger’s recently named Manilla to its Personal Finance’s 2013 Best of Everything List. Also, CNBC had it on its list of the 10 best financial apps for 2014. The way it works is that you add all your financial documents to Manilla. It then gives you one secure access point to all your household accounts and services. You can use it to manage and share your household bills, travel programs, entertainment, financial and brokerage, magazine subscriptions and healthcare accounts so that you will always know your balances and due dates. In short Manilla can simplify and organize your financial life. Manilla’s features are even available on the go as there are iOS and android mobile apps available for it that have been rated four stars by its users. This means that you only need one password to get an organized view of all your account information, emails and text reminders to pay bills, check out expiring subscriptions and manage daily deals. Plus, it offers an unlimited amount of storage along with easy document retrieval.

Here courtesy of National Debt Relief is a brief video that explains more about Manilla’s features and benefits …


Mobile Menu