Tuesday, March 29, 2011

Think Twice About Transferring Credit Card Debt

Credit card companies make it so easy to transfer one credit card balance to another and at the time it may seem like the best option, but use caution. Transferring your balance from one card to another is basically the same as consolidating your debt without actually going through the process of a formal debt consolidation loan. Transferring balances may actually lower your credit score because it could be an indication that you are unable to manage your money and need to transfer your balance to make it easier to pay your debts.

The only reason you should transfer one credit card balance to another card is to save money and reduce your total debt owed. To take advantage of the low introductory you must pay off the full balance before the introductory rate special ends. If you are unable to pay off the balance before the introductory rate ends the balance transfer is not worth it. Do some comparison shopping before selecting a credit card that offers an introductory balance transfer rate. Two good sites to use when comparison shopping are bankrate.com and cardreport.com.

You may end up in more debt than you originally owed due to the guidelines of the new low interest credit card. To pay the new balance off faster you must pay more than the minimum monthly payment; try to pay at least double the minimum monthly payment. Here are 9 tips to use when considering transferring debt to another credit card.

1. Find out the APR or interest rate of the new card, if the interest rate is too high don't transfer the debt.

2. Ask if you will be charged a fee for transferring your balance, if there is a charge shop around for another credit card.

3. Find out what the guidelines are for the new card.

4. Find out how long the balance transfer will take and make sure you continue to make payments on the old account until the transfer is complete.

5. Check your monthly statement to verify that your old credit card company is reporting your balance as zero. But don't be tempted to charge on the old account.

6. Check your monthly statement on your new credit card to verify the balance is reported correctly. If not, write a letter to have your account balance updated.

7. Some companies offer transfer checks that can be used to transfer balances. Some companies charge a fee for using the transfer checks so keep this in mind when adding up all the fees that can come along with transfer of an old balance to a new credit card.

8. Ten percent of your credit score considers new accounts and your score may decrease as a result of opening the new account. If you decide to close the old account, the account was in good standing and you had the account for at least 2 years closing it could decrease your credit score.

9. If you know your credit score from each of the three major credit bureaus Equifax, Experian and TransUnion call each bureau and ask how transferring your balance to a new card will affect your score.

Saturday, March 26, 2011

College or Retirement

Nowadays many parents struggle with deciding to plan for retirement or save money to pay for their child’s college education. Yearly college tuition costs can range from $5,000 to $50,000 per year.

Parents should not have to make the choice to plan for retirement or save money to pay for their child’s college education. Your child may not be financially secure enough to take care of you when you get older which is a major reason why parents should plan for retirement. You will need to save money for 30-40 years to have enough to cover your living expenses when you retire.

Planning for retirement or saving money to pay for their child’s college education is an emotional choice. The decision to do one or the other should be a rational choice. If you save money to pay for a college tuition that could total between $20,000-$200,000 that is less money that you can contribute to your retirement account.

Think about worse case scenarios, if you child drops out of college you are stuck with a bill, less money in your retirement account and will have to take care of a child who is unemployed. If your child changes their major or transfers to another school, this will extend the time they are in school and increase tuition costs. You can’t control what your child does but you can control yourself. If you take out a home equity loan you will also be stuck with another bill.

Parents should plan for retirement because college tuition can be paid for with financial aid, savings bonds, 529 plans, part-time employment from 9th through 12th grade and summer jobs during their college education put the money in a high interest savings account.

Suggest that your child apply for financial aid which can be either grants, scholarships, or loans. If a child has to participate in paying for college they will be more responsible with their money, understand the value of money and the value of a college education.

Talk to a financial advisor to get advice on how to save for both and the options available to you. A financial advisor can help you determine what age your what to retire, how much you will need during retirement, how much you need to save to pay for your child’s college tuition. You can withdraw money from your retirement account but if your child decides not to attend college, you will have to pay a penalty on the money taken out of your account. If you lose your job or quit your job you may have to pay your loan in full and pay taxes and penalties on the money that was not repaid.

You cannot plan to pay for college tuition when your child is in high school. Planning early is the key. If you save just $5 a month towards your child college tuition when they are born that equals to $260 a year. You may have to tell your child that you cannot afford to pay for their college tuition.

If your child does not get financial aid, encourage your child to go to a state college to cut down on costs. You may have to make sacrifices, live in a modest home, live below your means and buy more needs vs. wants. Ask friends and relatives instead of giving your child a gift to make a donation to their college tuition. Whatever you decide make sure you don’t go into debt and make your current or future financial situation worse.

Wednesday, March 23, 2011

10 Tips to Manage Your Money

Everyone fears the word budget but don't be afraid. A budget is your lifeline to financial peace. A budget helps you know how much money you earn and spend each month. A budget is called many different names but the main goal of a budget is to help you live below your means. Nothing stays the same forever which is especially true today. Here are 10 helpful tips to help you manage your money.

1. Needs vs. Wants – buy more needs vs. wants to help reduce expenses.

2. Reduce spending – buy in bulk, on sale, at discount stores, online or use coupons, buy generic brands. Try websites such as groupon.com, coupons.com, freecycle.org, ebay.com or craigslist.com to find bargains.

3. Groceries – don’t go shopping when you are hungry, buy items on the lower shelves and ask about specials, join store clubs to get alerts on discounts.

4. Banking – open accounts with little to no fees, ask about discounts and specials, and establish a relationship with the branch manager to get alerts about specials and new products and services that could save you money. Don’t use check cashing stores or cash checks at the liquor store.

5. Driving – buy gas in the morning, combine nearby trips on the same day, keep the trunk empty, keep tires at the proper pressure level, get regular maintenance on your car, look for the cheapest gas and buy a gas efficient car, ditch the gas guzzler. Drive the speed limit to also save money on gas.

6. Medical – buy at least basic medical insurance for you and your family, get a prescription card and fill prescriptions at discounts stores such as Wal-Mart or Walgreens to save money, negotiate medical services to save money and ask about programs for uninsured or low-income patients.

7. Insurance – buy insurance for health, life, disability and your home. Buy bundled services to save money, buy homeowners and car insurance with the same company and ask about discounts.

8. AAA – triple AAA offers lots of discounts with partner companies that are not advertised, ask each company you do business with if they give discounts to AAA members.

9. Compare – Comparison shop before making a purchase to get the best deal. Use sites like bizrate.com, nextag.com and pricegrabber.com.

10. Clothing – shop at discount stores, buy clothes in off-season, check out discount racks at stores and ask if stores if they honor competitor coupons. Buy a few jackets and mix and match pieces to stretch your wardrobe.

Sunday, March 20, 2011

The Student Loan Dilemma

Prior to the Healthcare Reform law, private companies that offered student loans which were subsidized and guaranteed by the federal government. Under the Healthcare Reform Law the government now lends the money directly to students eliminating the need for private lenders. The money will go towards providing more grants to students. However, this has caused an increase in companies offering private student loans.

Private loans require a credit check and cannot be discharged in bankruptcy. Private loans offered through college have higher interest rates compared to federal student loans and accrue interest while students are in school. Since the Healthcare Reform, Sallie Mae which offers private loans now offers a Smart Option Student loan with an interest rate of 2.8% and allow students to lower their interest rates by paying on interest which still in school. Wells Fargo offers private loans with variable rates and student can reduce their interest rate three quarters of one percent if the student graduates.

The student loan default rate has increased to 7%. Many colleges are controlled by privately traded companies on the stock exchange and investors are always looking for ways to exploit low-income students. According to a report by the Education Trust titled “Subprime Opportunity: The Unfulfilled Promise of For-Profit Colleges and Universities”, private for-profit colleges take advantage of students by offering high interest loans.

According to the report, only 22% of students who enroll in a 4 year degree program graduate within 6 years. A U.S. Department of Education report states that Arizona has the highest rate of student loan defaults in the country. In contrast, the student loan default rate in Missouri is 5.8% which it achieves through grants to institutions and financial literacy programs. Grants are used to teach students financial literacy. Assistant Commissioner Leanne Cardwell, states that financial literacy outreach is critical to reducing default rates and student debt load.

Getting private student loans for college should be a last resort. Here are 8 ways reduce college tuition and student loan debt.

1. Apply for financial aid. Apply for at least 50-100 college scholarships and apply for the FAFSA January 1.

2. Plan for college costs early. If you will have to pay for college yourself get a part-time job as soon as you are old enough to work and put at least 50% of the money in a high interest savings account.

3. Ditch the high bill. It is nice to attend an Ivy League school but the tuition will cost you. Consider attending a less expensive school.

4. Work at school. Research getting a job which in school through the colleges’ work-study program.

5. Student loan forgiveness. Research student loan forgiveness programs before applying for a job after graduation to see which industries offer the best program for you. You may have to delay that 6 figure job until your student loan debt is paid down. Visit finaid.org for more information.

6. Apply for federal loan. Apply for federal student loans first which offer lower interest rates and multiple repayment programs.

7. Read the fine print. Read the fine print on student loan applications especially the interest rate, default penalties, repayment options, balloon payments, and prepayment options.

8. School decision. If feel strongly about attending the school of your choice with a high tuition, attend a school that offers a higher starting salary. CNBC ranked 16 schools that offer high starting salaries upon graduation. For more information visit cnbc.com/id/40703034.

Thursday, March 17, 2011

How to Clean Your Financial House

Many people spend time on the weekends on during the week cleaning their house, putting things in order, throwing away things, organizing, updating, replacing and moving things around. Some people do more extensive cleaning of their house when spring arrives. Some people clean their house and donate unused items to charity. Whatever the case – everyone cleans their house or place where their live but do you clean your finances?

Many people don’t know how much money they earn, how much they spend or how much debt they owe. Organization is the key to getting your finances in order and cleaning your financial house. Approximately seventy percent of Americans are living paycheck to paycheck. In some instances people live paycheck to paycheck because they don’t know where their money is going. Here are 9 ways to help you clean your financial house.

1. Fix Credit. Get a copy of your credit report at least once a year. Get current on all late bills and dispute any errors.

2. Create a budget. Create a budget or spending plan to determine how much you earn and how much you are spending. Include savings in your budget. Ensure that everyone in your family follows the budget. Track your spending daily, weekly or monthly.

3. Reduce expenses. Reduce your expenses by determining areas where you can reduce spending by buying more needs vs. wants such as bringing your lunch to work, shopping at discount stores or buying generic brands.

4. Pay down debt. Pay down debt and keep credit card balances at 20% or less of the limit which also helps increase your credit score. Don’t open any new accounts or incur any additional debt.

5. Establish an emergency fund. Create an emergency fund to cover bills and monthly expenses for 9-12 months to prevent using a credit card for unexpected expenses.

6. Plan for retirement. Plan for retirement and contribute 10-20% towards a retirement fund each month. Contribute to a retirement account through your employer or make automatic contributions to an IRA if you are self-employed or if your employer doesn’t offer a retirement plan.

7. Pay bills. Pay bills on time or before the due date to maintain good credit or increase your credit score. Pay bills online or through automatic deduction to save money.

8. Assess needs. Determine your needs for insurance such as life, health, disability and long-term care. Make adjustments as needed on a yearly basis or when a life event change occurs such as death, long-term illness or childbirth. Bundle services with the same company to save money.

9. Organize. Organize all bills, financial statements, debt, and loans in separate folders. Create a bill calendar to identify when each bill is due or create a list of keep track of bills. Get a file cabinet, cash box or accordion folder to store receipts. Tally receipts daily, weekly or monthly and track in your budget.

Monday, March 14, 2011

Help for Delinquent Tax Payers

If you are delinquent on your IRS tax bill now there is help. The IRS is trying to help taxpayers who are delinquent on their tax bills. They are reducing the number of property tax liens and loosening the rules for small businesses to allow small businesses to setup installment agreements to pay back taxes. Tax liens are notices that are filed on land to ensure the government will collect back taxes when a property is sold, i.e. real estate, boat, etc.

The new IRS guidelines increases the amount of taxes owed before a lien is placed. Liens are automatically placed when the limit is reached. If you owe $10,000 or more a lien is placed on your property, previously the minimum amount was $5,000. If you meet certain income or debt requirements you can settle your debt for less than the original amount owed.

Small businesses that owe up to $25,000 will now be eligible to setup 24 month payment plans. This is great for small businesses that are not struggling financially but for small businesses that are still recovering from the recession, this will cause many to go out of business. This may cause another recession for small businesses which greatly contribute to the health of the economy and provide jobs for millions of Americans.

Once a tax lien is placed on your property it remains on your credit report for 7 years from the date the lien is paid. Unpaid tax liens can remain on your credit report for up to 15 years. Tax liens also lower your credit score and are considered public records which may affect your employment and the ability to get hired for a job.

Friday, March 11, 2011

What To Do If You Are Audited

Every year during tax time someone gets audited and we all hope it's now us. If you have never gotten audited you are lucky. However, if you get a letter from the IRS notifying you that you will be audited don’t panic. Stay calm. All audits are not bad and may not result in you owing money.

If you prepare your taxes yourself with tax preparation software like Tax Cut or Turbo Tax the software provides audit checks on your return before sending them to the IRS and alerts you about possible items that could trigger an audit. If you go to a tax preparation company find out what the process is if a customer is audited. Here are 7 tips to handle an IRS audit.

1. Notice. If you receive a notice in the mail from the IRS stating that you will be audited read the notice carefully to fully understand what is required. An audit can be for one year or for multiple years. An audit can simply be resolved by sending documentation via postal mail or may require a meeting with an IRS agent.

2. Act Promptly. You must act promptly when you receive an audit notice to ensure your chances of the audit going smoothly. Gather all of your financial statements including canceled checks, bank statements, 401K statements, charity donations, credit card statements, monthly debt statements, taxes for the past 3 years, W-2’s/W-4’s, previous tax refund statements, your 1098 statements if you are a homeowner, etc. If you do not have a copy of past tax returns complete a Form 4506 to request an official copy.

3. Document. Make a list of all documents that you currently have in your possession that are required in the audit letter. Make a list of all documents that you don’t have and the status of obtaining those documents, i.e. you requested a copy with an estimated receipt date, you will request a copy or you are unable to get a copy.

4. Professional Assistance. Contact a tax accountant or tax lawyer to get advice on how to prepare for the tax audit and how they can help you successfully get through the audit including fees, services provided, years of experience, worse cast scenario, etc.

5. Response. If you are required to respond by mail, work with a tax lawyer or tax accountant to ensure you have all the required documentation. Send copies of all required documentation and responses to any questions via certified mail and return receipt. If you are required to respond in person, you can attend the meeting with your tax lawyer or tax accountant or they can represent you on your behalf. I recommend you attend the meeting with your tax lawyer or tax accountant to ensure you fully understand the information provided and to minimize chances of misunderstanding the information presented.

6. Resolution. After the audit the IRS may require you to pay additional money or you may receive a refund. If you have to pay work with your tax lawyer or tax accountant to setup a payment plan.

7. Dispute. If you are not happy with the findings of the audit, you can appeal the findings to the IRS agent’s supervisor or the IRS Appeal Division. You also have the option of taking your case to your state tax clinic or filing a petition with the U.S. Tax Court.

Tuesday, March 08, 2011

How Green Technology Can Save You Money

Green technology is using tools and methods to do things that are environmentally friendly and that also conserves natural resources and the environment. Green technology does not damage or deplete the earth’s natural resources. Green technology is used so products can be re- used and recycled. It is an alternative source of technology that reduces fossil fuels and creates less damage to people, animals, and plants. Green technology also reduces the amount of waste and pollution that is created during the production and consumption of goods.

A large part of managing your finances is saving money. Using green technology is a great way to help you save money and save the environment. In some instances it may cost more money with the initial purchase but over time you will see the savings. Green technology can be used in all areas of our life – cooling, heating, driving, electricity, computers, and more. Here are 14 ways to save money using green technology.

1. Pay bills online. Pay your bills online which saves you money on stamp, envelopes, writing checks, late fees or convenience fees. It also helps you budget your money quickly and easily. You can also setup automatic bill payment through your bank.

2. Drive less. Use public transportation, car pool, ride a bicycle or walk. With the increasing price of gas this will save you lots of money. Consider moving closer to your employer or moving near a train station or metro station.

3. Showering. Install a low-flow shower head to save money on water consumption. Limit the time you take a shower to 10-15 minutes.

4. Hot Water Heater. Trade in your gas or electric hot water heater for a solar water heater. It uses the sun’s energy to preheat the water which can save 50-80% on your utility bill.

5. Water. Drink tap water instead of bottled water. Use a filter like Pur or Brita for your kitchen faucet or water pitcher. This way you are not paying twice for water (your water bill and drinking bottled water).

6. Lighting. Use fluorescent light bulbs for lighting which will help you save money on lighting. Also make sure you turn off the lights if you are out of a room for more than 20 minutes. Use night lights to light dim areas if needed.

7. Electricity. Unplug large appliances and electronic devices when not in use. Set your computer to standby or sleep mode when not in use. It takes more energy to restart your computer every time you turn it on it than it does to wake it up from sleep mode.

8. Recycled. Buy recycled products which usually cost 10-15% less than non-recycled products.

9. Power Strip It. Use power strips to plug in your appliances and electronic devices. Most energy is consumed when devices are turned off but not unplugged. To save money, turn the power strip switch to off when you are not using the devices.

10. Energy Star. Energy Star has been around for a long time but now it is even cheaper to use energy efficient products which use 70-80% less energy.

11. Insulate. Insulate your home, attic, windows and door to save money on heating and cooling.

12. Solar window film. Switch your plastic window film to solar window film to help keep you home cooler by reducing utility costs. The film prevents the sun’s rays from entering your home and reduces the need for air conditioning. This is most effective in areas where the temperatures don’t get too cold.

13. Recharge batteries. Buy rechargeable batteries to charge your electronic devices, toys, games and more. The electricity you use to recharge a battery is much cheaper than buying a 4 or 8 pack of batteries.

14. Re-manufactured Supplies. Buy re-manufactured supplies such as printer ink and toner cartridges from Office Depot which can cost up to 15% less.

Saturday, March 05, 2011

Has America Lost Its Common Sense

Webster’s defines common sense as “sound practical sense, good judgment.” Waiting until the last minute to solve a problem is an example of not using common sense. Common sense is used in all aspects of one’s life including finances.

Unless you became sick, lost your job or received a reduction in pay and were previously able to pay your bills but then filed bankruptcy or foreclosed on your home, your lack of common sense prevented you from making good decisions managing your finances. Instead of filing for bankruptcy you could develop better spending habits which takes hard work and sacrifice. However, if you want something badly enough, you will do whatever it takes to accomplish it – this includes managing your finances, saving money and getting out of debt.

Many people work hard to try to get a handle on their finances but continue to be unsuccessful and in some cases repeatedly make the same poor decisions. It may seem like everyone is in debt or that everyone has bad spending habits, but that is just you trying to convince yourself that you behavior is normal. Well – it’s not. Being in debt and having bad credit is not normal.

You cannot do what everyone else does, even if they make the same amount of money as you do, live in the same neighborhood, send their kids to the same school and activities. Everyone’s situation is different and you can’t judge a book by its cover. Lack of financial common sense can cause you to:

1. Pay your bills late
2. Spend money you don’t have
3. Have no savings account
4. Don’t know how much debt you owe
5. Have bad credit
6. Buy basic necessities such as food and gas for your car with a credit card because you don’t have the cash
7. Get denied for credit
8. Hide from your creditors
9. Avoid paying your debt
10. Make a large purchase with upfront fees, hidden fees or unfavorable terms
11. Continue to apply for credit hoping that eventually a company will approve you

If you financial life is out of balance, your entire life will be out of balance. If you don’t think you have common sense, you can read books and read articles on how to develop your common sense. Common sense increases your confidence and self-esteem. Common sense can prevent you from buying a large flat screen television with your credit card and taking all year to pay it off.

Having financial common sense will cause you to:
1. Create a budget
2. Manage your money
3. Live below your means
4. Prevent you from buying something if you don’t have the cash to pay for it
5. Know how much debt you owe
6. Downsize or downgrade your lifestyle
7. Have a savings account
8. Have good credit or continuously work to improve your credit

Common sense is being able to think for yourself and being open-minded to different views and opinions. Financial common sense helps you to plan ahead which can be effective when using a budget or spending plan. Creating a budget makes you accountable for your spending.

Financial common sense also shows you more about yourself. If you spend money you don’t have, it shows your true character –what you believe in, what makes you happy, what you are good at, and what you are not good at. The lack of financial common sense can cause you to be an impulsive spender, have an emotional attachment to things, have the need to show everyone how much money you make or cause you to live in a fantasy land and live a lifestyle you truly cannot afford.

Financial common sense will minimize your chances of making bad financial decisions that will affect your future. Financial common sense can ensure you have an emergency savings fund and buy more needs versus wants. Financial common sense will help you to know how to get the most value for your money when making purchases. Financial common sense will help you to know how much you spend, how much you earn and how much you owe.

Wednesday, March 02, 2011

Establishing Credit Overseas is Not as Easy As You Think

Most foreign countries do not have access to run your credit report from your previous country of residence. Visit a bank in your new country of residence or ask around for a local financial advisor to get help to establish a credit history overseas.

Most foreign countries allow you to use your American credit card but the transaction history will not be reported on your foreign credit report. If you plan on moving back to the United States keep at least one American credit card account open.

American Express (Amex) stated that foreign customers may qualify for a U.S. AmEx card provided they have a U.S. address that AmEx can use to send the card or contact the cardholder if necessary. If you don’t have a credit score or a current copy of your credit reports, your income will be used to verify your creditworthiness.

If a customer lived in a foreign country and had a foreign AmEx card, that information can be used to consider credit approval. Once approved, you will incur foreign transaction fees for using a U.S. credit card in a foreign country. Here are 11 tips to help you establish credit in a foreign country.

1. You cannot use US credit history to establish credit history overseas, it cannot be transferred.

2. Foreign countries may not use SSN as a unique identifier.

3. Provide a hard copy of your US credit reports and letters of references from your bank and credit card companies.

4. Obtain a secured card.

5. Purchase overdraft protection which is treated as a credit product.

6. Open a foreign bank account.

7. UK and Canada use the same or similar type of credit reporting system as the US which may make it easier to obtain your credit report.

8. If your bank has an office overseas they can look at your US credit history and use that to approve you for an overseas credit account.

9. You can establish a credit rating within a year overseas. Open a charge card account like American Express and pay the balance in full each month.

10. Each country has their own credit scoring system: Austria uses Equifax and South Africa uses Experian.

11. Use a prepaid credit card.