For several months Wall Street employees and consumers have pointed the finger at many people who they feel should be responsible for the recession and financial crisis the country is experiencing. Some consumers believe President Bush is to blame, some feel Alan Greenspan is to blame, some feel Wall Street bankers, loan officers and mortgage companies are to blame and some feel consumers are to blame. No matter who messed up the economy, it is time to fix it and we can't wait for the government to fix it, we have be accountable for our actions and start with ourselves to help minimize the impact of the recession and future financial crises.
If any of the following conditions apply to you, start today to develop a plan to improve your financial life and your knowledge about the banking industry, housing industry and personal finance.
1. You got approved for a mortgage but had a gut feeling that something was wrong but didn't say anything about it.
2. You got approved for a mortgage and knew you couldn’t afford it but hoped that you would be able to work overtime or get some extra income to make the monthly payments.
3. Assumed you would not lose your job.
4. Assumed you would not get sick.
5. Assumed you would not experience loss of a family member.
6. Assumed the mortgage industry professionals were your friends and would be honest with you about everything regarding your mortgage application and mortgage loan paperwork and the process.
7. Were unaware of your housing rights as a consumer.
8. Lived paycheck to paycheck, day by day and did not worry about the future.
9. Did not have health, life or disability insurance.
10. Did not understand basic housing industry terms such as balloon, arm, and interest only.
Unfortunately the housing industry failure has taught all consumers that the only way to survive a crisis is to plan for the future, to live below your means, to save and to properly manage your finances.
To ensure that you do not become a victim again follow these 7 steps:
1. Read. Before signing a mortgage or loan application read the application in its entirety. Ask questions and write down the answers. Take the application home with you and read it in its entirety several more times. Jot down any additional questions you may have and contact the mortgage professional to get your questions answered. Do research at a library or on the internet about how to buy a home and the mortgage application process.
2. Say no to Bad Credit Companies. Do business with a reputable company. Search to see if a company has had any complaints filed with the past 2 or 3 years with the Better Business Bureau or FTC. Ask family, friends, co-workers or relatives if they have done business with the company. Be sure the company is licensed to do business in your state.
3. Don’t fall for gimmicks or false information. Verify everything told to you regarding your mortgage application. Hire a real estate attorney if necessary to review the mortgage application with you prior to signing it.
4. Slow down. Take your time and don't let the settlement company, your realtor or the seller of the home rush you into signing the mortgage application and/or settlement paperwork. Once you sign the paperwork you are bound by law to go forward with the loan unless the paperwork provides a rescind clause that allows you to cancel the loan within 3 days from the date of your signature.
5. Plan. Plan for your future by creating an emergency fund to cover all of your monthly bills and household expenses for at least 6-9 months.
6. Insurance. Get insured and get at least basic health, life and disability insurance to protect you if you become ill or are unable to work.
7. Track. Track your spending and live below your means. Your total monthly bills should be no more than 28% of your net income. Your total monthly debt should be no more than 15% of your net income. Your total housing expenses including mortgage payment should be no more than 35% of your total net monthly income.
Following these tips will ensure that you do not become a victim of predatory lending, that you properly manage your money and that you are prepared for the unexpected.
Wednesday, March 11, 2009
Sunday, March 08, 2009
Don't Get Suckered into Paying Someone Else's Debt
When a financial crisis occurs many people often become victims of scams and get taken advantage of because they don't know their rights and allow fear to cause them to make bad decisions. Companies take advantage of many consumers by using guilt and fear. Don't take responsibility for a debt you do not owe because once you do; you are bound to that debt and will have to pay it.
Many companies are desperate for business and are looking for someone, anyone to pay back an old debt. Companies are now reaching out to relatives and friends of the deceased to try to recoup money for delinquent debts.
Based on the Fair Debt Practices Collection Act by law you are not required to pay a debt that does not belong to you unless your name is on the account as a joint account holder or authorized user. A creditor can only contact you for payment for a debt of a deceased spouse or parent who had an estate or any assets worth value, i.e. an inheritance, a banking account, boat, car, home, stocks, bonds, or other assets. The money owed to the creditor is paid by the estate after any money owed to the government is paid first.
To protect yourself in that situation, get the caller's name, title, name of the company they are calling from and what they said. Tell the caller you will contact your attorney and then contact them if it is determined that money is owed to them.
If you have any bank accounts or other accounts that are in the name of your deceased spouse or parent's name put them in your name to prevent creditors from garnishing those accounts.
If you feel you are being harassed tell the company to stop contacting you by phone and notify you in writing. Learn about your rights as a consumer at ftc.gov.
Many companies are desperate for business and are looking for someone, anyone to pay back an old debt. Companies are now reaching out to relatives and friends of the deceased to try to recoup money for delinquent debts.
Based on the Fair Debt Practices Collection Act by law you are not required to pay a debt that does not belong to you unless your name is on the account as a joint account holder or authorized user. A creditor can only contact you for payment for a debt of a deceased spouse or parent who had an estate or any assets worth value, i.e. an inheritance, a banking account, boat, car, home, stocks, bonds, or other assets. The money owed to the creditor is paid by the estate after any money owed to the government is paid first.
To protect yourself in that situation, get the caller's name, title, name of the company they are calling from and what they said. Tell the caller you will contact your attorney and then contact them if it is determined that money is owed to them.
If you have any bank accounts or other accounts that are in the name of your deceased spouse or parent's name put them in your name to prevent creditors from garnishing those accounts.
If you feel you are being harassed tell the company to stop contacting you by phone and notify you in writing. Learn about your rights as a consumer at ftc.gov.
Thursday, March 05, 2009
6 Ways to Pay Down Debt
The recession is a new experience for some and a previous experience for others. Some have learned there lessons and changed their spending habits for the better. Others still have not learned their lessons and are hoping the "money angel" will fall down on them and help to get them out of the mess they are in.
This is a time of great stress and fear. Many people make rash decisions without thinking things through. This also applies to paying down debt. If you owe debt and have the money to pay it off or reduce the debt owed do so.
Now is the best time to negotiate with creditors and others you owe debt to. Here are 6 ways to pay down debt faster.
1. Pay balance in full each month prior to the due date or as soon as you receive the bill which helps to avoid paying finance charges. Beware of companies who may move your due date around to prevent you from paying your bill on time in hopes of being able to charge a late fee.
2. Pay half of the balance with 1st paycheck of the month then pay the remaining balance with 2nd paycheck of the month
3. Pay weekly instead of monthly. Pay the minimum monthly payment the first week after you get the bill, and then each week pay as much as you can toward the monthly balance. Repeat this every month.
4. Pay as much as you can when you get the bill, and then pay more towards the bill when you get extra money.
5. Set up automatic payments from your checking account the day you receive your paycheck or the day after you receive your paycheck
6. Can the Customer Service Department to find out if there is a certain hour and minute you need to make your payment by.
These six steps to ensure that you get out of debt faster, increase your credit score, reduce stress, stop harassing phone calls from creditors and lead you on your way to financial freedom and a debt free life.
This is a time of great stress and fear. Many people make rash decisions without thinking things through. This also applies to paying down debt. If you owe debt and have the money to pay it off or reduce the debt owed do so.
Now is the best time to negotiate with creditors and others you owe debt to. Here are 6 ways to pay down debt faster.
1. Pay balance in full each month prior to the due date or as soon as you receive the bill which helps to avoid paying finance charges. Beware of companies who may move your due date around to prevent you from paying your bill on time in hopes of being able to charge a late fee.
2. Pay half of the balance with 1st paycheck of the month then pay the remaining balance with 2nd paycheck of the month
3. Pay weekly instead of monthly. Pay the minimum monthly payment the first week after you get the bill, and then each week pay as much as you can toward the monthly balance. Repeat this every month.
4. Pay as much as you can when you get the bill, and then pay more towards the bill when you get extra money.
5. Set up automatic payments from your checking account the day you receive your paycheck or the day after you receive your paycheck
6. Can the Customer Service Department to find out if there is a certain hour and minute you need to make your payment by.
These six steps to ensure that you get out of debt faster, increase your credit score, reduce stress, stop harassing phone calls from creditors and lead you on your way to financial freedom and a debt free life.
Monday, March 02, 2009
The Recession - A Great Time for Discounts
Many Americans are struggling to make ends meet due to recession. Many Americans are changing their spending habits and finding ways to save money, pay down debt and just live from one day to the next. The way companies do business has changed due to the recession.
Due to the recession there has been positive change in the way companies view their customers. Companies are may have been doing this previously but are really making an effort to:
1. Show customers how much they value their business
2. Offer discounts, incentives or waive fees
3. Provide sympathy or mini-counseling to customers to encourage them to keep their accounts open
4. Frequently thank customers for their business in various ways
It is unfortunate that it took a recession for some businesses to start providing top quality customer service. For so long customers have been frustrated by the lack of customer service they receive.
According to Empire Research Team, a typical business hears from only about 4% of its dissatisfied customers - 96% just go away, and 91% will never come back. Most customers just go away because they believe their complaints will not do any good, not worth the trouble or personal stress, or don't know where or to whom to complain. Fifty-six – seventy percent of the customers who complain to you will do business with you again if you resolve their problem.
If they feel you acted quickly and to their satisfaction, up to 96% will do business with you again, and they will probably refer other people to you. A dissatisfied customer will tell 9-15 people about the problem experienced and approximately 13% of your dissatisfied customers will tell more than 20 people about their problem. It costs five to six times as much to get a new (first time) customer as it does to keep a current one. It takes 12positive service incidents to make up for one negative incident.
Consumers can take advantage of this opportunity during the recession by asking for discounts or specials. Here are 6 ways to ask for discounts with companies you currently do business with:
1. For creditors, ask for the cancellation department. Tell them you are happy with the service you have received but are unable to afford the interest rate you are paying. Ask that the interest rate by lowered to an amount you can afford, at least 30-50% of what you are currently paying, i.e. if you current interest rate is 24%, ask for an interest rate of 12%.
2. For utility companies, ask if they offer any specials or discounts for customers.
3. If have a bundled package (you pay for multiple services with the same company), ask about additional discounts they may offer. If you don't currently get a bundled package ask for one to save money.
4. If you cable companies, ask if they offer any specials or discounts. Tell them you are happy with their service but cannot afford to pay the monthly bill, especially if any fee on your monthly bill has increased in the past 6 months. Tell them you found a cheaper offer with a competitor and would like to cancel your service.
5. For insurance companies, if you have not received any moving violations in the past 3 years and have a pretty decent credit score remind them of that. Tell them you feel that you are paying too much for your rate. Quote a price from a competitor and tell them you are considering switching to another company and then began negotiating.
6. For banks, if you have bounced at least once check call your bank and let them know you are currently experiencing a financial crisis. Tell them that you are happy with the service you are receiving. Ask them if they can waive the overdraft fee or fees (if you bounced more than one check). Thank them for any fees that they waive. In the future if you know a check will bounce contact your bank right away and ask them about any options or programs available for customers who have bounced checks, i.e. overdraft protection, etc.
When you call a business' customer service department, always be polite and courteous, this goes a long way.
Due to the recession there has been positive change in the way companies view their customers. Companies are may have been doing this previously but are really making an effort to:
1. Show customers how much they value their business
2. Offer discounts, incentives or waive fees
3. Provide sympathy or mini-counseling to customers to encourage them to keep their accounts open
4. Frequently thank customers for their business in various ways
It is unfortunate that it took a recession for some businesses to start providing top quality customer service. For so long customers have been frustrated by the lack of customer service they receive.
According to Empire Research Team, a typical business hears from only about 4% of its dissatisfied customers - 96% just go away, and 91% will never come back. Most customers just go away because they believe their complaints will not do any good, not worth the trouble or personal stress, or don't know where or to whom to complain. Fifty-six – seventy percent of the customers who complain to you will do business with you again if you resolve their problem.
If they feel you acted quickly and to their satisfaction, up to 96% will do business with you again, and they will probably refer other people to you. A dissatisfied customer will tell 9-15 people about the problem experienced and approximately 13% of your dissatisfied customers will tell more than 20 people about their problem. It costs five to six times as much to get a new (first time) customer as it does to keep a current one. It takes 12positive service incidents to make up for one negative incident.
Consumers can take advantage of this opportunity during the recession by asking for discounts or specials. Here are 6 ways to ask for discounts with companies you currently do business with:
1. For creditors, ask for the cancellation department. Tell them you are happy with the service you have received but are unable to afford the interest rate you are paying. Ask that the interest rate by lowered to an amount you can afford, at least 30-50% of what you are currently paying, i.e. if you current interest rate is 24%, ask for an interest rate of 12%.
2. For utility companies, ask if they offer any specials or discounts for customers.
3. If have a bundled package (you pay for multiple services with the same company), ask about additional discounts they may offer. If you don't currently get a bundled package ask for one to save money.
4. If you cable companies, ask if they offer any specials or discounts. Tell them you are happy with their service but cannot afford to pay the monthly bill, especially if any fee on your monthly bill has increased in the past 6 months. Tell them you found a cheaper offer with a competitor and would like to cancel your service.
5. For insurance companies, if you have not received any moving violations in the past 3 years and have a pretty decent credit score remind them of that. Tell them you feel that you are paying too much for your rate. Quote a price from a competitor and tell them you are considering switching to another company and then began negotiating.
6. For banks, if you have bounced at least once check call your bank and let them know you are currently experiencing a financial crisis. Tell them that you are happy with the service you are receiving. Ask them if they can waive the overdraft fee or fees (if you bounced more than one check). Thank them for any fees that they waive. In the future if you know a check will bounce contact your bank right away and ask them about any options or programs available for customers who have bounced checks, i.e. overdraft protection, etc.
When you call a business' customer service department, always be polite and courteous, this goes a long way.
Saturday, February 28, 2009
8 Tips to Help Authors Survive the Recession
Many small businesses are suffering from the effects of the recession. The book business is suffering along with every other business in this recession. Some small business include authors who are frequently trying to find ways to save money and reduce expenses which can be a difficult task. Here are 8 tips to help authors save money during the recession.
1. Network. Since we are in a recession and many small businesses and authors lack a marketing budget, attend as many free networking functions as you can. Check your local newspaper or local civic organizations for networking events in your area.
2. Create a website. If you don't already have a website, create one. If you can't afford to pay for a website, create a free one on Myspace.com or Authorsden.
3. Sell. Think of creative ways to sell your books. Sell them at barber shops, hair salons, networking events, conferences, grocery stores, libraries, and community events. You can also sell your book on eBay or Amazon.
4. Create a shopping cart. Create a shopping cart on your website or use Google or PayPal. Make it easy for customers to purchase your book and any other products you wish to sell.
5. Learn. Learn everything you can about marketing your book, selling your book, and how to run a business. As an author you are a business and you must promote yourself as a business. Some great books to use as a reference are 1001 Ways to Market Your Book by John Kremer and The Publishing Game by Fern Reiss. Do research on web marketing by visiting websites such as Wilsonweb and Writers Market, and Writers Digest.
6. Barter. Barter services with other authors or small businesses if you cannot afford to pay for them. This will save you money and help out someone else.
7. Create a newsletter. Create a newsletter and provide a sign-up sheet at each event you attend. Use websites like Icontact or Constant Contact to create your newsletter. You can also find free newsletter templates on Microsoft's website. A newsletter is a great way to promote your book without spending a lot of money.
8. Develop a plan. Develop a marketing plan for your book, plan at least 6-12 months in advance of what you hope to accomplish with your book. Set target dates for each goal and document steps taken to accomplish each goal.
1. Network. Since we are in a recession and many small businesses and authors lack a marketing budget, attend as many free networking functions as you can. Check your local newspaper or local civic organizations for networking events in your area.
2. Create a website. If you don't already have a website, create one. If you can't afford to pay for a website, create a free one on Myspace.com or Authorsden.
3. Sell. Think of creative ways to sell your books. Sell them at barber shops, hair salons, networking events, conferences, grocery stores, libraries, and community events. You can also sell your book on eBay or Amazon.
4. Create a shopping cart. Create a shopping cart on your website or use Google or PayPal. Make it easy for customers to purchase your book and any other products you wish to sell.
5. Learn. Learn everything you can about marketing your book, selling your book, and how to run a business. As an author you are a business and you must promote yourself as a business. Some great books to use as a reference are 1001 Ways to Market Your Book by John Kremer and The Publishing Game by Fern Reiss. Do research on web marketing by visiting websites such as Wilsonweb and Writers Market, and Writers Digest.
6. Barter. Barter services with other authors or small businesses if you cannot afford to pay for them. This will save you money and help out someone else.
7. Create a newsletter. Create a newsletter and provide a sign-up sheet at each event you attend. Use websites like Icontact or Constant Contact to create your newsletter. You can also find free newsletter templates on Microsoft's website. A newsletter is a great way to promote your book without spending a lot of money.
8. Develop a plan. Develop a marketing plan for your book, plan at least 6-12 months in advance of what you hope to accomplish with your book. Set target dates for each goal and document steps taken to accomplish each goal.
Wednesday, February 25, 2009
Tips for Investing in 2009
Many people are asking for advice from friends, co-workers, family members, strangers and their financial planners about what they should do with their investments or retirement plan. Many people panicked and spent all or a large portion of their retirement money or moved their retirement money to a savings account, CD or hid it under their mattress.
Every investor has different financial goals and objectives and should work with a financial planner to assist with meeting your goals. Financial planners have expertise in how to survive the ups and downs of the stock market and can provide the best advice and if and when you should move your money. Here are 7 tips to help you invest your money in 2009.
1. Diversify. If you have all of your investment in one area, re-allocate your investments to at least 3 areas to minimize losses.
2. Review. Review your financial goals with your financial planner at least once a year to ensure you are on track to meet your goals. Also, check your statement for any errors and notify your financial planner immediately.
3. Loan. If you plan to take out a loan on your retirement plan or sell shares of stocks, consult a tax professional and your financial advisor to determine what options you have to minimize losses and taxes and ensure you will be able to continue to meet your financial goals.
4. Time. Your money cannot grow if you take it out too soon. It is the timing in the market, not the timing of the market. It takes a minimum of 5 years to see a significant return on your investment. The rule of 72 states that it takes at least 72 months for your money to double so be patient.
5. Don't panic. Don't panic and get overwhelmed by the media, fear, anxiety and nervousness of those around you. Stay calm and follow the plan you have setup with your financial planner. Don't torture yourself by checking the stock market everyday or checking your retirement account balance every week or every month. Don't let emotions cause you to make bad decisions.
6. DRIPs. To offset any losses you may have experienced you can purchase a Dividend Reinvestment Plan (DRIP) or use it as an easy way to start investing.
7. Buy now. The motto is "buy low, sell high" is truly appropriate during this recession. This is a great time to buy stocks or to invest in a mutual fund. When the market bounces back you will have achieved great gains.
Sunday, February 22, 2009
Freddie Mac and Fannie Mae to Fund Loan Modification Program
The Obama Administration will only use $50 billion from the $700 billion financial industry bailout package to fund the government foreclosure prevention program. Fannie Mae and Freddie Mac will contribute over $20 billion to the $75 billion loan modification program.
The money will be used to subsidize interest rates to assist distressed borrowers' so their monthly payments can be lowered to affordable levels.
The foreclosure prevention program requires doubling the Fannie Mae and Freddie Mac lines of credit they have with the federal government to $200 billion each.
The Department of Housing and Urban Development will contribute the remaining money towards the modification program which will be used for credit counseling programs for consumers in extreme debt.
The government will use the money to provide incentives to borrowers, mortgage loan servicers and mortgage investors to encourage loan modifications. HUD is conserving the remaining $350 billion from the package by drawing on Fannie Mae and Freddie Mac for funds.
The Obama Administration will use the money to stimulate consumer and business lending and provide additional capital to banks.
An excellent way to keep the bailout money focused on the financial industry is by using other federal funds to support the loan modification program. However, the federal government is the one providing the funds which ultimately comes from the taxpayers.
The money will be used to subsidize interest rates to assist distressed borrowers' so their monthly payments can be lowered to affordable levels.
The foreclosure prevention program requires doubling the Fannie Mae and Freddie Mac lines of credit they have with the federal government to $200 billion each.
The Department of Housing and Urban Development will contribute the remaining money towards the modification program which will be used for credit counseling programs for consumers in extreme debt.
The government will use the money to provide incentives to borrowers, mortgage loan servicers and mortgage investors to encourage loan modifications. HUD is conserving the remaining $350 billion from the package by drawing on Fannie Mae and Freddie Mac for funds.
The Obama Administration will use the money to stimulate consumer and business lending and provide additional capital to banks.
An excellent way to keep the bailout money focused on the financial industry is by using other federal funds to support the loan modification program. However, the federal government is the one providing the funds which ultimately comes from the taxpayers.
Thursday, February 19, 2009
President Obama's Middle Class Task Force
The Obama Administration has begun working on several different initiatives to help get the country back on its feet due to the lack of effective leadership of the previous administration. My interest has been peaked by one of the administration's initiatives - the middle class task force that will be led by Vice President Biden.
The newly formed task force will address problems middle class America is experiencing. Vice President Biden is the chairman of the task force. The president stated "the strength of our economy can be measured by the strength of our middle class" and I agree.
The Vice President and members of the task force including Jared Bernstein who is the Executive Director of the task force will work with several federal agencies that address issues affecting the middle class. The President's goals for the task force are:
1. Expanding education and lifelong training opportunities
2. Improving work and family balance
3. Restoring labor standards, including workplace safety
4. Helping to protect middle-class and working-family incomes
5. Protecting retirement security
The first task force meeting will be held on February 27, 2009 to discuss Green Jobs: A Pathway to a Strong Middle Class.
The Census Bureau states the median income for Americans is $50,000 a year. The Vice President describes the middle class as "any family that can’t afford to miss more than two or three paychecks without financial difficulty".
For more information visit the newly formed task force website AStrongMiddleClass.gov.
The newly formed task force will address problems middle class America is experiencing. Vice President Biden is the chairman of the task force. The president stated "the strength of our economy can be measured by the strength of our middle class" and I agree.
The Vice President and members of the task force including Jared Bernstein who is the Executive Director of the task force will work with several federal agencies that address issues affecting the middle class. The President's goals for the task force are:
1. Expanding education and lifelong training opportunities
2. Improving work and family balance
3. Restoring labor standards, including workplace safety
4. Helping to protect middle-class and working-family incomes
5. Protecting retirement security
The first task force meeting will be held on February 27, 2009 to discuss Green Jobs: A Pathway to a Strong Middle Class.
The Census Bureau states the median income for Americans is $50,000 a year. The Vice President describes the middle class as "any family that can’t afford to miss more than two or three paychecks without financial difficulty".
For more information visit the newly formed task force website AStrongMiddleClass.gov.
Monday, February 16, 2009
Freddie Mac Rents Foreclosed Homes
Freddie Mac will allow some mortgage borrowers to rent out their homes they lost to foreclosure. Freddie Mac wants to prevent foreclosed properties from becoming vacant so they won't fall into disrepair and be vandalized. Foreclosed properties also reduce property values and cause an increase in crime.
Freddie Mac will also allow renters to remain in their homes even if their landlord's property will be foreclosed. There are approximately 8,500 properties that have begun the foreclosure process but many of these properties are vacant. Renting out the property will help the housing market recover at a faster rate.
There are some guidelines that homeowners must follow under the Freddie Mac program. Former homeowners and tenants have to demonstrate they have enough income to pay the rental fee. Freddie Mac is also considering reinstating mortgages for borrowers who can qualify for a modified loan.
Freddie Mac recently announced it will stop all foreclosure sales involving occupied single family and 2 - 4 unit properties with Freddie Mac owned mortgages through March 6, 2009. The suspension however does not apply to vacant properties.
Fannie Mae is offering a similar plan and boasts that it has prevented the sale of 20,000 foreclosures and stopped the eviction of 6,300 homeowners and renters this winter season.
Fannie Mae also announced it will stop all foreclosure sales and evictions of occupied properties through March 6 in anticipation of the Obama Administration's national foreclosure prevention and loan modification program. For more information visit the Fannie Mae and Freddie Mac websites.
Freddie Mac will also allow renters to remain in their homes even if their landlord's property will be foreclosed. There are approximately 8,500 properties that have begun the foreclosure process but many of these properties are vacant. Renting out the property will help the housing market recover at a faster rate.
There are some guidelines that homeowners must follow under the Freddie Mac program. Former homeowners and tenants have to demonstrate they have enough income to pay the rental fee. Freddie Mac is also considering reinstating mortgages for borrowers who can qualify for a modified loan.
Freddie Mac recently announced it will stop all foreclosure sales involving occupied single family and 2 - 4 unit properties with Freddie Mac owned mortgages through March 6, 2009. The suspension however does not apply to vacant properties.
Fannie Mae is offering a similar plan and boasts that it has prevented the sale of 20,000 foreclosures and stopped the eviction of 6,300 homeowners and renters this winter season.
Fannie Mae also announced it will stop all foreclosure sales and evictions of occupied properties through March 6 in anticipation of the Obama Administration's national foreclosure prevention and loan modification program. For more information visit the Fannie Mae and Freddie Mac websites.
Friday, February 13, 2009
More Jobs Cuts and Counting
Last month employers announced more jobs cuts are expected, a total of 12,000. Several companies are still struggling to generate a profit and are forced to cut staff, close offices or reduce employee salaries and benefits to stay afloat. Thus far 2.6 million people are unemployed.
Eastman Kodak will eliminate 2,000 to 3,000 more jobs this year, Cessna will eliminate 2,000 jobs, Oshkosh will eliminate 1,050, Charles Schwab will eliminate 500 to 600 jobs, AstraZeneca will eliminate 6,000 jobs.
If you hear rumors that your company will have layoffs update your resume, take on additional responsibilities at work and reduce your spending by at least 30% each month. Use the extra money to pay down debt or create an emergency fund.
It is predicted that more jobs cuts will occur before the end of this year. Let's hope things start to turn around before then.
Eastman Kodak will eliminate 2,000 to 3,000 more jobs this year, Cessna will eliminate 2,000 jobs, Oshkosh will eliminate 1,050, Charles Schwab will eliminate 500 to 600 jobs, AstraZeneca will eliminate 6,000 jobs.
If you hear rumors that your company will have layoffs update your resume, take on additional responsibilities at work and reduce your spending by at least 30% each month. Use the extra money to pay down debt or create an emergency fund.
It is predicted that more jobs cuts will occur before the end of this year. Let's hope things start to turn around before then.
Tuesday, February 10, 2009
Should You Buy a New Car
The Obama administration has requested that automakers GM and Chrysler provide plans to turnaround the companies. Both companies are required to submit plans to restructure their businesses as part of the $17.4 billion received in government loans to keep the companies afloat.
The economic stimulus package includes a one year interest deduction for purchasing a new car.
I don't recommend buying a new car during this recession unless you have done everything possible to keep your car running and your car is no longer reliable and you have enough money in your budget to pay a car note. Your transportation costs should be no more than 15% of your total monthly income which includes your car note, gas, insurance, maintenance costs, and parking.
Initially it may seem as though buying a new car will ease all your worries. Buying a new car will make a huge difference in your budget. You will have to pay a car note, plus regular maintenance. Your new car should not have any major problems for at least 3-5 years. When you own a used car you should save money each month in a car maintenance fund to have money available if your used car needs repairs.
If your used car needs a new engine or several new parts, you should compare the cost of buying the parts on your own plus the cost of having the parts installed in your car, versus the cost of buying a new car with a car payment for 12 months. I am pretty sure the repairs will be much less than the new car note.
If you still decide to buy a new car, who should you buy a car from? The big 3 automakers are still struggling financially. Chrysler is struggling the most while GM is struggling but has been able to stay afloat with the government loan money received. Ford is in the best shape financially. Here are 6 tips to consider when purchasing a new car from the big 3:
1. Models Eliminated. Due to the recession, the big 3 may eliminate some models. The weaker models that do not generate enough revenue will probably be the first to be eliminated. Finding parts for discontinued models may become harder to find.
2. Warranty. You need to be concerned about a car's warranty. If the automaker files bankruptcy your warranty may no longer be valid which will instantly increase the costs of getting your car repaired.
3. American vs. Foreign. Many auto buyers prefer to buy foreign made cars. Unfortunately this has a dramatic impact on US automakers whose revenue has been steadily declining over the past few years. One major way to help jumpstart the revenue of the big 3 is to buy American made cars such as Cadillac, Buick, Chevrolet, Jeep, etc. You can always check the Consumer Reports survey to find out about the pricing, quality and reliability of Americans made cars.
4. Research. Research the automakers financial report, prices and incentives, warranties and clauses that address how the company honors customers if it has financial problems such as being sold, filing for bankruptcy or completely going out of business.
5. Trade in. Don't trade in your old car. You will get a better deal by selling your car to Carmax, Craigslist, eBay or the newspaper.
6. Temptation. Don't fall into the trap of temptation with low car prices. Do your homework and ask lots of questions, take a friend or relative with you who has experience buying cars to assist you with buying your new car.
This is the time to buy only "needs". A new car is usually a "want" and should be evaluated in your list of financial priorities and financial goals.
The economic stimulus package includes a one year interest deduction for purchasing a new car.
I don't recommend buying a new car during this recession unless you have done everything possible to keep your car running and your car is no longer reliable and you have enough money in your budget to pay a car note. Your transportation costs should be no more than 15% of your total monthly income which includes your car note, gas, insurance, maintenance costs, and parking.
Initially it may seem as though buying a new car will ease all your worries. Buying a new car will make a huge difference in your budget. You will have to pay a car note, plus regular maintenance. Your new car should not have any major problems for at least 3-5 years. When you own a used car you should save money each month in a car maintenance fund to have money available if your used car needs repairs.
If your used car needs a new engine or several new parts, you should compare the cost of buying the parts on your own plus the cost of having the parts installed in your car, versus the cost of buying a new car with a car payment for 12 months. I am pretty sure the repairs will be much less than the new car note.
If you still decide to buy a new car, who should you buy a car from? The big 3 automakers are still struggling financially. Chrysler is struggling the most while GM is struggling but has been able to stay afloat with the government loan money received. Ford is in the best shape financially. Here are 6 tips to consider when purchasing a new car from the big 3:
1. Models Eliminated. Due to the recession, the big 3 may eliminate some models. The weaker models that do not generate enough revenue will probably be the first to be eliminated. Finding parts for discontinued models may become harder to find.
2. Warranty. You need to be concerned about a car's warranty. If the automaker files bankruptcy your warranty may no longer be valid which will instantly increase the costs of getting your car repaired.
3. American vs. Foreign. Many auto buyers prefer to buy foreign made cars. Unfortunately this has a dramatic impact on US automakers whose revenue has been steadily declining over the past few years. One major way to help jumpstart the revenue of the big 3 is to buy American made cars such as Cadillac, Buick, Chevrolet, Jeep, etc. You can always check the Consumer Reports survey to find out about the pricing, quality and reliability of Americans made cars.
4. Research. Research the automakers financial report, prices and incentives, warranties and clauses that address how the company honors customers if it has financial problems such as being sold, filing for bankruptcy or completely going out of business.
5. Trade in. Don't trade in your old car. You will get a better deal by selling your car to Carmax, Craigslist, eBay or the newspaper.
6. Temptation. Don't fall into the trap of temptation with low car prices. Do your homework and ask lots of questions, take a friend or relative with you who has experience buying cars to assist you with buying your new car.
This is the time to buy only "needs". A new car is usually a "want" and should be evaluated in your list of financial priorities and financial goals.
Saturday, February 07, 2009
What the IndyMAC Sell Means
The FDIC announced last month that it would sell IndyMAC to a group of private investment firms for $13.9 billion. The buyers include J.C. Flowers & Co. and hedge fund Paulson & Co plus several other firms.
The bank will be controlled by IMB Management Holdings and managed by Steven Mnuchin, who is chair and co-chief executive of Dune Capital Management. Terry Laughlin, will serve as chief executive of IndyMac and previously headed Merrill Lynch Bank & Trust.
The failure of IndyMac bank will cost the FDIC between $8.5 billion and $9.4 billion and the deal is expected to close within the next three months.
The private buyers will put $1.3 billion in capital into the IndyMAC bank. IMB Management has agreed to continue the streamlined loan modification program that FDIC Chairman Sheila Bair put into place to continue to receive the FDIC's loan loss protection.
The IndyMac loan modification program will assist homeowners who are experiencing problems by adjusting their mortgage payments to no more than 38% of their monthly income. This is achieved by either reducing the interest rate or extending the length of the loan.
According to the FDIC, more than 8,500 mortgages have been modified and over 9,400 are in the process of being modified. The new bank will have 33 branches in the Los Angeles area.
The bank will be controlled by IMB Management Holdings and managed by Steven Mnuchin, who is chair and co-chief executive of Dune Capital Management. Terry Laughlin, will serve as chief executive of IndyMac and previously headed Merrill Lynch Bank & Trust.
The failure of IndyMac bank will cost the FDIC between $8.5 billion and $9.4 billion and the deal is expected to close within the next three months.
The private buyers will put $1.3 billion in capital into the IndyMAC bank. IMB Management has agreed to continue the streamlined loan modification program that FDIC Chairman Sheila Bair put into place to continue to receive the FDIC's loan loss protection.
The IndyMac loan modification program will assist homeowners who are experiencing problems by adjusting their mortgage payments to no more than 38% of their monthly income. This is achieved by either reducing the interest rate or extending the length of the loan.
According to the FDIC, more than 8,500 mortgages have been modified and over 9,400 are in the process of being modified. The new bank will have 33 branches in the Los Angeles area.
Wednesday, February 04, 2009
Beware of Predatory Lenders
According to the Daily News two mortgage companies, Consumer One Mortgage and HCI Mortgage have been found guilty of overcharging African Americans and Latino mortgage loan applicants versus similar Caucasian applicants. Both companies were ordered to pay $665,000 in payments to 445 African American and Latino borrowers.
The Housing and Urban Development has charged: a New York City cooperative and Mississippi Regional Housing Authority with discrimination against disabled persons, various landlords in Alabama wrongfully evicting Caucasian tenants, the Wayne County Housing Authority for housing discrimination against African Americans, and landlords in New Mexico for evicting a couple expecting a baby because the woman became pregnant after moving into the apartment. These are just a few of the thousands of incidents that occur each year against African Americans and Latino mortgage applications and homeowners.
The Fair Housing Act (Title VIII of the Civil Rights Act of 1968) prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing related transactions, based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and handicap (disability).
When you are considering buying a home follow these 8 tips to prevent being a victim of predatory lending and discrimination:
1. Do you research before applying for a mortgage loan
2. Shop around to several lenders before making a selection
3. Ask questions if you don't understand something
4. Take the paperwork home and read it over, contact a real estate lawyer or law school student to help explain any legal terms and information you don't understand
5. Make sure all of your questions regarding the loan are answered
6. Make sure you are comforable with the terms provided
7. If the terms keep changing find another lender to do business with
8. When all else fails go with your gut instinct, if it seems too good to be true it probably is
Also refer to the Housing and Urban Development Fair Housing website for more information on predatory lending and how to protect yourself or file a complaint.
The Housing and Urban Development has charged: a New York City cooperative and Mississippi Regional Housing Authority with discrimination against disabled persons, various landlords in Alabama wrongfully evicting Caucasian tenants, the Wayne County Housing Authority for housing discrimination against African Americans, and landlords in New Mexico for evicting a couple expecting a baby because the woman became pregnant after moving into the apartment. These are just a few of the thousands of incidents that occur each year against African Americans and Latino mortgage applications and homeowners.
The Fair Housing Act (Title VIII of the Civil Rights Act of 1968) prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing related transactions, based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and handicap (disability).
When you are considering buying a home follow these 8 tips to prevent being a victim of predatory lending and discrimination:
1. Do you research before applying for a mortgage loan
2. Shop around to several lenders before making a selection
3. Ask questions if you don't understand something
4. Take the paperwork home and read it over, contact a real estate lawyer or law school student to help explain any legal terms and information you don't understand
5. Make sure all of your questions regarding the loan are answered
6. Make sure you are comforable with the terms provided
7. If the terms keep changing find another lender to do business with
8. When all else fails go with your gut instinct, if it seems too good to be true it probably is
Also refer to the Housing and Urban Development Fair Housing website for more information on predatory lending and how to protect yourself or file a complaint.
Sunday, February 01, 2009
Proposed Tax Cuts
The new administration wants to offer taxcuts to all Americans and businesses. The proposed tax cuts by the House include:
1. Payroll tax credit of 6.2% of earned income in 2009 and 2010 with a max of $500 for single filers and $1,000 for joint filers each year. It would be phased out for higher income filers. Congress may offer this tax credit by the end of the year.
The proposed tax cuts by the Senate include:
1. Retirees would get a one-time payment of $300
2. The remaining tax cuts are similar to the propsoed House bill
Tax cuts proposed by the House and Senate include:
1. First-time homebuyer credit of $7,500 for purchases made after 4/8/08-7/1/09 must be repaid over 15 years starting 2 years after the credit is claimed. However, if you buy a home in 2009 you don't have to pay back the credit as long as you don't sell your house within 3 years.
2. Increasing the Hope credit to $2,500 per student in 2009 and 2010 to cover college costs and would be available for all 4 years
3. Increase the earned income credit for low-income filers with 3 or more children
4. The tax credit for energy saving home improvements will increase and extend to 2010. The credit may be increased by 30% with a cap of $1,500.
Business tax cuts:
1. Revive 50% bonus first-year depreciation for assets purchased in 2009
2. Carry most or all of their losses for 5 years except for businesses that received aid from the government
3. Extending the renewable energy credits for wind, solar, biomass, and geothermal
4. Continue the higher $250,000 limit on expensing assets through 2009
5. Expand work opportunity credit to cover businesses that hire out-of-work youth between ages 16-25 or unemployed veterans
1. Payroll tax credit of 6.2% of earned income in 2009 and 2010 with a max of $500 for single filers and $1,000 for joint filers each year. It would be phased out for higher income filers. Congress may offer this tax credit by the end of the year.
The proposed tax cuts by the Senate include:
1. Retirees would get a one-time payment of $300
2. The remaining tax cuts are similar to the propsoed House bill
Tax cuts proposed by the House and Senate include:
1. First-time homebuyer credit of $7,500 for purchases made after 4/8/08-7/1/09 must be repaid over 15 years starting 2 years after the credit is claimed. However, if you buy a home in 2009 you don't have to pay back the credit as long as you don't sell your house within 3 years.
2. Increasing the Hope credit to $2,500 per student in 2009 and 2010 to cover college costs and would be available for all 4 years
3. Increase the earned income credit for low-income filers with 3 or more children
4. The tax credit for energy saving home improvements will increase and extend to 2010. The credit may be increased by 30% with a cap of $1,500.
Business tax cuts:
1. Revive 50% bonus first-year depreciation for assets purchased in 2009
2. Carry most or all of their losses for 5 years except for businesses that received aid from the government
3. Extending the renewable energy credits for wind, solar, biomass, and geothermal
4. Continue the higher $250,000 limit on expensing assets through 2009
5. Expand work opportunity credit to cover businesses that hire out-of-work youth between ages 16-25 or unemployed veterans
Thursday, January 29, 2009
Help for Homeowners
If you are facing foreclosure or are late on your mortgage payments there is help for you.
The Federal Reserve has created a program to help homeowners. The program promises to: reduce the amount owed on your mortgage loan, reduce the interest rate or lengthen the term of your loan.
The program will apply to mortgage assets that are currently held by the Federal government due to the bailout of Bear Stearns and AIG.
To qualify for the program a homeowner must be at least 60 days late on their mortgage payment.
For more information contact the Federal Reserve.
The Federal Reserve has created a program to help homeowners. The program promises to: reduce the amount owed on your mortgage loan, reduce the interest rate or lengthen the term of your loan.
The program will apply to mortgage assets that are currently held by the Federal government due to the bailout of Bear Stearns and AIG.
To qualify for the program a homeowner must be at least 60 days late on their mortgage payment.
For more information contact the Federal Reserve.
Monday, January 26, 2009
The New Credit Score
With all of the worry regarding the recession, job loss, rising prices of food and medical costs, we know have something else to worry about. Currently we have 2 types of credit scores, the FICO credit score and the Vantage credit score, vantagescore.com. However, Fair Isaac sued the three credit bureaus in 2006, accusing them of unfair and uncompetitive practices that it said harmed the FICO brand regarding use of the Vantage score.
Starting in late January or early February 2009 a new credit score will replace the current FICO credit score called the FICO 08. The FICO 08 will have the same range of 300 to 850 as the current (classic) FICO score.
The new FICO 08 will be used by TransUnion in late January 2009. Equifax will begin using the new FICO 08 in spring 2009. Experian has not announced when the new score will be used Equifax because it is waiting for the lawsuit filed by Fair Isaac to be resolved.
Fair Isaac insists the new credit score formula was created as a result of a demand by consumers due to increasing defaults on mortgage payments and late payments to creditors. The FICO 08 claims to provide a better way of analyzing consumer risk and that the product will be used by most lenders to grant credit and to set interest rates and other loan terms. FICO scores are also factored into credit decisions by insurance underwriters, cell phone, and utility companies and are sometimes used by employers to evaluate prospective employees.
Fair Isaac says most consumers will see a slight increase in their FICO 08 scores compared with their current FICO score numbers, but others will see a drop in their score. Fair Isaac says the new formula will do a better job of predicting consumers who are a good risk and who are a bad risk, especially among consumers: with bad credit or short credit histories, who are actively seeking credit or who are listed as authorized users ("piggybacked" on others' good credit).
Fair Isaac said FICO 08 will be less harmful to those who have had a single serious credit setback, such as a charge-off or repossession, as long as their other active credit accounts are all in good standing. Having a "moderate amount" of credit inquiries on your credit reports won't be as harmful to consumers under the new formula. No one knows what is considered a "moderate amount". However, consumers with several delinquent accounts may experience a drop in their credit score.
Starting in late January or early February 2009 a new credit score will replace the current FICO credit score called the FICO 08. The FICO 08 will have the same range of 300 to 850 as the current (classic) FICO score.
The new FICO 08 will be used by TransUnion in late January 2009. Equifax will begin using the new FICO 08 in spring 2009. Experian has not announced when the new score will be used Equifax because it is waiting for the lawsuit filed by Fair Isaac to be resolved.
Fair Isaac insists the new credit score formula was created as a result of a demand by consumers due to increasing defaults on mortgage payments and late payments to creditors. The FICO 08 claims to provide a better way of analyzing consumer risk and that the product will be used by most lenders to grant credit and to set interest rates and other loan terms. FICO scores are also factored into credit decisions by insurance underwriters, cell phone, and utility companies and are sometimes used by employers to evaluate prospective employees.
Fair Isaac says most consumers will see a slight increase in their FICO 08 scores compared with their current FICO score numbers, but others will see a drop in their score. Fair Isaac says the new formula will do a better job of predicting consumers who are a good risk and who are a bad risk, especially among consumers: with bad credit or short credit histories, who are actively seeking credit or who are listed as authorized users ("piggybacked" on others' good credit).
Fair Isaac said FICO 08 will be less harmful to those who have had a single serious credit setback, such as a charge-off or repossession, as long as their other active credit accounts are all in good standing. Having a "moderate amount" of credit inquiries on your credit reports won't be as harmful to consumers under the new formula. No one knows what is considered a "moderate amount". However, consumers with several delinquent accounts may experience a drop in their credit score.
Friday, January 23, 2009
Warning: You May Pay for Not Using Your Credit Card
Due to the bailout and current recession we have been experiencing for the past year or so many banks and financial institutions are afraid of losing more money. As a result, they are changing the rules and implementing new guidelines for credit card holders. If you haven't used a credit card in the past 6 to 12 months you are at risk for having your account closed or your credit limit reduced. If your limit is reduced or the account is closed this will lower your credit score. If doesn't matter what your previous payment history was or what your credit score is.
Some credit card companies that are practicing this are: Citibank, HSBC, Chase, Capitol One and Washington Mutual. Many credit card companies are doing this without notifying customers. If you have been a victim of this check your credit card disclosure agreement. If you don't have a copy asked the credit card company to send you a copy. Read it carefully. If it is not mentioned in your credit card disclosure agreement then call the company and complain. Here are 5 ways to reduce your changes of having your limit reduced or your credit card account closed.
1. Order a copy of your credit report from annualcreditreport.com. If you have already received a copy within the past 12 months you can still order a copy from the website but you will have to pay a small fee of $6 per report from each credit bureau: Experian, Equifax and TransUnion.
2. Check your balances. Review your credit card accounts and pay down debt on the cards with the highest balances to prevent the accounts from being closed or the limits reduced. For accounts that have not been used in a while and that have a larger limit, buy something cheap like milk and bread or a pair of socks and pay the bill off right away. Do this every 3 months to show activity on the accounts. Don't worry about credit cards with balances less than $1,000 or new accounts opened within the past 24 months because they won't impact your credit score as much if they are closed.
3. Ditch the small potatoes. You may want to close any credit card accounts that haven't been used in 1 to 2 years that have a limit of $500 or less and have a zero balance. If you have more than one credit card in this category only close one of these types of accounts every year. This will prevent your credit score from being impacted as much. This will prevent the credit card companies from closing your account and reporting this on your credit report. In some cases, credit card companies will report "closed by creditor", "account closed by credit grantor", "closed at creditor's request" or something similar. This greatly lowers your credit score.
4. Negotiate. If you have an account that has been closed and you use your credit card to make ends meet or pay for basic necessities I would recommend calling the credit card company and letting them know that you need your credit card. They should be sympathetic and re-open your account if it was closed or increase your limit if it was reduced. If that does not work call back and ask to speak to a supervisor. Follow-up all correspondence in writing. If that fails file a complaint against the credit card company with the Better Business Bureau and Federal Trade Commission.
5. Find extra money. Sell new and unused items on eBay or Craigslist. Get a part-time job and find ways to reduce expenses to get extra money to pay for basic necessities to make up for the loss of using a credit card that was closed or the limit was reduced.
Some credit card companies that are practicing this are: Citibank, HSBC, Chase, Capitol One and Washington Mutual. Many credit card companies are doing this without notifying customers. If you have been a victim of this check your credit card disclosure agreement. If you don't have a copy asked the credit card company to send you a copy. Read it carefully. If it is not mentioned in your credit card disclosure agreement then call the company and complain. Here are 5 ways to reduce your changes of having your limit reduced or your credit card account closed.
1. Order a copy of your credit report from annualcreditreport.com. If you have already received a copy within the past 12 months you can still order a copy from the website but you will have to pay a small fee of $6 per report from each credit bureau: Experian, Equifax and TransUnion.
2. Check your balances. Review your credit card accounts and pay down debt on the cards with the highest balances to prevent the accounts from being closed or the limits reduced. For accounts that have not been used in a while and that have a larger limit, buy something cheap like milk and bread or a pair of socks and pay the bill off right away. Do this every 3 months to show activity on the accounts. Don't worry about credit cards with balances less than $1,000 or new accounts opened within the past 24 months because they won't impact your credit score as much if they are closed.
3. Ditch the small potatoes. You may want to close any credit card accounts that haven't been used in 1 to 2 years that have a limit of $500 or less and have a zero balance. If you have more than one credit card in this category only close one of these types of accounts every year. This will prevent your credit score from being impacted as much. This will prevent the credit card companies from closing your account and reporting this on your credit report. In some cases, credit card companies will report "closed by creditor", "account closed by credit grantor", "closed at creditor's request" or something similar. This greatly lowers your credit score.
4. Negotiate. If you have an account that has been closed and you use your credit card to make ends meet or pay for basic necessities I would recommend calling the credit card company and letting them know that you need your credit card. They should be sympathetic and re-open your account if it was closed or increase your limit if it was reduced. If that does not work call back and ask to speak to a supervisor. Follow-up all correspondence in writing. If that fails file a complaint against the credit card company with the Better Business Bureau and Federal Trade Commission.
5. Find extra money. Sell new and unused items on eBay or Craigslist. Get a part-time job and find ways to reduce expenses to get extra money to pay for basic necessities to make up for the loss of using a credit card that was closed or the limit was reduced.
Tuesday, January 20, 2009
Bankruptcy Filings Increased in 2008
Due to the financial woes the country has experienced for the past few years personal bankruptcy filings remain high. At the end of September bankruptcy filing rose 30%. From July through September 2008 bankruptcy filings rose 35% or equaled to 292,291 filings.
Personal bankruptcy filings in 2008 totaled approximately 1.1 million and increased 31% from 2007. Older Americans have also filed for personal bankruptcy due to the rising costs of food, gas, and medical costs. According to AARP, personal bankruptcy filings among Americans age 65 or older grew by 125%. The bankruptcy rate of Americans aged 75 to 84 jumped 433.3%. Bankruptcy should be a last resort. Here are 5 ways to prevent filing for bankruptcy.
1. Live below your means. Keep debt to 15% or less of your monthly income. Save 10% of your monthly income, housing costs should be no more than 30% of your monthly income, transportation costs 28% and other expenses 17% to ensure you keep a balanced monthly budget.
2. Downsize. Get a cheaper car or home or buy a condo to save money on housing and transportation costs.
3. Enjoy retirement. You should be debt free and mortgage free during your retirement. If you are not you need to make a plan to move towards being debt free during your retirement.
4. Change your diet. If you are spending hundreds of dollars a month on medical costs and prescriptions it is time to change your diet. Eat more fruits and vegetables. Eliminate junk food, fast food, fried foods and sweets. Eat balanced meals and don't overeat. Try to eat 3 meals a day and eat your largest meal at lunch. Don't eat after 7pm. Start exercising. Contact a nutritionist or get a referral from your doctor to develop a plan to shed those extra pounds.
5. Get help. Contact a financial advisor to map out a plan to help you pay off your debt and enjoy your retirement years.
Personal bankruptcy filings in 2008 totaled approximately 1.1 million and increased 31% from 2007. Older Americans have also filed for personal bankruptcy due to the rising costs of food, gas, and medical costs. According to AARP, personal bankruptcy filings among Americans age 65 or older grew by 125%. The bankruptcy rate of Americans aged 75 to 84 jumped 433.3%. Bankruptcy should be a last resort. Here are 5 ways to prevent filing for bankruptcy.
1. Live below your means. Keep debt to 15% or less of your monthly income. Save 10% of your monthly income, housing costs should be no more than 30% of your monthly income, transportation costs 28% and other expenses 17% to ensure you keep a balanced monthly budget.
2. Downsize. Get a cheaper car or home or buy a condo to save money on housing and transportation costs.
3. Enjoy retirement. You should be debt free and mortgage free during your retirement. If you are not you need to make a plan to move towards being debt free during your retirement.
4. Change your diet. If you are spending hundreds of dollars a month on medical costs and prescriptions it is time to change your diet. Eat more fruits and vegetables. Eliminate junk food, fast food, fried foods and sweets. Eat balanced meals and don't overeat. Try to eat 3 meals a day and eat your largest meal at lunch. Don't eat after 7pm. Start exercising. Contact a nutritionist or get a referral from your doctor to develop a plan to shed those extra pounds.
5. Get help. Contact a financial advisor to map out a plan to help you pay off your debt and enjoy your retirement years.
Saturday, January 17, 2009
9 Quick Ways to Save Money in 2009
Many Americans baulk at the words "budget", "cut back", "spending plan", "reduce expenses", or "save" and other terms that are used to help Americans change their spending habits. However, these words are not the enemy, your spending habits are. These words are very helpful and if followed can begin to change your financial situation over a short period of time.
The recession should be a wake-up call to all Americans aged 18 and over that now is the time to change those bad spending habits and plan for the future. We must use the advice of our parents, grand-parents and great-parents such as "a penny saved is a penny earned", "save your money for a rainy day", "better safe than sorry" and many others sayings.
I have talked to thousands of people across the country and many times when I talk some who is 50 and older they are not experiencing a financial crisis, they have one credit card or no credit cards, are not in debt or have small amounts of debt, have a savings account and a retirement account and are puzzled as to why so many Americans who are employed are struggling to pay their bills. If you fit into that category here are 9 quick ways to save money in 2009.
1. Ditch the Starbucks. Trade in your Starbucks for coffee at home. On average a cup of Starbucks costs $5.25 a cup. If you drink 5 cups a week you are spending on average $26.25. On average one bag or canister of coffee from the grocery store costs $5.76 which can last anywhere from one week to three weeks depending on how many cups you drink a day.
2. Drink tap. Trade bottled water for tap water. Use a filter to remove particles from the tap water.
3. Cancel all memberships. Cancel any memberships you currently have and request a full or partial refund. In you have a gym membership cancel the membership and exercise at home with a video tape or take low cost classes at a local YMCA or community center.
4. Cancel subscriptions. Cancel all magazine and newspaper subscriptions. To keep up with current events listen to the radio or watch the news.
5. Downsize. Move to a cheaper apartment, condo or home. Trade in your car for a used car with a cheaper note. Trade in designer clothes for cheaper brands like Gap or Old Navy.
6. Get a roommate. Rent out a room in your home or apartment. Sleep in the basement or on a couch to rent out a room if you only have one bedroom. Use the extra money to pay down debt or create a savings account.
7. Skip the pampering. Skip the hairdresser and barber or reduce visits by half each month. Skip the spa or nail salon for those facials, manicures and pedicures. Try doing them at home yourself to save money.
8. Reduce car expenses. Buy the cheapest gas possible for your car. Carpool and get regularly scheduled maintenance on your car to make it last longer. Keep you car for at least 5-10 years to save money.
9. Slash your grocery bill. Skip the steak and potatoes and pork chops. Fix more casseroles, soups, stews and other comfort foods to save money on grocery bill costs. You can also eat sandwiches for lunch or dinner, eat tuna, hot dogs, bologna, breakfast food, Ramen noodles, cup 'o noodles and other cheap buys to slash your grocery bill.
The recession should be a wake-up call to all Americans aged 18 and over that now is the time to change those bad spending habits and plan for the future. We must use the advice of our parents, grand-parents and great-parents such as "a penny saved is a penny earned", "save your money for a rainy day", "better safe than sorry" and many others sayings.
I have talked to thousands of people across the country and many times when I talk some who is 50 and older they are not experiencing a financial crisis, they have one credit card or no credit cards, are not in debt or have small amounts of debt, have a savings account and a retirement account and are puzzled as to why so many Americans who are employed are struggling to pay their bills. If you fit into that category here are 9 quick ways to save money in 2009.
1. Ditch the Starbucks. Trade in your Starbucks for coffee at home. On average a cup of Starbucks costs $5.25 a cup. If you drink 5 cups a week you are spending on average $26.25. On average one bag or canister of coffee from the grocery store costs $5.76 which can last anywhere from one week to three weeks depending on how many cups you drink a day.
2. Drink tap. Trade bottled water for tap water. Use a filter to remove particles from the tap water.
3. Cancel all memberships. Cancel any memberships you currently have and request a full or partial refund. In you have a gym membership cancel the membership and exercise at home with a video tape or take low cost classes at a local YMCA or community center.
4. Cancel subscriptions. Cancel all magazine and newspaper subscriptions. To keep up with current events listen to the radio or watch the news.
5. Downsize. Move to a cheaper apartment, condo or home. Trade in your car for a used car with a cheaper note. Trade in designer clothes for cheaper brands like Gap or Old Navy.
6. Get a roommate. Rent out a room in your home or apartment. Sleep in the basement or on a couch to rent out a room if you only have one bedroom. Use the extra money to pay down debt or create a savings account.
7. Skip the pampering. Skip the hairdresser and barber or reduce visits by half each month. Skip the spa or nail salon for those facials, manicures and pedicures. Try doing them at home yourself to save money.
8. Reduce car expenses. Buy the cheapest gas possible for your car. Carpool and get regularly scheduled maintenance on your car to make it last longer. Keep you car for at least 5-10 years to save money.
9. Slash your grocery bill. Skip the steak and potatoes and pork chops. Fix more casseroles, soups, stews and other comfort foods to save money on grocery bill costs. You can also eat sandwiches for lunch or dinner, eat tuna, hot dogs, bologna, breakfast food, Ramen noodles, cup 'o noodles and other cheap buys to slash your grocery bill.
Wednesday, January 14, 2009
Jobless Rates Reach All Time Highs
In December 2008, the country's jobless rate increased to 7.2% or 11.1 million Americans who were unemployed. This was the highest level in the past 16 years. Employers were nervous about the economy and as a result eliminated 524,000 jobs in the month of December 2008.
In Massachusetts the jobless rate increased to 6.9% with 16,800 employees losing their jobs. In California, the jobless rate increased to 9.3% which marked a 14 year high for the state with 78,200 employees losing their jobs. In North Carolina, the jobless rate increased to 8.7% which was the highest in the past 25 years. In December, 396,846 people were unemployed. In Connecticut the jobless rate increased to 7.1% with 11,500 employees losing their jobs and was the worse since 1991. In Washington (state) the jobless rate increased to 7.1% with 251,700 employees losing their jobs.
These figures also coincide with the foreclosure rates of these states. As of December 2008: California had 89,449 foreclosures (highest in the country), Massachusetts had 3,919 (ranked 15th), North Carolina 2,274 (22nd), Connecticut had 2,060 (25th), and Washington had 2,769 (21st).
To reduce the impact of a job loss, be the best employee you can be: arrive to work on time every day, cancel vacation, "mental health days", and other scheduled time off. Ask for extra assignments, reduce your lunch hour to 30 minutes and spend the other 30 minutes looking for a part-time job or doing research to take a course or training class to increase your skills.
Spend time with senior employees at your job and learn all you can from them, but be sure to remind them that they are the senior staff on the job and you are only there to learn from them and not take their job. Reduce your expenses by bringing your lunch to work or carpool with co-workers to save money. Make at least one sacrifice to save money and reduce your expenses to pay down debt and create an emergency fund to cover bill for at least 8-12 months.
In Massachusetts the jobless rate increased to 6.9% with 16,800 employees losing their jobs. In California, the jobless rate increased to 9.3% which marked a 14 year high for the state with 78,200 employees losing their jobs. In North Carolina, the jobless rate increased to 8.7% which was the highest in the past 25 years. In December, 396,846 people were unemployed. In Connecticut the jobless rate increased to 7.1% with 11,500 employees losing their jobs and was the worse since 1991. In Washington (state) the jobless rate increased to 7.1% with 251,700 employees losing their jobs.
These figures also coincide with the foreclosure rates of these states. As of December 2008: California had 89,449 foreclosures (highest in the country), Massachusetts had 3,919 (ranked 15th), North Carolina 2,274 (22nd), Connecticut had 2,060 (25th), and Washington had 2,769 (21st).
To reduce the impact of a job loss, be the best employee you can be: arrive to work on time every day, cancel vacation, "mental health days", and other scheduled time off. Ask for extra assignments, reduce your lunch hour to 30 minutes and spend the other 30 minutes looking for a part-time job or doing research to take a course or training class to increase your skills.
Spend time with senior employees at your job and learn all you can from them, but be sure to remind them that they are the senior staff on the job and you are only there to learn from them and not take their job. Reduce your expenses by bringing your lunch to work or carpool with co-workers to save money. Make at least one sacrifice to save money and reduce your expenses to pay down debt and create an emergency fund to cover bill for at least 8-12 months.
Sunday, January 11, 2009
How Banks are Helping Customers Pay Down Debt
Due to the bailout and current recession many businesses have gone bankrupt and closed their doors forever or have downsized such as Lehman Brothers, Circuit City, Linens 'N Things, Steve & Barry's, Sharper Image, KB Toys, Mervyns to name a few.
Some companies are so desperate for revenue that they are offering incentives to help customers pay back debt like Citibank which offers to match a percentage of credit card payments made over the minimum monthly payment if the customer agrees to pay off a percentage of their credit card balances quicker. However, Citibank does have a cap on the match up to $550 and the customer has to agree to stop using their credit card during participation in the matching program.
If you are struggling to pay back debt contact your creditor right away to negotiate. Try setting up a payment plan; ask for late fees, over-the-limit-fees or other penalties waived, a reduced interest rate or a reduced minimum monthly payment. If the creditor refuses to work with you call back and ask to speak to a supervisor. If that fails file a complaint against the company with your state Better Business Bureau, Consumer Affairs office, Attorney General's Office or the Federal Trade Commission. Be sure to follow-up all phone calls with a letter.
Some companies are so desperate for revenue that they are offering incentives to help customers pay back debt like Citibank which offers to match a percentage of credit card payments made over the minimum monthly payment if the customer agrees to pay off a percentage of their credit card balances quicker. However, Citibank does have a cap on the match up to $550 and the customer has to agree to stop using their credit card during participation in the matching program.
If you are struggling to pay back debt contact your creditor right away to negotiate. Try setting up a payment plan; ask for late fees, over-the-limit-fees or other penalties waived, a reduced interest rate or a reduced minimum monthly payment. If the creditor refuses to work with you call back and ask to speak to a supervisor. If that fails file a complaint against the company with your state Better Business Bureau, Consumer Affairs office, Attorney General's Office or the Federal Trade Commission. Be sure to follow-up all phone calls with a letter.
Wednesday, January 07, 2009
Be Thankful
According to the Department of Labor, the jobless rate increased to 7.2% or approximately 11 million Americans that are currently unemployed. In December 2008, 2.6 million jobs were eliminated. In addition, employers reduced hours, benefits and perks. Many employees now have to do the work of 2 to 3 employees due to layoffs for the same or reduced pay. It seems no industry is immune to the layoffs.
The largest layoffs occurred in the construction, manufacturing, temporary services and retail industries. The government and health care industry were the only industries that actually created jobs.
Some private sector employees gave no notice to employees who came into work one day and were laid off the same day.
If you have delayed furthering your education, now is the time to go back to school or gain at least one other skill to make yourself more marketable to a potential employer. You should have at least 2 skills that you can list on your resume to become more appealing to hiring companies.
If you still have food, clothing and a roof over your head, be thankful. It may be a cold winter and many people are homeless and jobless which will make this winter season even harder.
To help ease the pain of a layoff:
1. Start saving every dime, quarter, nickel, penny, and dollars you can.
2. Reduce all your expenses – eat Ramen Noodles, oodles & noodles, tuna fish, bologna, hot dogs, breakfast food, etc. for dinner to save money on groceries.
3. Modify your tax withholding for six months to get extra money to pay down debt and pay for monthly expenses. After June 30, 2009 change your tax withholding back to your original deductions to prevent owing taxes at the end of the year.
4. If you are currently contributing to a 401K, halt contributions for 3-6
months to get extra money to pay down debt and start a savings account.
5. Prepare for the worst by creating an emergency fund to cover bills and monthly expenses for 8-12 months.
6. Keep up to date with the employment trends and news. This will help you to know when to start applying for jobs. Polish your resume and keep it up-to-date so when a job becomes available you can apply for it.
7. Lower your job expectations. You may have to take a significantly lower pay cut to get hired. When you do get hired learn everything about your job, take training classes and be a model employee. This will help you to get promoted at a faster rate and increase your salary.
The largest layoffs occurred in the construction, manufacturing, temporary services and retail industries. The government and health care industry were the only industries that actually created jobs.
Some private sector employees gave no notice to employees who came into work one day and were laid off the same day.
If you have delayed furthering your education, now is the time to go back to school or gain at least one other skill to make yourself more marketable to a potential employer. You should have at least 2 skills that you can list on your resume to become more appealing to hiring companies.
If you still have food, clothing and a roof over your head, be thankful. It may be a cold winter and many people are homeless and jobless which will make this winter season even harder.
To help ease the pain of a layoff:
1. Start saving every dime, quarter, nickel, penny, and dollars you can.
2. Reduce all your expenses – eat Ramen Noodles, oodles & noodles, tuna fish, bologna, hot dogs, breakfast food, etc. for dinner to save money on groceries.
3. Modify your tax withholding for six months to get extra money to pay down debt and pay for monthly expenses. After June 30, 2009 change your tax withholding back to your original deductions to prevent owing taxes at the end of the year.
4. If you are currently contributing to a 401K, halt contributions for 3-6
months to get extra money to pay down debt and start a savings account.
5. Prepare for the worst by creating an emergency fund to cover bills and monthly expenses for 8-12 months.
6. Keep up to date with the employment trends and news. This will help you to know when to start applying for jobs. Polish your resume and keep it up-to-date so when a job becomes available you can apply for it.
7. Lower your job expectations. You may have to take a significantly lower pay cut to get hired. When you do get hired learn everything about your job, take training classes and be a model employee. This will help you to get promoted at a faster rate and increase your salary.
Sunday, January 04, 2009
New Year’s Resolutions for a Recession
Here are 7 tips help you survive the recession in 2009 and develop good money management skills so if another crisis occurs you will not feel the pain as much as you did in 2008.
1. Admission. Admit you are in debt and stop charging! Face reality and make a plan to get out of debt. You can’t get out of debt doing the same things you did in 2008. You have to make a change. If you are in a lot of debt then you need to make some drastic changes. If you drive an expensive car consider selling your car and buying a used car with a smaller payment or no payment at all. Negotiate with creditors to setup payment plans to pay off debt.
2. You are Not the Jones. Don’t live above your means. Buy needs instead of buying wants. Don’t impulse shop or buy something based on how you feel (sad, happy, angry, mad, depressed). Shopping doesn’t make you feel better, it is a temporary feeling, when you get your credit card bill those happy feelings go away quickly. Find ways to reduce expenses to help pay down your debts. Catch public transportation or carpool to work. Buy items or sale, buy used instead of new, use coupons, or shop at wholesales or thrift stores.
3. Be Responsible. Because of the bailout things have changed and creditors are looking for any reason to identify someone as risk. It doesn’t matter what your previous payment history has been. Only use your credit card for emergencies only. Don't use your credit card to purchase gas, food or other everyday items. Keep credit card balances at 30% or below the credit limit. Pay balances off at the end of the month.
4. Track Spending. Write a list of all of your total monthly expenses including debt and write down your total monthly income (net). If you have any money left over use that to pay down your debts. If you do not have any money left over look at the areas where you can reduce expenses. Use paper and pen, and a tool like Microsoft Money or Quicken or use the envelope method.
5. Save. Save. Save. I cannot emphasize this enough. Create an emergency fund with enough to cover at least 6-8 months worth of bills. This will prevent you from getting into debt. For long-term goals begin planning for retirement or increase your allotment for retirement. You should save at least 10-20% each month towards retirement.
6. Education. Further your education by taking training classes, get a college degree or an advanced degree to increase your skills set and salary. Plan to take at least one training course every year during your career to stay current with industry standards and technology advances.
7. Financial Planning. Get health, life and disability insurance. Also, create a will even if you don’t feel you have anything of value, but someone else might be eyeing something you possess. Your will can ensure that all your possession are distributed properly to your heirs. You should also consider getting a trust. Store copies of your financial and insurance papers in a fireproof and waterproof safe. Make copies of all of your credit cards, insurance papers, mortgage and creditors bills and store in your safe.
1. Admission. Admit you are in debt and stop charging! Face reality and make a plan to get out of debt. You can’t get out of debt doing the same things you did in 2008. You have to make a change. If you are in a lot of debt then you need to make some drastic changes. If you drive an expensive car consider selling your car and buying a used car with a smaller payment or no payment at all. Negotiate with creditors to setup payment plans to pay off debt.
2. You are Not the Jones. Don’t live above your means. Buy needs instead of buying wants. Don’t impulse shop or buy something based on how you feel (sad, happy, angry, mad, depressed). Shopping doesn’t make you feel better, it is a temporary feeling, when you get your credit card bill those happy feelings go away quickly. Find ways to reduce expenses to help pay down your debts. Catch public transportation or carpool to work. Buy items or sale, buy used instead of new, use coupons, or shop at wholesales or thrift stores.
3. Be Responsible. Because of the bailout things have changed and creditors are looking for any reason to identify someone as risk. It doesn’t matter what your previous payment history has been. Only use your credit card for emergencies only. Don't use your credit card to purchase gas, food or other everyday items. Keep credit card balances at 30% or below the credit limit. Pay balances off at the end of the month.
4. Track Spending. Write a list of all of your total monthly expenses including debt and write down your total monthly income (net). If you have any money left over use that to pay down your debts. If you do not have any money left over look at the areas where you can reduce expenses. Use paper and pen, and a tool like Microsoft Money or Quicken or use the envelope method.
5. Save. Save. Save. I cannot emphasize this enough. Create an emergency fund with enough to cover at least 6-8 months worth of bills. This will prevent you from getting into debt. For long-term goals begin planning for retirement or increase your allotment for retirement. You should save at least 10-20% each month towards retirement.
6. Education. Further your education by taking training classes, get a college degree or an advanced degree to increase your skills set and salary. Plan to take at least one training course every year during your career to stay current with industry standards and technology advances.
7. Financial Planning. Get health, life and disability insurance. Also, create a will even if you don’t feel you have anything of value, but someone else might be eyeing something you possess. Your will can ensure that all your possession are distributed properly to your heirs. You should also consider getting a trust. Store copies of your financial and insurance papers in a fireproof and waterproof safe. Make copies of all of your credit cards, insurance papers, mortgage and creditors bills and store in your safe.
Thursday, January 01, 2009
Beware of Cash Strapped Cities
Many cities around the county are finding other ways to generate revenue for their cities at residents and visitors expense. Many cities are installing more speed cameras and handing out record numbers of speeding tickets and parking tickets due to budget cutbacks. These changes are happening pretty quickly so one day you may drive through an area and be fine, the next day you may get a ticket. Some cities that are raking in the cash are: Baskin Louisiana, Boston Massachusetts, and New York City. States that are raking in the cash are North Carolina, Colorado, Detroit and Arizona. Here are 5 ways to prevent being a victim of cash strapped cities.
1. Slow down. Drive the speed limit at all times especially when out-of-town.
2. Know the limit. Know the speed limit in all areas where you live, work and drive to prevent getting a speeding ticket.
3. Stop at caution. Don’t drive through the yellow caution light. In times past you could drive through the yellow caution light and make it through an intersection before getting snagged by a red light camera. These cameras are more sophisticated now and some are on a hair trigger. In addition, the price of a ticket has increased, you could get slapped with a $50 to $200 ticket for speeding depending or going through a red light.
4. Be polite. If you are pulled over for speeding or given a parking ticket be polite with the police officer and everyone you communicate with regarding the ticket. Being polite will go a long way and may help to get the ticket cost reduced or get lesser penalties.
5. Don’t be aggressive. If you are an aggressive driver now is the time to change your ways. Cameras are available on nationwide highways that ticket aggressive drivers.
These habits may also cause an increase in your car insurance or being dropped by your insurance for repeated offenses. Make a change in your driving habits in 2009; it will save you a lot of money and headaches.
1. Slow down. Drive the speed limit at all times especially when out-of-town.
2. Know the limit. Know the speed limit in all areas where you live, work and drive to prevent getting a speeding ticket.
3. Stop at caution. Don’t drive through the yellow caution light. In times past you could drive through the yellow caution light and make it through an intersection before getting snagged by a red light camera. These cameras are more sophisticated now and some are on a hair trigger. In addition, the price of a ticket has increased, you could get slapped with a $50 to $200 ticket for speeding depending or going through a red light.
4. Be polite. If you are pulled over for speeding or given a parking ticket be polite with the police officer and everyone you communicate with regarding the ticket. Being polite will go a long way and may help to get the ticket cost reduced or get lesser penalties.
5. Don’t be aggressive. If you are an aggressive driver now is the time to change your ways. Cameras are available on nationwide highways that ticket aggressive drivers.
These habits may also cause an increase in your car insurance or being dropped by your insurance for repeated offenses. Make a change in your driving habits in 2009; it will save you a lot of money and headaches.
Monday, December 29, 2008
Christmas Shopping Survey
Please answer the following questions below to participate in a financial survey. The responses will remain anonymous and the results will be posted on my blog. If you would like to participate send your responses to feedback@hefreemanenterprises.com. Please submit your responses no later than January 10, 2009.
1. Did you buy Christmas gifts this year? If yes, go to question 2 if no skip 5
2. Did you scale back your Christmas shopping this year because of the recession?
3. Did you buy gifts with cash or credit?
4. Do you have the money to pay the credit card bill when it arrives in January 2009?
5. Are you currently in debt?
6. Do you have a different outlook on your finances this year because of the recession?
7. Have you made a plan to improve your financial situation next year?
8. If you purchased Christmas gifts this year do you have one or more of the following: 1) savings account, 2) 401K with your employer, 3) IRA, 4) stocks
1. Did you buy Christmas gifts this year? If yes, go to question 2 if no skip 5
2. Did you scale back your Christmas shopping this year because of the recession?
3. Did you buy gifts with cash or credit?
4. Do you have the money to pay the credit card bill when it arrives in January 2009?
5. Are you currently in debt?
6. Do you have a different outlook on your finances this year because of the recession?
7. Have you made a plan to improve your financial situation next year?
8. If you purchased Christmas gifts this year do you have one or more of the following: 1) savings account, 2) 401K with your employer, 3) IRA, 4) stocks
Friday, December 26, 2008
Christmas Wasn’t The Same This Year
Due to the recession, increasing food prices, previous increase in gas prices, continuing company layoffs, 4.39 million unemployed, 46 million uninsured and thousands more are homeless or at risk of experiencing a financial crisis many American cut back. Today I am happy to know that someone finally woke up. Some Americans actually cut back their Christmas shopping and faced reality. Some Americans were smart this year and didn’t spend money they didn’t have on Christmas gifts.
According to SpendingPulse, the 2008 Christmas shopping season was the worst it has been in decades. The shopping season was tracked from the day after Thanksgiving until Christmas Eve. The Christmas shopping season accounts for approximately 40-50% of retailer’s annual revenue. Sales at specialty clothing stores such as Gap and Old Navy fell 19.7%. Sales at electronics stores such as Best Buy fell 26.7%. Sales at high end department stores, jewelry stores and restaurants fell 34.5%. Online sales fell 2.3%.
This is the start of a new day. If you are feeling the sting of the recession you need to make a plan for how to survive in 2009. Experts indicate that the recession will continue through 2009 and possibly into 2010 so you need to make sure that you are able to survive and reduce your chances of losing your home to foreclosure, filing bankruptcy, having repossession or some other financial crisis. Make your plan today before it’s too late.
According to SpendingPulse, the 2008 Christmas shopping season was the worst it has been in decades. The shopping season was tracked from the day after Thanksgiving until Christmas Eve. The Christmas shopping season accounts for approximately 40-50% of retailer’s annual revenue. Sales at specialty clothing stores such as Gap and Old Navy fell 19.7%. Sales at electronics stores such as Best Buy fell 26.7%. Sales at high end department stores, jewelry stores and restaurants fell 34.5%. Online sales fell 2.3%.
This is the start of a new day. If you are feeling the sting of the recession you need to make a plan for how to survive in 2009. Experts indicate that the recession will continue through 2009 and possibly into 2010 so you need to make sure that you are able to survive and reduce your chances of losing your home to foreclosure, filing bankruptcy, having repossession or some other financial crisis. Make your plan today before it’s too late.
Tuesday, December 23, 2008
Keep Saving Your Pennies
The number of Americans currently unemployed has reached 4.39 million. This number is staggering and reminds Americans that now more than ever you need to have a Plan B.
No one knows what tomorrow holds so if you haven't already start savings your pennies, quarters, dollars, and more. Use coupons, only buy necessity items.
More layoffs are expected in the new few months. Bancorp will cut 1,000 jobs, Textron will cut 2,200 jobs and Unisys Corp will cut 1,300 jobs. That is an additional 4,500 Americans who will become unemployed.
You can no longer buy luxury items because you don't know if you will still have a job to pay for it. You must live within your means and that is going to hurt and hurt big but as your grandparents and parents used to say, it is better to be safe than be sorry.
No one knows what tomorrow holds so if you haven't already start savings your pennies, quarters, dollars, and more. Use coupons, only buy necessity items.
More layoffs are expected in the new few months. Bancorp will cut 1,000 jobs, Textron will cut 2,200 jobs and Unisys Corp will cut 1,300 jobs. That is an additional 4,500 Americans who will become unemployed.
You can no longer buy luxury items because you don't know if you will still have a job to pay for it. You must live within your means and that is going to hurt and hurt big but as your grandparents and parents used to say, it is better to be safe than be sorry.
Saturday, December 20, 2008
Beware of Pick a Pay Loans
The next wave of loans due to reset in 2010 are the “Pick a Pay” Mortgage loans. The “Pick a Pay” mortgage loans are where homeowners can choose to pay less than the full monthly mortgage payment and the difference is added on as principal.
When the loan is reset in 5 or 10 years the homeowner is locked into a higher monthly mortgage payment. This may cause a higher increase in foreclosures or bankruptcy filing because homeowners will be unable to make their mortgage payments. Many banks and financial institutions offered this loan such as Wachovia, Golden West, Countrywide, Washington Mutual, First Federal Financial Corp, and Platinum Capital Group.
However, this type of loan neglected to tell homeowners that they could risk having negative amortization and could even up owning more on their home than it is worth because the loan principal would increase between 110 to 125% of the original loan amount when the loan resets.
Mortgage loan officers are worried that is may be harder to help homeowners modify their loans because there will be a large difference in their current mortgage payment and the new mortgage payment when the loan resets.
If you are currently a homeowner and do not have a fixed interest rate that remains the same over the life of the loan please read your mortgage loan agreement and contact your mortgage company to modify your loan to get a fixed interest rate. Contact a hud counselor hud.gov/offices/hsg/sfh/hcc/hcs.cfm or call Hope Now at 888-995-4673 to get help.
When the loan is reset in 5 or 10 years the homeowner is locked into a higher monthly mortgage payment. This may cause a higher increase in foreclosures or bankruptcy filing because homeowners will be unable to make their mortgage payments. Many banks and financial institutions offered this loan such as Wachovia, Golden West, Countrywide, Washington Mutual, First Federal Financial Corp, and Platinum Capital Group.
However, this type of loan neglected to tell homeowners that they could risk having negative amortization and could even up owning more on their home than it is worth because the loan principal would increase between 110 to 125% of the original loan amount when the loan resets.
Mortgage loan officers are worried that is may be harder to help homeowners modify their loans because there will be a large difference in their current mortgage payment and the new mortgage payment when the loan resets.
If you are currently a homeowner and do not have a fixed interest rate that remains the same over the life of the loan please read your mortgage loan agreement and contact your mortgage company to modify your loan to get a fixed interest rate. Contact a hud counselor hud.gov/offices/hsg/sfh/hcc/hcs.cfm or call Hope Now at 888-995-4673 to get help.
Wednesday, December 17, 2008
Great Last Minute Holiday Gift
If you need a great last minute gift for a friend, relative or co-worker, purchase remaining copies of my self-help book, How to Get Out of Debt: Get "A" Credit Rating for Free for $7 with free shipping anywhere in the United States.
The regular retail price is $19.95 available at Borders, Barnes & Noble, Walden Books and B. Dalton. This sale price is available until all remaining inventory is sold.
This self-help book provides step-by-step information on how to repair your credit, create a flexible spending plan, and how to get out of debt.
The book also has sample letters to use to write to your creditors to repair your credit and fix errors, sample budget spreadsheets and resource information listed by state.
Visit my website at hefreemanenterprises.com/books.html to purchase a copy today!
Sunday, December 14, 2008
Credit Card Tips for College Students
According to Nellie Mae, 56% of undergraduates get their first card at age 18 and 91% of final year students have a credit card. 56% of final year students carry four or more cards. The average outstanding balance on undergraduate credit cards was $2,169.
As parents you have to teach your children how to use a credit card. Credit card companies are waiting for your students to go to college and get in debt. If you don't teach them about proper credit card use they will end up in debt and it will take them years after getting a full-time job to pay the debt off.
The credit cards that are promoted with on-campus are the worst credit cards students can get. You have to do research to find the credit card with the best interest rate and terms. Visit websites such as bankrate.com or creditcards.com to comparison shop.
Here are some tips to help college students when selecting a credit card:
1. Explain how credit cards work, the advantages and disadvantages and all the fees associated with credit cards such as: interest rate, minimum payment, grace period, and the finance charges, late fees, etc.
2. Talk to your children about who will pay the credit card. Many times students assume their parents will pay the bill. Discuss this before your child goes to college to manage expectations.
3. Offer assistance to help your child compare credit card offers or talk to your local bank officer who can help you review terms and conditions and compare rates.
Here are 5 to help prevent overspending on credit cards:
1. Pay off your balance each month.
2. Keep track of your credit limit.
3. Use for emergencies only.
4. Know your payment due date.
5. Do not get cash advances.
Parents you can also write your state congressman and representative to complain about credit card interest rates and marketing practices used on college students.
Wednesday, December 10, 2008
6 Holiday Savings Tips
Most Americans spend the greatest amount of money during the December holiday season. The holidays should not be filled with anxiety, pressure or guilt about spending money during the holidays. If you don't have the money to buy gifts be honest. If you have a small amount of buy to buy gifts buy what you can and don't use your credit card to buy gifts unless you have the money to pay the debt off in two or three months. Here are 6 tips to help you save money during holiday shopping.
1. Buy Christmas or holidays gifts during store sales in October or November.
2. Visit local vendors, you can probably negotiate a good deal on the same items you find in the department stores.
3. Think of creative gifts to give that you can make yourself.
4. Visit the local dollar store to find gifts for children.
5. If you have to buy gifts for several family members try doing a "secret Santa" or "grab bag" so only one family member has to buy a gift for one family member and set a limit on the amount spent. That way everyone gets a gift and you don't have to worry about buying several gifts.
6. Shop online, some companies waive shipping and handling fees during the holiday season.
1. Buy Christmas or holidays gifts during store sales in October or November.
2. Visit local vendors, you can probably negotiate a good deal on the same items you find in the department stores.
3. Think of creative gifts to give that you can make yourself.
4. Visit the local dollar store to find gifts for children.
5. If you have to buy gifts for several family members try doing a "secret Santa" or "grab bag" so only one family member has to buy a gift for one family member and set a limit on the amount spent. That way everyone gets a gift and you don't have to worry about buying several gifts.
6. Shop online, some companies waive shipping and handling fees during the holiday season.
Sunday, December 07, 2008
More Layoffs to Come
In the past several months, many companies believed to be stable have had massive layoffs which has contributed to the 10.3 million Americans who are currently unemployed. Some of the companies that had major layoffs or will have layoffs by the end of 2008 year or early 2009 are:
Citigroup (53,000)
Bank of America (35,000)
GM (32,000)
HP (24,500 over next 3 years)
Advanced Micro Devices (AMD) (16,800)
Rio Tinto (14,000)
AT &T (12,000)
Las Vegas Sands Casino (11,000)
BT Group (10,000)
Deutsche Post AG (DHL) (9,500)
Dell (9,000)
Sony Music (8,000)
Circuit City (7,300) and will close 155 stores
Merck (7,200)
American Express (7,000)
Dow Chemical (5,000)
Sun Microsystems (5,000-6,000)
Credit Suisse (5,300)
Whirlpool (5,000)
Sprint (4,000)
National City Corp (4,000)
Pepsi (3,300)
Goldman Sachs (3,260)
Motorola (3,000)
Xerox (3,000)
Dupont (2,500)
Ford (2,260)
Office Depot (2,200) and will close 112 stores
Nortel (2,100)
Chrysler (1,825)
3M (1,800)
Siemens (1,800)
eBay (1,600)
Yahoo (1,500)
Fidelity (1,300)
GlaxoSmithKline (1,000)
Starbucks (1,000) and will close 600 stores
Market Watch (850)
Viacom (850)
Texas Instruments (650)
Adobe (600)
Nokia (600)
Level 3 (450)
Palm (200+)
Legg Mason (200)
Cisco (129)
Yum Brands (Pizza Hut, Taco Bell), (unknown)
Morgan Stanley (10% of workforce)
Mattel (Fisher Price, Barbie, HotWheels) (3% of workforce)
EA Video Games (6% of workforce)
This list equals a total of 322,724 jobs that will be lost and an increase in the number of Americans who will be unemployed.
Now is the time to show that you are an asset to your company. Take training courses or go back to school to learn a new skill. Every American worker should have at least 2 skills that can be used to get a job. Also, get a part-time job if possible and use the money to pay down debt or create an emergency savings account to cover monthly bills and household expenses for at least 6 months.
If you currently do business with a company that is closing or downsizing consider how this will affect customer service: such as wait time to reach a customer service representative, proper processing of your payments, technical assistance, and other services. Also, ask the company questions on how they will ensure that their existing customers receive exceptional customer service. If you are a good customer negotiate with them for cheaper rates or discounts.
Citigroup (53,000)
Bank of America (35,000)
GM (32,000)
HP (24,500 over next 3 years)
Advanced Micro Devices (AMD) (16,800)
Rio Tinto (14,000)
AT &T (12,000)
Las Vegas Sands Casino (11,000)
BT Group (10,000)
Deutsche Post AG (DHL) (9,500)
Dell (9,000)
Sony Music (8,000)
Circuit City (7,300) and will close 155 stores
Merck (7,200)
American Express (7,000)
Dow Chemical (5,000)
Sun Microsystems (5,000-6,000)
Credit Suisse (5,300)
Whirlpool (5,000)
Sprint (4,000)
National City Corp (4,000)
Pepsi (3,300)
Goldman Sachs (3,260)
Motorola (3,000)
Xerox (3,000)
Dupont (2,500)
Ford (2,260)
Office Depot (2,200) and will close 112 stores
Nortel (2,100)
Chrysler (1,825)
3M (1,800)
Siemens (1,800)
eBay (1,600)
Yahoo (1,500)
Fidelity (1,300)
GlaxoSmithKline (1,000)
Starbucks (1,000) and will close 600 stores
Market Watch (850)
Viacom (850)
Texas Instruments (650)
Adobe (600)
Nokia (600)
Level 3 (450)
Palm (200+)
Legg Mason (200)
Cisco (129)
Yum Brands (Pizza Hut, Taco Bell), (unknown)
Morgan Stanley (10% of workforce)
Mattel (Fisher Price, Barbie, HotWheels) (3% of workforce)
EA Video Games (6% of workforce)
This list equals a total of 322,724 jobs that will be lost and an increase in the number of Americans who will be unemployed.
Now is the time to show that you are an asset to your company. Take training courses or go back to school to learn a new skill. Every American worker should have at least 2 skills that can be used to get a job. Also, get a part-time job if possible and use the money to pay down debt or create an emergency savings account to cover monthly bills and household expenses for at least 6 months.
If you currently do business with a company that is closing or downsizing consider how this will affect customer service: such as wait time to reach a customer service representative, proper processing of your payments, technical assistance, and other services. Also, ask the company questions on how they will ensure that their existing customers receive exceptional customer service. If you are a good customer negotiate with them for cheaper rates or discounts.
Thursday, December 04, 2008
Boost for Gavel Holders
As part of the $14 billion dollar bailout plan Federal judges will also get a pay raise. The raise was identified as a cost-of-living increase which if anyone who works in the government knows, these adjustments are automatically given every year to Federal government workers also known as COLA (cost-of-living-adjustment).
So, we ask ourselves, why do the judges need a raise from the $14 billion dollar bailout plan when they get one automatically every year? Well, supposedly the COLA does not apply to judges and Congress has to vote to give judges a raise. I don't buy that one but anyway. The Federal judges will get a 2.8% raise beginning January 1, 2009.
Well, as a taxpayer and American I am tired of everyone getting raises when our country is in a crisis. I urge you to write your state congressman and representative and express your opinion about judges getting raises and the method in which raises are given to judges. I am writing my letter today.
So, we ask ourselves, why do the judges need a raise from the $14 billion dollar bailout plan when they get one automatically every year? Well, supposedly the COLA does not apply to judges and Congress has to vote to give judges a raise. I don't buy that one but anyway. The Federal judges will get a 2.8% raise beginning January 1, 2009.
Well, as a taxpayer and American I am tired of everyone getting raises when our country is in a crisis. I urge you to write your state congressman and representative and express your opinion about judges getting raises and the method in which raises are given to judges. I am writing my letter today.
Monday, December 01, 2008
More Jobs Lost in November 2008
If you are still asleep or living under a rock wake up! It has been confirmed that we are in a recession and have been since December 2007. Based on this announcement by the National Bureau of Economic Research we have been in a recession for 12 months and counting. According to expert economists, the recession will last at least through the middle of 2009 and the economy is getting worse by the day.
The private sector industry eliminated 250,000 jobs in November. There will be additional private sector layoffs at least through the end of the year. Citigroup plans to layoff 50,000 employees. They have had 220,506 job cuts so far in 2008. The 3 major auto companies, GM, Ford and Chrysler are on the verge of bankruptcy or failure in addition to many stores closing or going bankrupt.
Although gas prices have gone down to below $2.00 a gallon the continued job layoffs will greatly affect this year's holiday season.
If you have not already done so, now is the time to change your spending habits and your lifestyle. Buy items on sale, in bulk, eat more casseroles, soups, ramen noodles, tuna and sandwiches, for lunch and dinner, bring your lunch to work and buy only necessities. Live at least 30% below your means to ensure you are able to survive the recession. It is going to be a long winter season.
Friday, November 28, 2008
5 Reasons to Use Debit Instead of Credit
Use Debit Instead of Credit
According to The Nilson Report, debit card purchases are expected to increase 13% in 2008 to $1.2 trillion versus a 3% increase for credit card purchases or $1.9 trillion. This year, Visa debit card transactions could exceed credit card transactions.
For banks this is not good because they are not able to collect interest on debit transactions but helps their accounting department because they don’t have to report any losses when consumers fall behind on credit card payments.
However, banks also charge overdraft fees for debit card transactions when consumers do not have enough money in their accounts to cover an item purchased. Fourteen out of fifteen of the largest banks in the U.S. charge overdraft fees for consumers who exceed their funds.
Overdraft fees ranges from $20 to $35 per occurrence. Banks are responding much quicker to consumers who exceed their funds by charging overdraft fees the same day or the next day. In the past banks would wait a few days before charging the overdraft fee.
To combat this practice the Federal Reserve has proposed rules to restrict these abusive practices by banks.
Here are 5 reasons why use should use a debit card versus a credit card:
1. You don’t pay interest or finance charges
2. You can only spend the money you have in your account, however, some banks do allow you to exceed your funds but you are charged an overdraft fee
3. You can use debit cards or Visa check cards at many of the same retailers that accept credit cards
4. Helpful for those with bad credit who are unable to get approved for a credit card
5. Can be used like a credit card by swiping the card without entering a PIN
Tuesday, November 25, 2008
5 Ways Save Money on Heating Costs
This winter season which begins October 1 and ends March 31, gas and oil heating bills are expected to increase. According to the Energy information Administration the average American household will pay $1,182, an increase of 19.8% from last year.
Americans who live in the Northeast and heat with oil will pay on average $2,725 this winter, an increase of 37.1% since last year. The national average price for heating with oil has increased more than 198% from 2003-2004 to 2008-2009.
Americans who live in the South who heat with propane will pay on average $1,578 this winter, an increase of 18.7% since the 2003-2004 winter season. The national average price for heating with propane has increased 100% from 2003-2004 to 2008-2009.
Americans who live in the West who heat with gas will pay on average $684 this winter, an increase of 23.8% since last year. The national average price for heating with natural gas has increased approximately 60% from 2003-2004 to 2008-2009.
Americans who live in the Midwest who heat with electricity will pay on average $1,051 this winter, an increase of 4.7% since last year. The national average price for heating with electricity has increased 34% from 2003-2004 to 2008-2009. Here are 5 tips to help reduce heating costs this year.
1. Annual check. Have annual checks on your heating system before the winter season begins. It is best to get a checkup during the summer months when business is slow.
2. Insulate. Insulate your attic and any others areas that are drafty such as your attic, ceilings, walls, crawl spaces, hot water pipes, furnaces, ducts, etc.
3. Automate. Install a programmable thermostat and keep your setting on 68% Fahrenheit or lower during the winter season. Lower the temperature setting while away from home and during the day. This can save 20% on your heating costs.
4. Seal drafts. Seal any drafts around windows, chimneys, pipes, light fixtures, doors or electrical outlets which can reduce your heating costs by 30%.
5. Use a wood burning or pellet burning stove to heat your home.
Saturday, November 22, 2008
Help for the Unemployed
Due to current recession and the closing of many companies, the number of people unemployed has reached new highs. The unemployment rate is 6.5% meaning over 10.1 million Americans are out of work. Generally the November and December holidays are a time to spend with family and have fun but this year the holidays won't be like past years.
Many Americans are feeling the burden of the bailout plan. However, there is some relief. On November 21, 2008, President Bush signed the Unemployment Compensation Extension Act of 2008 which extends Emergency Unemployment Compensation to 20 weeks which will help some Americans through the holiday season. For states with high unemployment rates such as Georgia it creates a second tier of 13 weeks of compensation for individuals.
Tuesday, November 18, 2008
Mortgage Helps for Americans
The government and mortgage industry are launching a new program effective December 15, 2008 to help homeowners' stay in their homes by renegotiating delinquent loans held by Freddie Mac and Fannie Mae. Almost 1 out of every 6 loans held by Freddie Mac and Fannie Mae are delinquent.
To qualify for the new program homeowners will have to be at least 3 months behind of their mortgage and have to owe 90% or more of their home's current value. Homeowners who filed for bankruptcy are not eligible for the program. In addition, homeowners' interest rates would be reduced so their mortgage payment is no more than 38% of their monthly income (similar to a plan IndyMac introduced in October 2008), loans can be extended for 30 to 40 years or some of the principal can be deferred interest free. Contact Freddie Mac or Fannie Mae to get more information or contact a HUD counselor at 888-995-4673.
So far, 2,795,920 people have filed for foreclosure this year. Millions of Americans need help and the government and other banks have begun implementing plans to help homeowners but in some cases it is too late. There should be a fine charged for those banks that did not help customers before the bailout plan and before these new programs have been or will be implemented.
Why are banks allowed to behave in any manner they choose and nothing is done about it. Banks should also develop programs for homeowners who lost their homes because they were unable to get help to save their homes. Is anyone concerned about the Americans who lost their homes because the banks refused to help them? We should be. I applaud the government and banks for developing plans but I fear it will not be enough. If the government can help bailout airlines and loan money to foreign countries surely they can help all Americans stay in their homes. Write your state house of representatives and congressman and express your concerns.
Friday, November 14, 2008
A Unique Option to Survive the Bailout
There are several conventional ways to save money that we hear about over and over again such as using coupons, buying things on sale, shopping at discount stores, buying online, reducing your expenses, and living below your means. All of these are great ways to save money and survive a financial crisis in normal times. Unfortunately, we are not living in normal times and it will take some creative thinking to survive the current recession.
We, as Americans will have to change the way we think about money and how we spend it. We must change our bad spending habits to ensure we have a decent life in case an unexpected expense occurs such as a medical condition, job layoff or death of a loved one. We must also position ourselves for retirement so if social security is not available we can still survive and have enough money to cover our basic living expenses.
More than 2.6 million Americans have foreclosed on their homes this year and over 960,000 Americans have filed for personal bankruptcy. These statistics are alarming. One way to prevent being one of those statistics is using a radical approach called the Voluntary Simplicity Movement or simply living.
The Voluntary Simplicity Movement started in the 1960s and has grown widely with approximately 20 million people following all or some aspects of the phenomenon. Simply living is examining every aspect of your life to determine what is most important and eliminating the rest. Simple living has various aspects such as ecological, technological, financial, etc. Many Americans cannot embrace this concept out of fear, embarrassment, and reactions by family and friends. Living below your means is how many entrepreneurs got their start and became successful. They understood the sacrifice that needed to be made to achieve their goals.
The Frugal Simplicity aspect of the Voluntary Simplicity Movement means spending in terms of needs vs. wants, cutting back in various areas of your life – reducing expenses, and being responsible with your spending. Shopping frugally and living below your means reduces stress related to debt and helps to move towards a debt free life and financial independence.
Many Americans have tried creating a budget or spending plan, use coupons or cutting back on some expenses. Unfortunately many have started with the right intentions but failed to continue performing those actions as a lifestyle choice and reverted back to their old bad spending habits.
If you have tried everything else or felt like no other option would work – don't file bankruptcy or foreclosure. Try the voluntarily simplicity movement for 30 days and track the following: your stress level after the 30 days, how much money you saved, how much debt you were able to pay down, how you felt after the 30 days. Even if you don't continue the Voluntary Simplicity Movement, hopefully you will have made a great change in your life about the purpose of money and how you can use it to create a better life for yourself. For more information visit www.simpleliving.net.
Tuesday, November 11, 2008
How IndyMac is Helping Consumers
Due to the current economic crisis and high number of foreclosures, approximately 2.66 million as of October 2008, many banks and financial institutions are helping consumers on a case-by-case basis. The process is very slow, resource intensive and frustrating.
IndyMac services more than 60,000 loans that are either more than 60 days past due, in bankruptcy or in foreclosure. Approximately 40,000 customers are eligible for the IndyMac program to help consumers with their mortgages. More than 3,500 IndyMac customers have had their loans modified reducing their mortgage payments on average by $380.
Establishing standard rules that a lender can apply can speed up the process and the lender will be able to help thousands of customers and restore the housing market at a faster rate.
Using IndyMac's program lenders modify a loan so that the borrower's new mortgage payment, including insurance and taxes, is no more than 38% of their pre-tax income as known as the debt-to-income ratio which was as high as 50% during the housing boom.
IndyMac can achieve this by lowering the interest rate, extending the life of the loan, deferring some principal to the latter years of the loan, or a using a combination of these methods to help customers.
To simplify the process for customers IndyMac sends loan paperwork overnight with a signature required upon receipt. The paperwork explains the customer's new loan terms, the interest rate and monthly payments over the life of the loan. The customer signs and returns the documents along with the initial lower monthly payment. The IndyMac program does not forgive debt.
IndyMac's program is now being applied to many delinquent loans owned by Fannie Mae and Freddie Mac. Bank of America has also developed a similar program that will launch in December 2008. The Bank of America plan was instituted as part of a settlement with state attorney general offices that sued Countrywide for predatory lending practices, which was acquired by Bank of America.
Bank of America hopes the program will help approximately 400,000 customers. The Bank of America plan will use a 34% debt-to-income ratio to calculate an affordable monthly payment for its customers, and may write down the principal balance of some negative amortizing loans.
Some housing economists warn that lenders should look at a borrower's other assets in addition to their debt-to-income ratio before restructuring a loan because "they will include people who shouldn't really qualify, and might exclude people who do".
"A customer with substantial additional assets and no other debt may have taken out a big mortgage that accounts for 45% of his income. The program will help this customer and not someone with a smaller mortgage and no other assets who also have student and car loans".
FDIC Chairwoman Bair thinks this foreclosure prevention program can also work for other banks.
Saturday, November 08, 2008
Greenspan Takes Some Blame
On October 23, 2008, former Fed Chairman Alan Greenspan testified before a Congressional committee to discuss the current economic crisis in the country. He admitted that mistakes during his appointment worsened the current economic crisis. A quote from his testimony stated "those of us who have looked to the self-interest of lending institutions to protect shareholders' equity... are in a state of shocked disbelief."
Once appointed to his position in 1987, Greenspan immediately began pushing Congress to repeal the law implemented during the Depression that prevented banks from competing with investment banks in underwriting stocks and bonds. When Congress hesitated, Greenspan used the Federal Reserve's authority to allow banks to circumvent the law. Greenspan also opposed efforts by the Securities and Exchange Commission (SEC) to initiate modest regulation of the $1 trillion hedge fund industry.
Greenspan instituted the deregulation of the banking and financial system and the institution of mortgage ARMs in 2004. Greenspan admitted during his testimony that deregulation didn't really work and that it was flawed. Greenspan admitted that he put too much faith in the power of the free market and failed to foresee the self-destructive power of reckless mortgage lending.
However, Greenspan also placed blame on Wall Street companies that bundled subprime mortgages into 100 million dollar packages and sold them as mortgage backed securities. Global demand for the mortgage securities was so high, Greenspan said, that Wall Street companies pressured lenders to lower their standards and produce more "paper".
Greenspan also explained during his testimony that he did not anticipate the massive housing bust because we (he and other top economists) cannot see events that far in advance. "Greenspan explained that even after he realized there was a bubble, he never expected housing prices to decline so dramatically, because we had never had a nationwide decline in housing prices in the past.
Well Mr. Greenspan, if you are in disbelief how do you think the rest of the country feels.
Tuesday, November 04, 2008
How the Federal Rate Cut Affects You
The Federal Reserve cut the federal funds rate on October 29, 2008 by 1%, its 9th reduction in 13 months. The federal funds rate is the target interest rate for banks borrowing reserves (deposits in accounts with the Federal Reserve plus cash that is held in bank vaults) among themselves.
Changes in the federal funds rate influence the borrowing cost of banks and the returns offered on bank deposit products such as CDs, savings accounts, and money market accounts. Changes in the federal funds rate also dictate changes in the prime rate or Wall Street Journal Prime Rate.
The Federal Reserve began cutting rates to deal with the current economic recession in September 2007. Since September 2007 the rate has been reduced from 5.25% to 2%. The current rate cut is the lowest it has been in the last 4 years. The prime rate is now 4%. The prime rate is based on the federal funds rate and is a benchmark used to set home equity lines of credit, credit card rates, lines of credit, auto loans, personal loans, and some small business loans.
Rate cuts usually take several months before consumers can see the impact. The rate cut helps bank because it reduces their borrowing costs and they pay lower rates on deposits.
Consumers who benefit from the current rate cut are homeowners who are looking for fixed rate mortgages which are still low. Also, consumers who plan to stay in their homes for less than 10 years can still get ARMs to get a lower interest rate on their mortgages. All ARMs are not the same so make sure you do your homework to find the deal that right for you. Some homeowner's with existing ARMs may see lower mortgage payments the next time their mortgage resets. Contact your lender to get more information.
Saturday, November 01, 2008
1929 vs 2008
Here is a quick comparison of The Great Depression in 1929 vs. The Financial Crisis (Recession) in 2008. You can voice your opinion about the conditions we are experiencing in 2008 on election day November 4, 2008.
1929 October 29, 1929 (Great Depression - Black Thursday)
1. Crisis called a Depression
2. 13 million people unemployed
3. Industrial production fell 45% between 1929 and 1932
4. Home building dropped by 80% between 1929 and 1932
5. 5000 banks went out of business between 1929 and 1932
6. Massive layoffs, unemployment rates over 25% in 1933
7. Home prices and income fell by 20-50%
8. Depositors lost $140 billion in bank deposits by 1933
9. Took 10 years to cure
2008
1. Crisis called a Recession
2. 3,720,000 people unemployed
3. Industrial production in September was 4.5% below last year’s figures
4. 16 banks went out of business and counting
5. Under 20 financial institutions have gone out of business and counting
6. Massive layoffs, unemployment rates of 6.1%
7. Home prices fell 16.6% since 2007
8. Depositors lost $2 trillion in bank deposits and counting
9. Estimated that 28 million people will use food assistance programs an increase in 26.5 million from 2007
10. Federal Reserve has dropped interest rates by more than 2.5 percentage points since August 2007
11. 2.5 million foreclosures and counting
12. 967,000 personal bankruptcies as of Aug 2008 and counting
13. Food prices rose more than 4% since last year
Wednesday, October 29, 2008
Another Chance for Bankruptcy Filers
Due to the financial crisis which resulted in a credit freeze and implementation of the $700 billion dollar bailout many Americans will feel the burden regarding their existing credit card accounts or when applying for new lines of credit or credit cards.
Well, thanks to several Americans who were fed up with the inaccuracies reported by the credit bureaus a recent court ruling which occurred due to a class action lawsuit that was filed against the 3 major credit bureaus, Experian, Equifax and TransUnion stated that Experian, Equifax and TransUnion violated the Fair Credit Reporting Act (FCRA) by failing to maintain accurate records related to Chapter 7 bankruptcies.
The court ruling required the 3 major credit bureaus, Experian, Equifax and TransUnion to change their reporting system by October 1, 2008 and remove old debts that were included in bankruptcies. This is a HUGE victory for many Americans who had low credit scores and were unable to get approved for loans or credit cards due to: old debts still being reported as open, old debt reported with balances, reported with an "active" status or as a collection account. Accounts included in a Chapter 7 bankruptcy will now be reported with a zero balance and with a closed status.
Based on the credit ruling the 3 credit bureaus will have to clean up credit files for approximately 6-10 million consumers who have filed for Chapter 7 bankruptcy.
Many consumers have been impacted because late accounts were reported to collection agencies that ignored the fact that the accounts were included in a Chapter 7 bankruptcy. As a result, the accounts are reported multiple times as delinquent. Each occurrence of the delinquent or unpaid account lowers a consumer's credit score.
Consumers who filed Chapter 7 bankruptcy that has already been discharged will have to request a new credit report after October 1, 2008 to see if their credit report has been updated by going to the annualcreditreport.com website or by calling 877-322-8228.
If you still find errors on your credit report due to a bankruptcy, file a dispute with the credit bureau reporting the inaccurate information. You can file a dispute online which is faster and usually takes 2 weeks for a response or you can file by mail which takes 30 to 45 days for a response.
Saturday, October 25, 2008
Government Bailout Plan Funding Continues
On Friday, the U.S. government started to inject capital into some banks by helping to finance a $5.2 billion takeover of National City Corp bank by PNC valued at $2.33 per share.
The Treasury Department plans to provide funds for 20-22 additional lenders as part of its next phase of a $250 billion bank recapitalization program. The Treasury Department has already committed approximately $125 million to 9 of the country's largest banks in exchange for preferred bank shares.
The Treasury Department has also decided to let banks announce the government assistance plans which will be staggered instead of the Treasury providing a complete list of bank recipients to ease investors.
Regions Financial Corp, First Horizon National Corp, PNC, Valley National Bancorp Capital One Financial Corp and SunTrust Banks will also receive government funding.
The Treasury Department is also determining how to give assistance to insurers under its Troubled Asset Relief Program (TARP) also known as the Paulson Proposal which became law on October 3, 2008. The program is run by the Treasury Department's newly formed Office of Financial Stability Department. The TARP has 7 components:
1) Mortgage-backed securities purchase program which identifies which troubled assets to purchase, who to buy them from and how to buy them.
2) Whole loan purchase program which will work with bank regulators to identify which types of loans to purchase first, how to determine their value and how to buy them.
3) Insurance program which will determine how to insure mortgage-backed securities and whole loans (residential mortgage loan that is owed by one company sold to one or more investors who pays the seller a servicing fee).
4) Equity purchase program is a standardized voluntary program to purchase equity in a various financial institutions to encourage participation from healthy financial institutions.
5) Homeownership preservation consists of programs that purchase mortgages and mortgage-backed securities to help homeowners stay in their homes.
6) Executive compensation is a law defined requirements regarding executive compensation for firms that participate in the TARP.
7) Compliance is a law that establishes oversight and compliance structures, including establishing an Oversight Board, on-site participation of the General Accounting Office and the creation of a Special Inspector General, with strict reporting requirements.
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