Basketball and Debt

The NBA Finals was action packed with wins from the Spurs, Thunder, Lakers, Clippers on the west and the 76ers, Heat, Pacers and Celtics on the east.  Then it was the Celtics, Thunder, Spurs and the Heat, then the Thunder and the Heat.  Now everyone will be watching the NBA finals to see who wins between the Thunder and the Heat. With all this excitement about the NBA Finals, consumers should use that same excitement to improve their finances and get out of debt.  

Some consumers even go into debt watching basketball: ordering cable sports packages, have game parties, go to sports bars to eat, drink and watch the games all day, buying tickets to live games, and buying sports memorabilia.  All of these costs can add up and cause you to spend more than you earn. 

The goal of basketball is getting the ball to go securely in the net to score points. The goal of getting out of debt is to pay off the debt and increase your credit score.   If you are obsessed with watching basketball you may be obsessed other things.  If spending more than you earn is one of them, here are 6 ways to help you get out of debt and increase your credit score. 

1. Don’t hit an air ball – Many people file bankruptcy multiple times as an easy way to get out of debt.  You should only file bankruptcy as a last resort.  Filing for bankruptcy greatly lowers your credit score and remains on your credit report for 7-10 years.
2. Ball control – Manage your finances by reducing expenses and reducing debt. Taking control of your finances is key to developing good spending habits and reducing the change of having a financial crisis. The total amount of debt you owe contributes to 35% of your credit score.
3. Shoot for a basket – Set financial goals as part of your budget. Develop an action plan to achieve each goal.  Creating a budget helps you live below your means, reducing your spending and reduces your chances of going into debt.  Your total monthly debt excluding mortgage and car loan should be no more than 10% of your total monthly gross income.    
4. Don’t try to achieve a bury – A credit score or FICO score ranges from 300-850. Only a small percentage of Americans, less than 5% achieve a score in the 800’s.  Focus on paying down debt, paying your bills on time and getting current on any late accounts. These actions will help increase your credit score.  Don’t focus on getting a perfect credit score, focus on getting the best credit score you can. 
5. Don’t stay cold – Many consumers have tried different methods on their own to get out of debt.  If you are unable to improve your situation on your own, don’t stay cold – get professional help from a credit counselor, financial coach or financial planner. 
6. Avoid disqualification – You can lose your job or get disqualified from a job by having bad credit.  Bad credit can also prevent you from getting approved for a loan or line or credit. 

The Importance of Donating

Do you donate to charity?  Do you know why you donate to a specific charity? Do you make anonymous contributions or like to receive recognition? Whom do you give to, and why? Do you donate to small charities or larger ones? Do you donate only to tax deductible charities?

Google executive Sheryl Sandburg states that less than 1/3 of the money that individuals gave to nonprofits in 2005 reached the poor. A study by the Center on Philanthropy at Indiana University showed that only 8% of charitable donations provide basic necessities, food and shelter.  Sandberg names two possible explanations for this “charity gap”: (1) It is easier to give to those in our own communities than to the truly economically disadvantaged who are outside our immediate circles of relationships; and (2) donors do not fully understand where their contributions are going.

Sandburg encourages Americans to consider the disconnect between their desires to do help the poor and the destination of their money.  Americans donate the most to religious groups, education, foundations, health care organizations, human services and arts and humanity groups.

The US average for donating to charities is 2% or $76. The wealthy spend 3% of their monthly spending towards charity.   Most charitable states are: Delaware, Washington, DC , Kansas, Oklahoma is the top state, and Washington. The United States is in the lower half of the top 20 of all countries that donate to charities. Approximately 86% of professional athletes donate to charities.  

People give based on their identity: who they are and how they view themselves. The degree to which identities are flexible, involve a willingness to act, and help make sense of the world has significant implications determining whether and how much people give.  

Individuals who donate to charity may deduct contributions on their federal tax returns. Contributions must be made to legitimate charity to receive a deduction; contributions to a specific person may not be deducted. Keep careful records of money given through bank records or written communication from the charity, which includes the name of the organization, the date a contribution was given, and the amount.  Here are 4 tips on donating to charities:

1. Charitable Organization. The organization must be recognized by the Internal Revenue Service as a 501(c)(3) tax-exempt nonprofit organization. Verify status by checking www.charitynavigator.org and www.guidestar.org. 

2. Keep receipts.  If you donate a cash gift greater than $250, the charity must acknowledge the gift in writing. If less, you’ll need a receipt, canceled check, or credit card statement. If you do payroll deduction, you need the pay stub or W-2 and they’ll provide acknowledgement saying this deduction was a charitable contribution. For non-cash gifts, request a receipt with the name and location of the nonprofit, date of the donation, and description of the item.

3. Give appreciated assets.  Appreciated assets include stocks and real estate. By donating an appreciated asset, you can get the tax deduction based on the current value, not the lower value of the property when it was obtained.

4. Volunteer work deduction. Out-of-pocket expenses related to the volunteer work, can be deducted.

7 Ways to Avoid Credit Card Blocking

Have you ever had a “hold” place on your credit score?  If so, you were a victim of credit card blocking. Credit card blocking occurs when a business places a hold on your credit card sometimes for more than the total amount that is owed for a reservation such as a hotel or rental car.  Some companies that use credit card blocking are Diners Club cards and Visa.  When you use your credit card at registration for a hotel or to rent a car, the cashier will contact your credit card company and provide an estimated total of your bill. If the transaction is approved, then that amount is held in reserve. In addition to the actual cost of staying in the hotel or renting a car the clerk may add on reasonable "incidental" costs for items such as food or gasoline.  

Some experts believe that credit card blocking is helpful because it makes sure you don't exceed your credit limit before checking out or returning a car.  Using credit card blocking means that the company you receive these services from can be assured that your bill will be paid. If your balance is far enough below your limit you usually will not have a problem. Unfortunately, if your balance is near the credit limit, it may be an inconvenience by tying up credit that you may need and can cause a denied transaction for an item that is purchased after the block is placed.

If you pay the bill with the same credit card used when you checked in or returned the car, the purchase will replace the block usually in one or two days. However, if you pay using a different credit card or with cash the block may be held for up to 15 days after you've checked out. This happens because your credit card company was not notified that you used another form of payment and assumed they had to continue to hold that amount in reserve on your credit card. This can be avoided by asking the merchant to notify your credit card company and remove their block promptly.  Here are 7 ways to protect yourself against credit card blocking:

1.      Pay for a hotel or rental car with the same card you used at check-in.

2.      Ask the merchant the amount that will be blocked, how they determined the amount blocked and the time period the block will be held.

3.      Use two credit cards, one to make a reservation and one to pay the final bill.

4.      Pay with cash.

5.      If you pay using another method, ask the clerk to call the credit company and have the block removed. Get the clerk's name and ask for proof that the block was removed if possible. Also contact your credit card company to ensure the block was removed.

6.      Pay for hotel reservations in full prior to check-in so that a block is not placed on your credit card.  However, if a block is placed after arrival it will only be for a small amount to cover incidentals.

7.      Complain to your state Congressman regarding credit card blocking.

 

Credit card blocking is not illegal as long as the amount blocked isn't above what the customer is likely to pay at the end of the transaction. Most consumers are not aware that it happens at all because the blocked amounts may not come close to their credit limits. Some businesses will remove a block at the consumer's request if they see the bill has been paid.

Credit card blocking ensures the business will get paid if the consumer does not pay the final bill and prevents the consumer from exceeding the credit limit before checking out of a hotel, returning a rental car or making another type of purchase.

Make Cash by Cleaning Out the Clutter

The Weather has warmed up and many people are out and about.  I don’t like the cold so when summer arrives I try to enjoy the weather as much as possible.  Many people like to do spring cleaning and get rid of stuff that don’t want anymore.  A great way to make money this summer is by getting the clutter out of your home.  However, getting rid of clutter can be an emotional, frustrating and an overwhelming experience. 

Many people don’t want to part with their things even if they haven’t been used in over 10 years or it has turned colors and is almost unrecognizable.  Storing clutter takes up space and can cost money if you have so much stuff you have to store it in a self-storage unit. If you haven’t used something in the past 6-12 months it has now become clutter and you should consider getting rid of it.  

Possessing large amounts of clutter can cause you to spend more money because you may buy items that you already have but can’t find. Now you have duplicates of several items. You will be surprised what you find when you remove the clutter from your home.  Here are 9 ways to get rid of clutter.

1. Start slow. Start cleaning out one room at a time, try a small room first.
2. Categorize. Categorize items by type to make it easier to go through them.  Put all shoes in one pile, all shirts in one pile, all books in one pile, etc.
3. Identify. Label items based on their condition: trash, new, good, need repair, etc.
4. Decide. Determine which items you want to donate to charity and which items you want to sell.
5. Sale.  Have at least 30 items to sell if you are having a yard sale.  Have at least 5 items if you are selling online. You can sell clothing, coats and shoes to consignment shops. You can also take large items such as refrigerator or dishwasher to a scrap yard.
6. Online. Sell items online at sites such as on eBay, Craigslist or Amazon.com.
7. Donate. Donate items to charity and use the donations as a tax write-off.  Give items away to less fortunate people or list on freecycle.org.
8. Recycle. Recycle old papers, CDs, brochures, manuals, cell phones and electronics.
9. Annual Check.  Get rid of clutter at least once a year.