Take Charge of Your Finances

Americans have a greater need to educate themselves about how to effectively manage their finances because many employers are eliminating retirement plans and offering 401K’s, 457 or 403b as an alternative. Social Security may not be available for those who are in their 50s or younger. Those who are unemployed, underemployed or retired also need adequate skills to properly manage their finances. In addition, financial products and services are more complex and perplexing. April is Financial Literacy Month that stresses the importance of financial literacy.

Without adequate knowledge about basic financial literacy concepts, consumers can make devastating financial mistakes that can take years to recover. Regularly practicing good money management habits eliminate the needs for dependency on credit cards, payday loans or title loans and cash advances.

The financial stability of families is directly linked to economic growth in America. The economy is stronger when more Americans have jobs, increases in income and an accumulation of wealth.

Financially strong families tend to have better money management skills and are more willing to make major purchases that help advance our economy. Financially successful people save more and are more able to get approval for credit cards and loans.

The average American believes all they need to do is go to work everyday and pay their bills on time. However, being a responsible consumer requires much more. Consumers need to be able to make informed decisions about how to earn, spend and grow their money.

This is where the importance of financial literacy plays a key role. The lack of financial literacy education and effective money management skills result in mounds of debt, low credit scores, denial for approval of credit and loans, increased foreclosures and bankruptcies. These factors ultimately slow economic growth.

Financial literacy increases the awareness of the benefits and risks of consumer credit and the consequences of poor money management skills. Financial literacy benefits include: accumulating wealth, planning for retirement, planning for children’s college education, starting a business, ability to make large purchases, maintain good credit and achieve financial goals. Financially literate consumers help the banking industry by purchasing products and services which results in stable banks, better customer service, lower fees, and increases in money available for lending.

The primary benefit of financial literacy is providing an improved standard of living for students, individuals and families.  Financial literacy helps individuals and families accumulate wealth and live a financially stable life. Families are also able to pass knowledge on to their children and future generations.

This month make at least one change to your spending habits to help pay down debt, create a savings account or start planning for your retirement. Make a promise to yourself and your family that starting in April you will do at least one of the following to improve your financial life. Here is a suggested list:

1. Create a budget or spending plan and track spending daily, weekly or monthly.
2. Pay bills on time or before the due date.
3. Verify financial statements each month.
4. Create an emergency fund to cover bills and monthly expenses for 9-12 months.
5. Get current on any late bills by negotiating with creditors or setup payment plans.
6. Reduce monthly spending by 30-50%.
7. Buy more of items you need instead of items you want.
8. Use credit cards for emergencies only.
9. Do not buy something if you do not have the cash to pay for it.
10. Order a copy of your credit report and dispute any errors.
11. Avoid using risky options such as payday loans, cash advance or title loans.
12. Get overdraft protection to reduce bounced check fees and find banks with little to no monthly fees.
13. Plan for your future by performing estate planning.

Ways to Recover From a Natural Disaster

There are many types of natural disasters that occur during a year such as hurricanes, tornadoes, monsoons, tsunamis, twisters, earthquakes and more. After the dust has settled the first thing one thinks about what do I do know.  The next thing to consider is their identity. 

When I heard stories about natural disasters I started to wonder did they have a safe and copies of all of their bills and financial papers. How will they regain their identity and start their life again?  What is the first thing they should do? These are just some of the questions that must be considered when rebuilding after experiencing a natural disaster.  Here are 14 financial tips to help you recover from a natural disaster.

Notify. 

Contact all of your family and friends and employer and let them know what happened. Ask them for resources or people that can assist you with food, clothing and shelter.

Insurance.

Contact your insurance company and file a claim. Contact a lawyer to get legal advice.

Mail.

Ask a friend or relative if you can use their address to receive mail temporarily.  

Inventory.

Make a list of all your service providers you do business with. Include the name of the company, mailing address, payment address, phone number, type of account and website. Call each company and tell them you have been a victim of a natural disaster.  

Identification.  

Contact your local passport, motor vehicle and social security administration office to get duplicate copies of your driver’s license, SSN and passport.  Also contact your local Office of Vital Records, Public Health Department or county recorder’s office to get a duplicate copy of your birth certificate.

Financial. 

Contact all of your financial institutions and ask for duplicate copies of your financial statements.  Apply for a new debit card and pin.

Credit. 

Contact your credit card companies and ask for a new credit card for each account. Contact the 3 major credit bureaus, Equifax, Experian and TransUnion and place a credit freeze on your credit reports.

Spend Wisely.

Replace missing items by shopping at discount or outlet stores, buying in bulk and buying items on sale.

The Dangers of Payday Loans

If an unexpected emergency arises that has to be paid immediately and you don’t have any savings or a credit card many consumers resort to using payday loans. Payday loans can be obtained for $50 up to $1,000 or higher depending upon specific requirements. 

To receive a payday loan you are required to write a post-dated check for the amount you wish to borrow plus any fees for using the payday loan.  The money minus the fee is provided immediately into the consumer’s bank account the next day. The next time the consumer gets paid the lender accesses their bank account to process the post-dated check and withdraws the amount owed plus the fee.

Payday loans are attractive to consumers due to aggressive advertising, lack of education and knowledge about the consequences of using payday loans. Payday loans users think they are getting ahead but they are really getting further behind. If you don’t have the money to pay your bills, you also don’t have money to repay the payday loan. 

Many consumers choose to use payday loans because they have or had access to credit but are unable to get approval for a loan or credit card and have little to no savings. Payday loans do not require a credit check or other forms of verification.

Payday loans are structured to keep consumers in debt because they have high fees, short term due dates, balloon payments, and have access to a borrower’s checking account. This results in consumers borrowing additional money to pay back payday loans. 

Some payday loan lenders offer no-cost loans to new borrowers although they know that most borrowers will not be able to repay loan and will be charged a default fee. Payday loans lenders operate as collection agencies and must adhere to the Fair Debt Practices Collection Act (FDPCA) when collecting on a debt, unfortunately most do not.

The consequences of payday loans are:

1. If you don’t have the money in your account on payday you will be charged overdraft or additional fees.
2. Banks may cash checks prior to the post-date on a check.
3. Payday loans have high interest rates with a common default rate of 6% if you fail to pay. 
4. Security and fraud risks may occur because payday loans companies are not licensed or regulated.
5. Some payday loan lenders report to the credit bureaus.
6. Your payday loan account may be sold to a collection agency.
7. If you default on a payday loan you may be sued by the payday loan lender.
8. Payment arrangements are available but are not offered to eligible consumers so payday loan lenders can make more money.
9. The default payment plan for most payday lenders is setup for consumers to pay the finance charge only which does not reduce the loan principal. 
10. Once a payday loan company has a consumers’ bank account information they can access their account for repayment at any time without the consumers’ permission.

Is Renting the Right Option for You

Americans no matter what age or education level believe that buying a home is a good financial decision and more than two-thirds or 68% believe now is a good time to buy a home. Fifty-one percent of renters say that owning a home is one of their highest personal goals. Many believe that housing prices in their neighborhood are more expensive than there were a year ago.

Several issues prevent Americans from becoming homeowners such as: bad credit, little to no savings, student loan debt, other debt, low earnings, illness or experiencing a financial crisis.

There are advantages to renting such as:  

1. No costs associated with maintenance
2. Easier to maintain
3. Reduced financial responsibility
4. Increases your credit score
5. Proves that your are a responsible spender

There are disadvantages to renting such as:

1. No tax benefits
2. No equity
3. No control over rental increases
4. No control over who owns the building or property

If you are considering renting or moving to a new rental consider these 10 tips to help make the process easier.

1. Review. Review your credit report and credit score before signing a lease. If you have bad credit you may have to put down a larger security deposit or other upfront fees.
2. Energy Costs. Energy costs are higher when renting a home especially for older, concrete or brick homes where air escapes easier.
3. Insure. You should obtain renter’s insurance to ensure all of your items are protected. Your premium may be a little higher if renting a home but you should be able to get a policy for less than $500 a year. Try to purchase a policy from the same company as your car insurance policy.
4. Fees. You may have to pay additional fees if renting a home that is part of a homeowner’s association such as: parking spaces or storage, snow removal, garbage collection, and pets.
5. Don’t assume. Don’t assume the landlord will pay for utilities or whenever something is broken. Ensure the details of who is responsible for what are identified in the lease.
6. Ask. Ask the landlord to provide any verbal agreements in writing.
7. Privacy. Ask about privacy rights.
8. Safety. Use police department search tools to verify if the neighborhood is safe.
9. Budget. Create a housing budget to cover additional expenses such as: security alarm, utility costs, possible repair costs, additional fees, etc.
10. Furnish. Don’t go overboard or furnishings. Look for bargains to furnish your rental.