Debt Reduction Counseling and Credit Rating

Debt reduction is something we may have to face at some time in our lives. Some people may have overspent and others may have had a period of unemployment or underemployment that caused them to over extend on their credit cards. Medical expenses have also caused people to incur more debt that they can handle.

If you are in the situation where you need to reduce debt here are the basic option available otherwise known as debt solutions. Debt solutions are process where we can pay off these debts completely instead of declaring bankruptcy which is harder to do than it used to be. There are usally two kinds of debt solutions. One is a debt settlement plan and the other is credit counseling programs.

Credit counseling can be a good option for you if you have very high interest rates or are having trouble paying much more than the minimum payments on your credit cards. In this case you just have a lot of debt and need some help reducing it and managing your debt levels in the future.

For those in a more dire financial situation meaning you have fallen behind and have late fees or over limit fees, a debt management plan may be more appropriate

In this case, the credit counselor will approach your creditors and negotiate with them to lower rates, fees and monthly payments.The big pro or advantage here is the lower payment you end up making lets you pay your debts off on better terms and faster than if you just tried to keep paying all the credit card bills.

The big con here is what it does to your credit rating. Most people feel the damage is about the same as if you declared bankruptcy. This is a case where facts get distorted because people do not have enough information.

It is true that it can show on your credit report and may affect your ability to get credit. At this point though you should not be trying to get more credit though and by participating in this type of plan you are cleaning up your credit problems.

Another disadvantage is you have to close all of your credit card accounts that go onto the plan and this can cause a temporary drop in your credit score.

If you are not in trouble and are just looking to reduce your debt so you can buy a home or car don’t consider this option there are better programs more suited to your debt problem.

Debt settlement or credit card debt negotiation is usually the stuff you see on television where the depressed, pitiful debtor is rescued by the sympathetic and heroic debt settlement company. But underneath the slick commercial hides some pretty big cons relating to this type of program.

You have to pay the creditor in one lump sum. Your credit rating is negatively effected because creditors may report that you only paid a portion of the debt. That stays on your record for seven years. Also the money you don’t pay counts as income and you have to pay taxes on it. None of this is revealed in the advertising.

If you want to know long it will take you to pay off your credit cards by just making monthly payments you can use our free
Debt Calculator To Estimate Debt Payoffs

Retire Early and Frugally

Here is an interesting perspective on frugal living that goes along with our mission to live frugally but still enjoy life and live well.

One author of a frugal living blog describes frugal living as “to look at optimizing efficiency and utility – one will become frugal, rather than just do frugal things.”

This blogger claims he spend about 75% less than the average person, and yet gains an equivalent level of satisfaction.

One of things he mentions that helps you cut expenses during retirement is to live in a smaller dwelling and be within walking (or cycling) distance from work, libraries, and shopping areas.

If you don’t have children living with you, you will not have to worry about what school district you are in.

Large homes have high maintenance costs. You have to pay higher taxes, heating, cooling, lighting and water bills. Plus you have a large outside area to maintain. A smaller home will scale down many of your monthly expenses.

If live close to where you shop, play and work you will probably not need a car or be able to get away with one if you previously had two. You decrease your bills tremendously if you are only insuring and maintaining one car instead of two. Plus you get more exercise if walk to do some of your errands.

The frugal blogger I checked out said “If you take the money you’ll spend on your car and invest it in your retirement, you will add one million dollars extra to your early retirement account.”

Another tip is to stay healthy and exercise regularly. Health insurance is expensive and you probably will be paying for a portion of it yourself. So preventing future health problems is one of the best things you can do to prepare for early retirement.

Eat a good healthy diet and take care of your teeth. Dental procedures are really expensive so make sure you floss and get regular dental checkups.

Reducing clutter can also help you on your way to early retirement. Anything that you own has to be maintained. Furniture has to be cleaned, electronics need to be repaired, knick knacks take up space etc.

Before you make a purchase of a non-consumable item, think about if you really need it. If for instance it is a tool to make a repair, ask a neighbor if you could borrow theirs.

The less stuff you have, the more financial freedom you will have.

Try to avoid fixed costs for things you do not use all the time. For many people this could be cable tv or magazine subscriptions. You might want to consider Netflix instead of cable and going to the library occasionally to read your favorite magazine. You get the idea how your mind needs to orient itself to live frugally but comfortably.

Notice I have not mentioned anything about eating macaroni and cheese three times a week or keeping hens to save on buying eggs. Actually macaroni cheese is not very healthy and the hens might be fun but you see the point.

There are plenty of ways to cut expenses so that you can retire early without feeling like you are living a sub-standard lifestyle.

So keep riding with me on our journey into frugal living made easy. Knowledge is power so if you want to learn more ways to cut expenses see our post Understand Credit Card Grace Period Due Dates

Medical Bills and Collection Agencies

Everyone watches their credit rating and if you don’t pay a bill you are usually aware that you didn’t pay the bill but medical bills can go unpaid and you will not even know it. Your credit rating gets affected and you can spend a lot of time and money trying to figure out what happened. If you have health insurance you are not immune from this happening to you.

Let’s briefly go through the process of what happens with medical bills so you can learn how to prevent this from happening to you and damaging your credit rating.

Your physician submits a bill to your health care organization or insurance company. For whatever reason, payment is delayed or denied entirely. Meanwhile, you don’t pay the bill and you may not even know a bill hasn’t been paid.

The physicians office then turns the matter over to a collection agency and the collection agency reports the debt as delinquent to the credit reporting agencies — Experian, TransUnion and Equifax.

Healthcare providers don’t want to be in the business of extending credit. If they were to report unpaid bills directly to the credit reporting agencies, they have to follow a lot of rules and regulations that creditors must follow when reporting debts. To avoid those, the providers prefer to use collection agencies.

Collections are weighted more heavily than other unpaid or late bills when it comes to your credit rating. So getting these on your credit report does hurt.

Legally, even though you have health insurance, you are ultimately responsible for your medical bills and that unpaid bill will appear on your credit report.

Even as you are in the process of discussing the bill the bill can go to collections. Small bills are not really worth it to the collection agency so they won’t try to collec,t they will just report the unpaid balance to the credit agencies.

Because of privacy laws, when you look at the report you may not be able to tell where that particular bill came from.

So what can you do to prevent this from happening to you? Here a few simple steps you can take:

1. Stay in touch with the billing office of your doctor or other provider during any type of delay. Ask them to get in touch with you if there is a problem. Those people have tough jobs and sometimes people get angry at them. Be polite and respectful to them and most of them will be glad to help you. Explain that you don’t want the bill to go to collections.

2. If they seem unwilling try to remind them gently that they provider will receive much more in payment if you pay your bill rather than if they turn over the account to a collection agency.

3 If you have worked out a payment plan with a hospital or other provider, be sure you pay it on time or let them know if you are going to have problems. Hospitals are really bad about sending bills to collection agencies after even just one late payment.
You may think no one cares but sometimes just a phone call saying we are having trouble and will be late with the payment can help. They may renegotiate with you or find another way. Don’t be embarrassed. I speak from personal experience, just try.

4. If your bill has already gone to collections and the agency calls you offer to pay the right away if the following conditions are met:

The agency will have the bill removed from your credit report.
(if you pay first and then ask to have the bill removed, you
won’t have any leverage)

The agency will give you a copy of this agreement in
writing. (If there is a dispute, you will need that written
proof.

5. If the collection agency calls you before they report, offer to work out a plan and get them to give you written confirmation if you pay they will not report you.

It is hard to believe you credit rating can be affected even when you have health insurance and would pay the bill if you knew about it. Being aware that this problem exists and knowing how to prevent it puts you way ahead of the game.

Banks are also notorious for being inflexible about fees and such. If you want to get the upper hand with your bank see our post Avoid Unfair Bank Fees

Do You Need To Save For Retirement?

If you ask most people if they need to save for their retirement, and they are honest about it, they will say they needed to start saving long ago. Of course, most people had some sort of retirement plan set up in the past But the average American has not stayed on course, and they do not believe they have enough saved for a comfortable retirement at all.

If you would like to get back on course with your retirement plans, there are dozens of ways to do it. Some of these plans are open to almost everybody.

410K at Work

Does your job have a 401K plan? Many allow employees to automatically invest in a variety of plans. Some companies even match a portion of these funds, making this an obviously good idea. If you plan to be at your job for a few years, you will be happy to see how much small contributions can grow into tidy sums. You may also enjoy some tax deductions that you can use in the current tax year.

Individual IRA Plans

If you do not have an employer based plan, you are free to set up your own individual retirement account. You can choose a traditional or Roth IRA. You might be able to set up a plan at your bank, or even with an Internet company. You can even have them perform automatic deductions from your checking or savings account.

Retirement Annuities

Insurance companies also provide another solution that helps you use your money to give you retirement income. These are called annuities. There are several varieties of annuities, but if you are trying to use one to save for your future income, you may be interested in a deferred annuity.

You may fund them with one large payment. However, at this point it may be more useful to fund your annuity with a smaller initial contribution, and then keep adding to the balance every period. You can use this free deferred annuity calculator to see how much your savings can grow.

Can You Save For A Comfortable Retirement?

The longer you have to accumulate assets, the better off you will be. However, you will never be in a better position to start than you are today!

Everyday Cheapskate

Cheapskate Living Baby Steps!

At first when you hear the phrase frugal living it sounds like you have to start reusing your aluminum foil over and over again or living on macaroni and cheese like you did when you were younger.

You think it is just a nice way of saying you don’t make enough money. Believe me, I have been there. Actually though frugal living means something completely different. Not like the Monty Python and now for something completely different but a more peaceful way to live. There are many wealthy people who engage in frugal living and it is probably one of the reasons they are wealthy.

I learned about the relationship between frugality and contentment from a book called “Don’t Sweat the Small Stuff” by Richard Carlson and another book called Simple Abundance by Sarah Ban Breathnach.

Both authors talked about the endless cycle we all go through of when we get something we immediately start thinking about the next thing we want. Dr. Carlson gave the example of a friend his who bought a home. As soon as he closed on it, the friend started talking about the next bigger home he was going to buy. We have all experienced this cycle.

We are happy for a short period of time because we stopped focusing on what we don’t have but the wanting feeling comes right back and we start thinking about the next thing we have to have.

Frugal living is not about having less but being satisfied with what we have right now and we have a lot. Both authors advise “counting your blessings” and it does help make you feel better.

When you get into the mind set of being happy with what you have it translates into better financial and mental health.

Better financial health because when you are content you are less likely to use your credit cards to buy things you may want but not really need. Often we spend money because we have built up huge expectations that the item will make us feel better and improve our life somehow. Then we get disappointed because the purchase didn’t make our life happier. Plus we have the added worry of more debt.

Frugal living is a way of breaking out of that credit card debt financial misery cycle. It does not mean you will never buy anything new again but when you do buy that car, computer or piece of furniture, you know have done it for the right reasons.

Sometimes credit card debt is unavoidable – you need to fix your car, a major appliance or have medical expenses. When that happens though you are better prepared because you may have more available credit since you converted to the frugal lifestyle. Better mental health because you know you are not overspending and it helps you feel that you are more in control of your life.

If you are anywhere close to retirement frugal living can help you have a more comfortable retirement. If you want to retire at 30, frugal living will help you get there.

You don’t have to buy a course, read a book or sign anything to begin your journey in frugal living. Just begin by focusing on what you have and feeling content. When you start to think about what you don’t have just dismiss that thought. Count your blessings.

Stay tuned for more lessons in frugal living. The journey is more fun if you go with someone, so let’s go together.

Are Refurbished Electronics Worth Buying

One of the best kept secrets of the high end electronics market is how much you can save by buying a refurbished product. Because of the dip in the economy more people are discover refurbished electronics have reliability and better company warranties.

You can usually save between 50% and 70% on refurbished product. There are several different kinds of refurbished and the pricing is reflective of the differences. For example there is: ‘factory refurbished’ or factory-sealed refurbished products, and ‘third-party refurbished’ products. Factory refurbished products sell at a higher price over third-party refurbished items but still represent big savings.

You have an added “green” bonus buying refurbished as refurbishment is a form of recycling.

It helps to understand what the different the terms means when you see ads for refurbished products. Refurbished means the product has been repaired but it doesn’t the product has actually been purchased and used.

Products suffer cosmetic damage and are returned for that reason. The company fixes the damaged product but sends the buyer a brand new one. Sometimes it is the packaging on the product that is damaged and the product is perfectly good. You can buy the original product whose cosmetic damage has been repaired for a great price. A warranty is usually included.

Reconditioned means the product was sold to someone and they used it. The product has now been fixed up and is being sold again. Depending on how long the product was used it might still have a manufacturer warranty but if not usually the company that did the repair work will usually offer a limited warranty.

So refurbished electronics or reconditioned electronic products really do you give you significant saving. What is the down side? Experts say that when you are talking about high end electronic products such as flat panel tvs and home theater projectors, you the consumer can’t really know what the effect of usage is on the internal components.

So what they recommend is buy only ‘factory-certified’ refurbished products. You still get significant saves but minimize your risk as the products come with a manufacturer’s warranty.

Phishing is the Method of Online Identity Theft

As you may already know, online shopping while incredibly inconvenient can leave your vulnerable to credit card fraud. Here are some easy steps you can take to protect your bank account during the holiday season and all year round.

1. First Line of Defense

It is a pain to come with strong unique passwords but they are your first line of defense against hackers. Most people don’t bother to do this. The cybersecurity firm Imperva examined 32 million passwords exposed in a breach last year and found that the most commonly used password was “123456,” followed by “12345.”

A strong password should include at least five letters, numbers, and punctuation marks. Don’t use passwords that relate to information that is easily available to others such as your address, your telephone number, pet’s name etc.

A unique password means you use different passwords for different site. Again, this makes life difficult but ultimately safer.

One place to test the strength of a password is Microsoft’s password checker, http://bit.ly/fvaesw .

2. Symbol of Safety

Before placing an online order, look for a padlock symbol or “https” in the address line on your browser. Those sign are your assurance that your data will be encrypted.

3. Phishing

Any email you get from stores you have shopped at, or your bank or credit card company should be regarded with suspicion. Don’t click on any of the links because it could be that they are just trying to get you to input personal information. More details on this scam, known as “phishing,” can be found at www.antiphishing.org and http://onguardonline.gov .

It may also be helpful to call your bank or card company using the phone number on your statement or the back of your card, and confirm your accounts are secure.

4. Online Customer Service Rep

You know the pop-up window that let’s you chat with a customer service rep? Hard to believe but it is possible that it is a hacker looking to steal your financial information. Don’t place your order or reveal any personal information during the chat. If you do reveal something you should not have contact your bank or credit card company ASAP.

5. Prepaid cards

One of the best ways to shield your credit cards and bank account from exposure is to use a prepaid card to use online instead of a credit or debit card. These reloadable cards may be used just like credit and debit cards, but spending is limited to the amount loaded onto them. They are easy to purchase and will give you so much more peace of mind. Additionally, it will help you know which purchases were made online and which at conventional stores.

Why Be A Cheapskate?

Cheapskate Living Baby Steps!

We not expect you to start raising your own chickens (unless you want to) or give up your home for a shack in the mountains in order to pursue a more frugal life.  What we are realizing is that the old consumerist mindset has not served us very well. After the past economic downturn, millions of Americans are struggling because their savings accounts and homes have lost value. We can get back on the road to prosperity, but we may have to realize that we need to pursue a different prosperity!

Different people have different reasons for following a more frugal retirement. You may want to enjoy a frugal retirement that is also more secure and comes about a lot faster. You might just want to be able to manage your monthly expenses better with a family budget and a plan!

Step ! – How Do You Spend Money Now?

You cannot hope to start becoming a better money manager if you do not understand your current budget. It is surprising to find that many families have no clear idea how their budget keeps moving out of control. Your first step should be to gather documents that can tell you how your money has been spent during the last few pay periods. If you cannot find these documents, you need to keep track for a month or so in the future.

Step 2 – Can You Devise A Budget?

Now that you have some idea where your money goes, try to allocate money for the essentials, and also for luxuries. This may mean you will have to do some shopping, in order to find cheaper prices for fixed expenses. And it may mean you will need to make some choices about the kind of extras you purchase each month.

Step 3 – Pay Yourself!

Make sure that your budget includes some sort of emergency fund. An emergency cash fund can leave you more secure, help you avoid charging things, and form the basis for long term savings. The more money you can contribute the better, but even if you can only spare $25 a month, you will be better off than you were before!

Step 4 – Don’t Kick Yourself – Move On!

This is no time to waste your energy by worrying about the past. You only need the past to understand your mistakes so you can start to correct them. You can get started towards a life of extreme frugality by taking fairly small steps at the beginning.

Get Ready – Go!

Hopefully these frugal living quick start ideas will get you started on the path to a more comfortable and secure life! Most of the people who enjoy success today have some horror stories about the past to share. This makes them really appreciate the new way of managing their money!

Why Do Credit Card Companies Offer Incentives or Rewards to Use Their Cards?

With the holiday season upon us, card issuers are offering big sign-on bonuses and rewards that they say will save you money. Beware though you might end up paying more than expected if you don’t read the fine print. Here are some things to watch out for:

1. The sign-on bonus

Make sure you understand what you have to do to take advantage of the offer. With the Chase Sapphire Preferred card, for example, cardholders need to spend $3,000 in the first three months after the card is opened to qualify for the bonus. If airline miles are being offered, airline-branded cards may promise new customers enough miles for a free domestic ticket. But you will still need to pay the fees and taxes for the ticket, which can amount to several hundred dollars.

Also check the card’s. Even if it has a generous rewards program, the card may carry a high annual fee or a higher interest rate. If you tend to carry a balance, you’re probably better off with a card with a lower interest rate.

2. Consider your credit score - Each time you add a card it impacts your credit score. A new line of credit could ding scores by as much as 25 points, according to Barry Paperno, consumer affairs manager for FICO, which develops the most widely used credit scores. The exact impact will vary depending on other factors in the individual’s profile. It takes about three to six months to recover your lost points, assuming you make payments on time and don’t open any other accounts. So if you’re applying for a mortgage in the near future, you might want to hold off on opening new cards.

3. Opening a retail card for the discount – Sales clerks pitch this to you all the time. Store credit cards usually have higher interest rates; the Macy’s card, for instance, carries an interest rate of 24.5 percent. The store will constantly offer you discounts if spend more and if you plan to spend that amount it works out but if you end up spending just to get the discount – it doesn’t make sense or cents. Also store-branded credit cards also tend to have lower credit limits, which could hurt your credit score if you get close to your credit limit.

4. Spending just to take advantage of rewards – It turns out that you really don’t save that much. For example, if you’re earning 1 percent cash back, that would $5 back for $500 in purchases. When credit card companies promise extra rewards customers can earn during the holiday, they often limit the reward. In the case of Discover, the accelerated rate applies to a maximum of $300 in purchases, meaning the most you’d get back is $15.

Converting Traditional Ira To A Roth 2010

Beginning in 2010 everyone had the option of converting traditional IRA accounts to Roths. So what’s the advantage to a Roth? With a Roth you pay taxes on the income before you deposit it, you can take it out in retirement tax-free. If your’re thinking about converting, just make sure you have enough money on hand to pay the taxes you’ll owe. If you’ll have to dip into the IRA balance to pay them, experts say don’t convert. Instead, consider opening a new Roth account; The rules for eligibility and contribution limits change every year. You can (and should) get the official rules from IRS Publication 590.

When you do file your taxes a good way to avoid errors is to e-file. One of the biggest tax mistakes is not e-filing.
Nearly a third of people still send in paper tax returns. Not only is it tedious to do your taxes by hand, but you’re also more likely to mess it up. “When you file a paper return, the error rate is about 20%,” says Nancy Mathis, spokesperson for the IRS. “When you e-file, it drops to less than 1%.” Why? Among other things, the program takes care of the math and also prompts you to sign electronically. Plus, you can get your refund within 10 days using direct deposit, compared with 4 to 6 weeks when filing by paper and requesting a check. If you make $57,000 or less, use the IRS’s Free File program (irs.gov/freefile). Otherwise, taxact.com lets you file federal returns for free. (It’s $25.00 for state returns)