Archive for the ‘Saving’ Category

« Older Entries

Lost home, lost job, now what?

Tuesday, June 23rd, 2009

Many Americans these days find themselves in a common situation: the house has been lost, jobs have been lost, and credit card debt is out-of-control. What comes next?

It’s not possible for a blog article to completely answer this question, partly since any number of things can happen. But what follows is a great set of tasks to financially “pick up the pieces” after taking a moment to sit down, breathe, and get ready to move forward with confidence that better days are ahead.

People living through a stressful financial situation often feel overwhelmed by the experience because tight money impacts one’s ability to do a wide variety of things. Likewise, thinking clearly can feel especially difficult. There’s no magic solution, but one possible remedy for this is not confusing, esoteric, or abstract: brainstorm options, collect as much financial information on yourself as possible, think about the information in a systematic way, and choose from amongst the options that best fits your short and long-term financial needs.

Checklists are one the greatest, intuitive, and simplest forms of getting organized immediately. I use them frequently. Consider any of the following actions, and fit them into a handwritten checklist of things to get done. Aggressively check them off one by one as you move through the list.

  • Gather all of your personal financial documents into one location/folder
  • Use receipts from last month to roughly estimate your expenditures on a monthly basis: tick the discretionary and non-discretionary items separately on the sub-list. Set up a basic budget, without fretting over precise accuracy.
  • Find cost-effective housing. Even those with families can rent several rooms in a house for cheaper than renting a new home.
  • Be honest with the children about financial concerns and the need for lifestyle adjustments.
  • Create a list of monthly costs you can do without. Cut them from your budget for an entire month and see what happens, knowing that if you cannot bear the experience for that month, they can always be added back later on. Especially try and cut the items that represent recurring monthly charges.
  • Cut up the credit card plastic and switch to paying for as much as possible with cash. For items that require an account number, use a debit card if cash will not work.
  • Call credit card lenders and start discussing options for your outstanding debt. Make clear to them with real numbers from your financial situation your limited ability to repay at least some of the debt and a desire to have interest rates frozen while repaying the balance.
  • Refresh your resume, keep your cell phone handy, and practice mock interviews with your spouse or friend. Draft a couple of different cover letter templates for different types of positions. Borrow a friend’s or family member’s computer if you don’t already have one to begin searches for jobs on job aggregator websites — one of the most efficient methods possible. Getting income up and running again has to be a top priority.
  • Use your network of friends and family to get into contact with people at organizations that you’re willing and interested in working at. If granted contact with a target of interest, don’t lose hope if they cannot offer you a job; rather, ask them for references to further people in that sector.
  • Fill out the paperwork to acquire unemployment income. Having paid into the system while working, you’re in all likelihood entitled to a modest amount of assitance from it now.
  • Set up an emergency fund with six months of expenses covered.
  • Grocery shop for every meal.

There are many more options than these listed. Share some of your favorites.

Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

Tags: , , , ,
Posted in Debt Management, Paying Down Debt, Saving, Spending | View Comments

Undergrads and Debt

Friday, April 24th, 2009

A discouraging trend is the balooning credit card debt of college undergraduates. According to a Sallie Mae study, students now hold on average more than $3000 in credit card debt, and much of it is not due to late night pizza bills, beer runs to the store, or airfare to Daytona Beach – it’s for bread-and-butter costs in school – books, supplies, and tuition.

This obvious problem demonstrates the need for substantial educational planning beginning long before the decision of where to attend school is made, in part because the most financially-saavy strategy for achieving a degree if one does not have scholarships that cover the vast majority of educational expenses involves attending a public community college and transferring to a low-tuition, public institution.

But what if you’re already in school and need to make some hard decisions about money? First, live and die by a budget. Setting one up is easy. Living by it is a little harder, but absolutely doable. Second, contact your financial aid office. With their help and guidance, dedicate several days to exhausting all of the options for getting more funds toward your college years that do not involve taking on more debt. Third, cut up the credit card, yet leave the account open. Switch to cash, checks, and if really necessary, check cards with lender logos. Fourth, look into ways to trim recurring costs from your budget – items in your discretionary and non-discretionary areas that your must pay every month. Follow this advice and you’ll be leaps and bounds ahead of the “cool” kids in school with no income, 25 credit cards, the 25 correspondingly uncool credit card T-shirts, and a mountain of debt they’re unprepared to tackle upon graduation.

Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,
Posted in Credit Card, Credit cards, Debt Management, Saving | View Comments

Thrifty is the New Frugal

Wednesday, April 22nd, 2009

Telis Demos recently wrote about consumer behavior for Fortune Magazine. Interviewing investment specialist Edward Kerschner, he identifies his perspective that consumers are at “a behavior inflection point” — that thriftiness is here to stay for quite some time. Clearly families are pinched from all angles these days: mortgage debt, income reduction or at the very least insecurity, and mounting bills through inflation for basic staples and balooning healthcare costs. But he goes on to state that “it’s not about price. It’s about the whole value proposition.”

This doesn’t make sense for those with debt. Price has a lot to do with the whole value proposition, and someone with financial insecurity and no emergency fund in place cannot afford expensive upfront items that, albeit valuable over the long term, simply increase their financial insecurity in the short-term to the point that emergencies will cost an arm and a leg.

Instead, someone with debt should make their financial decisions based on their budget plan. By defining a target amount for anything based on its ability to fit within a specified budget, thereafter striving for the most value-laden option amongst the several fitting the cost limitation, one can take advantage of the items that have “the whole total value proposition” without breaking the bank.

Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,
Posted in Saving, Uncategorized | View Comments

Credit Card Industry Providing Credit Help Websites?

Friday, April 17th, 2009

In the article entitled “Help with Credit Card Debt,” Gerri Willis, CNN’s personal finance editor, brings to our attention a new public relations move by a credit card industry trying to preempt a new regulatory system that will negatively impact their ability to make money. Quite simply, credit card companies banded together and put up a new website for consumer help. One of the goals of this site – HelpWithMyCredit.org – is to provide consumers with easier access to credit counselors. But the site doesn’t mention that using a credit counseling service from their list can drive down your credit score.

Aside from the credit counseling issue, should someone with debt take the rest of the website seriously? Probably not. For one, those building the website may offer helpful tips, but perverse incentives underlie whatever they present over the Internet: their long-term objective as a business remains to extract the maximum profits from consumers through their product – credit cards.

Take for example the page on credit card basics with the headline “Why You May Need Credit.” While some of the pointers they list are truthful, the page stills paints credit cards as a necessary part of life. But for those that struggle under the weight of revolving and overwhelming debt, many of the items in the list described as benefits are in reality not worth the cost by a long shot. They write, “Spreading out payments on high-dollar items” as one of the needs. However, if you can’t afford a high-dollar item and it is not critical to survival, then don’t spring for it.

Yet another of their “needs” is “Making urgent repairs to your car or home.” While few will argue with the need to keep a roof one’s head, perhaps the repair costs on a house that is already too expensive to maintain, with unrealistic mortgage payments and certain foreclosure is not worth adding money into. It can be the best course of action from a financial standpoint, depending on the specifics to the situation, to not repair a home and instead transitition into a rental unit. For a car, the need for reliable transportation to and from work is essential to financial security. But repairing a nonfunctional window or a scratch on the paint job are not needs; keeping the engine and tires in shape are. Even if faced with cases in which one needs to shell out for a house or car, build and rely on an emergency fund instead of the credit card.

The site goes on to identify Internet purchases as a need. The merits to buying over the Internet are numerous and include likely better price points for products because of economies of scale, the vendor’s efficient access to the target market, and the seller’s costs of doing business online. But this doesn’t mean you need a credit card to get the goods. Consider using a debit card, check card, or storing cash on a PayPal account for transfer to the seller at the point of purchase.

What accurately captures the perspective of someone thinking clearly about HelpWithMyCredit.org is one of their final bullet points – “Carry only the cards you expect to use, and keep the others in a safe place.” Why should someone not just get rid of the other cards, to say nothing of the ones you use? The truth is many people face the real temptation to go and retrieve the cards from their “safe place” – safe for reckless spending – and get into even deeper debt. Here’s a better idea for someone that is unmistakably going to fall back into the plastic routine: to maintain a credit history, keep one card open with the largest credit line, then immediately cut it up, freeze it, or toss it into a bonfire along with all of the other cards you have. Get rid of them once and for all, with one credit account left open.

Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,
Posted in Credit Card, Credit cards, Debt Management, Emergency Savings, Lending Industy, Saving, Spending, credit score | View Comments

Movie Strategies for the Thrifty

Thursday, April 16th, 2009

Hollywood is going strong right now. Ticket sales for movies are up 11% on a year earlier, and the summer season has not even begun. Jack Kyser, an economist in Los Angeles, writes, “The bottom line is that consumers still want to be entertained. A movie date, even with popcorn and a soda, is still a relatively cheap night out.” While this might be true, the fact remains that one can easily spend more than 100% of their ticket price on a variety of snacks and drinks that kill the idea that it is really a cheap night out. But can’t someone with major financial concerns trim down their trip-to-the-theater costs intelligently?

Costs on a night out to catch a flick can be managed. One might even buy the proposition that everything but the admission pass can be cut from the entertainment bill for the evening. But the movie ticket itself, despite the decline of the “student discount” era, can also be strategized. Research the matinee time restrictions at a particular theater in advance and plan on catching a film at that lower price point. Like attending early, consider going very late – around midnight. Some theaters offer discounted tickets for older films screened near the end of the night. Call theaters in advance and ask about ticket deals for large groups, as well as special promotion nights. Skip the ticket preorder websites that add on a service charge. Swing by a grocery store to pick up snacks, and enjoy them immediately before watching the movie. Many metro areas have designated “second-pass” theaters, sometimes called the “dollar movies” that build a business model around charging a fraction of the price to see a movie in exchange for only showing flicks that have been in release for many months. Opt for a film that is several months old. Choose the movie theater that has easier parking if you drive your car, and specifically avoid the venues that have all but mandatory pay-for-parking. Finally, get online. Sometimes theaters do ticket promotions on their websites.

Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

Tags: , , , , , , ,
Posted in Saving | View Comments

« Older Entries