PMW Says . . .

[ProfMoneyWise]

PMW Says: If you owe it, pay it, but this does not mean you need to be unfairly hounded along the way.

PMW Says: Ok so you made mistakes in the past and some debt was sold to a collector and they contacted you. First calm down. Second, you have rights. Third, take control. Fourth, make them validate the debt and the amount if you are in doubt with a Debt Validation Letter.

PMW Says: So you were summoned to court and you did not go? Nice job hotshot. Now you have the Judge mad at you too. That should help your cause.

PMW Says: Sure, you can throw money at the problem and hire a debt settlement company. Your name will be trashed financially before it is over and the real problem of racking up debt that resides in the mirror was never addressed.

I am not one to rant about collection companies. I say if you don't play with the snake to begin with you don't get bit. With that said some are getting bit.

If someone is contacted about a debt and not sure it is their debt (I mean really sure) don't just blindly send money. Make them validate the debt with a "Debt Validation Letter." The sample I will provide also lays down the ground rules as to how much, and when, contact will occur. Send the letter, certified mail, return receipt requested. Document, document, document. Remember you and your documentation may end up in court someday.

Finally, never, ever, ever, give them electronic access to your bank account. They will, and do, clean you out. Illegal? Probably. Unauthorized? Sure. But it will be their word against yours . . . good luck proving that one.

Sample Debt Validation Letter as follows:

Date
Re: Account # xxxxxxxxxx

To whom it may concern,

I am requesting that your office provide me with legitimate evidence that I have any legal obligation to pay you. This is not a refusal to pay, but rather a notice sent pursuant to the Fair Debt Collection Practices Act, 15 USC 1692g Sec. 809 (b) that your claim is disputed and validation is requested.

Please provide me with the following:
Identity the original creditor.

Provide me with copies of paperwork showing that I agreed to pay what you claim I owe.

Explain and show how you calculated what you say I owe you.

Show me that you are licensed to collect in my state.

Provide me with your license numbers and Registered Agent.


I would also like to request, in writing, that no telephone contact be made by your offices to my home or at my place of employment. I would prefer that all future communications with me must be done in writing and sent to the address noted in this letter by US Postal Service. However if you must speak with me on this matter, I authorize you to only contact me on ___________(day) between the hours of ______ and ______ and to only speak with me. Calling me on a different day and a different time will be considered a violation of my request and a potential violation of the FDCPA.

Best regards,

 

[ProfMoneyWise]

PMW Says: I owe my child a path to have it better than I did. If I can help out with money that is a plus, not a requirement.

PMW Says: The next person who will sleep late, drink beer, attend sporting events and basically live a very good life on "my" money . . . will be me.

PMW Says: I can teach my own chlid (once 21 of course) how to drink beer. I do not need a college to do it.

A letter from a Dad to a High School Sophomore:

Dear . . . ,

As part of your continuing education to handle that “rumbling in the distance” (i.e. adulthood) I keep referring to I am giving you a not-to-interfere with school research project to gain an awareness of what college really costs. Why? One, never go into anything that can be prepared for unprepared. Two, college is a large expense and not just something money is thrown at in hopes of getting a return on the investment. In your case the return on investment will be an education that will serve you the rest of your life. Pretty important I would say how about you?

I’ve also enclosed an article from the newspaper I noticed this weekend. Pretty good points and I like the “thinking outside the box” points concerning taking care of college in less than 4 years. Time costs money, cut down the time, you lessen the expense. As I come across these articles on this and any other applicable subject I will be providing them for your information. And do read them, I will be asking you about them at any given time.

Do not get me wrong. I want college to be enjoyable for you. However, I would be doing you a disservice if I did not do whatever I have to do to help you prepare for college and also after college.

To that end, the research project I task you with is as follows:

1. Pick a (large) Maryland State College of your choice such as University of Maryland. Pick a smaller Maryland college such as Salisbury or McDaniel. Pick an out of state school of your choice and whatever size you wish.

2. For all three I want you to research and come up with values (for the 2010 or 2011 school year) for each of the following:

a. Tuition?

b. Room and Board?

c. Books per semester?

d. Any other mandatory fees for that college?

3. I also want you to start tracking how much any “personal care” items you use would cost you on a monthly basis. In other words write down how much your shampoo costs and do you have to buy new every month, every two weeks? Let’s go ahead and start figuring out how much these types of personal things cost so you can have an idea when the time comes to be acquiring these things on your own. We will also add in car expenses, clothing, etc, once we get the big part of this done.

How is college paid for? Please research the various ways people go about paying for their education. Give a brief description of each (in your own words, not cut and paste). You don’t have to do it for each college as paying for it is paying for it regardless of where you end up going.

There are parents who will just throw money into the wind and hope it works out for their children. You are not surrounded by those types . . . sorry! Seriously, I want you to always value your money. Not love your money, but value it. If you value your money you will expect others to value and respect it as well in the form of providing you what you are paying for. When you go to college you will go with the mindset that those professors work for you. You are paying their wages. You are paying for them to impart their teaching upon you so that you can use this knowledge as your own. You will expect them to work their tails off for you. Different way of thinking huh?

Signed, your parent(s)

 

[ProfMoneyWise]

PMW Says: There is nothing "co" about "co-signing." You do it, you own it. Only difference is you now have a partner who is supposed to pay it back.

PMW Says: A bank who sells money decides they just can't see their way clear to selling to a person because of risk. A co-signer decides they are smarter than the bank. This has "bad" written all over it.

True story:

Relative gets turned down for a loan from the bank. Another relative thinks they know more than the bank and a co-signing of a a $25,000 car loan is the result.

Relative loses job, is ashamed to say anything and in the process lets the insurance lapse.

Whoops . . . car wreck. No one is hurt thank goodness but car is totalled.

About 3 months later the bank calls the co-signer and informs them that they (note "they") are 3 months behind on payments.

A search for the relative and car is initiated and what is not found is the other co-signer and the vehicle. He has skipped town and the car is totalled.

So what is the Good Samaritan left with? A $25,000 car loan on a totalled vehicle.

Never, ever, ever co-sign a loan.

 

[ProfMoneyWise]

PMW Says: Never, ever, give a collector electronic access to your life. They will clean you out.

PMW Says: Do not fall for scare tactics. Do not fall for pleading. Do not fall for threats of going to prison. There is no such thing as Debtors Prison.

PMW Says: Do not let the collector convince you to pay them before you take care of shelter, food, utilities and basic transportation.

P.S.: IRS and Federally backed Student Loans are a whole different ballgame. Do not duck either. They have power to get to your money without going to court . . . and they use that power.


A few posts ago was a Debt Validation Letter. If the Collection Agency responds and proves it is indeed your debt you then move forward with paying the debt. Some will settle for less than you owe. I am not here to promote paying less than owed. I am also not here to pay more than you need to pay. This is between you and the collection agency.

So what to do now? Here is a good list of how to handle the collector and the relationship from this point forward. It was provided by a person who has experience unfortunately.


1) Relax!

2) Call them and as soon as you get a person on the phone, write down their name, the time of the call, the date.

3) Tell them that you are only going to say this once, so ask them to please take clear notes.

4) They will send you a letter hand signed on company letter head that clearly states that the amount of the settlement. Further, that this settlement amount will be considered as payment in full for this account. The letter MUST state that they will not attempt to collect the difference and that they will not allow anyone else to attempt to collect on the difference. Restate that it must be clear in their letter that the settlement amount will pay the account IN FULL.

5) Listen to them tell you a few lies while you pet your cat or dog and snicker to yourself because you knew it was coming

6) Restate #4 for them, and tell them that this is the only way they will be paid.

7) Listen to them lie again in an attempt to scare, entice, persuade and otherwise mislead you.

8) Tell them that if they do not agree to YOUR terms that you will end the call, and they can call you when they ARE ready to accept.

Skip to #10 if they refuse

9) If they accept, tell them you are eagerly awaiting their letter IN THE MAIL. Not faxed, not emailed. Why? I just like to annoy them. Proceed to #11

10) If they refuse, stand firm and end the call as you told them you do in Step #8.

11) Sit down and smile. YOU are in control, YOU have the cookie that they want.

If their letter is not accurate and is not worded as you requested, call them and start again at step #1.

When you receive the letter from them and it's correct, go down to your bank and get a Cashier's Check for the amount. Send them the check certified mail with a return receipt requested.

Keep a copy of the letter, the receipt and/or copy of the Cashier's Check and a copy of the return receipt in an envelope FOREVER. It's not uncommon for someone to "accidently" attempt to collect again, and you will simply send copies of these things to them to stop it.

 

[ProfMoneyWise]

PMW Says: Five Year Rule - If you need the money in the next five years call it savings. Any money you do not intend to touch within the next 5 years can be put at more risk such as in the stock market.

PMW Says: Learned from a hurricane kit tip. Keep $500 in cash in a fire safe. If the power goes out for an extended period of time the ATM's will not be working either. And if you have a safe in the house keep it on the ground floor. The fireman will appreciate it not crashing down upon them from above.

PMW Says: Instead of your mattress use your freezer. In lieu of a fire safe keep your cold hard cash . . . real cold.

PMW Says: Warren Buffet Quote: "Its only when the tide goes out do you learn whose been swimming naked."

Good jobs numbers, bad jobs numbers. Debt crisis in (pick a country, including the US) at any given time. Consumer Price Index. Consumer sentiment. Jittery market, jittery investors, the sun came up, the sun went down.

Heck of a thing to watch and to let set your day-to-day (and some minute to minute) mood. And besides whatever money you need in the next 5 years should not be in the market, you should have it in nice safe savings accounts. Anything more than 5 years you can have in the market. Knowing you are in it for the long term allows you to view the financial news with some amusement.

And savings are not investments so don't get too caught up on the return they are giving. The first job of the savings vehicle is to ensure that the money is there at the pre-determined time. If you should happen to find an extremely low-risk place to park it that keeps up with inflation good for you, but that is not the first job of where you park the money.

 

[ProfMoneyWise]

PMW Says: Paid for cars get better gas mileage.

PMW Says: The average income in $50K. The average new car costs $26K. A car depreciates 15% per year for the first 4 years . . . but the payment stays the same four years later. I'm not a math whiz but I think I will own what I drive how about you?

PMW Says: Want a new car fix? Go rent one for a week. You get the smell, they get the wear, tear, depreciation . . . and payment.


Car Leasing Means Losing

The most expensive way to operate a vehicle

MAY 17, 2010 | WRITTEN BY CHRIS RUSSELL (Dave Ramsey Homepage - daveramsey.com)

We all want to own the nice cars. But many of us pay for them in a way that makes the car own us. And the worst way, by far, is car leasing.

There are tons of rumors surrounding a car lease. They range from giving you a tax advantage to being what sophisticated (*COUGH*) people do. But it's a bad deal—no two ways about it. The car companies pitch the "benefits" to you, but in the end, it doesn't work in your favor.

Example time. You lease a $22,000 car for three years, and at the end of the 36 months, you turn it back in for $10,000. The payment that the car dealership charges you is what covers that $12,000 loss. So $12,000 spread over three years equals $333 a month. Sound like a normal car payment? It is, but we aren't done yet.

If you've gone over the mileage limit when you turn the car in, you get charged per mile. On top of that, you'll get charged for excessive wear and tear to the vehicle (we're talking scratches and dirty carpets here, not bumper replacement).

So when it's all said and done, you'll pay $12,000 plus operating expenses like gas and oil, plus mileage, plus wear and tear, and after you've turned the car in, you'll have no car to drive. That can easily cost more than $20,000.

What you could have done was saved up and paid $6,000 cash for a nice three-year-old car that runs fine. Then you would have paid less money and had a vehicle that you owned for several years. Car leasing doesn't sound too hot anymore, does it?

Here is an eye-opening stat: A car dealership makes almost 16 times as much money on a car lease than on a new car sale! Smart Money magazine quotes the National Auto Dealers Association as stating that a new car sale means an $82 profit for the dealer. But when car leasing comes into the picture, things change. If you lease the car, the dealer can sell the contract to a bank or one of the car company credit divisions for about $1,300!

A car lease is the auto industry's game. Don't play it. Keep your car purchases simple and affordable and you'll get ahead.

 

[ProfMoneyWise]

PMW Says: Use "Cash" for your "same as cash" purchase.

PMW Says: They are not giving the stuff away. They are not in business to save you money. Don't get blinded by "I WANT IT NOW!"

How can they offer 90 days same as cash? How can they offer "interest free if you pay it off in a certain time" credit purchaes for a certain period? What is the deal really?

Like Vegas the odds are stacked in the favor of the house. The fact is that almost 80% of people that go for these deals NEVER pay off the balance in full by that 90, 180, or even 360 days. Companies know this, and that is why they offer it! They get you to make the purchase, and then they start making money off the financing once you don’t pony up the money right away. And it’s not that you are a totally irresponsible person. Life took control of the situation. Maybe you car had to be repaired or your kid needed new glasses. Life’s little emergencies pop up and hinder us from paying off things that we planned on paying off. Sure, you might be part of that 20% of people that have paid off the balance in full and “beat the system”, but did you really? It’s much harder to negotiate a deal when you are financing something like appliances or furniture. If you had walked into the furniture store with $2200 in cash, you may have been able to walk away with that set for a 10% discount, but instead you are sweating it out for 90 days hoping that you can get it paid off.

Another reason why the interest free gimmicks are a bad deal is because many programs will back date the interest during the interest free period and charge it to you in a lump sum once the interest free period has passed. Also, that 0% interest will most likely turn into an obscene rate like 24, 32, or even 38% interest! These deals will also go sour if you are late on a payment. Many programs will void the special if you are even one day late. One couple I read about told a story that they paid off in time but found out later a credit insurance plan was slipped in the deal on them. Whether they should have known is beside the point. When the final tally was done it was determined that they had not paid for the insurance plan in full in the allotted time so BAM . . . deal voided, bring on the interest, fee’s and even a penalty for good measure.

Remember, the easiest way to avoid getting a shark bite is by staying out of the water.

 

[ProfMoneyWise]

PMW Says: If you don't own the car outright you are just renting.

PMW Says: Cars depreciate 15% a year for the first 4 years but the payment does not.

PMW Says: Paid for cars get better gas mileage.

If you find yourself upside down on a car (i.e. you owe more on it than it is worth) and it will take you more than a couple of years to get it paid off I suggest you get rid of this shiny anchor on your personal finance ship and here is how you do it.

Go to KBB.com or NADA.com and price it for Private Sale. This is not the dealer, or the dealer price. This is put an ad in the paper and get it sold person to person. Clean it up, make sure it is in good mechanical shape and lets get to selling.

Yes, the price as listed is less than you owe. Let's chalk up that amount to being the last financial mistake you make. You are going to have to come up with the difference so that you can take the money you get for the car and your other money to the bank to pay the thing off.

If your local bank holds the note on the car go see them and tell them what you are doing. In fact if you don't have the difference this is one time I will encourage you to borrow. See if the bank will give you an unsecured loan for the difference between what is owed and what the car is worth. If they fuss just tell them they already are giving you an "unsecured" loan, you are just asking them to admit it. While you are at it get an extra $1,000. this will be to buy the beater you will be driving . . . until you can save up for a different car . . . after you have paid off this loan and the rest of your debt.

And by the way, newer cars do not equal more reliable. Don't fall for that one.

Car payments are not a fact of life.

 

[ProfMoneyWise]

PMW Says: It is hard to spend what does not exist.

PMW Says: Let your envelope be your guide. If there is nothing in your envelope then you can't afford it.

There are a few things in your budget that you tend to overspend on. One of the reasons you overspend is that there’s nothing to tell you when to stop. You may write down $800 for Groceries ($400 per 2-week period), but between the checks and checkcard purchases, you can go over the budget, because your money is going in 14 different directions.

To get on the Envelope system what you do is, every 2 weeks, write a check for $400 and cash it. Put the cash in an envelope and write “Groceries” on the envelope. Never buy anything out of that envelope except groceries, and no groceries are bought unless it is with money that comes out of the envelope. The point is that you can’t overspend what’s in the envelope. If you run out of cash, then you don’t spend any more from that category. If you get to the cash register and don’t have enough cash to cover your items, you have to take some of them back.

You can have more envelopes as you get the feel of this. I have six myself, but I know a guy who has fifteen.

And for those that did not know how to get this much cash from a check you write the check out to “Cash” and walk in with your ID to your bank and ask to cash it. You get to meet the nice people at the bank and to help them out let them know what denominations you would like your cash in. As you get into this you will get all scientific and get $100’s, $50’s, $20’s and $10’s.

Eventually you will get to where your auto-pay type stuff and deposits are all you use your check register for and using cash will help you not spend what you do not have.

Simple? Yes. Just like it should be.

 

[ProfMoneyWise]

PMW Says: Kids mimic adults. If adults are always in debt, have no plan, spend uncontrollably to get things before (or if ever) they can pay for them how do you think the kids will end up acting when it is their turn?

PMW Says: Go to store. Pick up item. Pay for item. Leave store. Pretty simple yet finite and powerful.

The Stress of Debt
Why being broke is not worth the strain
JUN 10, 2010 | WRITTEN BY CHRIS RUSSELL (https://www.mytotalmoneymakeover.com/)

The newest poll shows the same old news. An Associated Press-GfK survey found that 46% of people say they are suffering from debt-related stress, and half of that group says the stress level is a "great deal" or "quite a bit."

Some people may chalk that up to a bad economy or high unemployment, but when you get right down to it, debt in any form causes stress to increase. The only thing that has happened in the last year or two is that the economy tanked and lots of people started seeing the bad financial shape they were in. That's when they started paying attention.

When you walk along the edge of a cliff, just because you don't look down doesn't mean you're not in danger of falling. People with debt who are just cruising through life might be one disaster away from being in major financial trouble. They just don't have a clue until that happens. The smart people will get a money plan in place so they have no debt and an emergency fund of three to six months of expenses in place before Murphy comes knocking at their door.

Let's look at an example. What if you had a car wreck, broke both arms, and couldn't work for two months? If you are stuck with a car payment or credit card debt, some angry people will start calling and demanding payment. And while many of them will lie to you in order to get paid, you still legally owe the money. It's hard to enjoy dinner with your family or playing with your kids when you are constantly looking at the phone expecting a nasty call. Stress level ... UP!

Now, what if you had no debt and a full emergency fund when that auto accident happens? Not only will there be no collectors hollering at you, but you will have the cash tucked away to pay your bills until you heal up. You can sit at home, rest, and recover with no worries. Simply because you chose to avoid debt.

Source: Associated Press

 

[ProfMoneyWise]

PMW Says: Easy Counselor. Don’t get all excited that you discovered your State’s Statute of Limitations on old debt and think you are in the clear. What that Statute means is you can’t be sued in court any longer but it sure does not mean the collector can’t keep trying to collect. So put down your fake law degree and pay up.

Check statute of limitations on old debt

 

[ProfMoneyWise]

PMW Says: There is a way to avoid the games and manipulation practiced by lenders. Don't be a debtor to begin with.

PMW Says: They can't make a law against everything stupid. Individuals have to do their part as well.

PMW Says: Stimulus checks, CARD Act's, Bailouts, etc, etc, etc. Just heard that Discover's profits are back and card use is up, up, up. Sigh . . .

5 Ways To Maximize The CARD Act's Protections:

Confused by the CARD Act? Here are the top five ways to maximize its protections and minimize your credit card pain:

1. Understand the consequences of "opting out" of the rate increase.

Under the law, if you opt out of the changes in terms and close the card, the card company can require you to pay off the balance in five years, or they can double the previous minimum monthly payment. If you can't handle those consequences, be prepared to roll the debt over to another card -- just watch out for balance-transfer fees. Also understand that if you close the card, it may affect your credit score because it reduces the overall amount of credit you have available.

2. Know the four conditions that will cause an interest-rate hike on your existing balance.

They're pretty simple. The card company can boost the rate with no advance notice if: a) you have a variable interest rate tied to an index and the index rises; b) you opened the card with a teaser rate and it expires (which would be stated in your original agreement); c) you're in a workout agreement and you haven't made your payments as agreed; and d) you're more than 60 days late with a payment. (Late payers can earn back their previous rate if they make minimum payments on time for six months.) You won't get 45 days notice on any of these provisions.

3. Pay more than the minimum -- especially if you have a card with balances at different rates.

Let's say you opened a card that offered zero percent interest for six months, and continued charging on the card after the teaser expired and the rate rose to 14 percent. If you only make the minimum payment, the card company can apply that amount to the zero percent portion of your balance -- while the portion at 14 percent continues to snowball. The law does require that any amount you pay over the minimum be applied to the balance with the highest annual percentage rate.

4. Pay attention to the new box that shows how long it will take to pay off your debt if you only make the minimum payment -- it may shock you into action.

The CARD Act requires issuers to display that pay-off information on your bill. In 2009, nearly one in three Americans reported that they had only paid the minimum on their credit card bill sometime in the previous 12 months, according to a report by the FINRA Investor Education Foundation. The figure was 41 percent among cardholders age 18 to 29.

"A lot of people think the math is wrong. They don't realize it will take two decades to pay (the balance) off if they only pay the minimum," says Ulzheimer. "That box was a clear win out of the CARD Act."

5. If you push the limit, be prepared for rejection.

The new law bans card companies from assessing a fee for going over your credit limit unless you specifically opt-in; if you don't, the card will be rejected by the vendor. If you're someone who uses a personal card for business, the opt-in may be worth the fee. "We've actually surveyed on this, and apparently embarrassment has a price," says Ulzheimer. About half of consumers "do not want to have the waiter come back to the table and say, 'I'm sorry your card has been declined.'"

Finally, read every notice that comes in the mail from your card company, even if it looks like junk.

 

[ProfMoneyWise]

PMW Says: Money, how to raise the kids, religion and in-laws. These Big Four cause the most fights in a relationship. Of the four Money is the number one fight causer, but the easiest to get on the same page about. Don't let money ruin a good thing.

PMW Says: Money fights are the number one cause of divorce in America. Nuff said.

PMW Says: If you think you have money problems now, try it after the divorce.

Common financial issues that mess with unity
JUN 23, 2010 | WRITTEN BY CHRIS RUSSELL

The top cause of divorce in America today is money fights and money problems. It's amazing how quickly a money conversation can turn into an argument.

But the good news is that money can also be the best area of marriage if you work at it. When you get the junk out of your union, there is more room for happiness.

Here are some junky areas:

Debt
It's no secret that debt can mess with a marriage. When you have debt, you owe people. Those people want their money, and they'll put pressure on you to pay up. That puts you in a bad mood, and you tend to take that out on your spouse. If you don't keep that in check, pretty soon you'll always be fighting with your spouse. A marriage is too important to be broken up over money. Kick the debt out of your life and tons of stress will go with it.

Communication (or lack of it)
Be. On. The. Same. Page. That can't be stressed enough. When a couple doesn't talk about what they need or want, or what they hope for, conflict is just a step behind. A study by Fidelity Investments last year found that only 45% of couples make day-to-day financial decisions (like budgeting) together.

If a husband or wife feels like they don't have an equal say in money matters (or they are just spoiled), they may secretly spend or hide money from their significant other. That creates a feeling of betrayal when it eventually becomes known. It's unbelievably hard to recover once you get to that point, so always be open with your husband or wife. Don't be afraid to tell your spouse what you want. If they want something different, come to a compromise. But don’t hide anything.

Paycheck Envy
When you are married, it's not "your" money and "my" money anymore. It's "our" money. That's not to discount the efforts of people who earn an income; it's to shift your thinking to having a team mindset. When one spouse earns $70,000 a year and the other pulls in $20,000, you have a $90,000 household income. When you start bickering about "I earn this and you earn that", it will lead to fights and hurt feelings.

Remember, money isn't the only way you contribute to a household. When a task like washing the dishes or bathing the kids comes up, both adults are perfectly capable of doing it.

 

[ProfMoneyWise]

PMW Says: Short sell? Walk away? Voluntary foreclosure? What ever happened to "you made a bet and you lost?" Everyone gets all sucked into buying a home as an investment and when the investment does one of the three things an investment can do and does not work out they think it should not impact them. Well, well, well, I guess all those years of "nobody loses, everybody gets a trophy" are coming back to bite the world huh?

PMW Says: No, you don't really deserve to pay less than you owe. You made the bed, now get in there and lay in it.

PMW Says: That which you get for free will cost you ten times as much in the end. Be careful as to what good deal you may or may not be getting.

PMW Says: If you want your friend to have money then give it to them. You need a friend not a slave.

Pay friends debt as a gift, not a loan

 

[ProfMoneyWise]

PMW Says: Retirement? You are living on more than you make, have no plan, have debt and you are dreaming of retirement? It is going to be a long dream.

PMW Says: Your expenses do not go down in retirement. Many say things like dry cleaning, lunch, and gas to/from the job are gone. I say they are replaced by dry cleaning, lunch and gas to/from the golf course. The expenses that you should make go down are mortgage, credit card debt and loans of any kind. Get out of debt then retire. To do otherwise is . . . unwise!

The Big Retirement Obstacle
There are many, but they can all be summed up in one word.
JUL 6, 2010 | WRITTEN BY CHRIS RUSSELL

Debt is the symptom, not the problem. And the symptom is putting a lot of Americans in a pinch.

A study commissioned by Scottrade found that, for 63% of Americans, debt was an impediment to retirement savings in 2009. Sixty-one percent expect debt to limit retirement savings in 2010. The longer you keep debt and make payments, the more time and money you lose because you aren’t funding a Roth IRA or a 401(k).

The research is partially right. Debt is a huge retirement roadblock. So we’ve got the symptom identified, but what about the problem?

We look at the study a slightly different way. There is one obstacle standing in the way of happy and prosperous golden years. Here’s a hint of what it is: If you’re married, there are two obstacles.

The problem is YOU. When you have credit card debt, you are the one who chooses to spend when you don’t have cash. You are the one who got a $450 monthly car payment instead of saving for 10 months and buying it outright. The problem is you. But the good news is that you can turn the problem into the solution pretty quick.

The key to determining how much or how little progress you make is you. If you are the only thing standing in your way, then you can do something about you. You can control your behavior and not overspend. Is it tough sometimes? Sure. Will saying no to eating out mean you have more money to invest, so you can have many dinners out in a few years? Sure again.

You must factor retirement savings into your budget. If you’ve got a spouse, work as a team and don’t spend money that’s not agreed on first. Get rid of the debt, and you can be in the 37% who won’t get held up from retirement by your bills.

Source: US News

 

[ProfMoneyWise]

PMW Says: Nowhere did I say that what I preach is easy. It is very worth it however.

PMW Says: It is easy to do what everyone else does. The line to fix it is much longer as well.

PMW Says: Sure there are Government programs to help you out of your own doings but the Government does not do or give anything for free. Be prepared to have Uncle Sam as a partner in your life.

PMW Says: There is no shame in renting but there sure is shame in foreclosure.

To buy a house you must:

Be Debt Free

Have a Fully Funded Emergency Fund of 3 - 6 months of living expenses (including house payment) in a separate never to be touched unless it is a true emergency fund.

Have enough down to avoid PMI - usually 20%.

Be able to afford a 15 year fixed mortgage and your total Principal, Interest, Taxes, Insurance and if applicable HOA monthly payment does not exceed 25% of your take home pay.

Buy what you need, not what others tell you to buy. To many others have great ideas about what we should do with our money. To many others talk you into buying for investment purposes but have no skin in the game. To many will say "you will grow away from the payment" well what they don't tell you is the cost of everything will "grow" as well.

Buy it to live in it. If someday you make money on it great, but like where you live.

Don't ask a realtor if you can afford something. That is like asking a dog if it is hungry. They make a percentage of the sale. Higher the sale, higher their cut. Know the game you are playing.

Do not take on debt to furnish or move into the home. Have that money set aside before you purchase. It's called discipline.

Immediately start a 1% - 3% of your homes value Home Maintenance Fund. This is for things that break, things that need paint, things that need gas. These things happen, they will happen, they are not emergencies.

Please don't be a slave to your home. You will end up despising your home. Life is hard enough, don't make it harder by doing things you know better not to do.

 

[ProfMoneyWise]

PMW Says: Budgeting is a weekly exercise. Look at where you are and always be in control.

Too many work up a quick budget, often incomplete, and never look at it as the months progress. Then when they still have no idea where they stand financially and are spending more than they have they blame the budget they "tried" way back when.

The budget is a living thing. It needs to be attended to EVERY week.

The budget is not about living on less than you have, the budget is about living on what you have.

The budget stops where your money does. The budget cannot go into red numbers.

Try this for a quickie budget:

Left side of page list all the things you spend money on in a month.

Right side of page list a dollar value of each item.

Add it up and subtract from your take home pay. Not income, but take home as that is your reality.

How did you do? No, don't tell us, tell yourself.

We only make so much money in a lifetime. I'm not about being ultra-tight but I am about making good use of that money and making that money work for me in the future.

The budget is about reality.

 

[ProfMoneyWise]

PMW Says: The last place you need to be worrying about money is a Doctor's waiting room.

PMW Says: Do not sleep on medical insurance . . . or you may end up losing the place where you sleep.

PMW Says: Everybody is healthy as a horse . . . the day before they get sick.

The number one cause of personal bankruptcy is medical bills. Numerous sources cite this statistic. And many of those who have health insurance don't take the time to really know what they have (or dont' have) and find out way too late what they had was not enough.

This is not a debate on health care costs or politics. This is a simple warning. If you have health insurance available to you do not turn the other way. This is a request to you that if you feel you cannot afford this in your budget to please re-work your budget to ensure you make room for this service.

Healthcare is not an entitlement. It is a service that must be paid for. I'll let others debate the cost and availability. My job is to shout from the rooftops one medical incident of any note can break you financially.

For example could your personal financial situation handle:

Emergency Gallbladder Surgery: $22,000
Broken Ankle Repair: $15,000
*Pain in the neck that began in 2005: $180K to date!

*Cervical Spine Stenosis . . . say what????

I'm sure you all have your own stories. And as Warren Buffett says, "Only when the tide goes out do you discover who's been swimming naked."

This week's offer is as follows:

Normal day at the ballpark. Birds chirping, kids warming up, aaaahhhhh a nice summer day.

Hit to pitcher who turns to flip to shortstop for a force out at 2nd base.

Executed perfectly and as the Umpire yells "OUT" the shortstop hits the ground screaming in pain.

The baserunner bursts into tears. The team gasps. The Coaches are running to the player and one has a cell phone to his ear.

Ambulance arrives. They pick the player up and cart her off the field.

X-Ray's show broken fibula, broken ankle, dislocated ankle.

Put the ankle back into place, splint up the leg.

Ortho consult leads to Ortho Surgeon scheduling.

PMW Says: Do not sleep on health insurance. This stuff happens. This is real. This must be attended to.

PMW Says: A good rule of thumb on what insurance you need is you must have the insurance you hope to never use (i.e. Health, Home, Car). Life for awhile but if you have no one financially depending upon you, the you don't need insurance. And eventually when you have money in the bank . . . you don't need life insurance.

PMW Concludes: I'll let you know how she makes out. The shortstop is my daughter . . . and yes, the runner was OUT!

Update 8/17/10: Surgery went well, recovery has began. She's young and motivated to get back amongst the walking so PT will be embraced.

 

[ProfMoneyWise]

PMW Says: Is the next year money coming or not? Every August in a Government town is a long one. Will next year be funded or not? Do I have enough set aside in case we get furloughed? What if I get laid off, have I planned appropriately? And the worst part is if the money does show up will it pay the bill in full or just get us a few months down the road?

Think we are the only one's who live like this? Ask someone in sales, or that owns their own business. They would love to only have to look for the money once a year. They look for it daily.

PMW Says: You must be prepared to lose your job tomorrow.

PMW Says: Food, Shelter, Utilities, Basic Transportation. These are the four basics. Everything else comes after these. Do not let circumstances push you to a different conclusion.

PMS Says: Four months to Christmas. How much have you saved? Don't give yourself Debt for Christmas.

and finally . . .

PMW Says: You did talk to Junior about hunkering down at College right? I mean the next person to sleep late and shirk responsibilities on your money better be you.

 

[ProfMoneyWise]

PMW Says: Reminder. The amount between what you owed and what you settled for with the collection agency will show up on a 1099 as income and you will pay tax upon the amount. State and Federal.

PMW Says: Reminder. You do not deserve to pay less than you owe and think about it if there was such a sure-fire way to pay less taxes do you really think you would hear about it on your radio?

PMW Says: There is a way to avoid the grief, frustration, agony and stress that comes with spending more than you have. Call or IM me and I'll get you started.

How low can you go with debt payment?

Excerpts from the link:

"There is no government program to bail out credit card debtors and while you have the right to ask for a settlement (you could ask for a cheeseburger while you're at it), they have no obligation to give you anything but a hard time unless they want to."

"Debt settlers are filling the airwaves with nonsensical commercials that have confused many and mislead others. It has gotten so bad that the Federal Trade Commission is implementing new restrictions on debt settlers in October to try to rein in abuses. But, you can try to settle a debt for less than you owe on your own. However, there are some consequences that I'd like you to consider before giving in to the temptation to settle."