Cold French Fries . com » Financial Literacy

Stopping the Collection Calls

marcus — Tue, 29 Jun 2010 12:00:32 +0000

Not responding to collection calls and letters will only make your life miserable. If your personal finances are in dire straits and you are unable to pay the full amount dues on your monthly financial obligations, then you need to bring your creditors and those in which you are indebted up to date on your financial abilities. However, if you are only able to make a partial payment to your creditors…prepare to make the payments. If your creditors are unaware of your financial circumstances and you do not answer their calls or letters, then this frustration of seemingly creditor harassment will never subside and the creditors have only to assume you have abandoned your responsibility and financial commitments with them. If you don’t respond to their calls you could face heavy collection fees, further declining credit, law suits and income or bank account garnishments. Call your creditors and have your account noted on your new financial situation. You may find your financial institutions offering payment extensions or plans that will better meet your new financial ability until you are able to more comfortably manage your debt. But most important …follow through with your promises to make those new reduced/partial payments and if something new comes up financially…for better or worse….do not hesitate to communicate clearly again your newer situation and a new feasible budget to repay your debt. Additionally, I would suggest if you make partial payments that you should include an explanation letter each time a partial payment is sent as well as make payment more frequently than once a month to show a greater effort to satisfy and meet your financial responsibility. Some creditors will not be empathetic to any financial turns your life has made, but in case you ever find yourself in court with these creditors, the fact that you tried to remedy your inability to make full payments with regular partial payments will speak volumes in your defense and may influence a lenient decision in your favor.

Calculating Your Personal Finances

marcus — Thu, 29 Apr 2010 12:27:46 +0000

You have a tri-merged credit report and gathered any collection letters in your hand. You are now on your way to the easiest part of regaining control of your personal finances. First, we need to understand what percentage of your income (take home pay after taxes and deductions) is owed out each month. Divide each debt by your take home pay and you will reveal the percentage of your money that is being used each month for the individual debt.

Example:
Monthly Income – $2,400
Monthly Housing Payment – $975 975/2400 = 41%
Monthly Auto Payment – $245 245/2400 = 10%
Monthly Credit Cards – $125 125/2400 = 5%

Idealistically, your entire monthly debts should not equal more than 50-70% of your monthly take home pay. If you are living outside of that percentage area…lower is great, but on the higher side…then you are running the risk of financial collapse should you or the economy ever stumble again….and it will stumble again If your numbers mirror the above example then its time to get the red pen out and contact your creditors to negotiate a new lower payment. Base your requesting the reduced payment on the percentages and record their exact responses and remember to get any offers they extend in writing. And lastly, do not make any decision to pay one group without reviewing the totality of your new financial recovery plan. Its a good idea to start allowing an overnight time period before making financial decisions.

Next time, we will further discuss the conversation and the follow up with your contact with creditors, so you can begin feeling the effects of a recovering personal finance plan.

Goldman Sachs Scandal Pushes Financial Literacy

marcus — Tue, 27 Apr 2010 17:18:30 +0000

If the Goldman Sachs mortgage securities scandal hasn’t increased your thirst to mentally arm yourself with financial literacy, then you really like throwing and giving money away ….so I will forward you my mailing address on a private email later. It can be dizzying to the average person to understand the extent to which the banks create investment vehicles to drive money/profits to themselves, but it is not hard to learn the basics to insure you are able to defend your financial security and therefore, your future. However, as I sit through the past and current years of various board meetings on budget cuts as well as financial counselor feedback meetings, I realize more and more that the lack of understanding of the “flow of money” or financial literacy is the cause for most of the general public’s economic hardships and the past, present and future of their personal finances. Remember that dealing with your finances without a financial education is like entering the boxing ring without any prior fighting skills.

To comprehend the extent of the Goldman Sachs scandal is simple. The investment bank created investment programs, at the request of an uber-wealthy investor and sold them to the public knowing the securities would perform poorly and did not advise the investment purchasers they had bet against the same investment vehicle they were selling. Goldman suggested and sold securities they speculated were poor grade and as a result they made millions in investment fees and profits. ..and the uber-wealthy investor that requested the investment vehicle earned over $1 billion.

Why should you care? Local and State governments as well as retirement management firms invested in those Goldman securities and lost big….those particular losses helped move the economy to its fall and our current tax dollars and financial future were used to rescue investment firms like Goldman Sachs.

The result of “not knowing better,” over 8 million jobs and 7 million homes in foreclosure…all lost to the recession. Knowing is half the battle.

Increasing Your Income

marcus — Sun, 07 Mar 2010 12:00:40 +0000

Many times when people are working at correcting their financial status they focus their efforts in locating more money to pour over their personal finance issues. The solution for most is to get a part-time job now. However, I have not always been a fan of getting a part time job with but having a sure entrance and exit plan on working that 2nd job, because that 2nd job can easily become a necessity instead of a financial life preserver. Instead of just finding a part-time job that will hand you a few dollars to assist in making ends meet, explore making money by mixing activities you enjoy. Although I am a professional banker, I am also a certified personal trainer and this allows me time to exercise, maintain a free gym membership, meet people with like interests and oh yeah, and make some “extra” money. Although I make money from this “side” interest, I still manage finances as if that “side” job does not exist. If you start relying on the extra money then the side/voluntary job will become a necessity and not a luxury. Allow the 2nd job to free your main salary to address your main financial responsibilities and the extra money should be used for extras…such as additional retirement, short/long term disability insurance, a college savings, emergency funds, et cetera. Remember to use the 2nd job, and not let the 2nd job own you.

Understanding the Numbers

marcus — Fri, 05 Mar 2010 12:00:57 +0000

Okay, remember those numbers. Don’t know which numbers? Then go read, Getting Back on Track. The numbers of which I’m speaking represent your total monthly expenses / bills and your total monthly take home pay. Divide the monthly expense amount by the total income. That quotient (answer) will represent the percentage of your monthly income is committed to expenses each month and is called the debt to income. Example: $1500 monthly expenses divided by $2000 monthly income = 75% debt- to-income ratio. The debt to income should be in the area of 50%, however, many families live with that number closer to 75% and many times over 100%.

Review your expenses and make determinations if any of those monthly expenses can be reduced to allow for more monthly disposable income. Disposable income is money received that is not committed to paying a debt. We want to increase the disposable income, so that we can create a pool of “non-obligated” funds to be use to offset debts that weigh heavy on the monthly expenses because of high interest rates or maybe even drawn-out repayment plans. ..either way, the objective is to create some temporary financial breathing room. Once you have reduced your monthly payments to the lowest allowable level, you will be able to start aggressively paying debts you will later label as priority. Next we will talk about categorizing debts by priority and developing a strategy to eliminate more debt.

Opening a Childrens Savings Account

marcus — Mon, 22 Feb 2010 12:00:49 +0000

The list of items to which your kids wants to buy is beyond anything that you could ever have imagined, but now is the time to give them a dose of reality in the form of perspective and priority. Everything they want is not necessary and some items may have priority over others. This is not different than teaching your kids to stay clear of fire not just because its hot but because its dangerous to them and everyone around it. However, as your kids are chomping at the bit to hit the candy store, head to the bank and open a savings account. A savings account is a great tool to help them properly manage funds and is key to starting a good financial education. Always incentivize their bank visit efforts with a treat each to encourage increased visits to the bank. I offer an extra dollar or two if they schedule bank visits with me and even more if they walk to the bank to make ATM deposits. If the day is nice, bank visits for deposits are rewarded with ice cream…okay that’s for me, but you get the picture. I want them to associate dealing with their finances as a privilege and not a task or act of labor. Make a small, if not big, production of their opening this bank account by making conversation on the subject leading up to the day and moment and afterwards. Take pictures during their opening transaction and present them with a wallet or record book in which to record their transactions and later to illustrate account reconciliation with account statements and their personal records. Opening a bank account is great but using the account is a larg3e component to a good financial education. Make sure to call relatives (grandparents ) to inform them of the account, not to request money, but to develop healthy conversation with adults the kids like, so that there is a positive re-enforcement of the act of saving. Remember that placing the money in an intangible account may lead to a slight disappointment to a kid. They relate the bank to the last moment they had money in their hand…and now its gone with nothing to show for it, so some pictures, phone conversations with loved ones that use a bank and an account statement with a balance in their name can go a long way for a kid that’s nervous about where their money goes when they leave the bank.

Finding Something to Buy

marcus — Thu, 18 Feb 2010 12:00:16 +0000

Each time I earned some money as a little boy, my mother used to say to me…”that money is burning a hole in my pocket.” She was referring to my insatiable urge to spend my new found wealth on the first thing that offered itself for sale to me. I had no reason for earning the money other than to buy the items that were most appealing to me…such as candy and toys. However, as I became educated (and older) I realized there was much more to which my hard earned money could be applied. The same is the case with your kids. Point out the financial and economical aspects of educational lessons, such as history, everyday life and as well as the finances tied to their dreams and desires. Helping your kids to understand the cost (in a relation to money and time) will assist your children to begin setting goals that will make dreams more of a plan at an early age. Please DO NOT discourage any goals because dollar amounts are seemingly high, based on present financial conditions and experiences. We want our kids to think realistically about money, however, with a well structured and grounded financial sense , today’s kids will be able to go further than we ever thought because of an understanding of money of which we could only have imagined. A good place to start exploring the effects of money is a downtown shopping area or library…although there’s probably more on the internet…these physical areas provide tangible items to compare to real costs. Either way, try to interest your child in something other than candy and toys or at least exposed to the manufacturing or transportation aspects of their interests. You can even watch television and explain marketing and costs of a show’s production i.e. – actor’s pay, studio/real estate, electricity, satellites, etc. Try not to make every conversation about money, but do point out the financial basics, no different than you would make passing references to good and bad food choices.

Money Opportunity for Kids

marcus — Tue, 16 Feb 2010 12:00:36 +0000

Teaching kids to ride a bike is easy … if you have a bike for them to ride. Imagine trying to learn to ride a bike by only watching videos and with no bike to actually try your new found skill. So if you’re with me, then you can imagine to effectively educate your kids about money … it really helps to have some money for them. Remember, you don’t want to dilute their beginnings to a foundation to value money by just handing over a bunch of cash to your kids. You want them to understand there is a price/sacrifice for money and learn it’s not to be wasted. To help, provide your kids with opportunities to earn money. Create a “After-Chores Opportunity List.” This list will be chores around the house or neighborhood that are outside the realms of their daily/weekly chores. Possible jobs are picking up litter at the park, shining dad’s shoes, scrubbing the car tires, taking the trash out for a elderly neighbor….be creative and pay modestly. Paying large sums of money in a short period of time will not provide a realistic flow of money and may diminish the value and worth of the perception of “an honest day’s work and pay.” However, without getting too deep, let’s keep it simple and provide a method for your kid to earn some money, so that we can begin teaching some simple components of financial literacy and personal finance.

Buying a Home is Becoming More Expensive

marcus — Fri, 29 Jan 2010 12:30:47 +0000

Although home prices haven’t increased much and interest rates have remained steady over the past year, it’s still going to be a more expensive to buy a home soon. The Federal Housing Authority (FHA) has decided to increase the down payment requirements on the mortgage loans they guarantee/insure. This down payment was increased a year ago to its current level of 3.5% of the purchase price. (Ex. $100,000 purchase price X 3.5% =$3,500 down payment). Buyers can still obtain a mortgage for the 3.5% down payment, but they must meet a minimum credit score. Additionally, the FHA insurance premiums will increase on each loan and the amount a seller can contribute to offset the buyer’s closing costs will be reduced to 3% from 6%. FHA insures the majority of mortgage loans held by borrowers that would traditionally not qualify for a mortgage on more conventional mortgage loan routes…as called bank loans. FHA appears to be adopting more stringent guidelines for its borrowers, however, conventional loans generally require at least a 20% down payment and much higher credit scores. (Ex. $100,000 purchase price X 20% = $20,000 down payment). FHA is more lenient on past credit issues and is accepting of credit scores below 600.

There’s Money in Your Home

marcus — Thu, 28 Jan 2010 12:30:25 +0000

The FTHB Credit of $8,000(and $6,500 for repeat homebuyers) will be expiring soon. Those wishing to utilize the tax credit need to enter into a home purchase contract by April 30, 2010 and fully close the loan by June 30, 2010. The homebuyer’s tax credit can be used to offset expenses for a home purchase from the down payment to improvements. (Don’t forget the up to $1,500 energy tax credit for all home owners that receive energy efficient upgrades or additions in their homes.)

Buying a home is a big step for most; however, when considering your housing options, while reviewing your housing budget, sometimes seemingly more expensive moves may prove to be the most financially astute decision. Example – I purchased my first home…through FHA…. as a fulltime working student because I couldn’t afford the increasing rent at the time. My rent was increasing from $780 to 840/month and I was barely making ends meet and going to school. I took my father’s advice and decided to buy a home. Although I had to come up with approximately $1700 to close my loan, my new mortgage payment was $340/month and I had created a tax deduction with my mortgage interest payments. As the years went by the property became a pool of equity and eventually rental income. As a college student, it was strenuous to come up with $1700, but the temporarily more expensive choice made financial sense.