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What to Expect if Your Bank Closes

A Facebook fan read about some local banks closing, and wanted to know how – as an account holder – this will affect her. Here’s what you need to know if your bank fails.

So far this year, 115 banks have collapsed in the U.S., and many of them are local banks. The Federal Deposit Insurance Corp. maintains a “watch list” of problem banks, those with troubled finances. In August 2009, that watch list contained 416 banks, so experts predict that half or more of those banks could also fail. Once a bank that is "undercapitalized" get taken over by federal regulators, it is either run by the FDIC, as is the case with IndyMac, or the institution gets sold off by the FDIC to another bank.

Here's how bank failures affect you and other consumers. If you currently have money sitting in a deposit account at a bank, and that bank is FDIC insured, then your money is protected up to $250,000. In 2008, during the height of the biggest financial crisis most of us have ever experienced, the FDIC raised the limits on insured accounts to $250,000 from $100,000. This $250,000 limit – per depositor, per account – will be in place until Jan. 1, 2014, at which time it is scheduled to go back to $100,000. The FDIC insures so-called deposit accounts, which include the following: • Checking Accounts • Savings Accounts • Negotiable Order of Withdrawal Accounts (also called NOW accounts, which are savings accounts that allow you to write checks on them) • Time Deposit Accounts, (including Certificates of Deposit or CDs) • Negotiable Instruments (such as interest checks, outstanding cashier’s checks, or other items drawn on the accounts of the bank) The good news for most people is that even if your bank goes out of business, if you’ve put your money in a FDIC-insured institution, you can rest assured that your money – up to the limits described – is perfectly safe. In fact, since the FDIC’s inception, not a single dime of insured deposits has ever been lost. Got a financial question? Ask The Money Coach! You can reach me here on Facebook: http://www.facebook.com/themoneycoach

What Creditors Can Do When You're Broke

[caption id="attachment_1490" align="aligncenter" width="300" caption="Being broke is not a legal reason to not pay a debt."][/caption] A Facebook fan who is facing threats from a creditor/bill collector wanted to know what a creditor can do when you don’t have any money. Specifically, she wanted to know if a creditor can sue, get a judgment, and garnish her unemployment checks. The short answer is: They can sue and maybe even get a judgment. However, that unemployment check is “untouchable” and can’t be garnished. Read on for more details about how to handle yourself if a creditor comes after you in court. First off, you have to know that it doesn’t matter if you don’t have the money. If you owe a bill (or even if you don’t actually owe it), a creditor can still sue you, and the Court can still enter a judgment against you. Being broke - even due to unemployment - is not a legal reason to not pay a debt. As a practical matter, however, if you let a creditor know that you are unemployed, they may be more willing to negotiate or settle your debt. Either way, here's what to do if you get a summons or notice to appear in court: 1) First, by all means do answer the summons/complaint. If you don't, the court can automatically enter a judgment against you for whatever amount the creditor requests. 2) Next ... Do show up in court. Even if you owe money, you can make a case in court about why you should be able to pay less. Maybe you are disputing the debt, for example, because you don't think you owe what they say you owe. 3) Know the statute of limitations. If it's a very old bill, they may not have a legal leg to stand on, and the judge may throw out the case. 4) Rest assured knowing your legal rights. That bill collector/creditor can NOT garnish your unemployment check. Under federal law, certain income can not be garnished. This includes: * Social Security * Retirement Plan Benefits * Public Assistance (Welfare) Additionally, unless someone gets a judgment against you for child or spousal support, these forms of income also can NOT be garnished: * Worker's compensation * Unemployment * Disability benefits So don't let any creditor make idle threats, and claim they are going to "take" your unemployment income ... they can't! Here's what they can take/garnish: * A vehicle (to sell) * Regular wages * Bank accounts When it comes to money in bank accounts, though, if the money came from the "untouchable" sources listed above, like unemployment, that money can't be snatched by a creditor via garnishment. Good luck!

Unpaid Small Bills and Your Credit Score

A Facebook fan considering applying for a mortgage wanted to know how seriously her husband's credit rating would be impacted by a court judgment for a small bill of just $109.00. Here's what she needs to know - and you too, if you ever are facing court action concerning a debt. [caption id="attachment_1485" align="alignright" width="249" caption="A "public record" can do very serious damage to your credit rating, easily knocking down your credit score 100 points or more."][/caption] A "public record" -- such as a bankruptcy, charge-off, repossession or court judgment against you -- can do very serious damage to your credit rating, easily knocking down your credit score 100 points or more. In this instance, you have three options, all of which may be necessary to repair your spouse's good credit. 1) You can dispute the information with the heating company. 2) You can also dispute the information with the credit bureaus (TransUnion, Equifax, and Experian) if necessary. Also, 3) You can contest this judgment with the court, on the basis that you were never properly served (i.e. never legally notified that you needed to appear in court). Start with the courts. See if they'll dismiss the judgment on the grounds of improper service. If that gets you no where, go to the creditor and negotiate with them. As a final tactic, dispute the information with the credit bureaus. Two important points to note: It sounds like you've pulled your husband's credit scores -- perhaps his Vantage Scores, or some other credit scores, because FICO scores range from 300 to 850 points, and you've indicated your spouse's scores were 839 and 714, after previously having been around 915. Get your FICO scores also to see what those are. The FICO scores are the ones mortgage lenders and other creditors most frequently use. Lastly, under FICO's new credit scoring model, small bills of $100 or less will be disregarded when it comes to calculating your credit score. However, since the bill your husband allegedly owed was for $109, and since it turned into a judgment, it will still present a problem for him. One last-ditch effort might be to try to get the heating company to agree that the original bill was for less than $100. That way, even if it still shows up on your credit report, it won't hurt your husband's FICO credit score. This is assuming, of course, you also get that public record eliminated from his report. Good luck!

More Banks Bite the Dust

As of Oct. 2009, more than 100 banks have failed in the U.S. this year, costing depositors millions of dollars. Most people know that the FDIC insures deposits up to $250,000, but many consumers may not realize that this $250,000 in protection applies to the total of all your regular accounts – checking and savings – that you have with a given bank; not to each individual account. Right now, there are more than 400 banks on the FDIC's "Watch List" – meaning they're financially shaky. What should you do? Keep tabs on your bank by staying abreast of the news, and learn more about limits to the FDIC coverage, by checking out the "Failed Bank Information" section on the FDIC's web site (www.FDIC.gov). For more information, read my article called “With Hundreds of U.S. Banks Still in Jeopardy, Credit Crunch May Last Decades.”

FHA Loan Guidelines

[caption id="attachment_1467" align="aligncenter" width="300" caption="There is no federal income limit for an individual or a couple to qualify for an FHA loan."][/caption] A Facebook fan who is about to get married had asked me whether there is a limit in the amount of income to be able to qualify for FHA. It seems that they were advise to only put the fiance's name on the mortgage as their combined income would disqualify them from getting the FHA loan. Further, they would like to confirm whether there is any truth to the rumors that the $8,000 tax credit will be extended or doubled. First of all, congratulations on trying to buy your first home - and on your upcoming wedding in 2010. You indicated that only your fiance's name would be on the mortgage because you were told that your combined income is too high for an FHA loan. If this is what you were told, then the gentleman you are working with appears to have given you misinformation regarding FHA loans. There is no federal income limit for an individual or a couple to qualify for an FHA loan. It doesn't matter how little or how much you make, as long as you meet FHA's rules regarding your debt-to-income (DTI) ratios. Under FHA guidelines, no more than 31% of your gross income can go toward your housing costs, and 43% of your gross income can go toward your housing plus other monthly debts that are on your credit report (like your credit card payments, a student loan, or a car note). The only thing I can think of that this gentlemen might have been referencing is that if you have large debts, then putting you on the mortgage could throw off your combined debt-to-income ratio, making the two of you ineligible to qualify for an FHA loan, based on their DTI requirements. Also, the FHA does have loan limits related to the median price of a property. But those loan limits are fairly high, over $400,000 in most states. In other words, the FHA program caps the size of the mortgage you can get to just north of $400,000 in most areas. But this loan limit (on mortgage size) does not impose any restrictions on how much income you or your fiance can make. You can learn more about FHA loans at: www.fha.gov. Regarding your second question, whether or not the $8,000 tax credit, will be extended or doubled, my answer is: There is talk in Congress right now to expand the credit, but the reality is that none of us knows whether that will pass or not. If you are seriously in the market for a home, and you and your fiance find a place you like, I would not hesitate to put in your offer and go ahead and try to close, as you've suggested you would like to do, before Nov. 30th. This way, you will get the benefit of that $8,000 tax credit, because there's no guarantee that it will be extended. It all depends on what happens in D.C. and whether or not the politicians think it's necessary to spur the housing market.

Here is a free video tip on how to negotiate with your creditors: http://ping.fm/55ai2 more tips here: http://ping.fm/mrOkt

Wall St. Is Winning: Elizabeth Warren : Tech Ticker, Yahoo! Finance

Kudos to Elizabeth Warren, chair of the Congressional Oversight Panel, for her straight talk on what's going on with banks during this ongoing credit crisis. Warren makes several key points to bolster her suggestion that banking conditions are actually worse than they were a year ago -- despite the $700 billion in taxpayer money Wall Street received. Warren notes, specifically, that: - Many "big" banks have gotten bigger (So much for the idea of making sure that there are no institutions that are "too big to fail." - Toxic Assets remain a problem (Even the TARP program was designed to get rid of illiquid, non-performing assets, these so-called toxic assets continue to drag down banks' balance sheets) - Stress Tests haven't worked (Warren accurately observes that one worst-case scenario - the one predicting how bad unemployment could get - has been "blown through" but nothing is being done about it) I would add one additional pointed observation to Warren's analysis, namely: - The credit crunch remains alive and well (The credit crisis reared its ugly head in 2007, when consumers couldn't get home loans, then it spread to institutions in 2008, when banks wouldn't even lend to themselves. Here we are in late 2009, and consumers and small business owners alike all know how tough it is to get credit - whether it's a business loan for expansion or a consumer loan, such as a mortgage, credit card, or student loan. Warren said the banks are carrying on like it's a big "party," and acting like "it's business as usual." Hopefully, the Obama Administration will insist that the bank play by new rules - customer-friendly ones - especially since it was the consumer (i.e. taxpayer) that bailed these banks out of financial ruin.

Tips for Splitting Assets: When Entrepreneurs Divorce

The owner of the Los Angeles Dodgers, Frank McCourt, is in divorce talks with his wife Jamie, the CEO for the team. This power couple is one of 1.2 million husband-and-wife teams who run a business together, according to the National Federation for Independent Business. And when couples split, often so can the business. John Moores sold the Padres earlier this year as a result of the petition for divorce his wife, Becky Moores, filed a year earlier. They then divvied up the proceeds. It is rare that couples who divorce can remain doing business together. So, what should you do with your business assets if you divorce from your spouse with whom you do business? Here are some tips. Buy the other spouse out. This is a good choice if one spouse started the business, or is more passionate about it. You can trade his or her stake for other assets, such as equity in the home or a greater share of the retirement accounts. Or you can take out a loan to pay cash. Sell it and divide the profits. Some small businesses are tough to sell, especially in today's economy, but if the company operates profitably, then it's possible to find a buyer. Start seeking buyers sooner rather than later before any divorce animosity can tour the business sour. Split it in two. This only works well if the company has separate units that can be spun off from one another. If you go for this option, you may want to have a valuation done to determine the worth of each unit. Because once the company is split and the divorce is final, it will be a lot harder to go back and make a claim to other business if yours fails and your ex-partner's takes off. Speed up the succession plan. Since many family businesses often name children as successors, a divorcing couple with adult children may be able to choose this option. Each spouse could possibly stay on as a silent partner with a small stake in the business, so long as you are willing to let your children run the business. This is hard to do even when divorce is not part of the picture!

How Credit Rating Can Affect Your Ability to Get a Job

[caption id="attachment_1440" align="aligncenter" width="299" caption="A bad credit rating can impact a person's ability to get a job."][/caption] A Facebook fan had heard that a bad credit rating could keep him from getting a job. He wanted to verify whether this is true and wanted to know where he find out about his credit rating. It is true that having a bad credit rating can impact a person's ability to get a job. Employers are increasingly pulling people's credit reports before offering jobs ... or in some cases, they'll check a person's credit after a job offer has been made. If the individual has poor credit, that job offer may be rescinded. By some estimates, one-third of all employers run credit checks. I've also heard statistics suggesting that as many as 70% of all employers do a credit check on employment candidates. I think the 70% figure is probably high. But in any cases, it's imperative to maintain good credit while job-hunting. To find out what's in your credit file, just go to www.annualcreditreport.com. This is the website maintained by the "Big 3" credit bureaus -- TransUnion, Equifax and Experian. Under federal law, you can get one free copy of your credit report every 12 months from each of these credit bureaus. If you find any erroneous or outdated information in your credit files, dispute that data with the credit bureaus. I also recommend that people use a credit monitoring service, to keep regular tabs on their credit and help guard against identity theft. FreeCreditReport.com has a good credit monitoring service that I use and would recommend to anyone.

Are Mortgage Companies Legitimate?

[caption id="attachment_1434" align="aligncenter" width="300" caption="When in doubt, always do a little bit of homework or research on the firm."][/caption] A Facebook fan has asked whether the National Mortgage Help Center is a legitimate company. I've never had any dealings with National Mortgage Help Center, nor have I heard anything about them from consumers or in the media. So I can't really comment with any authority or insight into whether this particular company is "legitimate" or not. What I can say is that if your brother is about to use this company - and he has any reservations or doubts about doing so - he should take normal precautions and investigate the company's track record. Do a Better Business Bureau search on it. Google the company's name and see if there are any serious reports of or complaints or accusations of wrongdoing. It could very well be squeaky clean and highly reputable. He'll never know unless he does at least a little bit of homework or research on the firm. As for you, if you ever face being delinquent on your home loan (i.e. 30 days or more late), then you should seriously consider re-organizing your finances, establishing a new household budget, and perhaps getting government assistance if your home loan is unaffordable. For both you and your brother, President Obama's home rescue plan may offer some relief. It's designed to help cash-strapped homeowners refinance their loans or get loan modifications. You can learn more about this housing program at www.MakingHomeAffordable.gov. Also, if any lenders or mortgage industry officials say they'll help you use the government's program for a fee, simply say: "Thanks, but no thanks." The government's program is free of charge, and you can readily do it yourself at no cost.

Credit Card Co Offers Fixed-Rate to Lure Consumers; Is This a Good Deal?

Banks are hurting with the economy and are looking for ways to lure back consumers who have increasingly turned to debit cards and cash-only payments. [caption id="attachment_1415" align="alignleft" width="278" caption="New Bank of America card sheds variable interest rate"][/caption] This October, Bank of America rolled out its "Basic" card, which establishes for the life of the card one interest rate for all purchases, transactions and cash advances. “For those consumers who just want the basics, our goal is to offer products with features that are predictable, easy to understand and help them manage their finances responsibly," says Ric Struthers, president of Bank of America Global Card Services. Other features of the card are: • One interest rate — U.S. Prime plus a margin of 14 percent — that never changes for the life of the account. Rate increases and decreases will only occur if the Prime Rate changes. • No over-the-limit fee. • Easy- to-understand, single-page disclosure explains terms and conditions. • One flat fee of $39 for late payments Is this card a good deal? The interest rate. At 14% plus prime, you're looking at a 17% interest rate. There are some consumers out there with interest rates of 9.99% and 13.99%. If you have good credit, you could obtain a lower interest rate than this offer. However, if you typically have interest rates over 20% then this card could be a good deal for you.....if you qualify. The late fees. Some cards, especially ones issued from community banks, have $15 late payment penalties. The $39 late fee on the Bank of America Basic card is one of the highest fees charged by banks. Remember banks are in the business of making money, not losing money. Whatever card they issue, it is meant to be done in their best interests, not yours. The best thing you can do for yourself is either pay your cards off every month, at least make the minimum payment, or opt for cash. There's nothing wrong with using your debit card if you have money in the bank to cover the purchases

Should You Leave a Low Paying Job Or Just Ask For a Raise?

[caption id="attachment_1407" align="alignright" width="200" caption="If you're cash-strapped, the simple act of walking into your boss's office and getting a raise could be just the thing you need to boost your finances in this shaky economy."][/caption] A Facebook fan who saw me giving career advice on the Tyra Banks Show had a question about whether to leave a well-liked job simply to earn more money elsewhere. My answer, simply put, is: NO. Here’s my advice for that person and others contemplating making a job or career switch solely to snag a higher paycheck. If you're working in a "dream job" in the career you planned for, I wouldn't suggest job-hunting as your first course of action in order to become more financially stable. Plus, you've indicated that you've looked around at other jobs and don't want to try any of them. Since you went to college for your current job, and are working in your chosen career, the best strategy is to try to maximize your pay and financial incentives at your present employer. You say the pay is "low" -- and indeed your $23,900 a year paycheck falls below the average annual salary of $31,824, according to Sept. 2009 Labor Department statistics. So why not request a raise? Get a raise by constantly documenting your work accomplishments to demonstrate your performance and what you offer to the organization. In other words, do not just walk into to your boss and say, “I want a raise,” or “I think deserve a raise.” Your boss won’t care that you’ve been doing good work, or that you’ve come to work every day on time. That’s not good enough. That’s a basic minimum level of expected performance. You have to show—in numerical terms—how you benefit the organization. If you saved the company X amount of dollars, if you created a new program that has generated a certain amount of income for the business, if you have been instrumental in training, if you have done hiring, if you have been a sales superstar or a technology whiz, whatever it is that you have done, document that. Then go ask for - and get - the raise you're due. Alternatively, why not try to get other fringe benefits and perks from your employer that could be valuable? I'm thinking of extra vacation days, a year-end bonus, or perhaps some freebies -- like your employer paying for a host on things on your behalf: ranging from gym memberships to financially planning services to any student loans you may have. It doesn't hurt to ask. The worst that can happen is that your employer says "No." And then you're in the same position. Ditto for asking for a raise. You can read more about this on a related article I wrote titled, "How to Negotiate for a Raise - Even in a Bad Economy" by following this link - http://www.associatedcontent.com/article/2256855/how_to_negotiate_for_a_raise_even_in.html?cat=31

5 Things to Know about Filing Bankruptcy

[caption id="attachment_1396" align="aligncenter" width="500" caption="Comic by Dan Gibson @ DestroyDebt.com"][/caption] The number of people filing for personal bankruptcy was up 36.5% in the first half of 2009 from the same period a year before, and more than likely that number will keep rising as people seek their own personal bailout from the recession. Here are a few things to know if you have ever contemplated filing. 1. More than likely, you will still have to pay something. Some people believe that filing bankruptcy means that they will get out of paying any of their debt. This is not true in most cases. Most people, those with some regular income or certain savings, qualify for a Chapter 13 bankruptcy, which puts them on a repayment plan. Although some of your debt may get reduced or consolidated, you will have to make payments on the remaining balance for about three to five years until the debt is paid off. 2. All assets could be liquidated. Although you can save your home and some other assets under Chapter 13, that is not always the case with Chapter 7—and you'll still owe on some payments. If you're without regular income you may be able to file Chapter 7 and avoid a payment plan on eligible debt, such as credit card balances, but will still have to pay on child support, alimony and most student loans. You also will have to pay your mortgage, but in some instances under Chapter 7, you could be forced to sell your home to pay off your debt. If you don't have enough equity in your home to benefit creditors, don't think that will save you. In some cases you will just be asked to move out, and your creditor will get to keep the home. 3. Bankruptcy can be better than debt settlement programs. Although I advocate for people to try to settle their debts directly with their creditors themselves, rather than choosing bankruptcy, if you don't have the stamina to settle your debts yourself, you can opt to enter a debt settlement program. However, you should know that you would still have to make regular payments to the settlement firm before they will negotiate with your debtors. Once there is a settlement plan, you will have to pay taxes on the amount you saved. For example, if your debt was $10,000 and the settlement plan says you only have to pay $3,000, you will have to pay taxes on the $7,000 you saved. The IRS considers it income. If you file bankruptcy, you do not have to pay taxes on the erased debt. 4. You can't hide your assets. If you're filing bankruptcy, you have to reveal all of your assets. Selling off items for cheap, or to friends and family until you can buy it back later is not allowed. Anything you sold or gave away within a year of filing bankruptcy can be retrieved by the court or trustee. So if you repaid Grandma $1,000 rather than pay your credit card, the court can make Grandma pay back the $1,000 or risk getting sued. You could also be jailed for perjury. 5. You need money to file for bankruptcy. Most people don't realize that lawyer fees for Chapter 7 bankruptcy could be $2,000 or higher. And guess what? That lawyer wants to be paid upfront, after all they want to be sure that they will get paid. Lawyers in Chapter 13 cases might just roll part of their fees into the payment plan. Chapter 7 lawyers can't do that because you're seeking relief from all debt, which would include their bill! ___________________ [caption id="attachment_1283" align="alignleft" width="125" caption="Get Help Now"][/caption] Not sure how to proceed now? Get free personalized financial coaching from the National Foundation for Debt Management (NFDM), a reputable non-profit credit counseling agency which negotiates with creditors, gets your interest rates lowered, and creates a plan to quickly get you out of debt. Since I am a spokesperson for NFDM, they’ve agreed to provide a free on-one-one counseling session to my readers and fans. With NFDM, there is no obligation to buy anything, and there will be no pressure on you to do anything. All you have to do is share your situation openly and honestly, and in return, I promise that you will get honest and real-world advice on how to handle your situation. To arrange for your free counseling session, click on this link http://www.themoneycoach.net/gethelpnow.htm to sign up for your free consultation.

5 Tips to Understanding What Affects Your Credit Score

You probably already know that not paying a bill can adversely affect your credit score, but do you know by about how much? Do you know what effect opening up a retailer charge card just to get 10% off on your purchase can have on your credit score? These are some things you should be aware of. Here are 5 tips that will help you understand how certain decisions can affect your credit score and what you can do to maximize your score. Pay Your Bills on Time. Even if you can only make minimum payments, that’s better than being late with a bill because late payments of 30 days or more can drop your FICO score by 50 points or more. If you suffer from "Financial Deficit Disorder" and just can't seem to get your bills paid on time, try setting up automatic bill pay. Don’t Max Out Your Credit Cards. Since your credit score factors in your debt to credit ratio, try to keep your balances to no more than 30% of your available credit limit. For instance, if you have a card with a $10,000 credit line, make sure you don’t carry a balance of more than $3,000 on that card. If you can pay off your credit cards each month, that’s even better. But if you can’t, it’s better to spread out debt over a few cards, to maintain lower balances, rather than max out any one card. Keep Older, Established Accounts Open. It feels good to pay off a credit card and finally get that statement showing a zero balance. However, if you pay off a creditor, don’t make the mistake of closing that account because 15% of your FICO score is based on the length of your credit history. The longer a credit history you have, the better it is for your score. Avoid “Bad” Forms of Credit. I’m sure you’ve walked into a department store and been offered 10% off, or some other discount, just for opening up a credit card with that retailer, right? Did you take the bait? If so, realize that you might have hurt your credit score. Here’s why. The FICO scoring model rates some forms of credit more favorably than others. For instance, the presence of a mortgage on your credit report will help your score, but too many consumer finance cards (i.e., the cards issued by department stores and retailers) can hurt it. For this reason, do yourself a favor and say “No” to those credit card offers from stores you patronize. Just use a major credit card — like a Visa, MasterCard, American Express, or Discover Card — if you need to use credit to make your purchases. Only Apply for Credit When You Truly Need It. Just because you get a pre-approved offer in the mail, or some telemarketer calls you to solicit for a credit card, doesn’t mean you should accept it. You should only seek out credit when you absolutely need it because taking on too much new credit - or even just applying for it - will lower your credit score. Each time you apply for a loan, whether it is a credit card, an auto loan, a mortgage, or a student loan, the lender pulls your credit report and generates an “inquiry” on your credit file. That inquiry remains there for two years. A single inquiry can lower your FICO score by up as much as 35 points. A longer version of this post appeared yesterday on Gwyneth Paltrow's blog, as "Top 10 Tips for Saving Money and Investing Wisely." Read it and my other tips to her readers here.

I've shared 10 tips for saving money with Gwyneth Paltrow on GOOP. Also mentioned in Huff Post. http://ping.fm/nRsJ2

Medical Bills and the Debt Collection Agency's Processing Fee

[caption id="attachment_1368" align="alignright" width="250" caption="If you can't pay what you owe in full to the medical company, then request a reasonable payment plan."][/caption] A Facebook fan who has a medical bill that got overlooked after she lost her job was contacted by a debt collection agency who said they have added $150 to the bill as processing fee. She wanted to know if is advisable to contact the medical billing company directly after it has gotten to this point. To answer her question about that past-due medical bill, yes, I would suggest that you contact the medical billing company (or your health care provider) first. They may be willing to work out a deal with you, particularly to allow you to pay a lower amount than the debt collection agency. Needless to say that $150 so-called "processing fee" is just the debt collection firm's way of trying to make some extra money off of you. If you can't pay what you owe in full to the medical company, then request a reasonable payment plan, perhaps of 6 months or so (depending on what you can afford). If they balk, and say "No, you must speak to the debt collector", then do contact the collection agency and start negotiating. Try to take a hard stance, and refuse to pay that extra $150 bill. Say "I can agree to pay what I originally owed, but I'm not willing or able to pay an extra $150 in miscellaneous fees."

Buying Your First Home

A Facebook fan, who wrote me saying she earns about $30,000 a year, asked about buying a home with little to no money down. If you or someone you know is trying to become a first-time homeowner, and you don't have a high salary or a lot of savings, there is financial assistance available if you don't have a large down-payment or enough money for closing costs. Over the past decade there has been a surge in first-time homebuyer initiatives designed to give people a helping hand in overcoming the down payment dilemma. In fact, in every state in America there are a broad range of first-time homebuyer assistance programs, including:

• Free grants and cash gifts for down payments – with funds ranging from $500 to as much as $40,000
• Money for closing costs, prepaid escrows and other mortgage expenses
• Grants or loans to fix up homes in need of repair
• 100% financing programs, so that you pay zero down on a home
• Home loans that feature 0% interest, low interest rates or below-market interest rates
• Mortgages with loan forgiveness benefits or no payments for a set period of time
• Federal and state housing tax credits
• Homebuyer workshops to teach you about the rights and responsibilities of being a homeowner
• Mortgage education classes that explain the mortgage process
• Budgeting, credit counseling, money-management and overall financial planning services

No matter where you reside or where you’re looking to settle down, if you’re a first-time homebuyer, there’s a program that can help you purchase a house. And virtually every type of residence is eligible under these programs, including single-family homes, condominiums, townhouses, modular homes, and manufactured housing. Many assistance programs have income limitations, particularly those that provide city, state or federal funding. But other programs have no income criteria. Also, certain housing assistance plans impose caps on the purchase price of the property you can buy. Despite these restrictions, you’ll find that taking advantage of a first-time homebuyers’ program is one of the smartest things you can do. It will allow you to get into a home sooner, save money in the process, and simultaneously build wealth. Even if you’ve already been successful at saving on your own, I highly recommend that you utilize a first-time homebuyer program for three reasons. First, if you can get down payment assistance, and you combine that money with your own savings, you’ll walk into your new home with a greater piece of equity. Second, using funds from a first-time homeowners’ initiative can allow you to keep some of your own savings in the bank as cash reserves – rather than depleting all of your money for the down payment and closing costs. Finally, many first-time homebuyer programs have a mandatory homeownership counseling component. Consequently, the knowledge and skills you’ll gain from this counseling will make you better-educated and more prepared for homeownership as you make the transition from renter to owner. Google the phrase "first-time homebuyer program" along with your city or state to find programs in your area. You can also pick up a copy of my book, Your First Home, for specific homeowner assistance programs in every state. Chapter 4 of Your First Home details eight sources of aid you can turn to for financial and educational assistance in buying a home. These eight sources include:

• Federal and/or National Programs
• State Aid
• County Initiatives
• Local/Municipal or City Efforts
• Non-Profit and Community-Based organizations
• Lender-Specific Programs
• Programs Based on Your Job or Occupation
• Employed Assisted Housing Initiatives

Becoming a first-time homebuyer is an exciting and commendable goal. Just make sure you're truly ready for the rights and responsibilities of homeownership.

10 Ways to Save on Your Purchases -- Reader Participation Required for Success

A step toward becoming debt free is to cut your spending and maintain your new lifestyle. Some people feel it is too hard, say, to stop smoking, cut coupons and then remember to use them, or do your own home maintenance. So start with what you can handle. You know your own vices and where you waste money when you could be saving. I can tell you what to do, but sometimes in order to motivate yourself, you need to take charge. As a result, I am giving you an exercise to determine how you can save on purchases or cut your overall spending for your own household. Come up with 10 ways to save and share part or all of your list with other readers by leaving a comment. Here's a list of three to get you started. Charge only what you can pay off. Getting a low interest rate on your credit cards can save you hundreds, even thousands of dollars a year in interest, but you can save even more if you don't carry a balance. When you make purchases on your credit cards, be aware what you have in your checking account. If you will not be able to pay off the entire balance at the end of the month when the bill is due, then don't buy the item. Choose take-out or eat at home. Have you ever paid more than $5 for an omelet when you know a dozen eggs cost under $2? What about $15 for a plate of pasta when a box of Rigatoni and a jar of Ragu at your grocery store would feed at least four people and cost you less than $7 total? Eating at home can save you a ton of money. However, if you feel you really crave restaurant food, try buying take-out, and save on tips. You can even double your savings by getting take-out at lunch time when many restaurants charge less for the same meal they serve during dinner hours. Just save your lunch take-out for dinner. Buy generic brands. Buying generic brand products, especially staples such as cereal, sugar, flour and other items can save you several dollars at the checkout lane without compromising quality or taste. Opting for generic prescription medicines are also a great way to keep money in your pocket.

Starting Your Own Business

A Facebook fan asked for some tips on starting his own business. It does not come as a surprise that although America may be in a recession with a rising job less rate, many laid off workers are contemplating a life of entrepreneurship. If you’re thinking of becoming your own boss, there’s much to heed before you start dipping into your retirement savings or severance pay to launch your own business. Here are six quick tips for entrepreneurs trying to finance a start-up or expand existing operations:

1. Do seek “trade credit” from vendors and suppliers. Too many entrepreneurs dream of going to a bank and getting a business loan or line of credit for their enterprise, but maybe you don’t need a traditional bank loan at all to launch or grow your business. If you can get your vendors and suppliers to agree to provide you with trade credit — i.e. the ability to pay for goods and services over time — you can creatively and more frugally run your operation.
2. Do request major funding long before you need it. Realize that getting money from “angel” investors and venture capitalists can be a longer-than-expected process; it often takes 6 to 12 months to secure. See the “How to Get Funding from Angel Investors” article from the Wall Street Journal.
3. Don’t feel compelled to buy everything. Ask yourself: Do I really need to purchase equipment, furniture, computers, etc? You may be able to get by, temporarily, by bartering, or even by renting and leasing equipment. And that’s OK!
[caption id="attachment_1325" align="aligncenter" width="300" caption="When starting a business, do not feel compelled to buy everything."][/caption]
4. Do get “buy in” from your spouse/partner. Many new (and veteran) entrepreneurs will tell you one of the biggest dream killers they’ve encountered is an un-supportive spouse. Make sure your partner is on board with your entrepreneurial ambitions. If not, you’ll face a host of financial arguments and money-battles that will be counter-productive to you building a business.
5. Don’t let your personal credit rating lapse. Amid the current environment, your credit standing is more important than ever. Guard it jealously. Pay all bills on time. Only take out loans/credit when you truly need it. The higher your FICO scores, the better loan rates and terms you’ll get when it is time to do business with a bank —or even just getting a corporate credit card. See more on how to get your financial house in order.
6. Don’t “bet the farm.” Smart entrepreneurs don’t “roll the dice” and risk everything. They take risks, but they’re calculated risks. Don’t gamble everything: 100% of your savings, your credit, putting your home up, etc. in the hopes that you’ll create a successful business. Be willing to invest in your business of course, but not foolishly, and and not at the expense of everything else.

School Loan Cancellation

A couple of Facebook fans who recently heard me on the Russ Parr Show have asked me to elaborate on the Student Loan Cancellation Program. Under federal law, you can get your federal student loans canceled or discharged for many different circumstances. Reasons for loan discharge:

• Death
• Total and permanent disability
• School-related issues or improper certification by your school
• Full-time teaching or public service work
• Military service
• Bankruptcy

Before I explain the nuts and bolts of what’s required for these various loan cancellations, let me first say that there are a multitude of scenarios that won’t get you a loan discharge. Reasons that won‘t get you a loan discharge:

• If you dropped out of school for any reason
• Experienced personal problems that forced you to abandon your studies
• Didn’t like your instructors
• Couldn’t get a job after graduation
• Were plagued by financial difficulties
• If you thought the quality of the instruction you received was sub-par

None of those reasons will hold weight with the Department of Education. Perseverance Required Let me also caution you that getting a student loan canceled or discharged is rare and often requires tremendous perseverance, know-how, and work on your part. Having said that, even though obtaining a discharge can be a big hassle, it is nevertheless certainly worth the effort and frustration you may experience in the process. For more details, below are some links to previous articles which I have written regarding this topic:

• How to Qualify for a Student Loan Cancellation or a Student Loan Discharge
• Student Loan Cancellation Due to Death
• Student Loan Cancellation Due To Disability
• Student Loan Cancellations for School-Related Issues and False Certification
• Student Loan Cancellations for Teaching and Community Service
• Student Loan Cancellation and Discharge for Military Service
• Student Loan Cancellations In Bankruptcy Are Rare – But Possible
• Law School Loan Forgiveness
• Health-Care Related Loan Forgiveness

Why You Should Answer a Summons on Debt Collection

If you can't pay a debt, creditors are willing to settle out of court with you for a lump sum payment of less than the amount you owe, or a monthly payment plan, but they also will not hesitate to sue you for the full amount of the money you owe them. So what should you do if you receive a summons and complaint from a creditor? Answer it. What Happens If You Do Not Answer the Complaint If you choose not to answer the complaint, the Court will enter a judgment against you, determining that you owe the creditor whatever amount they asked for. You may even be told to pay their attorney fees. The creditor can then use that judgment to garnish your wages, take money from non-exempt bank accounts or put a lien on your property. If You Do File An Answer If you answer the complaint (and you usually have about 20 days to respond to the plaintiff's claims), you preserve your right to be able to argue your position in Court. You also will be notified of any future Court dates. You can use your time in Court to state why you don't owe the money they claim. What If You Do Owe the Money they Claim Even if you do know for sure that you owe the exact amount the debtor claims, you can still use your time in Court to state another amount that you can afford to pay. Although typically if you admit you that amount, you will receive a judgment against you for said amount. The real leverage comes simply by answering. The debtor does not want to appear in Court no more than you do. They simply want to get paid. Once they see how time-consuming this may become for them since they are not receiving a default judgment, they may be more willing to enter a settlement agreement with you. [caption id="attachment_1300" align="alignright" width="149" caption="Debtors will take you to court for their money"][/caption] What If You Don't Have the Money to Pay? It doesn't matter if you don't have the money. The debtor can still sue and the Court can still enter a judgment against you. Being broke is not an excusable reason to back out of your financial responsibilities, as the debtor is willing to shake the money out of you if it could. In cases like that you might just want to consider filing for bankruptcy instead. However, if in your financial statement and affidavit you can show how you don't have the funds to pay, nor have a steady income, the debtor may be more willing to negotiate with you for a settlement plan. What If You Offer to Make Monthly Payments? A debtor does not have to enter into a payment plan with you. They can reject your offer and then sue you for the full amount. A debtor is more likely to reject a payment plan if they believe you have the means to pay, you have wages they can garnish, property they can attach a lien to, or a bank account they can raid. It is often, however, in the debtor's financial interest if they reach a settlement plan with you if you don't have the means to pay. [caption id="attachment_1306" align="alignleft" width="166" caption="Try to settle a debt"][/caption] Negotiate Your Debt You're in a better position to negotiate your debt before you stop making payments. However, if you're receiving debt collection notices, that means you've already stopped. So, the older your debt gets, the better your chances are to get a good deal on a lump sum payment. At some point some creditors may have "written off" your debt as a bad debt expense. If they've written it off but then you come to offer to make a payment, they should be willing to take almost any amount from you, as any amount is better than no amount. If you're offering a lump sum, try offering one-quarter or one-third of what you owe. Be careful with offering a monthly payment plan. Because if you miss a payment, the clock can start all over again for the full amount of the debt you owe. If you need further guidance, sign up for a free consultation about how you can improve your financial situation. RELATED ARTICLES Free Financial Guidance Statute of Limitations on Debt You Can Stop Debt Collector Harassment 5 Tips if You're Facing Court Action from a Debt Collector

Watch me today and on Sunday at 3:30 pm ET on Headline News.

Watch me this weekend on CNN's Your Bottom Line with host Gerri Willis. 9:30 ET Sat.

Home Affordable Modification Plan

Part of President Obama’s $75 billion mortgage rescue plan is aimed at helping people avoid foreclosure – by either refinancing their house notes or modifying their loans. Many lenders, large and small, are even agreeing to delay foreclosure proceedings for homeowners that meet certain criteria. To find out if you’re likely to qualify for government assistance under the Home Affordable Modification Plan, visit http://www.MakingHomeAffordable.gov. This is where you can find out if you qualify for a loan refinance or a loan modification under President Obama's housing plan. To be eligible for a loan modification, you have to meet at least five criteria: - the home must be your primary residence - you must owe less than $729,750 on the home (the federal limit) - you must be having trouble making payments (but you don't have to be late) - your mortgage must have been received before Jan. 1, 2009; and - your total housing payment (principal, interest, taxes & insurance) must now exceed 31% of your gross income To be eligible for a loan refinance, your existing mortgage must also be owned or insured by Fannie Mae or Freddie Mac. (That is not a criteria for a loan modification). To find out if your home loan is owned or insured by Fannie or Freddie, contact:

• 1-800-7FANNIE (8am to 8pm EST)
• www.fanniemae.com/loanlookup

or

• 1-800-FREDDIE (8am to 8pm EST)
• www.freddiemac.com/mymortgage

Get your documents in order Once you determine that you’re eligible for a loan modification, pull together a slew of paperwork: paycheck stubs, your last tax return, recent mortgage statements, an itemized list of your expenses, as well as anything that substantiates your financial hardship – such as those large medical bills, and a letter describing why you fell into trouble in the first place (i.e. a loss of income, etc.). You’ll need all these documents to backup your request for help. Only your current lender can modify the terms of an existing mortgage. Be prepared for a slow process One thing to keep in mind is that a loan modification is not mandatory. Lenders are doing these on a "voluntary" basis. Therefore, banks don't have to reply to you in, say, 30 days, or even in 60 days. However, banks are getting "incentive" payments to do workouts/loan mods, so when President Obama launched this housing rescue plan, nearly all the major banks got on board and agreed to further postponements and freezes on foreclosures. Many of them signed agreements to participate. Here is a list of lenders/loan servicers on board with the program, according to the MakingHomeAffordable.gov website: http://www.makinghomeaffordable.gov/contact_servicer.html.

Free Financial Guidance

People struggling with their finances often ask me for personalized coaching to help solve their money issues. While I don’t do one-on-one coaching anymore (I stopped doing that about 3 years ago to focus on group seminars where I can reach larger numbers of people), I can offer some free financial guidance in other ways.

First, I have partnered with the National Foundation for Debt Management (NFDM), a reputable non-profit credit counseling agency which negotiates with creditors, gets your interest rates lowered, and creates a plan to quickly get you out of debt. Since I am a spokesperson for NFDM, they’ve agreed to provide a free on-one-one counseling session to my readers and fans. With NFDM, there is no obligation to buy anything, and there will be no pressure on you to do anything.  All you have to do is share your situation openly and honestly, and in return, I promise that you will get honest and real-world advice on how to handle your situation.  To arrange for your free counseling session, click on this link http://www.themoneycoach.net/gethelpnow.htm to sign up for your free consultation. Additionally, I post articles and financial advice to social networking sites, such as Facebook and Twitter, as well as on my own website, blog, and in my newsletter at www.TheMoneyCoach.net. There you will find my tips on a host of topics ranging from budgeting, credit and debt, to student loans, taxes, insurance, investing and real estate. Lastly, you can get free information from my books, including Zero Debt: The Ultimate Guide to Financial Freedom, just by checking those books out from your local library.

5 Tips if You're Facing Court Action from a Debt Collector

[caption id="attachment_1264" align="aligncenter" width="500" caption="Comic by Dan Gibson @ DestroyDebt.com"]

      [/caption]     Creditors can sell your debt. When your debt is sold to collectors, some might use the threat of court action to try to intimidate you in order to get you to pay up.   Technically, it is illegal for collectors or creditors to threaten court action if they do not intend to carry through with it.  Taking you to court is time consuming and expensive for them, and there is no guarantee it will result in the outcome the creditor wants.  So typically, a court action is a tactic to get you to pay up, or to obtain a default judgment against you if you don't respond to a summons and complaint. Here are 5 things you should know in case you are presented with a court action. 1) Answer a summons and complaint.  If a creditor serves you with a summons and complaint, not merely a letter saying you owe debt, then you must answer within a certain timeframe set by your state laws (perhaps 10, 20 or 30 days), in order to avoid a default judgment. I'll speak more on how to answer a summons in the coming days. 2) Know the statute of limitations. There is a time limit on how long creditors have in which to try to obtain a judgment against you for the money you may owe them.  That "statute of limitations" varies by state and type of debt.  Typically, it is anywhere from 3 years to 10 years. A creditor can use the limits in your state or the state where they are located. They will often use the state with the longest statute of limitations, because it is obviously beneficial for them. Click here for a state-by-state list of limitations timeframes for debt.  3) Credit bureaus limits are not the same as debt statute of limitations. Federal law typically requires credit bureaus to drop negative information after about seven years from the date of your first missed payment. (There are exceptions, such as bankruptcies can stay on for 10 years, and tax liens can stay on for longer). If you live in a state with a 3-year statute of limitations on legal collection of debt, it will still show up on your credit report.  If live in a state that allows judgments to be entered for 10 years, it is possible the debt came off your credit report after 6 years.  So do not use your credit report to help you determine if you owe debt. You can use it, however, to check to see when the creditor first considered you to be delinquent. 4) Statute of limitations can start over. Please note that if you enter a payment agreement, make a payment — even a partial payment—, or promise to make a payment, you will restart the statute of limitations to day one. 5) Show up to court.  If you are sued, make sure you or legal representation on your behalf appear in court.  If you don't, the court can issue a judgment against you for the full amount the creditor requests.  Even if you make a settlement agreement prior to court, don't trust the debtor to notify the court that it has been settled. Appear in court for any date that was set and let the judge or trustee tell you to go home.

Statute of Limitations on Debt

Consumers often pay off debt for which creditors can no longer seek legal action because the Statute of Limitations has already expired for the account. Consumers pay off these accounts perhaps because the accounts still appear on their credit reports, they fear court action, or they simply don't know their rights.  There are even cases of "Zombie debt" where agencies are claiming to collect a debt from years ago that one may have already paid off, or never owed in the first place. Know the Statute of Limitations for your state or the state where a potential creditor is based.  The chart below provides links to various state laws.   STATUTE OF LIMITATIONS ON DEBT; STATE BY STATE

State	Oral	Written	Promissory	Open-ended Accounts	State Statute: Open Accounts
AL	6	6	6	3	§6-2-37
AR	5	5	5	3	§16-56-105
AK	6	6	3	3	§09.10.053
AZ	3	6	6	3	§12-543
CA	2	4	4	4	§337
CO	6	6	6	3	§13-80-101
CT	3	6	6	3	§52-581
DE	3	3	3	4	§2-725
DC	3	3	3	3	§12-301
FL	4	5	5	4	§95.11
GA	4	6	6	6 **	§9-3-25
HI	6	6	6	6	HRS 657-1(4)
IA	5	10	5	5	§614.5
ID	4	5	5	4	§5-222
IL	5	10	10	5	735 ILCS 5/13-205
IN	6	10	10	6	§34-11-2
KS	3	6	5	3	§84-3-118
KY	5	15	15	5	§413.120
LA	10	10	10	3	§3-118
ME	6	6	6	6	§5-511
MD	3	3	6	3	§5-101
MA	6	6	6	6	c.260, §2
MI	6	6	6	6	§600.5807
MN	6	6	6	6	§541.05
MO	5	10	10	5	§516.120
MS	3	3	3	3	§15-1-29
MT	3	8	8	5	27-2-202
NC	3	3	5	3	§1-52(1)
ND	6	6	6	6	28-01-16
NE	4	5	5	4	§25-206
NH	3	3	6	3	382-A:3-118
NJ	6	6	6	3	25:1-5
NM	4	6	6	4	§37-1-4
NV	4	6	3	4	NRS 11.190
NY	6	6	6	6	§2-213
OH	6	15	15	6	§2305.07
OK	3	5	5	3	§12-3-95
OR	6	6	6	6	§12.080
PA	4	4	4	4	§5525
RI	10	5	6	4	§6A-2-725
SC	3	3	3	3	SEC 15-3-530
SD	6	6	6	6	§15-2-13
TN	6	6	6	6	28-3-109
TX	4	4	4	4	§16.004
UT	4	6	6	4	70-09a
VA	3	5	6	3	8.01-246
VT	6	6	5	3	§3-118
WA	3	6	6	3	RCW 4.16.080
WI	6	6	10	6	893.43
WV	5	10	6	5	§55-2-6
WY	8	10	10	8	§1-3-102

** Georgia Court of Appeals came out with a decision on January 24, 2008 in Hill v. American Express that in Georgia the statute of limitations on a credit card is six years after the amount becomes due and payable

You Can Stop Debt Collector Harassment

Many people are well behind in paying their bills, but that doesn't give debt collectors permission to harass you at work, late at night, after you've asked them to stop, or under other conditions. What Debt Collectors Cannot Do

• Cannot contact you before 8 a.m. or after 9 p.m. your local time unless you give them permission or they have a court order to do so.
• Cannot call you at your job if you tell them your employer prohibits such calls.
• Cannot contact you if you tell them you have a lawyer representing you.

These, and other protections are spelled out in the Fair Debt Collections Protection Act (downloadable PDF file). I will highlight more of your rights over the course of this month. Send a Cease & Desist Letter To stop a debt collector from contacting you, write them a Cease and Desist letter telling them to stop all contact with you. The first sentence of your letter should say: "I am unable to pay this bill because...." or "I refuse to pay this debt because...." and explain your reason. You also have the option of not giving a reason at all. The second sentence should state: "I hearby assert my right under Section 805-C of the Fair Debt Collection Practices Act to request that you cease any further communication with me." After the debt collectors receive your "Cease & Desist" letter they cannot contact you except to indicate that the collection process against you has stopped or that legal action against you is moving forward. For a sample Cease & Desist letter, see my book Zero Debt.

 

5 Tips for Saving when Unemployment is Rising

As we creep into Labor Day we learn that the unemployment rate rose in August to 9.7% from July's 9.4%. The U.S. Department of Labor announced September 4 that this rate is the highest in more than a quarter century. There are now an estimated 14.5 million jobless Americans. I know what it feels like to lose a job. In early 2003, I lost my six-figure television job as a Wall Street Journal reporter for CNBC. Like millions of others in corporate America, I, too, was laid off in a cost-cutting move. After my layoff I didn't immediately rein in my spending. I even made some serious money mistakes that I'd never advise anyone else to make. For example, I took $80,000 out of my 401(k) plan. I tell you my story in the hopes that you won't be ashamed of the money mistakes you've made or that you can even learn from the mistakes I made in the past and not even make them. Here are 5 tips for saving if you've been laid off, fear you might or just need to save more. 1. Don't raid your 401(k). If you lose your job, leave your 401(k) with the same account if you can. Otherwise roll it over directly to a IRA or Roth IRA without taking any as cash. You will have 20% withheld for taxes if you took cash. And there's a 10% early withdrawal penalty if you're under age 55, as well as the missed opportunity of tax-deferred growth. 2. Pay bills on time. I know that is easier said than done for some people. You can save hundreds of dollars a year on late fees if you simply pay your bills as you receive them or set up automatic payment plans. 3. Curb eating out. You can save $1,825 a year by cutting out an average of $5 a day on fast food purchases and $3,650 a year for an average of $10 a day. Take a week or two and track your restaurant spending habits. Tabulate every bagel and coffee. You might be surprised by how much money you're wasting on these purchases. 4. Become a frequent library patron. Borrow videos, DVDs, CDs and books from the library instead of purchasing them. If you're used to buying even just 10 DVDs a year at $10 - $30 a pop, or downloading 50 MP3 music files a year for $0.99 - $1.99, or renting several videos a month from Netflix or Blockbuster, you'll save hundreds of dollars a year by simply borrowing them from the library instead. 5. Take a level-headed friend shopping with you. If you're the type who just can't stop spending, bring a friend with you who can keep you focused. Don't bring the friend whose Visa bill is constantly more than her rent, but do bring the one who knows not to squander rent money for a new pair of shoes one doesn't really need. A friend with a good head on her or his shoulders will keep you from making outlandish purchases and wasting your money. Take that friend's advice without holding it against her or him.

From Lockdown to Luxury: Ex Inmates Become Instant Millionaires

More than three dozen ex-prisoners in Texas just hit the lottery - or so it may seem - after the men had their convictions overturned based on DNA evidence, and now stand to become instant millionaires because the state is compensating them for being wrongfully imprisoned. This article from the Associated Press gives the details: http://news.yahoo.com/s/ap/20090904/ap_on_re_us/us_exoneree_millionaires After reading it, I couldn't help but thinking that this is a disaster in the making. These former inmates have each spent many years behind bars. In fact, several had been imprisoned two decades or more. Now, all of a sudden they get out of jail and, to rectify the terrible ordeals they endured, the state of Texas is throwing more money at them than they ever dreamed possible. Let me state upfront that I agree 100% with the concept of restitution and compensation for the wrongly convicted. Frankly, no amount of money can make up for all that these exonerated men no doubt suffered in prison, let alone the impact on their lives from being separated from family, friends and loved ones. However, I have to question what in the world would possess a state like Texas to do something so foolish as to give a million dollars or more to ex-inmates without giving them any financial education? The average person who's been living in society is apt to blow big sums of money without proper money-management training and guidance. This has been proven time and time again by so many lottery winners whose lives end up in financial and personal ruin. So why should we expect any different result from these exonerees? Texas is also offering other benefits, like access to healthcare, tuition credit, and job training. If they can provide all these social services and benefits, couldn't they throw in some financial literacy training too? In fact, taking a money-management and personal finances course should be a requirement for these gentlemen to get the money coming to them, because it's the tax payers who are paying the the mistakes the state made. Since there is no such requirement, and no financial education component involved (at least according to the details of the AP story), it makes you see how disconnected politicians and others can be when it comes to real-word affairs. These men are being set up for failure. The windfall they will soon get may seem like a "blessing," right now, but I can assure you many of them will unfortunately find the money (and all the issues that come with it) to be a "curse". By the way, Texas isn't alone in doing this. Dozens of other states also have similar laws to compensate wrongfully convicted individuals; though no states are anywhere as generous as Texas. As a nation, when are we going to learn that simply throwing money at a problem is rarely the best solution?

The Future of Credit Scoring

Click image to see a clip from my appearance on ABC News discussing "secret" credit scores you need to know! The Future of Credit Scoring [caption id="attachment_1234" align="alignleft" width="150" caption="Did you know that there are competitors emerging to the FICO score? Click on this image to learn more."][/caption]

5 Tips for Homebuyers as the Deadline Approaches for $8,000 Stimulus

[caption id="attachment_1182" align="aligncenter" width="500" caption="Deadline for $8,000 tax credit is fast-approaching. Take the necessary steps to buy a home now."][/caption] The $8,000 federal tax credit for certain qualified home buyers is scheduled to expire December 1, 2009. Don't be fooled by this deadline. This does not mean you have three months left to find your new home and make an offer. Instead, you have three months to close completely on the home sale. To receive the tax credit, you must complete all transactions and take possession of your new home on or before December 1. Since the closing process can sometimes take up to two months to complete as you wait for bank approval, or review of a home appraisal, etc., you really have only about 30 - 45 days left to put in an offer on a home. Here are 5 tips courtesy of Coldwell Banker to help you get to closing by October 1: 1. Find A Qualified Real Estate Agent. A real estate agent will arrange showings; keep track of the properties visited, and can help identify suitable lawyers, mortgage lenders and home inspectors. Remember, an agent is an expert that can help you negotiate the best price and incentives on a home. They can also keep the process on track to ensure that closing on the new home occurs within the deadline for the $8,000 tax credit. 2. Get your credit report in order. Lenders today are looking at prospective borrower’s credit reports more closely than ever, so it’s important to examine your credit report for mistakes and eradicate any "toxic" debt (such as overdue credit-card payments) before the home shopping begins. Rectifying mistakes is easy but can be time consuming, so be sure to address any errors as soon as possible. 3. Compile your paperwork. Lenders require a number of items from potential home buyers so it’s best to be prepared. Pull together the following documents for yourself and any co-applicants on the loan:

• Verification of employment form
• Two most recent pay check stubs and bank statements
• Copies of the last two W2 forms received from employer
• Copies of any asset statements including those for retirement accounts, stocks, bonds or mutual funds
• Copy of social security card

4. Get Your Pre-Approval. “Pre-approval” means that a lender has verified the borrower's credit, funds for down payment and closing costs and other credentials and is committed to making a loan. Getting this early green light will put you in a stronger position with sellers by demonstrating that you are serious and well-qualified. 5. Shop for the most favorable mortgage option. It's imperative for home buyers to educate themselves on the risks of the different types of mortgages and select the right one for his / her family. A difference of even half a percentage point can mean a considerable savings over the life of a loan Tip: To learn more about purchasing a home, read my book, “Your First Home: The Smart Way To Get It and Keep It.” It has plenty of tips to suit even homeowners who are in their second or third home. See the table of contents and an excerpt in this downloadable PDF.

3 Steps to Back-to-School Clothes Shopping on a Dime

[caption id="attachment_1145" align="alignright" width="200" caption="Found on the Racks of Crossroads Trading Co., July 11 in Sacramento: "Anchor Blue" shirt: $10.50; "BDG" shorts, $11.50; Herringbone hat, $8.50; Nike Dunks shoes, $26.50."][/caption] Unless your child attends a private or parochial school with mandatory uniforms, you’re probably clothes shopping right about now to find new outfits for the kids to wear this school season. Discount stores such as Target and Wal-Mart are a good place to head, however, consignment and resale shops are even better if you’re looking to save a buck. Here’s how to get the most for your money in three easy steps. 1. Get Rid of the Old. If your children are need of new clothes this Fall, that could be in part because they outgrew last year’s clothes. Raid your child’s closet to find those items that are too small, but don’t contain tears or several missing buttons or broken zippers. The same goes for shoes. Pile as many of these items into bags and boxes as you can. [caption id="attachment_1146" align="alignleft" width="109" caption="This "Moth" sweater was priced at $13.50 on Aug. 6 at the Crossroads Trading Co resale shop in Chicago's Lincoln Park"][/caption] 2. Find a resale shop near you. Whether it’s a consignment or exchange shop, look for a store near you that sells and buys gently used clothing. These places will determine the resale value of the items you just pulled from your closets and storage and will offer you a percentage of that value in cash or as store credit in exchange for your items. Some shops with locations nationwide include Buffalo Exchange, Plato’s Closet, Once Upon a Child, or Crossroads Trading Co. 3. Purchase Gently-Used Items. With the cash you earned from your trade-ins, purchase stylish clothes that fit from these same shops. Some, like Plato’s Closet and Crossroads, carry a lot of name brand items. [caption id="attachment_1155" align="alignright" width="135" caption="Involving children in the resale shopping experience teaches them about the importance of budgeting."][/caption] Tip: Involve your child in the process. Whether it is a young school-ager or a teenager, have your child help select items to sell. Set a shopping budget based on the money they receive from the store, supplemented by a few dollars from their allowance or money you paid them for participating. Let them go shopping within this budget. You’re not only teaching them a valuable lesson, but quickly you’ll see how unimportant certain items become when they have to spend their own cash.

How Credit Card Reform Impacts You

By Lynnette Khalfani-Cox, The Money Coach [caption id="attachment_1126" align="alignright" width="300" caption="Overall, credit card reform is a huge win for consumers, but there are a few downsides for consumers."][/caption] Starting today, big changes will impact you and your credit cards, thanks to the credit card reform legislation that President Obama signed into law earlier this year. The goal of credit card reform was to stop or prevent unfair or deceptive lending practices by banks and credit card issuers. The two provisions of the legislation that kick in today are:

• Banks and credit card issuers will now be required to give you 45-days notice before an interest rate hike. (Currently, they only have to give you 15-days notice)
  • NOTE: If you reject a rate hike, you will have the right to pay off the debt over 5 years at your original rate)
• Credit card companies must give you more time to pay your bills because banks must now mail your bills 21 days before due date; not 14 days, as is currently the case.

Even bigger changes will come in February 2010, when you’ll see a host of other benefits. For example, in the future, the credit card reform law:

• bans retroactive interest rate increases (unless you’re 60 days or more late paying your credit card)
• restricts default rates to 6 months if customers pay on time
• outlaws universal default (although this is officially banned starting Feb. 2010, but many banks have already stopped this)
• mandates that payments be first applied to the highest rate balances (this will really hit bank profits; but again, it’s not mandatory until Feb. 2010)
• requires anyone under 21 to have a co-signer to get a credit card
• forbids credit cards from being issued to people under 18
• sets rules for how quickly banks must apply payments
• prohibits fees on payments made via phone and the Internet
• puts a 5-year lifespan on gift cards and eliminate their hidden fees
• requires better disclosure of payment due dates and late payment penalties
• prevents issuers from establishing early morning payment deadline (no due dates before 5 p.m. on any business day; starting in Feb. 2010)

Here’s my take on the new law: The downsides - or potential risks - to consumers include:

• limited or no grace periods
• more credit cards with annual fees
• stricter credit practices (harder to qualify for cards, higher rates, slashed credit lines or outright closing of accounts)
• creative fees or questionable practices until 2010
• more junk mail in your mailbox (because banks will try to make up for lost profits by attracting certain new customers.)

Overall, I think credit card reform is a huge win for consumers. I don't buy the banking industry's contention that it will be unjustifiably hurt by the changes. Sure, they'll have diminished profits. But that's after having reaped many billions of dollars in profits based on questionable fees and unfair practices. Nor do I accept the industry's claims that "low income" people will be the most to suffer, because of reduced access to credit. Only time will tell, but my best guess is that banks will tighten up the rules, as they've been doing lately, and hit customers with more fees in the short run ... Banks compete But in the long run, banks will become more competitive with one another, and try to stand out to consumers by dropping those fees, etc. And when one bank stops imposing annual fees, or quits nickel and diming credit card customers, and that starts to win over clients, then the rest of the industry will take notice and try to do the same. Lastly, it’s important to note that banks still exert a lot of power. For example, they can close your account any time they want, without notice and for any reason. And they can also still lower your credit line without advance notice -- providing they don't impose any fees or hike your interest rate. So credit card reform is essentially a way to create a more level playing field, and to bring more fairness into credit card lending and marketing practices.

Savings for Back-to-College

Although the amount of money expected to be spent to furnish college dorm rooms and off-campus housing is up 3 percent to $618.12 per student, overall college spending is expected to decrease to nearly $30 billion, according to the National Retail Federation. This decrease actually means the college-bound shopper can get more for their money, as retailers slash prices and ramp up marketing to lure buyers. TIP: Start your comparison shopping online. Retailers are maintaining dedicated websites that will make the comparisons that much simpler. Here are two of the biggest retailers with college subsites: TARGET Target has www.target.com/college. At this site you can shop by price category. "Under $20," "Under $30," etc., at the click of a button. There is also a color-coded, downloadable checklist that lets you mark off all the necessities, such as dental floss, can opener, night light, as you purchase them. You can even shop sections by gender. Don't forget to click on "Daily Deals" to find sale items not otherwise available online or in the store. WALMART Walmart has www.walmart.com/college. At this discounter's site is interactive. There is a Q & A section, a photo of the day of student shoppers, and even a tip of the day. (Today's: If you can avoid it, don't buy textbooks from the college bookstore. Check sites such as half.com and others that allow you to buy used books at half the cost.) Wal-Mart also has checklists, include a road trip safety check list, as well articles. For further savings, check out its "Value Bundles" on small appliances, desk sets, electronics, etc.

Back-to-School Season Sees Cautious Spenders

[caption id="attachment_1089" align="aligncenter" width="295" caption="Americans are expected to spend $47.50 billion to send kids K-12 and college-bound back-to-school equipped with essentials, gadgets and clothing."][/caption] The Back-to-School shopping season is underway. Americans are expected to spend $47.50 billion to send kids K-12 and college-bound back-to-school equipped with essentials, gadgets and clothing. The average family with students in grades Kindergarten through 12 is expected to spend $548.72 on school merchandise, a decline of 7.7 percent from $594.24 in 2008, according to the National Retail Federation. The economy is having a major impact on back-to-school spending. Four out of five Americans (85%) have made some changes to their back-to-school plans this year as a result, according to a consumer survey released by the National Retail Federation. Some of those changes impact spending:

• 56.2 percent of back-to-school shoppers are hunting for sales more often
• 49.6 percent are planning to spend less overall
• 41.7 percent purchase more store brand/generic products
• 40.0 percent are planning to increase their use of coupons.

In looking for deals, Americans are heading mostly to discount stores and drug stores.

• 74.5% are shopping discount stores
• 54.4% are shopping drug stores
• 41.2% are shopping office supply stores
• 22.2% are shopping online
• 18.2% are shopping a thrift store

Although 18 percent is a fairly good number for those who are more budget-conscious, I do believe there are more deals to be had of quality merchandise at thrift stores than many people realize. But whether it’s a thrift store deal or not, for the next two weeks I will post several articles about back-to-school shopping and saving. So check back next week for tips for the K-12 children or college bound.

As Housing Prices Rise: Wait to Buy or Buy Now?

U.S. Housing prices rose 1.2% in June, according to the House Price Index released today by Integrated Services. This makes the fourth consecutive month of positive home price increases. The price gains for the second quarter of 2009, 2.7%, offset the 2.6% decline we saw in the first three months of the year.These increases seem to reflect President Obama's housing rescue efforts, however, overall, home prices are still down 16.7% from its high in June 2007. Some prospective buyers can't decide if they should buy before prices get rise too high, making the homes unaffordable to them, or should they purchase now and take advantages of still low prices, low interest rates and home-buying incentives for the first-time homebuyers. Although only you know your personal situation and the savings you have, and no one knows for sure what future home-buying incentives may be available, I maintain that investing in a primary home is still a good idea. If you can buy now, do it.

4 Tips for Avoiding Airline Baggage Fees

Airlines seem to be going ala carte. They are charging passengers for every bag they check, if they exceed the 40 lb or 50 lb weight limit, or bulge beyond the 40 linear inches allowed. Some are even charging extra if you check a bag at the gate. If you learn to pack lighter when you fly, you'll be able to save money in more ways than one. For example, if you travel with just one carry-on, you will not have to worry about tipping a bell hop for carrying your bags or holding them in storage after you check out. You will be more free to take a bus or train to and from the airport rather than the more expensive taxi or shuttle service. Here are 4 tips on how to avoid airline baggage fees:

1. Use small, light luggage. Pack everything in one bag that is at or less than 40 linear feet (width + height + length). Most airlines limit carry-on sizes to 40 linear feet. If you choose a bag at this size be aware, however, that if you over stuff the external pockets by even an inch, your bag can be sent to the belly of the plane, with a charge to you.
2. Weigh your bags. Airlines will also charge you extra if your bag is too heavy. Check on the weight limits for your airline and before you head to the airport make sure you stay within the guidelines, which is typically a 40- or 50-pound limit for most airlines.You can try setting a bag on a bathroom scale, or hold it in your arms while you step on, and then weigh yourself again without the bag. The difference is numbers is the weight of the bag. If you don't trust your bathroom scale, there are portable scales available just for this purpose. You can find such scales at travelonbags.com, magellans.com).
3. Board early. It is quite frustrating to have all of your belongings squeezed into the possible smallest bag so that you can avoid chcking luggage, only to board the plane and learn that the groups that boarded ahead of you used up all of the available overhead compartments and there is no space there for your bag. You then turn to slide the bag under the seat at your feet, but it just won't fit. Feel the panic as the airline attendant approaches you and says, "Sorry, it seems we're going to have to check your bag because there just isn't any more room." The easiest way to avoid the "cabin's too full" issue, is to be among the first to board. Some airlines determine your boarding order by how early you confirm your flight. If you confirm your flight online within seconds of the time the airline says you may do so online, you're apt to be one of the first for your boarding section. So, often the key to getting on board early is to reserve your seat online, and confirm your seat online as early as you can, and then arrive to the gate early enough so that you're able to be first in line for your section.
4. Choose the dreaded middle seat. Most people prefer window or aisle, but when it comes to assuring you make it on with your luggage in hand, choose the middle. Middle seats have more under-the-seat storage. Window seat under-seat floor space is smaller because the sides of the planes are curved, and the aisle seats are smaller because over the years aisles have been made larger. So just in case all the overhead bins are taken by time you board, you'll be assured enough space under the seat for a medium bag if you seat in the middle.

Be Aware of Baggage Fees before You Pack

  [caption id="attachment_1034" align="alignright" width="240" caption="Travel light with one carry-on to avoid the airline charging you fees for checking any luggage."][/caption] In a move to help force passengers to travel lighter and to curb its costs, most airlines began charging fees for luggage you check. Typically, an airline for domestic U.S. flights charge $15 for the first checked bag, $25 for the second and anywhere from $50 to $125 for the third.   If you must bring more than a carry-on, be aware of your airlines fees for checked baggages.  Airfarewatchdog.com offers a chart of most major airlines and their baggage fees.

Couch Crashing is a Money Saver for Travelers

  [caption id="attachment_1006" align="alignright" width="386" caption="Couch Crasher: Getting accommodations on someone's couch is a very low-cost alternative to a hotel stay."][/caption] Hotel costs can be the biggest expense of any trip, even trumping airfare based on the length of your trip.  One way to eliminate the hotel is to sleep on the couch of a friend or even distant relative.  But what if you don’t have a couch connection in the town on your vacation list?  Make one.   Sites such as couchsurfing.com are connecting hosts with travelers for a cheap to no-cost alternative to hotels. You simply sleep on the couch of willing hosts, for free. All most hosts expect in return is a gift from your home town or a treat to dinner, and of course respect for their home (i.e. cleanup after yourself). Couchsurfing.com verifies its members and home addresses through credit card verification and members rate each other and vouch for their credibility. If someone had a bad experience with a host or visitor, you’ll see it posted online, which takes some of the worry out of what type of host you’re getting. Simply opt for those with positive comments and high ratings. Here are a few sites to consider when you’re looking for a host for international travel, or even within the U.S.:

• couchsurfing.com A popular site that aims to “create deep and meaningful connections that cross oceans, continents and cultures.” Members post their photos and a little something about themselves and their home or travels. You can browse member entries without becoming a member.
• www.globalfreeloaders.com Is an Australian-based hospitality network connecting people worldwide.  You have to become a member before you can the details on hosts. Free membership is renewable in 12-month blocks.
• hospitalityclub.org Is one of the first to offer this service on the Web.  Each member fills out details on a web form that other members may view. Sample pages are available for viewing before you join. Duration of stay and specifics (such as how food will be shared or not) are set out before your arrival.
• stay4free.com A global “free accommodation network” based in Holland allows options that lets members swap their entire home with someone else in another location, or you can opt to just be a guest or just be a host.

Disclaimer: I cannot vouch for the members on any of these sites. For the adventurous who would like a real-town experience versus just a tourist view, I think it's a great alternative to a hotel stay. However, I still urge you to use your own best judgment before accepting accommodations from someone you don't know.

Airfare: How Getting Bumped Saves You Money

[caption id="attachment_990" align="alignright" width="197" caption="Watching your flight take off without you because you were just bumped isn't all bad: With the right negotiating skills you can walk away with free travel."][/caption] Have you ever been at the airport waiting for your flight to board when the attendants announced that their are too many passengers booked and some will have to wait for another flight? Well, "getting bumped" to another flight may seem like a bummer, but it is a great way to save on airfare — minus the inconvenience. Getting bumped happens because airlines allow overbooking for flights, counting on no shows so that they can still take off at full, or near-full capacity. However, if more passengers check-in than they had anticipated, the airline has to ask if their are any volunteers to wait for the next available flight. If there are not enough volunteers, then they will start bumping passengers themselves. Freebies for being bumped Here are some things passengers have been offered:

• free meal if the wait for the next flight or a delay is 2 hours or more
• a free hotel stay that night if the next available flight is for the next day
• admission to the VIP club
• discounted airfare for your next trip
• travel voucher giving you a free flight (note, this doesn't always cover round-trip, so be prepared to purchase your one-way ticket back)
• a discount or refund on your current flight

The latter is particularly a good deal for passengers who do not fly that frequently or have a low likelihood of using that same airline for their next travels if they're headed to a location the airline doesn't cover. Also, some of the coupons or travel vouchers have expiration dates. If you don't use them in time, it's as if you were never compensated for your inconvenience. Volunteer to be bumped A way to save money on your flight and to negotiate better terms is to volunteer to be bumped. Here's how to do it: Call the airline the morning of your flight or the night before if it leaves early in the a.m. Ask the airline if the flight is overbooked. If they say yes, arrive at the terminal 90 minutes to 2 hours early for domestic flights and tell the ticket clerk that you are willing to be bumped should the need arise. Volunteers are taking in the order they volunteer, so that earlier you arrive at the airport the better your chances. You still can ask to be put on the volunteer list if you arrive later, but your chances of getting bumped decreases. You can always back out from the list when the time comes and their airlines are not offering you the best freebie deal. Only take the bump if you're happy with what you're being offered. Also, only take the bump if your time is flexible. If you have a connecting flight or are trying to make it to a boat launch for a cruise, you'll probably be better off if you hold on to your seat.

3 Smart Tips for Wallet-Friendly Vacations: What to Do

Regardless of your finances, it never hurts to spend time during your vacation doing low-cost and free activities, or finding other ways to cutback. To learn how to save money while still enjoying your vacation, read below my "What to Do" tips. For other tips, click these links to read "Where to Go" and "Where to Stay." What to Do Regardless of where you go on your vacation, you can also cut costs by what you choose to do while taking time away from home. The more time you spend doing free or low-cost activities, the less time you have to shop or do more expensive activities. Here are just a few ideas: [caption id="attachment_930" align="alignright" width="300" caption="Biking, hiking, camping, or just taking time to stop at scenic overlooks are great low-cost ways to spend part of your wallet-friendly vacation."][/caption] Go Biking: In most cities there are parks, hotels or lake front shops that do bike rentals fairly cheap (or bring your own), allowing you to do a self-guided pedal tour around town, or simply take in the scenery. View the scenic overlooks: If you're driving to your destination, allow time to stop at many of the scenic overlooks or historical markers off the Interstate. Too often we drive past these as we're in a hurry to get to where we're going, but the views are often a nice no-cost pause to our day. Take a hike: You don't have to climb a mountain with granola in your knapsack to enjoy a nice hike. Take a walk through a forest reserve or nature preserve, or along a wooded trail. There's one in almost every area and if you walk right in, your cost is often free. [caption id="attachment_940" align="alignleft" width="135" caption="Spend a night camping"][/caption] Pitch a tent: Spend one night of your trip camping outdoors instead of in a hotel and shave $100 or more off your vacation. Even if you're not a camper, one night under the stars is a nice break from the hustle and bustle. If you don't want to pitch a tent and sleep in a bag, if the space in your mini-van or SUV allows, just let the seats back for a night, and relax. Bring pillows and a blanket to add to your comfort. You'll enjoy watching the sun rise after your night of rest. [caption id="attachment_941" align="alignright" width="243" caption="Looking for a low-cost vacation? Take a trip to the beach. (Photo courtesy of Joaquim Alves Gaspar)"][/caption] Hit the beach: Feeling the soft sand between your toes, listening to the sounds of the waves crashing and the seagulls cawing can be relaxing and inexpensive, when you choose a public beach instead of a private resort.

3 Smart Tips for Wallet-Friendly Vacations: Where to Stay

Looking for ways to save money on your summer vacation? I have three wallet-friendly tips for you on where to go, where to stay and what to do. Today I present "Where to Stay": [caption id="attachment_956" align="alignright" width="251" caption="Save on cab rides by having a shorter stay at a nicer hotel closer to the center of activities than a longer stay at a less expensive hotel farther away. You'll also feel more rested."][/caption] Where to Stay If your dream vacation spot seems out of your reach because it is a bit on the pricey side, don't let that deter you. Sure some people opt to stay at hotels farther away from the beach or center of attraction in order to save money while still hitting their desired location. However, sometimes that option zaps the fun right out of the trip because the schlepping back and forth is tiring you out, or you can't take a quick refresher in your hotel room so easily. Or, it actually eats up more money than you realize because, say, you forgot your sunglasses back in your hotel room, or the evening became chillier than you thought and you wish you had brought along long sleeves. So, instead of making a trip back to the room, you opt to buy a new pair of sunglasses or a sweater, or you hop in a cab to get make the round trip to your room and back to the festivities more quickly. You don't want that hassle, so just get a room with a view closer to the activities. I know some of you may be thinking: "But how can I do that, I can't afford that, Lynnette." Well, I'll tell you how. Tip: Shorten your trip so you can afford a better hotel. To solve the hotel-stay dilemma, instead of a 7- or 10-night stay at a subpar hotel a distance from the festivities, opt for a 3-day or 5-day vacation in the center of it all. After 3 days relaxing nearby everything, you'll probably feel more relaxed than you would after 7 days with a lot schlepping back and forth to your room.

3 Smart Tips for Wallet-Friendly Vacations: Where to Go

Whether you're wanting to take your first trip, second or third this summer, you do not have to let low funds get in the way of your taking a good, fun summer vacation. Although the often-hyped "staycation" is a great way to enjoy a vacation without necessarily spending so much since you're staying close to home, there are other ways to take a low-cost vacation and still get away. Over the next few days I will post 3 tips for a wallet-friendly vacation if you need to know where to go, where to stay and what to do. Let's start with "Where to Go": [caption id="attachment_910" align="alignleft" width="300" caption="Being flexible in your vacation destinations and departure dates will allow you to take advantage of discount deals."][/caption] Where to Go You're dreaming of a European vacation, or perhaps an island cruise, or backpacking through the wilderness, but the airfare to your preferred destination is a bit steep for your pocketbook. You juggle the dates, hoping to find a better deal, but you're just not finding one good enough in the narrow window that you have to take the vacation. You're frustrated and thinking of canceling an away-vacation this year until you can save more money. Well, there are actually other options. Here's one: Tip: Be flexible with your location. Instead of letting the destination decide your trip by locking yourself into that dream locale, let the airfare be your guide. Know what it really is you want from the vacation. Is it the hike up a mountain, snorkeling along a coral reef, or enjoying the sea breeze and deck games on a cruise? Once you know, look for discount airfares and hotel rates to destinations that will give you those experiences. You can check for last-minute deals directly at airline websites, through places such as:

• Priceline,
• kayak.com,
• vacationstogo.com,
• smartertravel.com or
• Airfarewatchdog.com

The latter recently listed round-trip flights from Chicago to Rio de Janeiro for $487 roundtrip, Atlanta to Honolulu for $276 roundtrip, and Phoenix to the Bahamas for $219 roundtrip. Also, check Travelocity's Low Fare Finder by clicking "my dates are flexible." It's a good way to check for lower prices between two cities if you don't have firm travel dates.

Online Appraisals: Are They Accurate?

[caption id="attachment_883" align="alignright" width="300" caption="Zillow.com and its competitors offer readers recent sales history and market value estimates. The estimates can vary widely and are not the best way to determine a list price or at what price to make an offer on a home for sale."][/caption] The popular Zillow.com and Trulia.com and a slew of other websites, have emerged over the years to reveal sale history of a given home, median averages for the neighborhood, to week-by-week price appreciation, or depreciation. These are fun sites for tracking sales history, but do not rely on the estimates from these sites to determine what you should list a home for or your starting point for an offer. One any given day, their numbers can fluctuate widely from each other, or even from themselves. One site, realestate.com, changed its estimate on one home three times in 5 hours! A quarter million dollar range of $300,400 to $552,210 was found from the lowest to the highest estimate of a friend's home, a 5 bedroom, 4 bath home in a Minneapolis suburb, that is currently on the market for $425,000 and last appraised by a certified appraiser in October 2008 for $450,000. Below are the median estimates for this home from four sites.

• Zillow.com - $492,000
• Cyberhomes.com - $417,287
• Realestate.com -$$375,500
• Eppraisal.com - $409,153

As you can see, the estimates vary quite a bit and wouldn't be reliable enough to inform you as to what price you should make an offer. That's where your agent can help you!

Your First Home: The Smart Way to Get It and Keep It

For more real estate tips see my book “Your First Home: The Smart Way to Get It and Keep It.

Don't Take from 401k to Pay Bills

[caption id="attachment_872" align="alignright" width="300" caption="It's a bad idea to take an early withdrawal, loan or a disbursement from your 401(k). Consider it untouchable until retirement age, as it is not a good financial move to use it to pay off credit cards or remodel your kitchen."][/caption] As the U.S. unemployment rate spikes to 9.5% as of June 2009, more and more people are considering taking a distribution from their 401(k) or withdrawing from other retirement accounts to help meet their expenses. This is a move of last resort, and even then it still remains a bad idea. Any money you withdraw from a 401(k) or take as a distribution after losing your job, is like stuffing 40% of it down your garbage disposal, flipping the on switch and saying goodbye to that money forever. When you take money from your retirement account before age 59 1/2 you:

• Pay a 10% penalty on the withdrawal
• Have to report the money as income on your taxes, potentially taking another 28% hit
• Lose compounded growth of your retirement account
• Have less to live on when you actually do retire

I spoke with the Associated Press about 401(k) withdrawals and loans back in March 2009. Watch this video to learn more. [youtube=http://www.youtube.com/watch?v=6SXBJlkbmvE]

Disadvantages to Obtaining a Payday Loan

[caption id="attachment_857" align="alignleft" width="147" caption="Payday loans are a horrible way to obtain cash in hand."][/caption] If you've never taken out a payday loan, great. Please never do. If you have, please don't ever do it again. If you absolutely need to borrow a small amount of cash, turn to your friends, family or employer, but don't get a payday loan. What is a Payday loan? Payday loans are short-term loans made by financial "institutions" designed to tide people over until they get their next paycheck. Say a cash-strapped person needs money for gas, a utility bill, car repair, to help cover rent or some emergency or other reason before their next paycheck comes in from their employer. To make ends meet until payday, they go to a "payday lender" who verifies that the borrower has a legitimate job with regular pay, and that they have a bank checking account. The customer then gets an immediate $300 or $500 cash "loan" in exchange for writing a post-dated check for that amount, or authorizing a one-time automatic withdrawal. But instead of getting that full amount in cash, the payday lender will deduct its fees from the amount borrowed, typically between $45 to $55. So, on a $300 loan, the borrower actually receives $255. Fees rival that of loan sharks The payday lenders fee, or interest, amounts to about 400% per year, some annualize to nearly 800%. These rates are worse than what most loan sharks charge. If the borrowers check then bounces, or they go back to the payday lender to ask for an extension of their loan, they pay another $45 fee (not to mention an insufficient funds fee to their bank if the payday lender had attempted to cash the check). In the end, some borrowers wind up paying more in fees than the total amount they borrowed. For example, if they get stuck in this vicious cycle they could end up paying $500 in interest for a $300 loan, while still owing the original $300 in principal. Every year payday lending costs Americans $4.2 billion in “excessive fees," according to the Center for Responsible Lending. Congress, states seeks rate caps Congress, through a bill introduced in the House and the Senate, is attempting to pass legislation that would put a 36 percent cap on annual interest rates for consumer credit. The cap would save $5 billion in abusive fees stripped from working families at no cost to taxpayers. While waiting for federal legislation, 15 states and the District of Columbia has already outlawed triple digit interest rates. Why borrowers obtain payday loans Payday loan borrowers resort to these loans for various reasons, but very few do so because it is the only option available to them, according to a February 2009 survey by the Center for American Progress. In the survey, borrowers cite convenience and emergencies as the largest reasons. [caption id="attachment_852" align="aligncenter" width="498" caption="Source: Center for American Progress, Feb. 2009 study"][/caption] The FDIC has stated that providing high-cost, short-time credit on a recurring basis to customers with long-term credit needs is not responsible lending.” [caption id="attachment_855" align="alignleft" width="270" caption="Payday loan industry is a $40 billion business made up of 23,000 lenders, such as Check Into Cash."][/caption] $40 billion industry The payday lending industry has about 23,000 lenders, such as Check 'n Go, Advance America, Cash America and Check Into Cash, where a typical borrower takes out between eight to 12 loans each year. Payday loan borrowers have little financial wealth People who withdraw a payday loan tend to have a lower income, net worth and asset level than people who do not withdraw payday loans. These borrowers also are less likely to be a homeowner or a self-identified saver and were more likely to have previously been delinquent on a loan or have had a loan application denied. Because payday loans are practically synonymous with high fees, hovering around 400 percent, the use of these types of loans may impede the wealth achievement for many borrowers who already have less wealth to begin with. So please heed my advice: Don't do business with payday lenders and subject yourself to their shenanigans. [caption id="attachment_863" align="alignleft" width="102" caption="Zero Debt: The Ultimate Guide to Financial Freedom"][/caption] For more financial advice, get a copy of my bookZero Debt: The Ultimate Guide to Financial Freedom.

Pros and Cons of a Homeowners' Association

An HOA, as a homeowners' association is known, creates and enforces rules for the community and collects the monthly or annual dues. There are pros and cons to owning a home in a community governed by a HOA, which is often a nonprofit entity that is operated by a board comprised of homeowners, sometimes in conjunction with a management company. [caption id="attachment_842" align="alignright" width="221" caption="Is a HOA community right for you?"][/caption] The HOA's purpose is to help maintain a certain consistency, conformity, capital improvements, and conveniences for the neighborhood, with an eye toward protecting property values. The collected dues are used toward the maintenance of the common areas or community property, or for other services. It is not meant to be a profit-making venture in most cases. Is living in a community governed by a HOA right for you? Know before you enter in a home purchase agreement, as your decision affects your bottom line. Here are some positives and negatives to consider as you weigh your options. Pros Below are five ways in which a HOA is helpful and beneficial to a community.

• Maintains and pays for the upkeep of common areas, such as swimming pools, tennis courts, play grounds, public gardens, golf courses and club houses. Without an HOA you may not have a community with these amenities within your neighborhood.
• May provide services such as driveway snow removal or lawn cutting for each residence, ensuring a clean, well-kept look throughout the neighborhood at all times. You will not have to worry about hiring someone or taking care of these services yourself. It can free up your time.
• Mediates disputes between residents. If there is a problem with your neighbor, the HOA should be able to help resolve it quickly and easily with hopefully little animosity left over, as it was the HOA making the final decision, not a complaining neighbor.
• Helps maintain or raise property values by regulating things that help keep a neighborhood looking good, such as keeping garage doors closed, no cars left in driveways for longer than certain periods of time, no signs in front yards, etc.
• Hosts annual parties, such as block parties and family nights, which helps build camaraderie in the neighborhood.

Cons Here are 5 reasons some people don't like HOAs.

• It feels as if "Big Brother" is always watching you to see if your grass is mowed to the right level, if you planted the right types of flowers in your yard, or don't have a pet that is oversize or of the wrong breed. For more on this, see this one homeowner's blog entry, titled "7 Reasons You Should Decline a Home with an HOA."
• Homeowners looking to rent out or sell their residences may need to have the new potential occupant screened and approved by the HOA board, thus hindering your ability to move on within your own time frame. Even how much you charge for rent can be regulated, and one what days or times a year the occupants can move in.
• The dues you owe is just another added expense for you to consider when factoring how much home you can afford. And the dues typically will go up over the years, without much warning—this is something that you should budget for in advance.
• An HOA can put a lien on your home or force a foreclosure on your property if you do not pay your dues within a set time frame. And if you fight them in court and lose, more than likely you'll have to also cover the HOAs legal bill.
• Some HOAs are poorly managed, in part because board members tend to be volunteers with a paying day job or other personal obligations and there is only so much time they can dedicate to overseeing matters. For this reason a management company is usually hired to also help set and guide the rules, which some worry is giving over control of their properties/community to a company that is managing several others and thus has no personal tie to the community.

Tip: If you are considering buying a home with a HOA, ask to get a copy of the rules, regulations and bylaws before you sign the purchase agreement, or make your offer contingent upon your receipt and acceptance of the rules. (The latter is harder to do). Also look at the budget, financial records and minutes from the board meetings. These will all help give you some indication as to how well run the association is, and if you can live with the rules that are already in place. Please write in to share your experiences with an HOA or to give other readers tips on this matter.

Avoid Dual and Designated Agents

A dual agent is one who works for both the home buyer and the seller. You typically end up in this situation if the agent who listed the property is also your agent. You might inadvertently put yourself in this situation if you buy a home from the agent hosting an open house. [caption id="attachment_828" align="alignleft" width="234" caption="Don't Put Yourself in a "Dual Agent" Situation."][/caption] Avoid dual agent situations when possible, because an agent representing the seller and the buyer has an extreme conflict of interest, and since they are being paid by the seller if the deal goes through, who do you think is holding the better end of the stick in this transaction? The seller. Sometimes an agent in this situation will suggest you use another agent in their office to help you close the deal. This is called a “designated agent.” You could also end up in this situation if the home your buyer’s agent showed you is listed by another agent with the same agency. Perhaps by coincidence that agent has a property they listed that is just right for you. This happens quite often when you’re working with an agency that has a lot of listings in your area. A designated agent situation is better than a dual agent one, but still is not ideal, as agents in the same office can inadvertently let out information about you, such as “Oh, my client really loved that home.” Such comments could leave the seller’s agent with the option of telling her client “hold firm on the price. The buyer really wants this home.” Tip: An easy way to avoid too many dual and designated agency situations is to work with buyer’s agents from smaller agencies. You can find great, seasoned agents at small firms. Choose one who knows your target area really well. And if they are from a smaller agency, they will have fewer chances of you falling in love with one of their own listings, thus avoiding the whole dual and designated agency situations.

Your First Home: The Smart Way to Get It and Keep It

For more home buying tips see my book “Your First Home: The Smart Way to Get It and Keep It.

Buyer's Agent v Listing Agent

As National Homeownership Month comes to a close, I wanted to remind potential homeowners that this is still a good time to buy. Although interest rates have been creeping back up, they still are very low compared to a couple of decades ago when they were at 10% and higher! If you are shopping for a home, you should know the difference between a buyer's agent and a listing agent. A buyer's agent, sometimes known as a "buyer's broker," works only for the home buyer, and is legally bound to represent the best interests of the buyer. A listing agent is the agent who contracts with the home seller to get the home sold. Although some people will buy homes from the listing agent of a home (say, you drove past a home for sale and called the agent on the for sale sign, or you went to an Open House and later enlisted that agent when you put in your offer. More than likely you were dealing with the listing agent), you're better served if you use a buyer's agent when purchasing. The job of a listing agent is to get the best deal for their client, the seller. However, the job of a buyer's agent is to represent the buyer and get them the best deal on the home. Accreditation Matters Realtors who specialize in representing buyers often have the ABR (Accredited Buyer Representative) designation after their name. The accreditation means they have taken advanced training in negotiation and have completed at least five transactions in which they served solely as a buyer's agent. You can find a list of buyer's agents on the website of the Real Estate Buyer's Agent Council, rebac.net. A buyer's agent will often have you sign a contract to work with them exclusively for a certain period of time. Realize some of those contracts say that they will get paid a certain percentage of the sale price of the home you buy. Typically, their payment will come from the seller, but know that some contracts say that even if you buy from a For Sale By Owner, or your friend, who was not listed on the Multiple Listing Service, you will still owe the agent a commission. Tip: Have the contract limit the agreement to homes for sale in the MLS, or only by sellers under agent representation, given that many FSBOs might still pay a listing service to put their home on the MLS. Check back this week to learn what I think about dual agents and designate agents.

Sad financial lesson from The King of Pop's death

I was so saddened to learn of Michael Jackson’s death, but his passing is also a painful reminder about managing one’s finances. Jackson reportedly died $400 million in debt – after spending an estimated $20 million to $30 million more each year than he earned. Please people, please remember: no matter how much or how little your salary, if you spend more than you earn, you will always end up broke and in debt.

See this article on Jackson’s finances: Jackson lived like king but died awash in debt - Yahoo! News.

5 Tips for Wheeling & Dealing in a Buyer’s Market

Even though homes sales are up nationwide (note, sales means number of transactions, not prices!), it’s still a buyer’s market out there, meaning there are more homes offered for sale than there are buyers. Here are 5 tips for negotiating a great deal in a buyer’s market.

1. Ask the Seller to Pay Some or All of Your Fees. In most contracts, fees are entirely negotiable. Even if some fees are typically split between the seller and the buyer, in a buyer’s market you can ask the seller to pay for all the fees, including city transfer taxes, inspections and appraisals.
2. Request a Seller Credit or Cash Back at Closing. Typically credits are given when repairs need to be made, needs paint or new carpet, or even significant upgrading. However, in a buyer’s market, you can simply ask for one as a financial concession to close the deal. Many banks allow a credit up to 6% of the purchase price.
3. Set an Expiration Date for Your Purchase Offer. In order to get a faster response from the home seller, and fend off competing offers, ask a seller to respond within 24 or 48 hours of your offer. In many cases, using a tight expiration date will get negotiations started quickly and get you a better price on the home.
4. Ask for a Home Warranty. No matter whether you’re buying an older or a newer home, it can be a good idea to get a home warranty to cover appliances, the furnace or the electrical system. In your offer, ask the seller to purchase one or give you credit so you can purchase one.
5. Request Extras as Bargaining Chips. Notice fine china, a piece of furniture or a piano? If so, you might make your purchase offer contingent upon the inclusion of those items in the sale. Even if you don’t really want those items, use it as a tool to negotiate a lower price. If the seller comes back and says, “No, you can’t have the china I inherited from grandma,” you can counter by agreeing to forgo those items if they agree to accept an even lower purchase price.

party at a friend’s house.

Your First Home: The Smart Way to Get It and Keep It

These tips were adapted from my book “Your First Home: The Smart Way to Get It and Keep It. For more tips, see the book.

Beware of "Zombie" Debt Collectors

Beware of calls from "zombie" debt collectors. These are bill collectors that try to get people to pay money on debts that were allegedly incurred 10, 15 or even 20 years ago. I received such a call today from a Christian Gable of National Action Financial Services (Phone: 866-529-1885). They claimed I owed money on a department store credit card opened in 1988. They said the bill was last paid in 1989. I told them I definitely did NOT owe money on the account -- and that even if I did, the statute of limitations has long since expired. Can you believe they had the audacity to call and claim I owed money on a credit card from 20 YEARS AGO?!? Needless to say, I was not going to stand for this. At first, two different reps from this debt collection company literally hung up the phone on me when I told them I was a financial expert and knew my rights under the law, and that they should not be trying to scare people into paying alleged old debts. Finally, (after I called back a third time), I told a "Mr. Johnson" at the company that if they didn't take my name off their list, or if they called me ever again, I would be reporting them to the authorities. His reply: "I understand .... We've already removed your name." Under federal law, any bill collector who sues you or even threatens to sue you after the statute of limitations has expired on a debt is in violation of the Fair Debt Collection Practices Act. Here's the lesson: don't be bullied into paying old bills from zombie debt collectors who come back from the grave, trying to intimidate or scare you into paying debts you may not have even had -- and certainly don't have any legal obligation to pay if the statute of limitations has run. Each state has different statutes of limitations for past-due debts, depending on if the debt was based on a written contract, an oral contract, a promissory note, or an open account. Credit cards are usually categorized as open accounts. The statute of limitations for credit card debt ranges from 3 to 10 years, based on where you live. To check the statute of limitations on debts in your state, contact your State Attorney General's Office or go to www.naag.org and click "The Attorneys General". Tell me  your Zombie horror stories.

5 Tips for How and Where to Save Money

By Lynnette Khalfani-Cox, The Money Coach We all can take advantage of some money-saving strategies, whether or not we have Financial Deficit Disorder. Whether you want to save money to buy a house, sock away for retirement, college or a rainy day, here are five tips, adapted from my book "Your First Home: The Smart Way to Get It and Keep It," that will help you slash your expenses.

1. Save on Your Car. There are a lot of expenses involved with having a car: gas, maintenance, insurance, parking, and a monthly payment if you have a loan. To save on gas and parking, you can give up a paid covered parking spot and park for free on the street, or take public transportation into the city to avoid feeding quarters in a meter or shelling out cash at a garage. To save on car insurance, opt for a higher deductible in exchange for 10% to 25% off your annual premiums, or ask your insurer about good driver discounts, discounts for having an alarm system, or lower rates for taking a defensive driving course. You can even save on your car loan by refinancing it, just as one might a mortgage, but without the closing costs. Try Capital One Auto Finance, which offers refinances in 15 minutes.
2. Save Money on Food. I know you already know you can save money if you went to fast food or sit-down restaurants less often, but you can also save money by keeping those loose coins in your pocket. Stop making daily runs for coffee or ice tea, or even donuts or a bagel before work. (You can buy a whole bag of bagels from the grocery store for the cost of just one bagel at some delis, so why not just grab one out of your cupboard instead?) And avoid those trips to the vending machines for junk food. Many people spend about $5 to $8 a day on drinks and snacks, amounting to $1,200 to $$2,000 a year! While you're saving by buying those bagels and snacks at the grocery store instead, don't forget to clip coupons and use them to save even more!
3. Save Money by Kicking Bad Habits. If you have a habit that's hurting you, financing or health-wise, it's time you kicked the habit. For example a chain smoker could save $300 a month or $3,600 a year! If you're a drinker, cut down from three drinks on your nights out to just one and save yourself $10 - $20 by the end of the night.
4. Save Money on Utilities. Leaving appliances plugged in when you're not using them only adds to your electric bill. Unplug toasters, coffee makers and blenders until you need them and only run dishwashers and washing machines when the load is full. If you make a habit of all this, you'll save 10% on your energy bills.
5. Save Money on Entertainment. Stick to free or low-cost forms of entertainment. For example, choose free museums — or even if it is a paid museum, most offer a free or discount day, attend then. Walk around a lake or have picnics in the park. If you're a partier, get to the club early before they start charging a cover. For those of you who wouldn't be able to resist buying more drinks because you're there longer, then opt for a party at a friend's house.

Your First Home: The Smart Way to Get It and Keep It

For these and other money-saving tips, see Chapter 3 of my book “Your First Home: The Smart Way to Get It and Keep It.

10 Ways to Tell If You Have FDD — Financial Deficit Disorder

By Lynnette Khalfani-Cox, The Money Coach It's not unusual to make the occasional late payment on a bill, or treat yourself to a frivolous purchase every now and then — We all have done it at some point in our lifetime, and perhaps even a few times too many. However, there are some people out there with FDD —Financial Deficit Disorder, who just can't seem to break the cycle of making a tangled mess of their finances. Maybe you know who you are, maybe you don't. Here are 10 signs that indicate if you might suffer from Financial Deficit Disorder.

1. You are living paycheck to paycheck.
2. You're constantly late paying your bills, from your car note to your rent or mortgage, and store charge cards.
3. You borrow money from your family, friends, or even mere acquaintances.
4. You're paying service fees on your checking account because it is constantly dropping below the minimum balance, or you're bouncing checks — or both!
5. You've taken out credit in the name of your children and your pet.
6. You park your car away from your home in an attempt to avoid repossession.
7. You change your phone number at least once in a year, screen your calls, or keep a separate number just for close friends and family so that you can avoid calls from bill collectors.
8. You and the pawn shop clerk are on a first-name basis.
9. You're more familiar with the inside of the payday loan store than you are with your local bank.
10. You don't have an emergency fund and a very low, or no savings account.

If three or more of the above apply to you, you probably have Financial Deficit Disorder. But don't worry, there is still hope for you! Next week I'll give tips to help you straighten up your financial disorder!

$8,000 Homebuyer Tax Credit Can be Applied to Closing Costs

Add one more incentive to the up to $8,000 in tax credits the government is offering first-time home buyers (including those who haven't owned a home in the last three years): Apply the funds toward your down payment, closing costs or to buy down your interest rate. But note, with this option comes some downsides. Last week the FHA announced that it will permit lenders to give qualified buyers a short-term bridge loan, up to the amount of their tax credit, to use as down payment assistance. A bridge loan with a home sale is a temporary loan that "bridges" the gap between the sales price of a new home and a home buyer's new mortgage until other funds are obtained. For the home buyer, essentially this means that you are selling, or promising, your tax credit to the lender in exchange for them loaning you the money up front to help cover your closing costs. Upsides This is all good news, as applying your tax credit toward your home purchase can help you:

• lower how much loan you need to take out, thus lowering your monthly payments
• cover your closing costs, which means this may provide you with just enough funds to help you qualify to buy a home.

Downsides

• Still need 3.5% down. You cannot use the tax credit loan to cover any part of the 3.5% minimum downpayment that FHA requires, so you will still need to come up with some funds on your own. (You can apply the tax credit loan toward an additional downpayment to, say, help you meet a 5% downpayment, or you can use it to cover other closing costs).
• Processing fees deducted. Remember, this option is a loan, and thus is subject to the lender's fees, which could equal up to 2.5% of your anticipated tax credit. What this means is in the end you will be getting less money back on your tax credit. For example, if you qualify for the full $8,000, but used it toward closing costs, you'd only receive funds toward your purchase equal to $7,800 because $200 (2.5% of $8,000) is paid to cover your lender's processing fees.So, if you don't need to take out a bridge loan, don't and save yourself the extra fees for extra cash in your pocket.

[caption id="attachment_781" align="alignleft" width="102" caption="Your First Home: The Smart Way to Get It and Keep It"][/caption] For more information on buying a home, see my book "Your First Home: The Smart Way to Get It and Keep It.

The Upside to Credit Card Reform

By Lynnette Khalfani-Cox, The Money Coach A major overhaul is underway to change the way credit cards work and are marketed in the United States. Congress has passed The Credit Card Reform Act and is awaiting President Obama's approval, which might happen later today. The Act's goal: to stop or prevent unfair or deceptive lending practices by banks and credit card issuers. The Bill contains some downsides for consumers, but it has more than a dozen great benefits for consumers. As proposed, the Bill would:

• ban retroactive interest rate increases (unless you're 60 days or more late paying your credit card)
• require 45-days notice before a rate hike
• restrict default rates to 6 months if customers pay on time
• outlaw universal default
• mandate that payments be first applied to the highest rate balances
• require anyone under 21 to have a co-signer to get a credit card
• forbid credit cards from being issued to people under 18
• set rules for how quickly banks must apply payments
• give consumers a minimum amount of time to pay bills
• prohibit fees on payments made via phone and the Internet
• put a 5-year lifespan on gift cards and eliminate their hidden fees
• require better disclosure of payment due dates and late payment penalties
• prevent issuers from establishing early morning payment deadline

All of these provisions boil down to one thing: bringing more fairness into credit card lending and marketing practices.

The Downside to Credit Card Reform

The good news: President Obama is about to sign landmark legislation overhauling many aspects of the credit card industry. The bad news: there will likely be some negative aspects and unintended consequences that are bad for consumers. Read more here: http://www.metro.us/us/article/2009/05/21/08/2212-82/index.xml

Health-Care Related Loan Forgiveness

By Lynnette Khalfani-Cox, The Money Coach Did you go to med school or nursing school? If so, you may qualify to have some of your student loans forgiven. If you have PhD or MD A little-known loan repayment program at the National Institutes of Health can provide eligible college grads with up to $35,000 a year if you work or do research in the general clinical medicine, pediatrics, fertility or health disparities. If you have a nursing degree The Nurses Reinvestment Act is a scholarship/loan repayment program helps those graduates who serve in critical needs areas. The Nursing Education Loan Repayment Program (NELRP) will pay 60 to 85 percent of loans for registered nurses who work in areas where there is a shortage of medical staff. This post is adapted from my book Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.

Law School Loan Forgiveness

By Lynnette Khalfani-Cox, The Money Coach The bad news is that most law school graduates have a ton of student loan debt. The good news is that many law schools forgive loans of students who serve in public interest or nonprofit positions. Equal Justice Works is a great resource for how you can get law school loans forgiven. Browse its website or download its PDF brochure "Financing the Future: Responses to the Rising Debt of Law Students." Through that publication and others, you'll discover how law schools, states, and philanthropies are helping college grads, especially lawyers, pay back their student loans. The new trend is toward the development of so-called LRAPs: Loan Repayment Assistance Programs, as more and more conscientious members of society recognize that it's not in the public's best interest to have a whole generation of students awash in debt. It's especially harmful in the legal arena, because law school grads who can't pay their student loans can't take public interest (translate: lower-paying) jobs where they could help poor communities or those disenfranchised members of society who, without some assistance, would not have access to all their rights under the law. _________ This is an excerpt from my book Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.

Free Webinar: How Government and Nonprofit Employees Can Earn Public Service Loan Forgiveness

By Lynnette Khalfani-Cox, The Money Coach

If you take a job in public service, you just may qualify to have your loan forgiven. A public service job is a full-time job in emergency management, government, military service, public safety, law enforcement, public health, public education, social work, public interest law services, child care, public library sciences, or any other job at an organization that is described in section 501(C)(3) of the Internal Revenue Code of 1986 n. To learn what jobs to accept to qualify or whether or not you currently qualify to have your loan forgiven, Equal Justice Works is offering a free Webinar on the following dates (space is limited, so participants are required to register):

• Wednesday, May 20, 12:15 – 1:30 p.m. EDT (11:15 a.m. CDT, 9:15 a.m. PDT) https://equaljusticeevents.webex.com/equaljusticeevents/onstage/g.php?d=...
• Wednesday, May 20, 7:15 – 8:30 p.m. EDT (6:15 p.m. CDT, 4:15 p.m. PDT) https://equaljusticeevents.webex.com/equaljusticeevents/onstage/g.php?d=...
• Tuesday, May 26, 7:15 – 8:30 p.m. EDT (6:15 p.m. CDT, 4:15 p.m. PDT) https://equaljusticeevents.webex.com/equaljusticeevents/onstage/g.php?d=...

For more information on paying off your student loans, check out my book Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.

What to Do if Your Student Loan Cancellation Application Is Denied

This post is the last of a week-long series of articles about how to qualify to get student loans canceled. By Lynnette Khalfani-Cox, The Money Coach I’ve already warned you about how difficult it can be to get a student loan discharged. Unfortunately, part of what makes it tough is that for most discharges, the ultimate authority on the matter is the holder of your loan. The loan holder has the final power to say yes or no to your request for a discharge and you don’t have the right to appeal the decision to the Department of Education, except in two instances: with false certification and forged signature discharges on FFEL and direct student loans. Ask for a Review If your claim for a discharge for these types of loans is rejected, you can take your case to the department and ask officials there to review your denial. Other than that, your best bet in handling a rejected application, if you truly feel you have a valid and worthy claim, is to be persistent in your pursuit of a discharge and to provide as much documentation to your lender as possible in support of your case. This may mean making multiple financial disclosures about your personal situation, explaining your argument time and time again to different people at your lender’s office, or writing letters to supervisors or an ombudsman within a bank or lending institution. Since the ultimate decision rests with the lender, that’s the place you have to target your efforts. Get Tips from Loanholders You should also try to find people who’ve been successful in getting the type of discharge you’re seeking. Ask them for tips and tricks they learned along the way. That firsthand advice from someone who’s been through what you have—and received a hard-fought discharge—could be just the prescription you need to turn a rejection into an approval. For more information on paying off your student loans, check out my book Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.

Student Loan Cancellations In Bankruptcy Are Rare – But Possible

This post is part of week-long a series of articles about how to qualify to get student loans canceled. By Lynnette Khalfani-Cox, The Money Coach Under federal law, as of October 8, 1998, you can no longer discharge student loan debt in a bankruptcy proceeding. As with most laws, however, there are loopholes and exceptions to the rule. In this case, it is technically legally possible to have your student loans discharged when you file for bankruptcy protection, but as a practical matter it is very, very difficult to get a judge to sign off on it. To have your student loans cancelled via bankruptcy, you have to prove to a judge that repaying your educational debt would cause you a substantial and undue hardship as defined by case law in your jurisdiction. Historically, most judges have been loathe to allow students to get rid of their student loans in bankruptcy court. Each claim is assessed on a case-by-case basis, and student loan discharges via bankruptcy are highly rare, even among those who’ve tried to demonstrate severe financial hardships. This post is an excerpt from my book Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.

Student Loan Cancellation and Discharge for Military Service

By Lynnette Khalfani-Cox, The Money Coach Effective Oct. 7, 1998, all borrowers of Perkins loans are entitled to have those loans discharged if they served in the U.S. armed forces. This cancellation privilege applies to Perkins loan recipients regardless of when the loan was made or what the terms on the original promissory note are. Military personnel qualify for loan cancellations in an amount up to 50 percent of their Perkins loans if they serve in areas of hostility or regions of imminent danger. For other ways to qualify for a loan cancellation, read:

• Student Loan Cancellations for Teaching and Community Service
• Student Loan Cancellations for School-Related Issues and False Certification
• Student Loan Cancellation Due To Disability
• Student Loan Cancellation Due to Death
• A Student Loan Cancellation Success Story

My book "Zero Debt for College Grads: From Student Loans to Financial Freedom" has even more helpful information. Get the book now at Amazon.com.

Student Loan Cancellations for Teaching and Community Service

This post is part of a week-long series about loan cancellations. By Lynnette Khalfani-Cox, The Money Coach Two other categories that you might qualify for with regard to getting your student loans discharged or cancelled pertain to service-based work. You can get your educational loans cancelled, or at least greatly offset, for jobs in teaching and public service. Up to $17,500 Forgiven Teachers qualify for loan forgiveness in the amount of $5,000 or $17,500 under the Teacher Loan Forgiveness Program. The money is usually doled out to:

• those who teach in low-income neighborhoods
• those who teach certain math, science, and special education subjects, and
• individuals who work in places where there are critical shortages of qualified educators

Additionally, child-care providers, nurses, and others in the medical field who are helping individuals in impoverished areas or high-need communities can also qualify for loan discharges. So if you happen to be a doctor or nurse working in one of these areas, by all means investigate and see whether you qualify for a loan cancellation and in what amount. This post is an excerpt from my book Zero Debt for College Grads: From Student Loans to Financial Freedom. Get the book now at Amazon.com.