In 2005, there were changes made to the United States Bankruptcy Code and these changes became known as The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. As a result, it is now required that individuals get additional counseling prior to filing bankruptcy. It was felt that many people were filing bankruptcy and did not know what other options might be available to them. It was also determined that a financial course on money management skills should be taken after filing bankruptcy as this could reduce the number of people who end up filing again several years down the road. So the new law contains a requirement that you receive credit counseling from an approved credit counseling agency before filing and a financial course from an approved agency before your debt can be discharged.
Credit Counseling Course Certificate
Before you file your bankruptcy petition you must complete the counseling course. Your attorney may have an approved agency they know about and refer you there. You can even contact an agency yourself before you see an attorney or start working on the petition if you are filing yourself. To get a list of approved agencies you can log onto the US Trustees Department of Justice website to see which agencies are approved in your area. All of the programs offered through these agencies are approved by the Department of Justice so pick an agency you feel comfortable with. Most are national call centers but there are some that will take the time to help you understand the process and offer several methods in which to complete the course; either online, phone and/or face to face counseling. The only thing your attorney needs is the certificate you will receive when you complete the course. That certificate is only good for 180 days. If you do not file within that time frame you will need to take the course all over again. The certificate is printed by the agency from the US Trustees secured website and can only be issued by that agency. The information you give the agency is confidential and is not passed to the attorney nor the courts.
Personalized Financial Management Certificate
After your bankruptcy petition is filed, you will receive a letter from the court giving you a file number for your case. Once you have that case number, you can take the second course. You MUST wait until you have that bankruptcy case number or you will have to take the course again at the appropriate time. This course is a required two hours in length and has a pre-test and post test attached. Most agencies offer it online. Some offer the course by phone or in a classroom setting. It is very different from the first course. It is a book that contains information concerning credit, debt, insurance, protection laws etc. It can help you understand how to rebuild your credit and stay out of debt. Again the certificate is issued by the agency and sent to you and your attorney should you have one.
Getting your certificates is not difficult but it will take some time and effort on your part. Do not become frustrated by the bankruptcy process as it usually follows a certain pattern. If you have questions contact us. Read some of our other blogs on bankruptcy or log onto our website for more information. Don't forget to find us on Facebook and Twitter for new updates.
A CHECKLIST FOR YOUR LOVE BOOK
In a previous blog we explored the many benefits of assembling important documents into a binder that we entitled The Love Book. It is a collection of those valuable papers that your successors would need to carry on your financial affairs should you pass away or become incapacitated. My attorney (and lifelong friend) J. Miles Buchman has prepared a pamphlet entitled "Read Me First" that presents a checklist of those items that your family would need in order to manage your assets and carry out your instructions upon your death. In addition to the usual entries, Miles has come up with some very helpful ideas and I wanted to share them here.
Your Love Book contents should include:
* Passwords to computer websites and your alarm codes for home security systems
* A separate section for each bank account that you own.
* A net worth statement or balance sheet showing your assets and liabilities
* Brokerage account section
* Mutual fund statements and statements for 401(k), IRA and other retirement accounts
* Copies of stock certificates you hold
* Copies of your advanced directives including durable powers of attorney, designations of health care surrogate, living wills and other directives
* Assemble all of the items in your wallet or purse on a copier and have a photocopy page consisting of your drivers license, credit cards, voter ID, health insurance cards, proof of auto insurance and any other items that you keep with you.
* Put your keys on the copier and label each key (this is a great way to identify assets as each key would represent cars, houses, file cabinets, storage units, etc.)
* Copy of the first page of your passport
* The first page of all your life insurance policies with your beneficiary designations
* Certificates of casualty insurance for properties that you own
* Copies of deeds, mortgages and property appraisal information for real estate that you own
* Copies of car, boat and RV titles
* Copy of your will and separate writing
* Your social security statement provided by SSA describing your benefits
* Copies of your most recent credit card statements
* Other legal papers such as marriage certificates and divorce documents
Miles cautions that this binder makes up your identity and should be kept under lock and key in a secure environment.
However you choose to organize your important papers, letting your family and personal representative know the location of the documents is a very important part of your family financial plan.
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Filing Bankruptcy can be a very difficult and confusing decision. While every case is different there are a few guidelines that one can follow to determine if you can solve your debt issues in another manner. Bankruptcy is an important decision and one that can have consequences for several years after filing. Here are some alternatives you should consider before filing:
Alternatives to Bankruptcy
Surprisingly, this option may work for some people. In some cases, people file bankruptcy because they are trying to protect something they think the creditor can take. If you do not own property ( your rent), do not have a car, do not have an income other than a retirement income like social security, and have no monetary assets, doing nothing may be a good option. The downfall will center around the constant phone calls you will receive from creditors. You can manage these by screening your calls or changing your number to an unlisted one.
Call Your Creditors to set up a repayment plan
Most creditors have an internal program to help you if you are experiencing financial difficulty. It is usually short termed...about a year, but they often reduce the interest and the monthly payment. You would have to call each creditor to work out separate payment arrangements. If you think your financial situation will change within the next year, this can be a good option for you. Warning....do not promise anything you can't do. Do not agree to new payment arrangements if you cannot keep them up for the appropriate time frame.
Call an approved credit counseling agency
Creditors offer a debt management program through approved credit counseling agencies. This program allows you to take all of your unsecured debt and place them into one program with a monthly payment made to the credit counseling agency. The agency then disperses the money each month to each of your creditors. Understand, there are no negotiations between the agency and the creditors. Each creditor sets their own policy and dictates to the agency what payment to charge and what the interest rate will be. All approved agencies have the same program. One does not give you a better deal then the next.
Debt settlement agencies differ in some major ways. While they have you put aside money each month (called a payment) that money is warehoused or kept until there is enough money to offer a creditor a settlement ( usually around 50% of the balance). It can take several months or years before you have enough money collected to offer a settlement (this depends on your balances). In the mean time, no money is going to your creditors and who can continue with their collection practices including filing a lawsuit. Settlement offers can be a good option as long as your creditors are willing to work with you. Word of wisdom...you can do this on your own. It is not difficult, just time consuming. You can find agencies that will help you understand the process and instruct you on how to negiotiate the balance owed.
Selling assets to pay down your debt
Look at your assets to determine if you can sell some of it to help pay down your debt. You may have items that can be sold like campers, motorcycles, and other large items to bring in some money. Even if you owe money on them, paying the loan off can help free up money for you. Garage sales can also help bring in some needed cash. By paying down your debt you may be able to make payment arrangements on the balance and stay out of bankruptcy.
Getting a loan modification for your home
The regulations for loan modification have become easier and you may qualify even if you have been turned down before. Warning...be aware of scams. Companies that guarantee a loan mod or some other reduction based on errors in the original closing papers should be scrutinized very carefully. It is best to go through a HUD approved agency for help in the application process.
Should I file Bankruptcy?
Search through the above information and see if any alternative will work for you. Get assistance from a Certified Credit Counselor who can assist you in determining your options. If your financial situation is not going to improve, if you are trying to save your home, if you never will have the financial resources to repay your debt, then bankruptcy may be your best option. Be sure to understand the consequences that go along with it. Making an informed decision is always a good decision. See our other blogs for more information on bankruptcy.
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If I filed bankruptcy, can I still buy a house? The answer is "Yes, you can still purchase a home" however, it will take some work on your end to prepare for the mortgage process. Understand that when a lender looks at your application to determine whether to loan you mortgage money, there are several variables they take into consideration. The general rule is to wait two years after filing a Chapter 7 bankruptcy to start the mortgage process. In the mean time, start building your credit, save for down payment and closing costs and keep out of credit card debt. Having a card that you pay off each month builds your credit. Having several cards where you are carrying a high balance may put you into a high risk category.
First and foremost, what is your income level? Individuals who are self employed, salesman that have variable incomes, and business owners that are sole proprietors always had a more difficult time obtaining a mortgage, at least until the housing bubble. Now our financial culture shows a tighter lending policy for those people who have incomes that fall outside the norm. With this said...your income level must also match the price of home you are looking for. If you are making $50,000.00 a year don't expect to qualify for a $300,000 mortgage. We encourage people to keep their mortgage payment to around 35% of their net monthly income. Watch out for additional expenses like house insurance, taxes, and homeowner's association fees. They can add a significant amount to your monthly payment.
Debt to Income Level
Now that you have filed bankruptcy your debt level should have been reduced. However, other debt can also affect your ability to get credit. Student loans can be a large factor that mortgage lenders now take into consideration. Other debt such as auto loans, child support, and debt owed to the IRS can rear it's ugly head and stop your efforts in purchasing a home. If you still have debt after the bankruptcy is discharged, make on time payments to help rebuild your credit.
Gone are the days of getting 100% financing. However, there is down payment assistance available for first time home buyers. If you have not owned a home for over three years you are considered a first time home buyer. Again, we encourage potential home buyers to save as much money as possible for the down payment and closing costs before starting to look at property.
Speak with a mortgage lender and get pre-approved for a loan. You will know for certain the price range of the home you need to search for and you can control how many lenders will hit your credit report. Each inquiry on your credit report takes points away from your score.
This topic is usually the first one discussed because it comes up so often as a barrier to finding mortgage money. Run a credit report six months after your bankruptcy to see what may need to be cleaned up. All debts listed in your bankruptcy discharge should show as "discharged in bankruptcy" with a zero balance. Debts showing as a "transferred or sold" can hang out there and impact your credit score. They are unexplained debt and not accurate. You will need to write the credit bureaus and dispute the debt as it is shown. Also make sure there is not a debt that shows discharged in bankruptcy that might have been paid by you. Get out your discharge papers and compare them to your credit report.
Understand the Process
Do your own research and understand the mortgage process. Purchasing a home is a large committment. Don't let someone else "take care of you". Everyone else tied up in this process, from the real estate salesman to the title company, have a stake in your transaction...for themselves. You can't be taken advantage of if you have knowledge about how the process works. If you need information, go to an agency that does not have a conflict of interest attached to either your loan or the sale of the property. Family Life Resources can help you build your knowledge: Read our blogs, like us on facebook to get updates and take advantage of the free educational material on our website at www.FLRMinistry.com.
THE LOVE BOOK
You've heard the story many times. A person passes away and their family is faced with the difficult task of administering their financial and legal affairs. Often, they have no idea of where to begin. In a marriage where one spouse dies after handling all of the money, the surviving spouse usually struggles to understand how the family finances have been managed. Do we have a will? Where are our bank accounts? How much insurance do we have? Where are the car titles? Who does our taxes? Do we have pre-planned funeral arrangements?
In the emotion-filled wake of a loved one's death, navigating these issues can be a heavy burden.
THE LOVE BOOK--MAKING A DIFFICULT TIME A LITTLE LESS STRESSFUL
Before the need arises, we suggest putting together a "Love Book". It can be a binder, folder or cabinet drawer where all of your important documents reside and where you can leave instructions or other helpful information about your family finances. By keeping everything in one place and letting your survivors know where it is located, you can make sure that the management of your affairs continues without undue stress or added expense. This also applies to someone who may be in the beginning stages of dimentia and will eventually be incapable of managing their own finances. The love book can be even more helpful if you now take the time to review its contents with your family and update the information regularly.
WHAT'S IN A LOVE BOOK?
In future blogs, we'll explore in detail those items that should be included and how to arrange the contents. Each family's love book will be different depending on age, dependents, assets and other obligations. For now, a general list of documents would include copies of your will, living will, power-of-attorney, medical instructions, insurance policies, bank accounts, retirement accounts, credit card and loan statements, deeds, car titles and a listing of the locations of all other papers and assets not included in the book. You might also include a list of passwords, safe-deposit box keys and funeral instructions.
WHERE DO I KEEP THE BOOK?
Obviously, you want to place the book in the most secure location possible. Remember that this information would be a prime target for identity theft and other criminal actions. Most people keep these types of documents in a safe-deposit box, but you might also consider a quality home safe. What's most important is that your loved ones have access to the book and know where it is located at all times.
WHY CALL IT A LOVE BOOK?
Because one of the most loving acts that you can do for your family is to spare them the confusion, frustration, anguish and hours of research that it might take to sort out your affairs after your death. A very touching article was recently published about a father who had carefully prepared his documents, contacts and information so that, upon his death, his family would not have to struggle to understand his finances and final instructions. Click here to read My Dad's Perfectly Crafted Estate Plan at MSN.com.
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Every so often, there are headlines and blogs written about people who claim to have "wiped out thousands of dollars worth of debt!" It is wonderful to hear these positive stories about people becoming debt free and finally managing their financial life. But, the rest of us tend to wonder, "HOW?"
Well, I will let you in on a little secret; well OK, not really a secret but information we could all use to help us better manage our finances. There is a strategy you can put into play that will help you tackle your debt, organize your budget and help you to keep up with the debt-free Jones'. It is going to take some work, some scrimping and some organization. Getting out of debt won't be easy and, for many of us, with much of our income spoken for, it will take time.
Awareness - Great news!!! You have already accomplished this step if you are reading this blog. You have decided that something needs to be done. You have become "aware" that your situation is getting progressively worse and that you need to make a change. The cycle of not having enough money has to stop. Becoming aware of your problem (as with most problems) is the step needed to get you to the next one;
Get Educated about Your REAL Spending! Make a cup of coffee and then begin gathering all of your expenses together (include household expenses and debt). Use our Income and Expense form to list your expenses by determining what is coming in (all of your take home pay) and what is going out (all of your expenses). Be SPECIFIC! Write down the electric bill, the cable bill and the water bill. But don't forget those other expenses like clothing, auto tags, hair cuts and even cigarettes (in the miscellaneous category). It all needs to go on the expense report! Anything you spend money on throughout the year goes into the budget. The best thing to do is break it down into monthly payments. This will give you your TRUE expenses.
Where's the Debt? Now that you have written down EVERYTHING you spend money on, make a list of your debt. If you are making payments, what are those payments and what do those payments add up to? As much as it may hurt, it is still in your best interest to see all of this (income, expenses and debt) in black and white. This will motivate you to determine what actions you need to take. These two organizational steps will lead you to the next step and help you decide what is important in your financial life.
Make A Plan! To get out debt, you are going to need a plan. You will want to prioritize your expenses. What gets eliminated or lowered in the expense categories? Where do you stand with an emergency fund? Your savings should be at least a minimum $500 - $1000 to meet deductibles or minor "unexpected" expenses. Do you have money to increase your minimum payments on at least one creditor? When paid off, can you snowball the payment (apply that payment to another creditor) in order to speed up the payoff process? Can you bring in more money to apply towards the debt? Yard sales anyone??? Once you set up a plan stick to! However, life changes still happen that affect our finances. So be flexible enough to meet the changes when possible.
Taking on the task of getting out of debt is not one to be taken lightly. You may need coaching from a Certified Credit Counselor
to help you get structured. They will take time with you to review your finances, set up a budget and determine what your options are for handling your debt. Then, one day, you too can write a blog on how YOU
got outta debt!
Most people think they should review their credit reports only when they are in the loan application process. While it is important to take a look at your credit before borrowing, there are at least four reasons why you should know what's in the file on a continuing basis.
You can conduct your own review or use the services of a Certified Credit Counselor, but knowing the contents of the report is important because:
1. NON-LENDERS USE YOUR CREDIT INFORMATION TO MAKE DECISIONS ABOUT YOU.
The information contained in the report can affect many areas of daily living that have little or nothing to do with the extention of credit. Car insurance companies, landlords, prospective employers and a host of other enterprises may use your credit history as a basis for setting rates, giving you a job or renting you an apartment. Negative items in a credit file can make life more difficult and expensive.
2. MANY CREDIT REPORTS CONTAIN INACCURATE INFORMATION.
Given the impact that a poor credit rating can have on you and your family, it is important to discover and challenge any items that are not correct. It is your right to dispute items in the report that are inaccurate and the Federal Trade Commission has a site devoted to assisting you in the challenge process.
Go to http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.shtm for guidance.
3. A DETAILED CREDIT REPORT REVIEW MAY UNCOVER IDENTITY THEFT.
Unknown entries on your report may be the result of an honest mistake or it could be evidence that someone is trying, or has tried, to use your name or social security number to open credit lines or steal your identity. Regular monitoring is a good defense against illegal activity or sloppy reporting.
4. CERTAIN ENTRIES MAY ALERT YOU TO LEGAL ACTIONS.
You could be facing tax liens, mechanics liens or other legal actions of which you were unaware. Public records filings where you are named are contained in a section of the report and lists those items when reported through the courts and other agencies.
When you use the services of a Certified Credit Counselor to conduct a credit report review, you have the advantage of someone who can explain the layout of the report, the codes relating to each entry and actions that you may take to improve your credit file.
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CALCULATING THE NUMBER
In 2006 financial author Lee Eisenberg published a book that explored the issues surrounding retirement savings and an important question that is on the minds of workers nearing the end of their careers: how much money will I need when I retire?
The book was entitled The Number.
The title refers to the amount of retirement savings that you should have set aside in order to suppliment social security and other sources of income that will see you through your golden years. It is a number that is both important to know yet very difficult to calculate. You need to get some idea of the amount that you need to set aside each year, but there are many variables that affect your planning.
Here are some considerations:
THERE IS NO THE NUMBER. Everyone's number is going to be different depending on current income and lifestyle, the availability of company-sponsored retirement plans and the amount of disposable income that you currently earn. Sadly, for some people, that number is going to be zero because they cannot afford to contribute to any plan. Others can save modest amounts that may be able to grow if invested properly. The wealthy and well-to-do can save large amounts, but they have professional advisors and don't read blogs by guys like me.
MANY ECONOMIC VARIABLES WILL AFFECT YOUR PLANNING. You can't accurately predict future rates of inflation, future interest rates, the direction of the stock market and government policies concerning taxes and social security. But they are all important incalculating your number.
HEALTH AND LIFESTYLE ISSUES AFFECT YOUR PLANNING. For people of retirement age, healthcare costs are the wildcard of financial planning. Although medicare and other programs pick up large portions of medical bills, there can be significant expenses for healthcare that fall outside of these programs.
Lifestyle and geography can play a part in your future budget. If you retire to a location away from friends and family, consider increased travel costs. And if the cost of living in that new city are higher than in your hometown, well......
SO WHAT ARE WE TO DO?
As you can see, trying to decide what you need to be saving toward retirement can be a complicated task. Fortunately, their are a couple of neutral websites that I can recommend to help you crunch the numbers (the mutual fund companies also have some excellent sites, but I don't want to play favorites).
For a simple, one-chart retirement planner, check out the MSN Money site
and for a little more in-depth calculator try this one at Money-CNN
WARNING: YOU MAY BE ENTERING THE DISCOURAGED ZONE
The amounts that you need to be saving may look so large that you become discouraged. Please resist that emotion. Future blog articles will explore how to reduce that number, such as paying down debt, cutting other expenses and landing a part-time income to make retirement a reachable goal.
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Determining whether you need credit cards, debit cards or just plain cash is a decision you may be trying to make as you attempt to meet your goals of financial peace. Determing what to use and if you qualify to use it, can be confusing.
In the last week, Suze Orman, Financial Planner, has been on various news sources promoting her new debit card. However debit cards like hers come with questions and fees. So, that being said, what is a debit card? How is it different from a credit card or secured credit card? And, why can't I just use cash? If you are trying to re-establish your credit, knowing these differences will help you determine the next step with your finances.
Let's start with the easiest one, CASH. You can still pay cash for purchases. Yes, it's true. Best part, once you buy an item...it's paid for! Hurray!!! You don't owe anyone anything! You don't have to worry about being late and you aren't charged any fees. It doesn't get any easier than this. Of course, you need to make sure you can afford it or you will throw your entire budget off. Also, cash does not affect your credit report because no one reports that you were responsible enough to save first and pay later for what your want or need.
- Next up...Credit Cards. Credit cards, as you know, allow you to "buy now and pay later." The risk is that you need to be sure you are able to pay off the credit card, preferrably within three months or less depending on the amount of the item purchased. Credit card activity generally gets reported to the one or all three of the credit bureaus depending on who that particular creditor reports to. Keep in mind, on time payments and keeping your debt to credit ratio low, have the greatest affect on your credit score. If you are late, your score will drop like a rock. So use them wisely.
- Debit Cards are another tool we can use to manage our finances:
- Nowadays, many of us have access to a debit card through our banks. With this type of debit card, a payment will usually be pulled directly from your bank account when you make a purchase. Some of these cards have the Visa or MasterCard logo on them and can be used as credit, but the money is still pulled directly from your account. IF the money is not there, the purchase is usually declined and/or you are charged fees.
- There are also debit cards you can purchase from a retailer (like Greendot) or order online (like Suze Orman's card) however, you will pay a fee plus a variety of usage fees, so be sure to read the fine print. To use the card, you load money onto the card. When you spend it all, you load it again (again fees may be involved). With debit cards, you cannot go over the amount of money you have on the card. If you do, it is declined.
- Debit cards are not reported to the bureaus. This makes sense since they function, in essence, like cash with no risk to a lender. Many individuals use debit cards to pay bills online, help manage their budgets or they use them as their banking system.
- Another type of card is the Secured Credit Card. People are using this type of card to help rebuild their credit scores. Those who have poor credit may qualify. Simply put, a certain of amount of money (usually $300 - $500) is placed into an account at your bank or other financial institution to secure the card and decrease the risk to the bank. You use the card like a credit card and your credit limit is the amount you have secured on the card. Some lenders will report the card activity to the bureaus so find this out before getting the card or you will defeat the purpose of improving your credit scores. Typically, for good behavior, after six months to a year, the lender may decide to change your secured card into an unsecured credit card.
Keep in mind that our goal is to help you become debt free. We strongly suggest you use cash for most purchases. Use credit only when it makes sense AND you can comfortably pay it off sooner than later. Otherwise, a debit card from your bank can help keep you on budget and still allow you to purchase items without carrying around a lot of cash. Be sure to read the fine print on any card you sign up for whether it is credit, debit or secured. Keep in mind, financial freedom is your ultimate goal.
Filing bankruptcy is always a hard decision to make. While it may relieve you of your debt, it can come back to haunt you in other ways. Under section 525(a) and (b) of the Bankruptcy Code, there are provisions that protect you from discrimination for filing bankruptcy. No employer, government or private, can fire you because you file bankruptcy. Your current employer cannot reduce your salary, demote you or take away responsibility because you filed. However, if there are other valid reasons for the negative actions against you, you would not have a case against your employer for illegal discrimination because of your bankruptcy.
Federal, state or local government can't discriminate against you by denying or revoking licenses, permits, charters or franchises based on your bankruptcy. They cannot terminate or deny public benefits, public housing, withhold college transcripts or deny you a contract such as a contract for a construction project. You can still apply for government-guaranteed student loans. You can still get a drivers license as long as any debt tied to a suspension of a license was discharged in the bankruptcy.
Private agencies are very different. In Myers v. Toojays Management Corp, the Eleventh Circut Court of Appeals affirmed a summary judgment in favor of private business. The court held the under section 525(b) of the code, a private employer may deny hiring an individual based on a past bankruptcy. Companies usually do a credit check as part of the background check done for employment. A past bankruptcy can be an issue. Other private entities are affected as well. Landlords can deny renting property to individuals with a bankruptcy. Credit can be denied from lending institutions and college transcripts can be withheld if it is a private college.
According to the Nolo's 3rd addition of The New Bankruptcy Will It Work For You?, "There are no reported cases from any state of a parent losing custody because he or she filed for bankruptcy." Be aware however that bankruptcy does not wipe away any child support or alimony obligations past or present.
Should you still file bankruptcy? That depends on your individual financial situation and how you see future job opportunities. Your credit will be restored with time. New job opportunities with private companies can be an issue. What would you do? Comment on my blog.
When considering your financial future, the role of the monthly Social Security check is a key element in developing your retirement plan. And no decision is more important than the timing of those payouts.
You can start claiming a monthly Social Security check at age 62 or you may wait until your "normal" retirement age which is based on your birthday. For example, for those born in 1954 the normal retirement age is 66 and if your birthdate was in 1956 it is 66 years and four months. If you claim benefits before your normal retirement age, your benefits will be reduced.
In order to get a statement and calculation of your benefits go to www.ssa.gov and choose Estimate Your Retirement Benefits on the left.
Considerations For Claiming Benefits At Age 62
1. Your employment status. If, at age 62, you're unemployed with limited
opportunities to earn an income, then you probably need to begin collecting benefits. If
you have a low-paying job and wish to suppliment your income with benefits,
remember that income earned above about $14,000 per year will reduce your Social
Security check. This income limitation does not apply to those who reach
normal retirement age and continue to work.
2. Your health and life expectancy. Some experts have calculated that you must live
into your 80s in order to make up the difference between the total amount of income
received by starting at age 62 and the increased benefits realized by waiting until your
normal retirement age.
3. Your other resources for retirement funding. The amount of other retirement assets
(savings and investments) also affects your decision. Those in good health who are
concerned about "outliving their money" might consider waiting to take benefits.
Claiming Social Security benefits at age 70 will yield an even larger check but, again, life expectancy is a major concern. There are also a variety of rules surrounding spousal benefits and other issues. For a summary of claiming Social Security Benefits, go to
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Traveling through the "bankruptcy maze" is not an easy journey. Just trying to understand the bankruptcy process; what schedules to fill out, gathering all the required documentation, what is exempted and what is not..... what a headache! That does not include the months or years prior to the bankruptcy in which you had to haggle with creditors, scrimp together enough money to file and deal with the fear that something might go wrong or you might be denied. Anyone who survives bankruptcy can either come out stronger or be mentally damaged for life.
The statement we most often hear from clients is " I'm never getting another credit card again!" While this may seem to be a way to simplify your financial life, the reality is you will probably need one somewhere down the road. So now the question "Is There Life After Bankruptcy?" becomes important. Here are some steps to take to rebuild you credit.
Get a credit report review within six months of your bankruptcy discharge.
1. Make sure all of the creditors listed in your bankruptcy have been "rolled up" in the public section of your credit report. Creditors are listed as trade items in a credit report. If you filed bankruptcy on them they should not show as a trade item in your credit report but will be part of the public record. If you find one listed, dispute the item with the credit bureaus as inaccurant information and have it removed. You will need to send a copy of your discharge papers to the credit bureaus as part of the dispute.
2. If you missed a creditor when filing bankruptcy you cannot put them in now. You will need to call them and make payment arrangements. Make sure they were actually missed when filing. Get out your discharge papers and compare them to your credit report.
Prepare for rebuilding your credit by getting your financial issues under control.
1. Build a budget. List your monthly income and expenses to make sure you have enough money coming in to meet expenses. You don't want a credit card that you can't afford. Been down that path before..remember? Personal finances take time to manage but it is well worth it. Setting a budget and even starting a cash envelope system are great tools to help you stay on track and get your credit back as well as your good name.
2. Plan for your emergencies. Set aside a savings as an emergency fund that can be used when financial troubles happen (and they will happen). Don't use that new credit card to help fill in the gap between income and expenses. Use it only to rebuild your credit.
Managing your credit card 101
1. Now you are ready to start rebuilding your credit. Start with making on time payments on homes, cars and utilities and cell phones. Having a credit card is not the only thing creditors look at to determine whether to loan you money. Mortgage payments and car payments hold a much higher value and can help rebuild credit without ever obtaining another credit card.
2. Wait one year after your bankruptcy to apply for a credit card. There are cards you can load with your own money like Greendot but, most do not report to the credit bureaus and therefore will not rebuild your credit. Credit Bureaus are developing products, such as pre-paid debit cards they can track. However, it is not set yet, so don't jump into that product. Remember you want to build credit.
Types of credit cards
1. There are two different types of credit cards; secured and unsecured. For unsecured credit cards, there are several websites ( www.bankrate.com, www.creditcards.com ) for information on which creditors are giving the best offers. Secured cards are harder to find. You can talk with your bank about obtaining a secured credit card. You would be required to open an account with generally $500.00 to cover the "risk" the bank would incur by giving you credit. These cards can be reported to the credit bureaus but make sure to check with your bank.
Just remember building your credit after bankruptcy will take time and discipline. The good news is bankruptcy is not the kiss of death and life does go on.
Take a look at the camera tripod to the left.
It requires three sturdy legs, all working together, in order to remain upright. If any one leg is missing, the tripod collapses.
For many years, retirement planners used this illustration to describe those elements necessary for a secure retirement (we actually referred to it as a "three-legged stool," but I didn't have that graphic available). The three legs represent (1) Social Security, (2) savings and (3) company-provided pensions.
Until the 1980s, many workers could rely on pensions, called defined-benefit plans, to suppliment the Social Security payouts that they would enjoy at either 62 or 65. They would then need to save a portion of their income to round out a successful retirement plan.
But in the last three decades, company pensions have been rapidly declining, replaced by 401k and other defined-contribution plans that are funded by employees and often matched by the employers. Retirees that have been unable to save substantial amounts (or saw those amounts decimated by recent declines in the stock market) now face a financial future relying mainly on Social Security.
The First Two Legs: Get An Early Start
For those of us with a few years left until we bow out of the work force, we need to take a fresh look at the three-leg concept. Assuming that Social Security will muddle through and be available in the future, you need to be addressing the other two legs. Contributing as much as possible to your 401K and other qualified savings plans will be big factor in how comfortable you are in your remaining years. But unless you get an early start, it's difficult to save enough to fund a long retirement depending on just investments and Social Security.
Rethinking The Third Leg
So, with no company pensions, how do we make the tripod stand up? For most, it's going to be starting a small business or holding some kind of part-time job well into your golden years. Begin now by maintaining your work skills or developing new ones. The world is changing and you can quickly be by-passed by a younger, more skilled workforce.
Keep up with trends, always be willing to learn new technologies and make new contacts with people in your field.
Retirement can be challenging and if you think you don't need to be making some careful preparations in your personal finances, well....you don't have a leg to stand on.
Image credit: Keerati/Freedigitalphotos.net
You may be tired of the “goal” talk when it comes to your financial plannning. But the truth is, setting financial goals can keep us motivated. Why do you think we make up New Years resolutions? Resolutions tend to give us a kick start to the year, help us focus on what we wish to accomplish and give us something to look forward to.
This is the same when setting resolutions for our finances. Actually it is imperative that we set goals and make plans with how we intend to spend our money. If not, we will spend money on anything that strikes our fancy and, before we know it, we will be deeper in debt and/or unable to financially do the things we wanted to do.
When it comes to financial goal setting, let’s keep it simple:
- Determine your financial goals. Don’t overload yourself with them. Pick about two or three goals and get going. Some examples may be you want to start putting money into a savings account or a Christmas Club account; you want to set aside money for car repair and maintenance in a cash envelope; or maybe you want to take a vacation this summer. Pick something you want to do and make it something obtainable. If you know you can't afford to go to Europe this year, don't make it your goal for this year. But if you think you can go in two years, make it a two year goal. Simply put, be realistic.
- Decide on a "plan of action" to meet these goals. Be specific and determine the amount of money you will need to meet your goals and by what date you will need that money. How much can you set aside each paycheck or each month? Can you make adjustments to your budget in other areas like entertaining and eating out? Will you need to increase the use of coupons? As a side note, if you have had an increase in income (either by paycheck or Christmas gifts), now is a good time to decide how to "spend" that money. Otherwise, it will be absorbed into the budget and three months from now you will wonder where that money went.
- Put the “plan of action” into action. No plan is going to work if we don’t get started. Decide which paycheck to begin making the changes and do it! If one of your goals is to get out of debt, it won't happen if you don't apply your plan of action. If you want to go on vacation, get ready for it now, not in June. Start setting aside the money you have decided on and go for it!
Setting your financial goals is exciting. Following through on them and seeing them happen is success. Small steps can lead to bigger financial gains. As you see your finances grow in one area, you become encouraged to have your money grow in other areas. Stay focused, make a plan and you will succeed!
Today's generation has been indoctrinated that any debt
is acceptable as long as you can make the monthly payment and
; you will always have mortgage payments, car payments and credit card payments. For many, you can add student loan payments to that list as well. But this blog is not about managing money. It concerns the consequences of when you don't
manage money. Those unplanned expenses that happen can have a large impact on monthly finances. "Robbing Peter to pay Paul" only works when Peter still has some financial resources left. Living paycheck to paycheck puts anyone into a precarious position and may send them into the world of pay day lenders where they become tied up in another cycle of debt.
While pay day loans can be viewed as a life saver in times of financial troubles, it can easily spin out of control. I recently spoke to a 23 year old single mom who had a pay day loan. I tried to explain to her that it was the most expensive way to borrow money. She responded "But I only have to pay back $50.00 on top of what I borrowed. That's not high." Unfortunately she was taking loans out on each pay week; paying one off then taking out another loan because she could not afford to pay off the current loan. She was paying back $100.00 plus fees each month. That was half of her car payment or gas money for most of the month. While her financial resources were limited, she had difficulty understanding the full impact these loans made and that the cycle she was in made her a prisoner to the lending institution.
Here are some steps you can take if you are unable to repay your loan or want out of the pay day lending cycle:
1. Look at your monthly expenses and income: when will you meet each expense and on which paycheck? Budgeting your expenses will help you know what your lifestyle costs you each month.
2. Figure out how much money you have left after meeting expenses to determine how much you can apply to your debt.
3. Repay the loan before the due date if possible. Once the loan is paid off, start setting money aside in an emergency fund. This will help you meet any financial crisis and break the pay day loan cycle.
4. If you can't repay the loan when due, call your lender and explain your situation. Don't wait until the last minute to call. It will cut down on the options you may have. Many lenders have internal programs for extending your loan obligation. If you live in a state like Florida, you can get an extension simply by calling an approved credit counseling agency.
5. Have a plan worked out on paper to show your lender as to when you can get the loan repaid. They may be willing to take weekly payments as a repayment option.
When you are ready to break the cycle of financial bondage, contact Family Life Resources. To help you get started, click on this link to begin the application process for your free budgeting and credit counseling session.
"IN THE WINDOW" OF RETIREMENT PLANNING
Most financial planners will tell you that the first 5 years of your retirement and the last 10 years of your working career are the periods of time that have the most significant impact on your long-term financial security. If you are "in the window," as this time frame is called, then you need to be thinking about how your current financial decisions will affect your quality of life in retirement.
In this series of articles I will present some financial and life-style issues that you need to consider as you begin your retirement planning. Before moving into the details, there are three general facts about retirement that should drive your family financial plan.
Retirement is more expensive than you think.
Most people underestimate the expenses of basic retirement living and are too
optimistic in predicting how long their retirement funds will last. A retiree trying to live
on interest income in the past few years knows that savings can shrink quickly in a
low interest rate environment.
Retirement will probably be longer than you think.
Considering the alternative, this is good news. Life spans are increasing and the number
of people living into their 80s and 90s is rapidly expanding. Retiring at 65 could easily mean
that you're spending the next quarter-century depending on Social Security, pensions and
whatever investments that you've accumulated.
Retirement planning isn't just about the money.
While most people think about retirement planning in financial terms, retirees face
lifestyle issues that can be nearly as challenging. Talk with anyone who's been out of
the workforce for a while and you might hear concerns about how they fill their time
(you can only play so many rounds of golf, sorry Rick and Rick) or how they miss
the social aspects of going to the office every day.
For those of you "In The Window," I'll be using this blog in the coming months to explore
many of the issues that surround your count-down to retirement.
Image Credit: AMBRO