/ Category / Manage Money Wisely

by Patrice C. Washington

You’ve probably heard for as long as you can remember that you should be saving for a rainy day. You likely call it an “emergency fund” or “a little something to fall back on” or a stash you’re planning to use in case you “fall on hard times.”

One question: How’s all that doom and gloom rhetoric going for you?

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How to Organize Financial Docs Step by Step

by Patrice C. Washington
This post is apart of the FREE Get It Together Challenge this Spring.

The Get It Together Challenge began with me sharing my Ultimate Financial Checklist so you’d know exactly which financial and legal docs you should have on hand. Next, we talked about which docs to toss and when. So now it’s only natural that we take the documents formerly scattered about your home, office or automobile and take a little time the necessary time to organize them in a systematic way. 

When Is It Safe To Toss Financial Documents?

by Patrice C. Washington
This post is apart of the Get It Together Challenge: How to Organize Your Finances in 7 Days or Less.

Early in my career, I would work one-on-one with individuals by going into their home and actually organizing their financial documents. It never failed that in every home I would find mounds and mounds of financial documents stacked up or tucked away that had been there so long the ink had faded rendering whatever it started out as useless. I also spent hours sifting through bank statements and utility bills from 1996 that no one would ever need again for any reason! Lucky for me, I was paid by the hour. Lucky for you, I can now tell you just what you need and for how long you actually need it!

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What Should I Consider When Buying A Car?

by Patrice Washington

Too many people fall in love with cars, sign up for a car note and then try to figure out how they’re going to make the payment work.

Well, that’s backwards. First, you should consider these tips:

  1. You should consult your budget to determine what makes sense for your budget once you not only factor in the car note, but also the car insurance, gas and annual estimated maintenance for the car you’ve got your eye on. A good rule of thumb is that your total car expenses should not be more than 15-20% of your monthly net income.
  1. Don’t start looking for financing for the first time once you get to the dealership. Financing at the dealership may be easy, but it’s not necessarily the best deal. Dealers are essentially acting as middlemen to offer you a car loan. They get paid for every loan they write, whether the loan is through the automaker or a local lender.

It is possible to get the best car-loan interest rate at the dealer, but you’re likely to find that it pays to shop around first. Know your credit score. Be especially wary if a dealer offers you a car loan at a rate that is far better than other lenders. Sometimes, dealers entice prospective customers with rates to get them to sign a contract to buy a car. Read all contracts carefully to make sure that the interest rate is not contingent upon approval.

I’ve always been a fan of getting prequalified with my credit union or local bank first. I’ve typically gotten better interest rates and it makes it easier to not be persuaded by some salesman that may not have my best interest at heart.

  1. Be prepared to negotiate. Since buying a car is such a pricey purchase, be prepared to negotiate to get the best deal. Before you visit a dealer, gather all your research materials so you are prepared. Know the cars bottom line price and find all possible discounts for the cars that interest you.

Automakers often advertise rebates and cash-back incentives on new cars to attract customers to their lots. Some dealers also will offer incentives on certified pre-owned cars or noncertified used cars. In addition, automakers often have discounts that apply directly to the buyer, such as for members of the military, current students or recent graduates or even members of certain local credit unions.

Research all of these incentives online at the manufacturer and dealer websites before you visit the lot so you know what you qualify for to save the most money.

Does It Affect Your FICO Score Differently If You Settle a Debt Versus Paying It In Full?

by Patrice Washington

Your credit report is definitely impacted differently if you choose to settle a debt rather than pay in full. When you settle a debt, you repay less than agreed under the original contract, which still shows you didn’t meet the terms of the contract. Therefore, a settled account is less positive than a paid account, which shows you repaid the total amount in full.

If you can do it, payment in full is always the best way to eliminate a debt. It means you have completed your obligation; you borrowed $2,000, agreed to pay it back and you did. This wipes the debt from your credit report and improves your score two ways: by reducing total debt and indicating good payment history. Those elements make up 65 percent of the score.

Consider these 3 points:

  1. When compared to settlements, your credit report and score will suffer less if you pay in full.
  1. You’ll reduce the chance of this bill reappearing in a year or two with a new collector, which is a vicious game that happens quite often in the credit world.
  1. You won’t owe the IRS money on the settled debt, which is a biggie people forget about. You probably didn’t know this, but you also can wind up with a tax bill if you settle for less than you owe. The IRS considers any difference between what you owed and what you settled as income. If you had a $5,000 credit card debt and settled it for $3,000, the IRS counts the other $2,000 as income. You and the IRS will both get a 1099-C showing that as income.

Now, with all that being said let me speak as someone who literally went from a seven figure business to scraping up change and having to make decisions on more than one occasion on whether I should settle or pay off a debt in full.

If you just cannot pay in full in one lump sum or even using a payment plan and you feel that your only option is to settle the debt, then do that. It’s much better than doing nothing at all and in the future, you can write a hardship letter explaining your previous circumstances and showing that you did the best you could with what you had.

rca3DOther “experts” may disagree, but I’ve lost everything before and ruined my credit in the process. When you’re trying to rebuild like I did, I
still believe in doing the best you can with what you’ve got. In my online course, Real Credit Answers, I walk you through the exact steps to use to rebuild your credit and regain control of your financiallife. Check it out! It might be just the start you’re looking for.

 

How Can I Stop Harassing Creditors?

by Admin

Today on the Steve Harvey Morning Show, we talked about how everyday consumers are getting back over $60 million in refunds from debt collectors.

Earlier this month, two of the nation’s largest debt collectors who were accused of harassing and misleading consumers settled to not only refund nearly $60 million, but also agreed to stop trying to collect on another $128 million in debts.

It seems these guys were up to some tricky tactics that we definitely wanted to make our listeners aware of because IF you haven’t experienced some of this stuff you definitely know someone that has.

San Diego-based Encore Capital Group and Virginia-based Portfolio Recovery Associates were accused of harassing consumers by:

  • calling before 8 a.m. or after 9 p.m  (the law states that creditors cannot call you repeatedly or continuously with the intent to annoy, abuse or harass you into paying.)
  • declaring the burden of proof is on the consumer to prove a debt claim was invalid as opposed to them having to prove that the debt is valid
  • regularly attempting to collect on debts by suing consumers in state courts across the country. In numerous cases, the companies had no intention of proving these debts. They placed tens of thousands of debts with law firms staffed by only a handful of attorneys and in many cases made no effort to obtain the documents to back up their claims. Instead, the companies relied on consumers not filing a defense and winning the lawsuits by default.

 

So, what if this has happened to you?
1. Keep a journal of the days and times of calls, as well as the method of contact you are receiving from credit collectors. You will need this in order to establish that the creditor’s efforts are indeed “continuous” and “repeated.”
2. Notify the creditor by phone if you do find that their contact is actually abusive. Let them know that you know your rights and that you do not wish to be harassed in such a manner and that you would prefer your communication by mail. Verify your mailing address with them and make an arrangement to handle your hardship if you still have not by this point. In my e-course, Real Credit Answers, I actually teach you how to develop a script so you’re not intimidated by talking to your creditors.
3. Report any problems you have with a debt collector to your state Attorney General’s office, the Federal Trade Commission, and the Consumer Financial Protection Bureau. Many states have their own debt collection laws that are different from the federal Fair Debt Collection Practices Act. Your Attorney General’s office can help you determine your rights under your state’s law.

Financial planning: Crucial Documents for Every 20-year old

by Andy Masaki

For a lot of young adults, wills and estate planning does not figure out in their list of to-dos when they are in their 20s or something. But, the fact is, it is important that all people regardless of their age have a proper plan in place for their estates right from the very beginning.
For starters, they usually do not require any sort of complex set of tasks to complete; only a strong understanding of some fundamentals regarding financial planning will suffice, especially about some selected documents.

So, here are some of the crucial documents that would help these young minds jumpstart their financial and estate planning endeavors.
Basic documents of financial planning you must have
When planning your finances, it is important that you get in place the below mentioned key personal finance documents:

• Powers of attorney – These documents provide the authorization to an individual, better known as attorney-in-fact, to discharge all the legal as well as financial liabilities and make the decisions pertaining to the same, on the actual owner’s behalf. Moreover, a power of attorney is considered as a what-if document. Being a young adult, it may seem to be unnecessary from your perspective at this moment. But, it is very important and that you need to think seriously over this issue, nevertheless. This is because these documents provide the assigned person an unlimited access to all the assets of the owner, upon his or her unanticipated incapacity. However, most of the time, a power of attorney becomes effective immediately after signing on the dotted line. The problem starts when the assets end up at wrong hands where they could be misappropriated or misused, or even get stolen. Hence, the key is to name only a trustworthy person as your power of attorney.

• Health Care advance directives – Most of the time people get surprised on learning about the rule that prevent them from taking decisions on medical matters that affect their relatives and friends, unless authorized by the person concerned. These instructions are generally mentioned in advance directives. These documents acts as the authorization letter allowing a named individual to take crucial, life-altering decisions on behalf of the other, especially during medical emergencies when the doctors are at a fix and cannot arrive at a concrete decision. To deal with these issues each state has its own set of laws in place that would govern the process of creating advance directives. You could access some of the sample online forms available for free that have been developed by various states.

• Beneficiary allotments – For a lot of young adults, assets linked to their trade or work like group term life insurance or their retirement accounts like 401(k) plans are some of the most precious assets they would ever have. Assets of these sorts are usually passed on to the beneficiaries of the owner. There are forms provided by the employer to access these assets instead of the will created by the owner. Most of the times, young adults like you are ignorant of these provisions and even if some of them are, then those people are found to be least bothered about filling up the necessary forms to safeguard their assets from future catastrophes. Failing to assign a proper beneficiary would actually make it tough for your immediate family members to access and use the legacy that would leave behind in the event of your sudden demise.

• Prenuptial contracts – A lot of has already been said and discussed regarding prenuptial agreements on various websites and textbooks. However, it is worth another mention here, as a lot of you will marry in your 20s or at least meet your life partners eventually. Financial planners encourage young adults to have a proper prenup in place before exchanging marital vows. This is not only to defend their existing wealth, but also the assets they share that could be divided in case of a divorce. The prenup includes gifts from family and friends, business interests, future inheritances, and so on. Though the list could go on and might overwhelm you in the process, yet all the above mentioned documents barring the prenups are most straightforward in nature and affordable. Moreover, there are some selected documents like advance directives that are free. According to the financial experts, the most suitable time to put these essential documents in place is before you need them. On the contrary, it might be too late to get hold of these documents once you actually need them.

This goes without saying that women should plan their finances well in advance as they are more prone to financial dependency over their husbands. Staying prepared for the worst could help you to avert a larger financial crisis and prevent unnecessary monetary hassles at a later stage in life.

Five Mistakes to Avoid with Tax Refunds

by Admin

Tax time: That remarkably peculiar time of year when ordinarily wise people begin to make really unwise financial decisions. The average tax refund for 2014 could be a little more than $3,000, which for many families is the largest cash payment they receive all year, making them vulnerable to mistakes if they don’t plan accordingly.

Here are the top five tax refund “don’ts” to avoid this year!

#1 – Don’t act like the refund is FREE money. The operative word in the term “tax refund” is REFUND! Common synonyms for refund are “repayment,” “reimbursement” and simply, “money back.” This means that tax refunds are not “free” money! The government is not giving us a bonus every year to thank us for being an American. This is money you’ve allowed them to “borrow” all year long. And now, unlike many friends or family members, they’re actually paying you back. While you were patriotically overpaying the government; you could have been doing a dozen other things with the money YOU worked for, allowing your money to actually work for you.

#2 – Don’t spend it outside your budget. The mindset that tax refunds are free money typically leads people who ordinarily use a budget to leave refund money off their money management radar. Typically, by the time you think about budgeting, you’re down to your last few hundred dollars and want to “be responsible” with it. Tax money should be approached the same way you would approach your paychecks; after all, it’s nothing more than the money you worked for all year long! Even if you apply slightly lopsided percentages to how you disperse the money, you should still use some type of logical system. Blowing it on insignificant, everyday purchases is not the way to go.

#3 – Don’t pay off too much debt. I know you’re thinking there is no such thing as “paying off too much debt”, but in reality there is. If you use your refund to pay off debt but don’t have an emergency or opportunity fund in place, you’re not really making progress. Let’s say you use the entire refund to pay off a credit card balance in April, but in May you have an emergency. Because you have no savings, what are you going to do? That’s right! You’re going to put that emergency expense on your credit card. By June, you can end up right back in the scenario you were in before the refund came.

Instead, strategically pay down your debt. Put a large chunk toward paying it down if you can but try to leave at least $1,000 aside in an account that you can easily access if necessary for emergencies.

#4 – Don’t save all the money. This is simply the reverse of #3. Don’t save the entire refund when you have high interest rate credit cards or even a small student loan balance that can be wiped out. Again, you should have a healthy balance in your personal finance efforts that allows you to save money and pay off debt simultaneously and systematically.

#5 – Don’t create ongoing debt with major purchases. Commonly, a feeling of prosperity follows a major infusion of cash and often forces, I mean literally strong arms, people into putting money down on a new apartment, car, furniture, etc. Here’s the thing to remember: After that down payment, you’re still responsible for the pesky monthly payments that linger long after the initial investment. Even though you’re feeling good right now, remember that April 15 only comes around once a year. Make sure if you have plans on using your refund in this way that your monthly budget can handle the payments you are signing up for. If not, the “blessing” of tax money can quickly become a nightmare. Use the refund to abolish your bills, not create new ones.

This year I’m supporting MyFreeTaxes as a quality tax initiative that’s committed to providing free filing and tax support nationwide to individuals and families. MyFreeTaxes.com is the only free online platform that can be used to file federal and state taxes in all 50 states, and the District of Columbia, for individuals and families who earned $60,000 or less in 2014. The online tool allows taxpayers to self-file for free using a simple step-by-step process that includes free telephone, email, and online chat support from IRS-certified specialists. Don’t wait, file your taxes today at MyFreeTaxes.com

What Should You Do With Your Tax Refund?

by Patrice C. Washington

Tired of hearing about what not to do with your tax refund? Here’s a look at 5 smart and actually powerful things you can do with this year’s tax refund. They’ll not only help you get the financial house in order today, but they’ll help you keep on track for the long term!

1. Create an Opportunity Fund – An opportunity fund is nothing more than the typical emergency or rainy day fund you normally hear about, but with a spin. I believe that what you verbalize, you visualize and therefore run a greater chance of magnifying or magnetizing in your life. So, if you’re running around asserting that you need an “emergency fund” then what will happen? You’ll probably have an emergency! Instead, think about the things you really want to accomplish and life and allow that to be your motivation. . . .Will emergencies still arise? Well, duh, of course they will. But, now you have the opportunity to make what would have once been a crisis a simple inconvenience. There is nothing pleasant about an emergency, but knowing that if one came up, you’ve psyched yourself into saving to handle it with ease is definitely a blessing.

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Need Student Loan Help?

by Patrice C. Washington

Since I’ve had the honor of answering all of the financial questions on the Steve Harvey Morning Radio Show lately, I’ve received literally hundreds of e-mails around student loan debt and default alone.

One thing I can tell you for sure is that no matter where you are in the process, YOU ARE NOT ALONE! This is a battle that many people are facing and fortunately, there are a lot of great (although little known) resources online to help you get through the process.

Here are a list of quick tips and websites to help you navigate your student loan repayment options ASAP:

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