Janet wrote to me through the GetOutOfDebt.org site and asked the question below. If you have a question you can write to me as well. Visit GetOutOfDebt.org . “Dear Steve, I bought my first home, moving from Pennsylvania to Florida, the only place I knew all my life, following the death of my beloved mother. I was able to put a down payment on a house in a beautiful community in Florida, & live rather cheaply as compared to Pennsylvania. Unfortunately, the job market has not been kind to me and I have been unemployed for 5 months. I have borrowed from every resource possible and have been through a line of credit of 31,000 over the past 1.5 years. The pay scale here is ridiculous…something I was not aware of and only wish I had done my homework on that front. I am now trying to start my own home based business, but in the meantime I have all these bills that are going to go unpaid after this month, including my mortgage. I fear going into foreclosure or losing my home. I am determine that I will not become another statistic. What do you suggest I do to get by for a few more months. I know I will do well with this business and or find a job…it is not paying my bills that concerns me. I had a great credit score, but I believe it went from 730 to 680 now, since I missed paying a bill or two by a few days. I do not know what else to do. I would appreciate your input. I have approximately $170,000 debt which includes my two mortgages and credit cards, and need about $2000 per month to pay all my bills. Help! Janet” Dear Janet, I had so much to say that I launched a new podcast show and your question and answer became the focus of the very first show. You can listen to the show using the player or link below. Big hug. Steve Give Me Credit Podcast Listen to my answer using the audio player below or the link below. Give Me Credit - Show 1 - Janet Other Related Articles to Read San Wants To Know “We Need Some Way To Pay Off Our Debts” David Writes In “I’m About To Lose My House” Karen Writes In “Ex-Husband Isn’t Paying The Bills and He’s Trashed My Credit. What Can I Do to Repair It?” America’s Job Bank - Find a Job Now Emily Wants to Know “I’m Pregnant And Got My Hours Cut. What Do I Do?”

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Jax wrote to me through the GetOutOfDebt.org site and asked the question below. If you have a get out of debt question you’d like to ask, just visit GetOutOfDebt.org . “Dear Steve, I need to refinance my home in Oct of 2009. My credit score is 669. I have a mortgage of $130,000, home equity loan of $34,000, a car loan of $4,000, & credit cards of $4,000. Some credit cards don’t have balances. Do I close these credit cards and extend my home equity loan to pay for my credit card debt and then refinance my home with the mortgage and home equity loan all in one? Jax” Dear Jax, Your approach seems to make logical sense. Of course it depends on what the mortgage market looks like in October of 2009. If the lenders are still all constipated or the first mortgage plus the home equity loan equals a substantial amount of your homes value at that time you may find it difficult to refi. It is a risk only you can determine if you are comfortable with. Also, don’t close the credit cards or you’ll kill the boost those credit cards give your credit report . You can see more about this if you read this other question for details . Big hug. Steve Other Related Articles to Read San Wants To Know “We Need Some Way To Pay Off Our Debts” Daniel Writes In - “How Can I Get Out of Credit Card Debt?” Teresa Writes In “I Have Too Many Credit Cards” Opal Writes In “I’m Worried About Hurting My Credit If I Close Credit Card Accounts” April Writes And Asks “Is There A Debt Program That Can Help Me And Protect My Credit?”

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Teresa wrote to me through the GetOutOfDebt.org site and asked me her question below. You can write me for help also. Visit GetOutOfDebt.org . “Dear Steve, I have too many credit cards. Where do I start to get rid of them? Teresa” Dear Teresa, Credit cards don’t magically appear in our wallets or purses. They appear because we have done something or participated in some process to agree to these credit instruments. The first step to get rid of your credit cards is to do a financial autopsy and figure out what your actions were that led to you getting so many cards up till this point. Unless you can develop some awareness about that you are bound to repeat the same steps again. You have three approaches to paying off the cards. The first would be to pay them in full. Second would be to adopt a debt snowball approach. Third would be to enter a credit counseling program if you are struggling but can afford to pay about 80% of the minimum payment you are making now. And then once you start to pay off cards, you should keep your oldest credit cards open to help bolster your credit report and credit score . Don’t close those oldest cards, they carry a lot of positive weight to pumping up your credit score . Once you start to follow this approach and you can come back and provide me with more information I’ll gladly help you further. Big hug. Steve Other Related Articles to Read Carol Wrote Me And Asked “Would You Advise Debt Consolidation?” Opal Writes In “I’m Worried About Hurting My Credit If I Close Credit Card Accounts” Jax Is Looking to Refinance An Has Some Questions April Writes And Asks “Is There A Debt Program That Can Help Me And Protect My Credit?” Crys Writes In And Asks “We’ve Been to Credit Counseling But Should We File For Bankruptcy?”

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Opal wrote to me through the GetOutOfDebt.org site and asked me the question below. If you have a question you can write to me through the site as well. “Dear Steve, I have two or three credit card that are debt free. Should I close these accounts since I don’t use them and don’t need but one active card? Would it go against my credit to close these? Opal” Dear Opal, As strange as this may sound, with only two or three credit cards to your name it does not make much sense to close any of them, and here’s why. Your credit score is calculated using a number of different factors. One of the most important factors is how long you’ve had credit. These cards help to improve your credit report and credit score because you’ve had them for a while and they are not maxed out or delinquent. If you can lock them away someplace safe, then I would do that rather than close them. I’m assuming that you are not having to pay an annual fee for any of them either. If you are paying an annual credit card fee then we should think about closing that card but only if it is not your oldest credit card . You can also call your creditor that is charging you an annual fee and tell them that you don’t want to pay it. About 75% of the time they will waive the annual fee then. The way to discover when your cards were opened is to get a copy of your credit report and check the date opened that is reported to the credit bureau on your credit report . You should also use the oldest card from time to time and pay the balance off in full at the end of the month. This will show some good credit activity on your credit report which will help to improve your credit score as well. If you just went in and randomly closed cards, yes, it could hurt your credit score . Big hug. Steve Other Related Articles to Read Teresa Writes In “I Have Too Many Credit Cards” Daniel Writes In - “How Can I Get Out of Credit Card Debt?” “How Do I Go About Making My Credit Score Better” - Antoine Jax Is Looking to Refinance An Has Some Questions Carol Wrote Me And Asked “Would You Advise Debt Consolidation?”

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Mary and Bob both wrote the me through the GetOutOfDebt.org site. If you have a credit or debt question you can write me for help also. “ Dear Steve, I’m living on small social security check and I have put all my investments in cash account with brokerage firm. I am moving into an annuity for security and need cash each month. I’m using the rest for money market checking account and a 6 month CD. Is this the right thing to do? I need an answer because I’m changing this on Tuesday. Thanks. Mary” Dear Mary, Asking me or any other casual adviser would be the wrong this to do. Nobody could properly answer your question based on the information you’ve provided and since we are talking about your future security here, I strongly advise you to talk to a Certified Financial Planner. And not just any CFP, a fee based CFP that will charge you for their time and not try to make a buck off of you by shoving you into the highest commission paying investment. You can find a Certified Financial Planner in your area through this link . Big hug. Steve Dear Steve, I am going to retire in September 2009 at age 62, my question is, I understand that my wife is eligible to receive half of my social security. Let’s say I get $1,100.00 of social security, does my wife get $550.00 in addition to this, which would give me $1,650.00 per month, my wife has never worked. Thank you. Bob” Dear Bob, There is no answer that I can give you that will encompass all the complexities of social security benefits. I’m going to give you some basic information and links but I strongly urge you to contact Social Security and get a direct answer to your question. Here is what I discovered from the Social Security site: Even if he or she has never worked under Social Security, your spouse can begin collecting the benefits as early as age 62. However, if the benefit begins early, the amount will be permanently reduced by a percentage based on the number of months up to his or her full retirement age . can qualify on your record for Medicare at age 65. can receive a benefit equal to one-half of your full retirement amount if they start receiving benefits at their full retirement age. There is also a very nice online benefits calculator that will be helpful to you. Big hug to you to. Steve Other Related Articles to Read Maria Writes In “How About Staying In The Stock Market?” ML Writes In, “I Can’t Pay My American Express Card.” Chanel Writes In “How Do I Find Out Who I Owe?” Teresa Writes In And Asks “What Should I Do Next?” Debit Card Concerns. Profits Hide Truth About Your Risks.

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Maria wrote to me through the GetOutOfDebt.org site and asked me the question below. If you have a question you’d like to ask just visit GetOutOfDebt.org . “Dear Steve, This is not a debt question - it’s about staying in the stock market with all the current turmoil? Will you still answer it? Maria” Maria, So much of what happens in the stock market is not based on logic or research, but innuendo, gossip and emotion. Just because the stock market is wildly gyrating at the moment is not necessarily a cause for concern as long as you are invested in professionally managed mutual funds. In a professionally managed fund you have a professional looking over the investment and you are sharing your risk with a pool rather than on one or a few stocks. My approach to the current situation is to not look at the value of my investments. It would make me ill to look now but I know that for me, I’m comfortable with the funds I’m in. I also know that what goes down, always goes up again, over time. If you sell now, you’ll sell at a low price, and if you invest latter, you’ll buy back at a higher price. The opposite strategy than what you want to follow. If you are working with a major mutual fund company or Certified Financial Planner then you might want to talk to them to see if your current portfolio needs to be rebalanced. The people I am most concerned about are those that depend on their stock investment for monthly income. It certainly makes the though of depending on a 401(k) or 403(b) scary as you near retirement. In that case you need to look to convert your portfolio into safer investments that don’t swing. But in high flying times it feels bad to move into T-bills that pay a low amount of interest when some other fund of investments is soaring. Investing should be 90% logic and 10% emotion but it’s not. I hope that helps. Big hug. Steve Other Related Articles to Read Steve Writes In “I Want to Cash Out My 401(k) And Pay Off Debt.” Christine Writes And Asks Me “Should We Liquidate The IRA to Pay Off Debt?” Mary & Bob Write In Retiring And Financially Concerned San Wants To Know “We Need Some Way To Pay Off Our Debts”

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This weeks question put to the personal finance bloggers brain trust at GetOutOfDebt.org was: When people are working with a credit counselor or working up their own budget they often hear or believe that they should not make religious contributions and should not put any money in savings while they are making debt repayments. Instead, some believe that every dollar should be used towards debt reduction. What is your opinion? Elizabeth Warren - A national expert in consumer debt and bankruptcy . She has authored a number of books and is often see on news shows and talk shows providing expert consumer debt advice. More Information | Blog Paying down debt is a form of savings. Because credit card companies charge 16% (or more) and savings accounts pay 4% (or less), it usually makes sense to pour every penny into debt repayment. Getting rid of debt is life transformative, and it is worth pushing hard toward that goal. I see religious contributions as a very different issue. For some, tithing is a regular part of religious observance. For such people, contributions are an expense, much like food or medical care. The costs should be kept to the lowest sustainable level, in the same way that it makes sense to pass up steak when the budget is tight, but nourishing the soul is as important as nourishing the body. Getting out of debt is about building a better and more complete life. WC - A 27-year-old writer living in Chicago and writing about personal finance through The Writer’s Coin . I think this all comes down to priorities. Religion is a very personal decision and I don’t think anyone should tell anyone else how to handle their religious beliefs. Debt can be a crushing thing, though, and I personally believe that you can’t really take care of other people until you can take care of yourself first. I would make religious contributions something you can take care of once you’ve settled your debt. Pay it off first and you’ll be in a better position to give down the line. Dawn - Iowa Hippie Chick blogs about money love and marriage and offers so very insightful posts on personal finance that involve emotional insight and awareness. Vist her blog . To me, the reason we usually get into debt in the first place is a lack of financial balance. The process of debt reduction can be a terrific time for us to learn that balance. Even if our primary goal is reducing debt - allocating a percentage of our incoming dollars to an emergency fund, savings, or retirement account, is a start to living in financial balance! And if we are committed to tithing or donating to a charitable organization - it can definitely continue during debt reduction. Maybe just scaling back on the actual dollar amount if necessary, until the debt is reduced. It’s really not about the debt reduction period - it’s about learning good financial skills for life! (If we don’t learn how to balance our finances during our debt reduction, we will probably just end up back in the same place - DEBT). Patrick Bryan - Living in Northern Ireland, Patrick helps people in a very different environment and economy but yet, mush is universal and much is the same. Visit Patrick’s Northern Ireland blog on debt . Thought provoking question, glad to have the opportunity to rumble it around my brain! I think the practical outcome to your question will depend on the level of debt people find themselves in, and how much agreement they have to obtain from their creditors in terms of their budget, although fundamentally I would always defend a person’s right to make religious contributions and have savings. If a client is going into a debt management plan or IVA then as you know there are ‘allowable expenses’ up to a certain level, and also ‘other’ expenses which the creditors may or may not permit. I had a case recently for example where the creditors agreed a £30pm gym membership because the clients had made reasonable claims in other sections of the income & expenditure form. I argued that staying healthy was important for these people and would help them continue to work hard to repay the money they owed. I certainly support an individual’s right to make religious/charitable contributions whilst in debt themselves, as for many people they feel a strong personal obligation to give, and when struggling with personal debts they also need to boost their feelings of self-worth wherever possible. The desire to make that religious/charitable donation may just give that person enough determination to grit their teeth and work harder to resolve their debt problems. In terms of making savings there are two aspects to this - from a purely financial perspective if you are paying 29% APR on a credit card and earning 6% on a deposit balance then it makes good sense to repay the credit card BUT in many cases credit card companies will cut a client’s spending limit if they reduce the balance on their account, or have perhaps defaulted them which means that they can’t spend at all. If that is the case then they have no emergency fund accumulated even though they are reducing their borrowings. For this reason I would recommend clients still have some savings tucked away for a rainy day as they are less likely to be able to rely on using their credit card as a buffer zone. Also, learning to save is a fundamental way of keeping out of debt in future, so it is good to get people in to that habit early, even if it is just a small amount whist they are reducing their debts. Steve Rhode - A personal finance blogger and founder of the Myvesta Foundation, a global scoial enterprise that helps people find solutions for money troubles. You can ask Steve your debt related question through GetOutOfDebt.org and he’ll help you for free. Many debt advisers and credit counselors approach the budget as a purely technical exercise and do not realize that to be truly representative of the person it should include expenses that are critical to the person even if we do not agree. Giving to a religious organization at a time of debt reduction is one such area. If tithing is fundamentally important to the person in debt, they are aware that money used to donate is not available to reduce debt and they want to give it, then I support that decision. It would be wrong for an adviser to suggest that they stop something like tithing or religious contributions and giving that is a core belief. If giving is slashed by the adviser it can have ramifications with the debtors self-worth and self-esteem when they are unable to give as they feel is necessary. And continuing to feel a valuable part of their religious community can give comfort and emotional support during an otherwise difficult time in their lives. However, I do have the conversation with people that they can give in other ways that are valuable, other than money. They can donate time and work around their religious organization to still feel like an important contributor even though the money donated may be less that their previous donation amounts. It is my opinion that savings should be part of a debt reduction budget. If the person is not putting emergency cash aside then far too often unexpected expenses wind up right back on the credit cards if they are still open. If the cards are not open they often find themselves in a very difficult position and it is not unheard of a client to then go get a silent payday loan to cross that financial bridge. Savings should be based on the individual persons circumstances but I usually suggest no less than $50 per month. If a large reserve is built up then a lump sum payment could be used to accelerate debt reduction latter. What are your thoughts about this? Leave your comment below. Other Related Articles to Read Lourdes Writes In “What Should I Do to Get Out of Debt?” Kiva Thu Wrote Me And Said “I’m Really Struggling, My Husband is Disabled, How Can I Get Out Of Debt?” Ryan Writes In Looking For His Lifestyle Back Christy Asks “Why Should I Even Bother With Getting Out of Debt?”

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Jackie wrote in to me through the GetOutOfDebt.org site and asked me the question below. If you have a question you’d like to ask and get some totally free advice, visit GetOutOfDebt.org and ask me your question. “Dear Steve, I have been approached by another financial company, current one is Edward Jones . Is it proper for another one to approch me? Do I tell my current one about it? How do I know if it is on the up and up? New name is Hantz Finanical . Please advise. Jackie” Dear Jackie, While this is not directly a debt question I’m happy to offer you my thoughts on this as an employer myself. I have never been miffed about other employers approaching my staff with other opportunities. Ultimately my focus is about what is best for the employee and if there is a better opportunity elsewhere that they want to pursue, they should. But new opportunities are not always attractive simply for more money. People often remain in jobs that pay less because they really like their job, enjoy the people they work for, their current job gives them flexibility or maybe it is just an easy commute. Unless you have signed a non-compete agreement I can’t see how going to talk to Hantz Financial would harm you in any way. I don’t think that you need to disclose this to your current employer, after all, the only thing you need to go and do is just have a friendly conversation to find out what Hantz Financial may be offering you. What you absolutely need to watch out for is disclosing any business confidential or operational information regarding what you know about Edward Jones. Don’t do that. The only way you’ll know if it is a legit job offer, which it might be, is to talk to them. Big hug and good luck. Steve Other Related Articles to Read No Related Post

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Theresa wrote to me through the GetOutOfDebt.org site and asked for feedback and advice. You can see her question below. If you have a question about how to get out of debt, just visit GetOutOfDebt.org and ask, my help and advice are totally free. “Dear Steve, I have $75,000 in school loans and I have one job bringing in $360 per week after taxes and another job where I make $150 per week after taxes. My car payment is $251, rent is $600, utilities are $130, Food is $80, and water is $45. I have a 401(k) with $6,000. Help me. I feel borderline and broke. I relocated ten months ago from New Jersey. After acquiring three degrees I still can’t find a job to match my qualifications. I feel broke and miserable. Help! Theresa” Dearest Theresa, I certainly feel the pain and frustration that is coming through your electronic correspondence. Working hard to get three degrees and achieving great things in education always seems like it should pay off, but sadly it doesn’t always. I recently wrote about this in “ Is Going to College Really A Smart Financial Move? “. I don’t know what your degrees are in and the student loans are not my first worry here since they are probably government backed student loans and you’ll have to pay them come hell or high water. Let’s Look At Student Loan Options First You did not mention what your student loan payments are and if your loans are on hold or in forbearance. If they are then they are just sitting there, ticking away, with the balances getting bigger due to growing interest being added to the amount of your loan. The Department of Education offers a little known program called ICR (Income Contingent Repayment) that is worth investigating. This plan gives you the flexibility to meet your Direct Loan obligations without causing undue financial hardship. Each year, your monthly payments will be calculated on the basis of your Adjusted Gross Income (AGI), family size, and the total amount of your Direct Loans. To participate in the ICR Plan, you must sign a form that permits the Internal Revenue Service to provide information about your income to the U.S. Department of Education. This information will be used to recalculate your monthly payment, adjusted annually based on the updated information. This plan gives you the flexibility to meet your Direct Loan obligations without causing undue financial hardship. Each year, your monthly payments will be calculated on the basis of your adjusted gross income (AGI, plus your spouse’s income if you’re married), family size, and the total amount of your Direct Loans. Under the ICR plan you will pay each month the lesser of: the amount you would pay if you repaid your loan in 12 years multiplied by an income percentage factor that varies with your annual income, or your monthly discretionary income* multiplied by 20%. If your payments are not large enough to cover the interest that has accumulated on your loans, the unpaid amount will be capitalized once each year. However, capitalization will not exceed 10 percent of the original amount you owed when you entered repayment. Interest will continue to accumulate but will no longer be capitalized. The maximum repayment period is 25 years. If you make payments under the standard or 12-year extended plan and then switch to the ICR plan, time under the former plan counts toward your 25-year repayment period. Time spent in other plans or in deferment or forbearance does not count toward the 25 years . If you haven’t fully repaid your loans after 25 years under this plan, the unpaid portion will be discharged. You will, however, have to pay taxes on the amount that is discharged. Let’s Look At Your Debt The figures you gave me indicate that your problem isn’t the typical too much credit card debt. Your monthly obligations and payment amounts seem reasonable, except for your monthly food budget . Really, only $80 a month for food? There isn’t much to trim or cut in the expense category. The Real Issue - Under Employment Theresa, the critical issue of your “broke and miserable” situation is that you are underemployed rather than unemployed. Now it is very easy for me to tell you to go out and get a better paying job, saying that does not make it happen automatically and there could certainly be some underlying issues that are holding you back from doing that. Once case in particular stands out as an example. I once had a client that was working the night shift at Walmart for years. She was just barely getting by. As we talked about why she had not tried to look for a better job she finally let it slip, “I am ashamed of my feet”. She felt her feet were too big and she did not want to go on an interview where she felt someone might make a comment or judge her by the size of her feet. Once we talked through that issue she developed the confidence to at least go try an interview. She got the new job making 50% more and it solved her money troubles. I’m wondering Theresa if you have an issue that is holding you back from looking for a new job? Getting a new job is not fun or easy. It often involves a lot of rejection and when you are already feeling borderline, broke and miserable the last thing you want to pursue is rejection. But if you can face the process mentally prepared for rejection then it makes it a bit easier. In fact, I would adopt the approach that each ‘no’ that you get is a good thing because it means you are one rejection closer to getting to the ‘yes’. To help I’ve put together this job bank page with links to help. I have always found that the secret is to make a job of getting a job. What I mean is that you have to approach it like a project. You need to use your educational skills, project management abilities and communication skills to diligently hunt for more income. Another issue that comes out in your email is one of self-worth or self-esteem. It sounds like you’ve been down for so long that up is impossible to set your aim on. In your search for more income I don’t want you to find a third job, I want you to find a higher paying primary job. Even if you don’t think you deserve more than what you have right now, trust me, you do. And I could tell you all sorts of mumbo jumbo that I believe in but let me distill it to say that as long as you feel you are not worthy to have a higher paying job, you’re not. Theresa, bankruptcy , credit counseling , debt settlement and all the rest of the tools to use in problem debt situations will not help you, only increasing your income will. And I did not forget about your $6,000 in 401(k) money. It’s just that unless we tackle those underlying issues that are holding you back, if you tap that cash, it will just be gone and the problem won’t be any more resolved than it is today. Don’t touch that 401(k). Big hug. Steve Other Related Articles to Read America’s Job Bank - Find a Job Now Crys Writes In And Asks “We’ve Been to Credit Counseling But Should We File For Bankruptcy?” David Writes In “I’m About To Lose My House” Worried Sick Asks “Am I Worrying Myself Sick About My Financial Future?” Steve Writes In “I Want to Cash Out My 401(k) And Pay Off Debt.”

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Carol wrote to me through the GetOutOfDebt.org site and asked me her question below. She knew I provide help and advice for free and if you have a question you’d like to ask just visit GetOutOfDebt.org and ask. “Dear Steve We are in debt up to our eyes. We are not behind in anything. We didn’t want to get to that point. We were denied financing our house for a longer period of time–our debt to credit ratio wasn’t good enough. However, we didn’t want to borrow any extra money. Would you advise a debt consolidation? Carol” Dear Carol, You ask a very good question. It is double-edged sword to be current on your bills but unable to make any progress and barely hanging on. The problem is that while you may have a really good credit report and credit score right now, servicing the debt leaves you in a dangerous life position. And I’m not all that certain how good your credit score and credit report might really be at this point since you are maxed out and your debt to income ratio is evidently bad already. So what does it really mean to be just making it from month-to-month? It means that your future labor is already pledge to pay for bills each month. You see, in order to pay for debt we have to convert work into currency and then use that currency to pay our bills. Bills don’t care if you hate your job, you get sick, the kids get sick, you need a break, you want to take a trip, or the EGR valve on your car goes. When you are in debt “up to your eyes” a significant part of your life is no longer yours. It is pledged and promised to your creditors. Technically I guess you could say that you are a slave to your creditors. Debt is just a thing but it is what that debt does to our lives where the problem occurs. Excessive debt creates stress, tension, fighting among friends and lovers. It creates depression and reduces our hope for tomorrow or enthusiasm for life. And it’s one life, that’s all you get. Your life, that one life is what you make of it and if that has become painfully serving debt and making it from month-to-month there is one simple way to instantly change your life to give you freedom with minimal stress, pay the debt off in full or put into place a longer term plan to actually eliminating your debt instead of just servicing it. Making it from month-to-month does not have to be the norm. There is a significant percentage of people and families that own their own home but owe no mortgage, who own their own car but have no car payment. It does not have to be normal to be “in debt up to your eyes.” I’m just saying, once this situation gets resolved, there are other options for your future. So Carol, what do we do with your situation? You asked about debt consolidation , it is a possibility, but any approach other than paying your bills every month as promised or in full is going to negatively impact your credit report and credit score . If you can value your future and your life more, and find gratitude in what you do have, well then maybe your credit score and credit report are not as important as breaking free from debt. There are several paths to consider in your current situation: Credit Counseling - You could go into a credit counseling program where creditors may reduce your interest rate you pay and possibly lower your monthly payment. Take a look at what I previously wrote about credit counseling and consider that as my disclaimer . Debt Settlement - A debt settlement program may work if you have a lump sum of money to use to pay off the debt for less than you owe. If you enter a debt settlement program and they encourage you to make monthly payments into a fund until you can accumulate enough to settle your debts, watch out. Most people are not prepared for the collection calls that will occur in that approach. Bankruptcy - I usually mention bankruptcy because it is always a legal tool that you can use to either put together a binding repayment plan (Chapter 13 bankruptcy ) with your creditors that you can afford or discharge your debt completely (Chapter 7 bankruptcy ). You owe it to yourself to speak to a bankruptcy attorney or get a free bankruptcy review as part of your information gathering homework. Debt Snowball - The debt snowball approach is just a good way to keep you motivated to paying off your debt if you have some extra money to devote each month above making just the minimum payments. The debt snowball approach works and is a viable option if you have the patience. Carol, I’m giving you homework. You must go out and research these various options and only once you have examined each option and gathered the facts, will you be able to make an informed decision about what is best for you and your family. Don’t rush to a decision, investigate it. Don’t be ashamed about your situation, you and millions of others are in the very same position. I was once. For you this is all personal and strikes at the core of your self-esteem and self-worth. For your creditors you are yet just another number on a screen and the only reason a creditor might pretend to judge you is to use it as collection pressure. Finally, as bizarre as this may sound, as long as you are current on your bills your creditors don’t want to lift a finger to help you. You are in exactly the position they want you in, maxed out, trapped with them and making the minimum payment. You see the minimum payment results in maxim profit for the creditor. Maybe we should change our terminology and call the minimum payment the Maximum Profit Payment from now on. I like that! Big hug. Steve Other Related Articles to Read Karen Writes In “Ex-Husband Isn’t Paying The Bills and He’s Trashed My Credit. What Can I Do to Repair It?” Chanel Writes In “How Do I Find Out Who I Owe?” Ginger Asks “I Started My Business On Credit Cards But It’s Hard to Make Payments” Holly Writes In “I’ve Kept This Secret From Him For a Long Time.” “How Do I Go About Making My Credit Score Better” - Antoine

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Sally wrote to me through the GetOutOfDebt.org site and asked the question below. If you have a question you’d like to ask you can visit GetOutOfDebt.org and ask me your question too. My help and advice is 100% totally free. “Dear Steve, My Mother has a CD worth $200,000.00 at our local bank. What should we do since the amount wouldn’t be insured if something were to happen? They automatically re-upped the account saying Mother didn’t respond to a letter they sent. She’s 88 yrs old and doesn’t remember receiving any such letter. She has aked me to try and handle this but I don’t really know what to do about the matter. Upon her death, I am the executor of her affairs or if she decides she wants help, Daddy stated in his will I was to step in. Thank you for your time. Sally” Dear Sally, Wow, that’s quite some situation and one that I am sure has left you concerned and alarmed in light of all the bank failures that are going on today. FDIC insurance does protect deposits up to $250,000 for “certain retirement accounts.” I think the FDIC online insurance coverage estimator is a great tool. You can access the insurance coverage calculator online here . “Certain Retirement Accounts” Means: Traditional IRAs Roth IRAs Simplified Employee Pension (SEP) IRAs Savings Incentive Match Plans for Employees (SIMPLE) IRAs All Section 457 deferred compensation plan accounts Self-directed defined contribution plan accounts such as 401(k) plans Self-directed Keough plan accounts for self-employed individuals I think if you uncover that her $200,000 CD is not protected by using the online calculator or calling the FDIC at (877) 275-3342, you don’t have any other choice at that point other than to cash out that CD and move $110,000 out of that bank. There may and probably will be a penalty for early withdrawal but it would be wise to think of that as insurance against losing the $100,000 portion of that investment that may not be protected or insured by the FDIC. Why move $110,000 out of that bank? It would be wiser to only keep $90,000 in each bank so that any interest that is added to that account will be protected as well. Using this approach you’ll have to open a third account at yet another bank to make sure the funds are protected. The good news is that as long as you fall under the FDIC insurance protection limits you can sleep well and rest easy that your mother’s money will be safe and secure. In all the years the FDIC has been in existence not a single depositor, under the covered limits, has lost one penny. Big hug. Steve Information From the FDIC Investors searching for relatively low-risk investments that can easily be converted into cash often turn to certificates of deposit (CDs). A CD is a special type of deposit account with a bank or thrift institution that typically offers a higher rate of interest than a regular savings account . Unlike other investments, CDs feature federal deposit insurance up to $100,000. Here’s how CDs work: When you purchase a CD, you invest a fixed sum of money for fixed period of time – six months, one year, five years, or more – and, in exchange, the issuing bank pays you interest, typically at regular intervals. When you cash in or redeem your CD, you receive the money you originally invested plus any accrued interest. But if you redeem your CD before it matures, you may have to pay an "early withdrawal" penalty or forfeit a portion of the interest you earned. Although most investors have traditionally purchased CDs through local banks, many brokerage firms now offer CDs. These brokerage firms – known as "deposit brokers" – can sometimes negotiate a higher rate of interest for a CD by promising to bring a certain amount of deposits to the institution. The deposit broker can then offer these "brokered CDs" to their customers. At one time, most CDs paid a fixed interest rate until they reached maturity. But, like many other products in today’s markets, CDs have become more complicated. Investors may now choose among variable rate CDs, long-term CDs, and CDs with special redemption features in the event the owner dies. Some long-term, high-yield CDs have "call" features, meaning that the issuing bank may choose to terminate – or call – the CD after only one year or some other fixed period of time. Only the issuing bank may call a CD, not the investor. For example, a bank might decide to call its high-yield CDs if interest rates fall. But if you’ve invested in a long-term CD and interest rates subsequently rise, you’ll be locked in at the lower rate. Before you consider purchasing a CD from your bank or brokerage firm, make sure you fully understand all of its terms. Carefully read the disclosure statements, including any fine print. And don’t be dazzled by high yields. Ask questions – and demand answers – before you invest. These tips can help you assess what features make sense for you: Find Out When the CD Matures – As simple as this sounds, many investors fail to confirm the maturity dates for their CDs and are later shocked to learn that they’ve tied up their money for five, ten, or even twenty years. Before you purchase a CD, ask to see the maturity date in writing. For Brokered CDs, Identify the Issuer – Because federal deposit insurance is limited to a total aggregate amount of $100,000 for each depositor in each bank or thrift institution, it is very important that you know which bank or thrift issued your CD. In other words, find out where the deposit broker plans to deposit your money. Also be sure to ask what record-keeping procedures the deposit broker has in place to assure your CD will have federal deposit insurance. For more information about federal deposit insurance, read the FDIC’s publication Your Insured Deposits or call the FDIC’s Central Call Center at (877) 275-3342 or (877) ASK-FDIC. For the hearing impaired call 1-800-925-4618 or 1-703-562-2289 (7:00 am to 7:00 pm Eastern time) Investigate Any Call Features – Callable CDs give the issuing bank the right to terminate the CD after a set period of time, but they do not give you that same right. If the bank calls or redeems your CD, you should receive the full amount of your original deposit plus any unpaid accrued interest. Understand the Difference Between Call Features and Maturity – Don’t assume that a "federally insured one-year non-callable" CD matures in one year. If you have any doubt, ask the sales representative at your bank or brokerage firm to explain the CD’s call features and to confirm when it matures. Confirm the Interest Rate You’ll Receive and How You’ll Be Paid – You should receive a disclosure document that tells you the interest rate on your CD and whether the rate is fixed or variable. Be sure to ask how often the bank pays interest – for example, monthly or semi-annually. And confirm how you’ll be paid – for example, by check or by an electronic transfer of funds. Ask Whether the Interest Rate Ever Changes – If you’re considering investing in a variable-rate CD, make sure you understand when and how the rate can change. Some variable-rate CDs feature a "multi-step" or "bonus rate" structure in which interest rates increase or decrease over time according to a pre-set schedule. Other variable-rate CDs pay interest rates that track the performance of a specified market index, such as the S&P 500 or the Dow Jones Industrial Average. Research Any Penalties for Early Withdrawal – Be sure to find out how much you’ll have to pay if you cash in your CD before maturity. Ask Whether Your Broker Can Sell Your CD – Some brokered CDs are issued in the name of the "custodian" or deposit brokers. In some cases, the deposit broker may advertise that the CD does not have a prepayment penalty for early withdrawal. In those cases, the deposit broker will instead try to resell the CD for you if you want to redeem it before maturity. If interest rates have fallen since you purchased your CD and demand is high, you may be able to sell the CD for a profit. But if interest rates have risen, there may be less demand for your lower-yielding CD. That means you may have to sell the CD at a discount and lose some of your original deposit . Find Out About Any Additional Features – For example, some CDs offer a death benefit that allows a CD owner’s heirs to redeem the CD without penalty when the owner dies. The bottom-line question you should always ask yourself is: Does this investment make sense for me? A high-yield, long-term CD with a maturity date of 15 to 20 years may make sense for many younger investors who want to diversify their financial holdings. But it might not make sense for elderly investors. If you have a complaint about a CD you purchased through a bank, try to resolve your complaint directly with an officer of the bank before involving an outside agency. Financial institutions value their customers and most will be helpful. If you are unable to resolve the matter with the financial institution, use the following guidelines to determine where to direct your complaint. If your complaint is against a salesperson who represents a third-party investment firm, call the number below for instructions on where to write: Financial Industry Regulatory Authority (formerly The National Association of Securities Dealers (NASD)) (301) 590-6500 Internet: http://www.finra.org/index.htm If your complaint or inquiry is about a specific financial product or investment, contact: Securities and Exchange Commission (SEC) Office of Investor Education and Assistance 450 5th Street, NW Mail Stop 11-2 Washington, DC 20549 (202) 551-6551 or (800) SEC-0330 Internet: http://www.sec.gov E-mail: Help@sec.gov If your complaint is about a financial institution or an employee of the financial institution, contact one of the federal agencies listed below.  If the financial institution is a state-chartered bank and not a member of the Federal Reserve System, contact: Federal Deposit Insurance Corporation 550 17th Street, NW Washington, DC 20429 (877) 275-3342 or (877) ASK-FDIC For the hearing impaired call 1-800-925-4618 or 1-703-562-2289 (7:00 am to 7:00 pm Eastern time) Internet: http://www.fdic.gov Online Customer Assistance Form: http://www2.fdic.gov/starsmail/index.html If the financial institution is a national bank, contact: Comptroller of the Currency Customer Assistance Group, 1301 McKinney Street, Suite 3450 Houston, TX 77010 (800) 613-6743 Internet: http://www.helpwithmybank.gov/ If the financial institution is a state-chartered member of the Federal Reserve System, contact: Board of Governors of the Federal Reserve System Division of Consumer and Community Affairs 20th and C Streets, NW Washington, DC 20551 (202) 452-3693 Internet: http://www.federalreserve.gov If the financial institution is a thrift or a savings institution, contact: Office of Thrift Supervision Consumer Affairs 1700 G Street, NW Washington, DC 20552 (202) 906-6237 (800) 842-6929 Internet: http://www.ots.treas.gov/ Questions? Call FDIC Central Call Center (877) 275-3342 or (877) ASK-FDIC For the hearing impaired call 1-800-925-4618 or 1-703-562-2289 (7:00 am to 7:00 pm Eastern time) Visit FDIC on the Internet Internet: http://www.fdic.gov Or for Customer Assistance http://www.fdic.gov/consumers/questions/index.html The above information is intended to be presented in a nontechnical way and is not intended to be a legal interpretation of FDIC regulations and policies Other Related Articles to Read No Related Post

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If you're new here, you may want to subscribe to my RSS feed right now, before you forget, to get the latest posts. Thanks for visiting! I thought it was just me but apparently others detest the sales PowerPoint presentation as well. Over the years I’ve been visited by many sales people. ...[Read More]

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I just saw someone searched for “Who Is Going To Help The American People To Get Out of Debt?” and landed here on the GetOutOfDebt.org site. It might be tough for me to help all the people that are going to be in financial trouble all by myself, but I’m doing my best to help. But I can use your help as well. It does not cost you anything to help and I’ve made a list of six perfectly free ways you can help me to help others . Together you and I might not be able to help everyone, but we’ll do our best to do the most that we can do. So the answer to “Who Is Going To Help The American People To Get Out of Debt?” is you and me. As a team, we can do anything. We’ll try to do the right thing and look forward to the good karma that will flow our way in return. Here is an enormous and massive hug for all your help. Steve Other Related Articles to Read 5 Ways to Cut Spending (without cramping your lifestyle) Brenda Writes The Squirrel Asking For Advice. Is She Nuts! Why Do You Want to Get Out of Debt? Is it for Freedom or Stress? How to Get Out of Debt - Part 1

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San wrote to me through the GetOutOfDebt.org site and wanted some free help. I’m happy to help as always and if you have a question you’d like to ask, just go the the GetOutOfDebt.org site and ask. I’m here for you too. “Dear Steve, We need some way to figure out how to pay our debts off. We have credit card debt, car loan, a home equity loan that has a balloon next year, medical bills and owe a balance to my brother for his half of property we inherited jointly. We have two incomes and we should be able to live on them. We have about 15 years to retirement and we would like to be totally out of debt in 5 years so we can save for the rest of the time. We are behind on mortgage and 2 other creditors and are trying to get that caught up and current. How do we straighten out our finances and make a budget that we can live with and still get things paid off in 5 years? San” Dear San, I’m sorry to say you’ve got all the ingredients for a financial disaster brewing here. Here are the things that concern me the most. Home equity loan has a balloon payment due next year. Can’t make it on two incomes. Need to cash out brother. Retirement looming but not enough savings for it. Behind on mortgage. Behind on two other creditors. Want to be paid off in five years. San, wishing and wanting don’t add up to reality all the time. But the good news is that with some adjustments there may be some solutions. The issue of making enough money but not having enough to live on tells me that you don’t have a basic understanding of where your money is going each month. Don’t worry, most people don’t. The fix for that is to use an online program like Mvelopes or just write down every penny you spend for thirty days and at the end of that period, categorize your spending and total it all up. Either method will help you to clearly see where you might be able to make easy budget adjustments to reduce your outgo. I think the Mvelopes method is just easier. Every dollar you save by making budget adjustments way remains in your pocket for debt reduction. The best and most logical method of debt reduction is the debt snowball method. Debt Snowbal Debt Reduction The basic steps in the debt snowball method are as follows: List all debts in ascending order from smallest balance to largest. This is the method’s most distinctive feature, in that the order is determined by amount owed, not the rate of interest charged. However, if two debts are very close in amount owed, then the debt with the higher interest rate would be moved above in the list. Commit to pay the minimum payment on every debt. Determine how much extra can be applied towards the smallest debt. Pay the minimum payment plus the extra amount towards that smallest debt until it is paid off. Note that some lenders will apply extra amounts towards the next payment; in order for the method to work the lenders need to be contacted and told that extra payments are to go directly toward principal reduction. Once a debt is paid in full, add the old minimum payment (plus any extra amount available) from the first debt to the minimum payment on the second smallest debt, and apply the new sum to repaying the second smallest debt. Repeat until all debts are paid in full. In theory, by the time the final debts are reached, the extra amount paid toward the larger debts will grow quickly, similar to a snowball rolling downhill gathering more snow (thus the name). The theory works as much on human psychology as it does on financial principles; by paying the smaller bills first, the individual, couple, or family sees fewer incoming payment requests as more bills are paid off, thus giving ongoing positive feedback on their progress towards eliminating their debt. Source: debt snowball You see San, without a major expense reduction or income increase it does not look good for a happy outcome here. When people fall behind on their mortgage it is a priority to get that caught up. To do that means you typically have to fall behind on your other bills. But you’ve got that balloon coming up next year and the problem with balloons is that they explode. You might not be able to refinance that due to your current bad credit or because the mortgage industry is in a bit of a meltdown, then like now. I’m sure your brother wants to be paid as well. Rightfully so. I’ve seen issues like this tear families apart. Don’t let that happen to you. Your brother is a creditor like the others and you need to treat him just as fair. If you apply all those techniques and you still can’t make it them I’m afraid we are going to have to talk about the big B word, bankruptcy . Bankruptcy is a legal and viable option for you and before you make any sort of emotional decisions about bankruptcy I insist that you get a free bankruptcy review and talk to a bankruptcy attorney to get the facts rater than the assumptions. If you go bankrupt you will have to move and you may lose some stuff but it would allow you to clear the debts and start saving for your retirement sooner rather than latter. Big hug. Steve Other Related Articles to Read Donna Writes and Asks “What Is The Best Way To Become Debt Free The Fastest?” Karen Writes In “Ex-Husband Isn’t Paying The Bills and He’s Trashed My Credit. What Can I Do to Repair It?” Steve Writes In “I Want to Cash Out My 401(k) And Pay Off Debt.” Teresa Writes In And Asks “What Should I Do Next?” Ryan Writes In Looking For His Lifestyle Back

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April wrote to me through the GetOutOfDebt.org site and asked me the question below. If you have a question, please write to me for free and I’ll help you as well. “Dear Steve, I am married with three children 11, 4 and 3, I also have an 11 year old step son. We live in Jersey. My husband is a disabled vet (from the first gulf war). He gets a pension and I work at home so I can take care of the kids our income is less then $50,000 per year, our money is very limited. Since everything cost double it’s been harder and harder to pay bills. I am on time with everything. I am very concerned with my credit score. I’ve been flirting with debt consolidation but am a bit leery to what it will do to my credit. Plus their fees almost equal what I’d be saving in interest. I’ve tried calling my credit cards to have my interest lowered and they won’t budge (I really don’t think they have a soul charging over 23%, it should be against the law). I’ve tried borrowing money and no one is lending even with a score close to 700. What’s the point of having good credit? I want to pay my bills but they are chocking me and my family. Do I pay my bills or feed my kids? Even PB and J is getting expensive with a loaf of bread over $3. Is there a program that can help me that will keep my credit intact? I will appreciate any advice! Thanks in advance, April” Dear April, I’m so sorry that you are living through this right now. I know it is stressful but I think I have some advice that will help. First, let me get right to answering your question if there is a debt consolidation program that will help you keep your credit intact. No, there is not. The only way to get out of debt without hurting your credit is to pay the debt in full or as agreed in monthly payments. Credit agreements are “take no prisoner” contracts. They don’t make room or allowances for people to pay what they can afford. Instead they ask you to make firm promises to repay the loan in full or with regular payments. Anything outside of those payments is an exception and reported to the credit bureaus. If you send less than you owe, it will be reported. If you go into a credit counseling program, footprints will appear on your credit report . If you sign up with a debt settlement company, you’ll fall behind on your debts and that negative information will be reported. If you go bankrupt, that will be reported for sure. But the issue here is twofold. First, you can’t live a life you can’t afford to preserve a credit score . While your score is good, the consequences to living for that score are not so good. Second, while you may be current on your bills, you won’t be for long. You are living so close to the edge that all it will take is one unforeseen event and your budget will be shot. Besides a safe monthly budget needs to include some money set aside in a savings account to build an emergency fund. If you can’t do that, you really are not making it from month to month now. Disabled Vet I am hopeful that you are receiving all the VA benefits you can for your husband. If not, here is a quick list of special loan programs for VA eligible members. VA - Home Loan - Construction VA - Home Loans - Cash Out Refinance (Regular Refinance) VA - Home Loans - Interest Rate Reduction Refinancing Loan VA - Specially Adapted Housing Program VA - Life Insurance - Veterans Life Insurance Policy Loans I know you’ve tried to call your credit card companies to lower your interest and they won’t budge, I’m not surprised. The issue here is that you are current on your bills and the customer service reps that talk to you when you are current don’t have access to those special programs to adjust your interest or payment. The irony is that to reach those customer service reps you’ll have to go past due on your bills and that will hurt your credit score . Creditors don’t reward people for being proactive. Another question you had was do you feed the kids or pay the bills. The 100% honest and moral response is that you fee your kids first. You need to put the priorities in the right order. They should be: Food Shelter Utilities Clothing Car or Truck Payments Other Needed Utilities (Reasonable mobile phone, cable TV, saving for an emergency, an occasional fun thing for the kids) Creditors Do you have an obligation to repay what you borrowed? Yes you do, but if prices have gone up and you can no longer meet the bills under your current day-to-day reality, then what has actually happened is that the loan agreements remained the same but your life changed around them. That happens, that’s normal. Are creditors soulless who charge 23% interest? You made that statement as well. Just yesterday I wrote about an account at 36.5% interest. In Europe the interest rates on a credit card can be even higher. I’m afraid you’ll have to shoulder the 23% interest argument. The interest rate calculations are covered in the terms and conditions that come with each card. If you did not want to be subject to them increasing the rate then your options are to not take out the credit card to begin with or pay the balance off in full. That is the only way for you to gain your freedom from the terms you agreed to when you took the card out. Let’s change a few things here. Read my article about getting cheap bread . You should not be paying $3 for a loaf. Read my article about where to buy cheap food . Doing that will help lower expenses. Come to terms with the fact that your credit score is probably not going to be sustainable and loosen your grip on that. You can try a debt management or credit counseling program if you want and see if they can come up with a monthly payment you can afford over a five to seven year period. But before you do that I want you to read what I said about credit counseling programs in this article . If you take a good honest look at what you can afford to repay each month and it does not meet the creditor minimum payments then you might consider bankruptcy . If so, speak to a bankruptcy attorney for a free bankruptcy review and get the facts. April, let me talk to the mother in you for a moment. Your children are young an impressionable. Please be sure to sit them down and have an honest conversation about the struggle that are going on. They need to understand that the reason you might say no to stuff they might want is not them, but the budget . They need to understand that it is the financial situation that makes things tough at times but no matter what, you love them with all your heart and soul. Big hug. Here is an extra hug for the kids. Steve Other Related Articles to Read Karen Writes In “Ex-Husband Isn’t Paying The Bills and He’s Trashed My Credit. What Can I Do to Repair It?” Daniel Writes In - “How Can I Get Out of Credit Card Debt?” Crys Writes In And Asks “We’ve Been to Credit Counseling But Should We File For Bankruptcy?” Where to Buy Really Cheap Bread This Time I Asked “Do You Think You Are a Failure When You Break Your Budget?”

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