Jill Russo Foster

Tips for Successful Personal Finances

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Tackling Your Debt – Part 2

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In the last issue we talked about paying off your debt with some methods that you could do on your own.  Let’s talk bout other options to payoff your debt, that you will need to consult a professional and make some tough choices before moving forward.

A Home Equity Line of Credit or Home Equity Loan: this is a mortgage against the equity in your home.  This is similar to debt consolidation except for using your home as collateral.  While this can be a much lower interest rate (and may be tax deductible), you are taking possibly unsecured debt and securing it with your home.  In addition, there may be closing costs, attorney fees, etc. involved with the mortgage process. And if you cannot make the monthly payment, there can be substantial consequences involved up to and including the loss of your home.

Debt Settlement sound like a great option to settle your debt for a lesser amount.  You would be paying a smaller agreed upon amount to pay off your debt.  While it sounds good, first do you have the cash to do this?  Second, there could be tax implications on the amount you save (the IRS can consider this taxable income).  In addition, this will be a negative factor on your credit report / score.

Bankruptcy, this is typically the last resort.  The is a legal / financial decision that you will need to discuss with your professionals (lawyer, tac preparer, etc.) before moving forward. There are two types of bankruptcy. One you will enter a payment plan to payoff your debt for a fixed period of time.  The other option, you will eliminate your debt entirely.  But you need to think about what is involved in the big picture – your will have legal fees that will need to be paid, your credit will most certainly be affected, and your will have difficulty receiving new credit at a reasonable interest rate for a period of time.  You will be able to get credit but at a much higher interest rate initially. Until your credit is reestablished.

One tool that I find useful is a financial calculator and BankRate.com is one of my favorite websites that offer a variety of calculators to help you make a decision that is right for you. https://www.bankrate.com/calculators/index-of-credit-card-calculators.aspx

Now that you have several options, make the choice that is right for you and your situation.  Talk to your professionals to get their option.  Then consider the benefits and costs involved.  These are not easy choices, but one that you need to make if you have substantial debt that you want to payoff once and for all.

Tackling Your Debt – Part 1

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Now if you are someone who has accumulated debt in 2020 (or previously), lets talk about ways to payoff your debt.  You have heard the ads on the radio and see the commercials on TV, but are they legit? Maybe, but do you want to try and find out you have been scammed?

Here are some of the ways that you can payoff your debt by yourself:

There is the snowball way:  Here is an example:  you have a $500 medical bill, a $2,000 credit card balance and a $10,000 car loan.  You would make the minimum payments to the credit card balance and the monthly payment to the car loan, while paying as much as you can to the medical debt.  Once the medical debt is paid off, you would start to pay off the credit card debt.  You payoff your debt by paying the smallest balance first and moving to the next smallest debt and so on.

The avalanche way: In this scenario you will pay the minimum payments to all your debt except the one with the largest balance.  Here is an example:  you have a $7,500 credit card balance on one card, $9,000 on another and $1,000 balance on a personal loan.  With this method, you would pay the minimum amount due each month on the $1,000 loan and the $7,500 credit card.  You would pay as much as you can (more than the minimum due) on the $9,000 credit card to pay this off faster.  Once this is paid off, you would move to the next largest balance and so on.

Debt consolidation is another option:  You would apply for an unsecured loan and consolidate all your debt into one loan and have one monthly payment to deal with.  Depending on what type of debt you are consolidating, you may have a lower interest rate. Typically, this would be lower than credit card rates, but may be higher than student loan debt.   You would need to compare terms and costs to see if this method is right for you.

A Balance Transfer can be an option:  With either your current credit card or opening a new one, you can transfer your debt to this credit card with zero percent interest for a fixed term.  A few cautionary notes: look at what fees might be involved for your situation.  Also, if you chose this option on a credit card that you have a balance on, your payments will be applied to the highest interest balance first.  Meaning you are not paying down the zero percent balance until the higher interest rate balance is paid.  This might take longer than the zero percent offer is good for.  If you do this, plan your payments wisely.  Take the balance and divide it by the number of payments during the zero payment term.  This is the amount you will be nee to be able to pay every month to pay this balance off.  If you fail to payoff the balance during the zero interest period, you will owe the remining balance with the new interest rate back from the date of the transfer.

Next issue, we will discuss other options that are available, that you will need to think about before moving forward.  Remember that debt is your financial enemy, so make a plan to tackle your debt now rather than later.

You will need to check with the appropriate professionals to discuss the pluses and minuses of each option before you make a choice.

2020 A Year For The Records Books – Part 2

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This is part 2 of 2020 A Year For the Record Books – click the link to read part 1.

We must learn to adapt our finances to changing times.If you live in the tri-state areas, we had a hurricane Esaias.  Many people had damage to their homes / property and lost power for days.  Having to replace all the food in your fridge and freezer is a huge expense, that you probably weren’t expecting.  Look into reimbursement from your renter’s / homeowner’s insurance (and possibly the power company) to ease your budget.

Spending more than you have. With more time at home and less going out, did you find yourself spending more online than your budget allows?  Just because something is a good deal, doesn’t mean you need to purchase it.  As they say, you don’t need to keep you with the Jones’s.

Credit card debt.  You know that debt is the enemy of your budget, so carry a balance month to month on your credit card in not good. Yes, I know that right now creditors are working with you if you are having trouble payment your debt.   But think long term, what is it costing you?  Make a plan to payoff your debt in full each and every month, so this won’t be an issue with your finances.

With the holidays just around the corner, that will be another big expense for many.  Think about what your plans are and how they may need to be adapted to fit your finances.  Another words, don’t overdue it.  Now is the time to make a plan and stick to it.

Now that I have shared with you some of the ways you might be accumulating debt, what are you planning on doing (or have done) to stop debt from accumulating?

Third Credit Report Reminder From Jill Russo Foster

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It’s September – Get ready for the holidays!  For this month use TransUnion for your credit report.

Hello, it’s Jill again, reminding you to get your finances in order before you start spending for the holidays.

Order your credit report from www.AnnualCreditReport.com. This is the ONLY authorized source for the no cost annual credit report that’s yours by law. You have the right to know. Exercise your rights! Learn more.

When ordering online:

  1. Select your state, then click Request Report.
  2. Fill out your information, then click Continue.
  3. When it asks you to select a service, select TransUnion.

Not comfortable ordering online? There are three ways you can order your report:

  • Order online at www.AnnualCreditReport.com. By ordering online you can have your report back in minutes!
  • Mail your postal order by downloading the form at www.AnnualCreditReport.com
  • Call in your order at 1-877-322-8228

It doesn’t matter how you get your report, the most important thing is that you do! Then…

  • Review it for accuracy!
  • Follow the instructions with the report to correct any errors.
  • And, always remember to keep copies for your records.

Were you hoping to get your credit score instead? Try CreditKarma.com. CreditKarma does not supply a FICO score, but it does provide scores from TransUnion and VantageScore. And, there’s no charge for you. CreditKarma funds their service through website advertising.

Wishing you the best for the school year and the coming holiday season!

2020 A Year For The Records Books – Part 1

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2020 has been a year unlike any other – from job loss / furloughs to pandemics to hurricanes.  All of this has signaled changes in our lives, not only in what we do (or don’t do), how we live and how it affects our finances.  We must learn to adapt our finances to changing times.

For many this is a year that you started (or continue) to accumulate debt.  Not a good thing!

Let’s first talk about all the ways that you may be accumulating debt:

Not having an emergency fund.  You have heard me preach over the years about having a savings account for life’s what ifs.  This was the year that many of us needed to fall back on our emergency savings as jobs were lost / furloughed and the unemployment system was overwhelmed, and payment were delayed.  Your emergency savings was the way to get you through in these uncertain times.

Adapting to change (the new normal). As your life changes, so should your finances.  Meaning that if you have job loss / less income coming in, you need to tighten your belt and cutback on your expenses.  Answer these two questions.  Think what can I get for free that I have been paying for?  Think what can I reduce or eliminate in my monthly expenses?  Want more information, check out my past newsletter, Budgeting By The Numbers.

Eating out / take out.  Food is one of the biggest expenses in a family’s budget.  Typically, when I coach a family, it the food that is an issue with their spending.  How much is it costing you to eat out, pick up take out, grab a beverage versus bringing and cooking at home?  Track this and see where your family stands.

Reimbursable costs.  In these uncertain times, you may have more medical than other years.  Make sure to utilize all your options such as FSA and HSA accounts, in network providers, etc.  I was speaking with someone who hadn’t submitted any expenses to her FSA account.  She potentially could be leaving a lot of money on the table by not timely submitting her expenses for reimbursement.  

Check out next week’s newsletter for part 2.

 

Decluttering Your Financial Records

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Since we have all been at home for months and doing things around the home, I thought I would rerun this appropriate newsletter about what you need to keep and toss for your financial records.

Here is what you can get rid of:

Paystubs – Do you have a stack of them?  You can get rid of last year’s because you have a W-2 that summarizes what you’ve earned.  Keep the W-2.  Make sure they match before shredding.

Bank Statements – If your bank gives you an annual summary or statement, then you can get rid of all the monthly or quarterly statements, but keep the annual summary / statement.

Tax Returns – Generally, you can get rid of tax returns that are seven years old or more (2013 and older) along with the supporting documentation.  However, you will want to check with your tax preparer if you:

  • bought, sold, and/or own a home
  • hold certain investments
  • received certain gifts
  • have any other special circumstance that requires you to keep related paperwork indefinitely.

In other words, check with your tax preparer before shredding your returns.

An alternative to paper files

Keeping your records on your computer is a great alternative to paper files. We had a lot of paper clutter hanging around, so I started the process of scanning my records as pdfs.  If you need a piece of documentation, it’s much easier to locate and open a single pdf than it is to search through a big, cluttered file full of paper. The best part is, that you don’t have to refile the pdf after you’re done looking at it. It’s also easier to fax or email a pdf if needed. Think of all the times you’ve needed to share information about insurances, taxes or rebates. Computer files are great to work with.  Remember to keep a back up of your files.  You wouldn’t want to lose them if your computer crashes.

Make sure to shred

Remember when I say “get rid of”, I mean for you to shred each and every document that has your personal information on it before throwing it away.  You don’t want to offer dumpster divers an opportunity to steal your identity.

Call your tax preparer to see what you need to keep and start to go through your paperwork to eliminate what you don’t need.  Happy Shredding!

Do You Need To Establish / Reestablish Your Credit?

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I always get asked how someone should establish credit when I speak.  Let me give you the answer.  First whether you are establishing credit for the first time or reestablishing credit, this information is for you.

There are two main ways to establish credit:

The first option is to be a joint user with someone else.  You would have to open a joint credit card with another person.  That means that what you do (and what they do) will appear on both of your credit reports.  If you both handle your credit wisely, that will reflect on both your credit reports positively.  On the other hand, if one of you abuse your credit, that will reflect on both your credit reports as well.  This can be a great way to establish your credit.  Take a great thought when determining who the joint user will be.  You want to be sure you are a joint user and not an authorized user – trust me there is a big difference.

The second option is to open a secured credit card.  A secured credit card is where you give the credit card company a sum of money for them to give you the credit card (without risk or harm to them).  Think of this as similar to a renter giving a security deposit to a Landlord.  This is what you are doing.  You get a credit card that looks and works just like a traditional credit card, but the creditor has minimal risk if you default.  Remember, you are doing this to establish or reestablish credit.

When you need to establish or reestablish credit, you are a risky person (from a credit stand point) and you need to minimize the risk to the creditor for them to give you a chance.  Once you have proven yourself, you can open a traditional credit card (with more favorable terms) and close the joint or secured credit card.  Notice the order, I said in the previous sentence – do it in that order, please.

Keep your credit as best as possible and this will help you in the long run and give you the best possible finance down the road, but first you need to take this step to establish or reestablish your credit.

Credit FAQ’s

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Whenever I do a workshop I am always asked about credit.  I have taken some of the most frequently asked questions and compiled them into this issue of my newsletter.

Why did the creditor close my credit card?  I didn’t own them anything.   Creditor will sometimes close your credit card account if you don’t use it.  If you want to have this credit card available to you, then make a purchase a few times a year to keep the account active.

My pay date and my credit card payment don’t coincide, what can I do?  You can call your credit card company and ask them to move your credit card due date to another date that works with your finances.

How to I get a copy f my credit report?  You have three credit reporting agencies – Experian, EquiFax and Trans Union.  You are entitled to one credit report from each of the three reporting agencies once every 365 days.  My suggestion is to order one credit report every four months to see your credit report three times in a year.  If you sign up for this newsletter, you will receive a credit report reminder to order your credit report three times during the year.

How do I see my credit score?  Your credit score if not a part of your credit report.  You can get a close approximation of your FICO score at Credit Sesame, Credit Karma or Quizzle (the scoring part of the three credit reporting agencies).  If you have a major credit card, most of them offer you your free credit score.

How do I know which credit card is right for me?  That’s a hard thing to answer without knowing your circumstances, but I will give you some ideas for you to select which one is right for you.  First thing to think about is how you will use this credit card.  Will you use it and pay the balance in full each and every month.  If so, then you want a credit card without any fees, because you won’t be paying any interest.  If you are planning on financing purchases with multiple payments, then you want to lowest interest rate credit card possible, to pay less in interest.

My friend was declined for credit and wants me to co-sign for him / her.  Should I?  You need to think about this carefully.  When you co-sign for someone, you are saying that you will be responsible for the payment, if the borrower doesn’t make the payment.  In addition, how they pay their credit back will reflect on your credit report.  So if they make a late payment, it will appear on your credit too.  Make your choice wisely.

What’s the difference between a joint credit card and an authorized user credit card?  Joint credit is exactly what it says, all parties apply for the credit card with their individual information are liable for what is charged (regardless of who made the charge). An authorized user is a person that you give a credit card to for them to use, but they are not responsible for the charges on the account.

What credit questions can I answer for you?

 

Understanding How Credit Works In Your Life

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Let’s talk about credit.

First, loans / credit cards are when you use someone’s else’s money (borrowing).  You are receiving goods or services now that you have agreed to pay for later (either in full or with a series of payments).  This will help you to establish or re-establish your credit.  This is different from a debit card, which is using your own money and not building your credit.

Now that we have that straight, credit is an extremely important part of your finances.  It gives you that ability to purchase goods or services when you need it and pay for it later.  Sometimes life requires you to make a purchase now (even when you don’t have the funds of your own to do it now).  Last month, I came home from work to find our smoke and carbon monoxide detectors beeping – not a good thing.  It wasn’t the batteries, which meant it had been 10 years since we replaced them.  Ugh!  There was an immediate need to have the electrician come and replace all 11 smokes and carbon monoxide detectors now.  It wasn’t something we planned on in our July budget, but it needed to be done now.   That’s where credit comes in.  They were replaced and we will pay the bill in August.

Credit is something you will find you need in your life, whether it be for emergencies or planned purchases.  Having good credit will be an asset to you in your time of need. Having good credit will give you more favorable terms (lower interest rate) for your repayment terms.  The higher your credit, score the better chances of getting credit at the best terms.  Putting it a different way, your credit score is as important to your finances as your GPA is to getting into college – both numbers are an important in your life.

To have the best credit, you need to use it but not abuse it.  It’s easier said than done.  You need to use your credit and make purchases as needed, but only purchase what you can afford.  You need to make your payments on time and not max out your debt.

In my next newsletter, I’ll talk about credit and some frequently asked questions.

Simplification Month

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If you have been following my posts in July, you see what we have done to simplify our lives.  This is always a priority for me.

Did any of tips inspire you to make a change?  What have you done?  What did you do that we haven’t yet?  I am always learning something new from  my readers.

I would love to hear from you.  Tell me what you’ve done.  Tell me what you like to learn more about with your finances.