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Christmas, Parenting and Debt

December 10th, 2009    Subscribe To Our Feed

The Christmas season is upon us with Christmas Day being less than a month away. With that, for many, the anxiety level may already be on the rise due to the expense the season usually incurs. If you find yourself in this position, consider some truths that can help you make it through.

As a parent you can feel overwhelmed at times like Christmas when you want to give gifts to see your child’s face light up, and yet financially it is just not possible.

The best thing to do is to simply be honest with your family. Children understand a lot more than we give them credit for. If you take the time to talk with your children before Christmas Day, and explain that your current situation will not allow you to buy them what you would like to, you will prevent their hopes from being dashed, and/or eliminate unrealistic expectations.

If that still leaves you feeling anxious, think about your own childhood. Did you always receive everything you wanted? Probably not, but you lived, and looking back, was your life scarred because of it?

If you really stop to think about it, what is it about Christmas that you remember most from your childhood? Is it the presents you received, or the gathering together of friends and family? The fun, the laughter, the being together. Aren’t some of the most treasured memories those that did not cost a penny?

Become Creative

For many people, being blessed by someone doing something with or for them is more meaningful than receiving a present. So stop and think of things you could do with your family and friends and then give them a gift certificate of that special something. They will be excited and appreciate it and it will lessen the impact on your wallet or credit card.

Prevent Overspending

Take the time to determine what the maximum amount you can spend on Christmas is and then stay within that amount. Look through the bundle of flyers that come to your house daily and find the best price on the items you want to buy. If you cannot find the item within the budget, choose a different item.

Pay Cash

One way to ensure you stick within your budget is to pay cash for the items you purchase. Not only will this prevent you from spending above your budgeted amount, but it will also alleviate the anxiety of receiving your next credit card bill and starting 2010 on a sour note.

Finally, remember that children live what they learn. The example you set for them by simply being honest and living within your means, will pay big dividends and last far beyond the length of the toys they may not receive.

Simple Facts To Face To Get Out Of Debt

December 1st, 2009    Subscribe To Our Feed

Recently I had a conversation with a friend who, for the last year or so, has really made an effort in getting a hold of her financial situation. During our conversation we came to the conclusion that in our Western culture, being in debt is so acceptable that unless you truly resolve to not play the game, you will remain in debt.

As she knows that I write for this site, I said to her that at times I feel frustrated as to what to contribute as there is only so many ways that you can say - “If you want to get out of debt, simply quit spending more than you make.” But it has to be a decision that first, you make, and second you stick to come hell or high-water.

Just as with dieting, you won’t be successful if you don’t resist the donuts that show up at the office, or the decadent slice of chocolate cake that’s shouting out your name. Same here, if you are sincere about wanting to get out of debt, you are going to have to stick with your decision even when you walk passed your favorite store and see the 50 Percent Off Entire Stock sign hanging in the window.

If we stick with our dieting comparison, to really maximize your success, it’s going to take a lifestyle change. You have to change your food choices, cut out excess, maybe change the time of day in which you eat, and to really like what you see in the end - you’re going to have to exercise.

So too with getting out of debt, it’s going to take a lifestyle change, or more so, a management change. You will have to go through the exercise process of creating a budget - or at least, go through the process to know exactly what your fixed expenses are and what your variable expenses are. You will then have to compare the sum of those values with your net income to determine how much of the variable spending has to be trimmed, or alternatively, what you are going to do to generate more income.

The option of doing something to generate more income is not something that should be quickly dismissed. In his book Rich Dad Poor Dad, Robert Kiyosaki talks about the mentality of the rich not being ‘I can’t afford it’, but rather ‘How can I get it.’ This outlook is liberating rather than restrictive. The minute you give yourself an ‘I can’t’ or restrict yourself, psychologically you start to want it more.

So really it just all boils down to this: everything has a cost. Plain and simple. Then you have to decide what it’s worth to you and what price you’re willing to pay. Back to the diet. If you tell yourself you can’t have the chocolate cake, you’re going to want it all the more. So instead if you assess the cost at 500 calories, is having to skip supper, or having to increase your exercise time, or staying where you are at, an acceptable price to pay for the brief pleasure of the chocolate cake.

If there is something that you really want to buy, rather than telling yourself you can’t, what can you do to make the purchase? If getting out of debt is your true desire, then what in your current budget gets cut, or what can you do to generate some income to purchase the item?

If you can’t recall a time of someone pointing a gun at your head, forcing you to buy something on credit, then you alone are responsible for your debt. If you lived by the principle of purchasing only that which you paid cash for, you wouldn’t be reading articles on this site. So the question to you is what are you prepared to do to turn things around? Start thinking, think outside the box, write an action plan down, stick to it and watch your life turn around.

Over the next while, we plan on posting articles that might generate some ideas on ways to increase your income. Please feel free to leave a comment with ideas or strategies which have worked for you.

Teaching Children How To Handle Finances

November 29th, 2009    Subscribe To Our Feed

It’s never too early to instill in your children the importance of money and how to handle it, especially if you haven’t been the ideal role model on the subject. If you’re in a position where you’re looking for ways to stretch the pennies or if you’re rolling in the dough, conducting a family finance project could be a fun and bonding time.

Do not allow the fact that you may not have made good financial decisions in the past, prevent you from teaching your children good financial management. You maybe going through a financial crisis right now and although it may not be pleasant, you will be learning valuable lessons about yourself and money while at the same time instilling those good lessons learned to your children.

Be honest with your children about the money situation in the household. Tell them as much as they can understand without overwhelming them. Children are more perceptive than you think and will appreciate not being kept in the dark. They are also more creative and perhaps can see ways of improving and increasing the family budget.

When it comes to giving allowances give according to age and family income. Talk about the need to save, spend and give. Encourage the children to pay themselves first and save a portion of their allowance. A portion should then be set aside for tithing or charity and a portion to spend.

Money earned is money valued and the best way to impress this upon children is to have them earn extra by doing non routine jobs around the home. Please note that the allowance is not payment or bribery for doing what is expected of them. Every child is required to take an active part in household duties simply because they are part of the family and shouldn’t presume payment for everything they do.

If doing this as a project, set up meeting regarding finances. Set a financial goal and find ways of achieving it. Say for example the annual holiday, decide where you would like to go as a family and devise ways of funding this. Give each child responsibility for looking into the cost of transport, flights, accommodation, food etc. They may offer suggestions or even decide to take on a job. Help them draw up a list of suitable jobs they can do. Mowing lawns, washing cars, a paper route and babysitting are all jobs that will earn them a few coins and who knows what might spark the entrepreneurial giant within them. Many millionaires started out this way and your child could well be one of them.

Once they start earning open a bank account or savings account for them. Take them shopping with you and permit them to buy what they want with their own money. Children feel powerful once they have their own money. They will soon come to realize that money doesn’t grow on trees and may even display a certain amount of thriftiness in relation to this.

Play money games with them such as monopoly and take them grocery shopping to see how and what you buy. Only by imparting a healthy respect for money early on in life can they avoid the frivolous ’spend now and pay later’ attitude that has become so prevalent in society today. As the project goes on, not only will your children be money savvy, but you may also find that your children will discover that some of the best things in life come from an investment of time rather than money - quality family time is priceless.

Identity Theft

September 19th, 2009    Subscribe To Our Feed

It was a bright, sunny day when Shelly decided she should check her credit report. It had been over a year, maybe even two, since she last checked. Her application for a new loan had been turned down recently and she was curious why.

After all, Shelly had a great credit record, a top-tier credit score, and she worked hard to maintain it. She made a habit of meeting her financial obligations plus she kept organized records. She never had a problem applying for credit or borrowing money before.

But when Shelly saw a frantic flurry of strange accounts and new purchases, she nearly fell to her knees. She had no idea what they were or where they came from. As it turned out, Shelly’s identity had been stolen a full ten months ago and she had no idea.

The scary truth is, most people don’t actively think about having their identity stolen. It’s only after catastrophe strikes that this debilitating scam makes itself known.

Consider some stats on identity theft from 2007 –

• There were 8.4 million victims amounting to a vulnerable victim every 4 seconds.

• Total identity fraud was $49.3 billion. That’s $160 for every United States citizen.

• The average take per victim was $5,720.

And with the ever increasing storage and transfer of electronic records, the threat is as great as ever. No doubt that’s what 145,000 customers of one data broker were made painfully aware of when it was revealed that a crime ring had obtained their sensitive information - Social Security numbers and credit reports.

Meanwhile, old-fashioned methods like stolen wallets, purses, and snail mail remain the most common ways thieves gain access to your information.

Why Bad People Love Identity Theft?

Identity theft is an instance of fraud or false pretense where someone has obtained your personal data, and then uses it to portray themselves as you, harming you in the process, usually in a financial sense, but sometimes through misidentification or property damage.

The irony is that the longer and better your credit rating and history, the more likely you’ll be a target and have your credit damaged. So, with very little effort, the criminal not only benefits from your years of hard work and financial discipline, they also jeopardize your financial future.

When ID theft occurs, it’s not unlike a burglar breaking into your home, rifling through your personal items. But a thief would much rather fill out a few forms to claim your ID than have to haul your 36” TV out the back door. It’s easy to see the criminal motivation to steal your personal data, instead.

To make matters worse, you are essentially considered guilty until you take a lot of action to prove yourself innocent. You’ll suffer the indignity of explaining your newly damaged credit to skeptical lenders for weeks or months until you get the crisis entirely solved and settled.

Creative Criminals Know No Bounds

So what are some schemes that an enterprising criminal might use when leveraging your good credit standing for ill-gotten gain and pleasure?

Normally, the perpetrator will open a new credit card in your name and max out the purchasing power and cash advance limit as soon as possible.

The thief may put it to more leisurely use by charging to a PO Box so you never see the bill. You’ll only be alerted by the sudden influx of harassing phone calls from a collection agency. Or you’ll find your interest rates suddenly surging because of the undetected red flags now polluting your credit report.

And it’s not always the usual buying binge and shopping spree. The thief might also commit all manner of crimes and then use your identification as their alias when they’re busted. They might even go so far as to rent a home in your name or rent a fancy car, never intending to return it.

If The Worse Has Come True, Here’s What You Do

If you’re like Shelly, having almost buckled at the knees, but now recovered and ready to put a halt to your evil twin’s good times, here’s some things you need to do immediately.

Contact the Fraud Victim Assistance Dept at any one of the major three credit bureaus and have a Fraud Alert placed on your credit reports.

Once you call, they must contact the other two, but is worthwhile to do it yourself and be certain. This will instruct all three creditors to take additional security steps to verify your identity before granting further credit, thus preventing more accounts from being opened.

When opening your fraud alert, you’ll have a choice of 90 days or 7 years. Keep in mind that 90 days may not be long enough to thwart a patient thief, and you can always have the alert removed before t he seven years has fully elapsed. Next, contact the local police and file a police report. You will need this police report should you choose the seven year Fraud Alert option. Make sure to obtain a copy for your records.

If your Social Security number has been compromised, be certain to contact the Social Security administration pronto. This particular piece of data is a key to the magic kingdom in terms of identity theft.

You’ll also be entitled to a free credit report which you should then review in detail to identify all questionable transactions. Look for inquiries from companies you haven’t contacted, accounts you didn’t open, and debts on your accounts that you can’t explain.

Check that information, like your Social Security number, addresses, names, and employers are correct. Close the accounts that have been fraudulently tampered or opened and get written confirmation that accounts have been closed. For existing accounts, contact the billing department and tell them you need to generate a fraud dispute form. They should guide you from there.

With falsely fabricated accounts, file a dispute with the creditor or file a report with the police and provide an “Identity Theft Report,” to the company. If you are unable to file a police report, ask if the creditor accepts the Federal Trade Commission’s “ID Theft Affidavit”. Filing a report with the police and then providing creditors with an Identity Theft Report will provide you more comprehensive protection as it will require that they stop reporting the fraudulent information.

As you resolve your identity theft disputes, be certain to ask for letters stating that the disputed accounts have been closed and fraudulent debts discharged. These letters serve as backup evidence if in the future issues relating to this account reappear on your credit report or you are contacted again about the bogus charges.

Beyond that, you can apply a credit freeze. This allows you to block all access to your credit report and score preventing identity thieves from opening new accounts in your name.

However, because a credit freeze also prevents legitimate lenders from reviewing your credit report without your consent, it may provide more protection than you need. It’s most effective when you’re dealing with an aggressive individual, like an angry ex-spouse, who is trying to ruin your credit.

Start monitoring your credit report. All three credit bureaus offer credit-monitoring services. They’ll notify you when there has been a change in your credit file, such as a new account or credit inquiry.

File a complaint with the Federal Trade Commission online or by phone using the their Identity Theft Hotline. And be sure to use it if more trouble happens and you need to update your complaint due to additional information or problems.

Also, providing a printed copy of your complaint form for the police report will constitute an Identity Theft Report and entitle you to further protections. This protective umbrella can be used to permanently block fraudulent information from appearing on your credit report, ensure that debts do not reappear on your credit report, prevent a company from continuing to collect debts that result from identity theft and place an extended fraud alert on your credit report.

As you recover and begin to open new accounts, create personal identification numbers and passwords that are non-obvious or even just nonsense. It will prevent the thief from guessing standards like your mother’s maiden name or your birth city.

As you can see, there are procedures and tools in place to help you combat clever criminals from accessing your personal data and disrupting your financial and personal life.

You’re entitled to one free credit report per year, so go ahead and do what Shelly didn’t - until it was too late.

South African Financial Blacklist - What You Should Know

July 8th, 2009    Subscribe To Our Feed

If you live in South Africa, understanding what being blacklisted means to your financial standing is crucial. The following information serves to give you some information and help bring understanding, along with actions to enable you to be on top of your financial circumstances.

What Is A Blacklist?

A blacklist is a register of persons who have been ‘red-flagged’ as a credit liability and are therefore denied access to loaning money through banks and other financial institutions. In South Africa you may be credit blacklisted because of your failure to settle your debt. However, being blacklisted is not something one should be ashamed of. Many professionals find themselves on a credit blacklist. Teachers, credit controllers, and admin people are just some of the professionals that find themselves in this situation. Statistics indicate that one in four people in South Africa are credit blacklisted. This suggests that there are about five million people whose names currently appear on a credit blacklist in South Africa.

Causes Of Landing On The Blacklist

Many people don’t realize that they are experiencing debt/credit difficulty until it’s too late and they find out that they are blacklisted. Owing money can lead to being blacklisted by authorized lending institutions thus making it very difficult to acquire loans. A seemingly insignificant missed credit card payment from five years ago could hinder your ability to acquire a home loan or vehicle finance. The good news is that there are easy steps you can take to repair your your credit rating and consolidate your debt so that your name is removed from the blacklist.

Where To Start

First, checking your credit history is essential so that you know where you stand in the eyes of a financial institution. The credit report will indicate whether or not your creditors view you as a credit risk and how responsible you have been about consolidating your debt. I suggest applying for a credit report before applying for a loan so that you know your credit status before potential lenders check you out. There are several Website sources you can go to, to obtain a credit health report. For a nominal fee you can find out your credit history within an hour.

Know Your Debt

It is also important to identify and understand the type of debt you owe. There are various types of debt that a person living in South Africa can be in arrears for. Banks will investigate all these areas when considering whether or not you are viable for a loan - Personal loans, credit cards, vehicle finance, furniture accounts, in-store accounts, mortgages, and overdrafts.

Knowing your credit score and clearing up any errors or inaccuracies is vital to your financial state. Start now and take charge of your financial circumstance. Consult a professional debt counselor if necessary as they are trained to provide advice on debt solutions. Whatever way, start today to ensure a bright financial future.

Making a Dent In You Debt

July 8th, 2009    Subscribe To Our Feed

Debt is the curse of our time. The amount we owe would make our ancestors’ heads spin. For some their income can cover the repayments. For others their income is simply insufficient to meet all the outgoing expenses and their debts are rising to even more unsustainable levels.

The Current Economy

The current world financial woes have just heightened the problem and raised the spectra of collapsing economies and the resultant pain and poverty that will inevitably follow. There is no time to be lost. You simply have to set your house in order.

How To Start

First, grab all the family credit cards and lock them away or destroy them as they make it way too easy to get into trouble. Next make a complete list of all your debts. Put them in order of amount borrowed and by the highest interest rate charges. Determine the lowest amount that is required to be paid collectively each month.

Fixed Expenses

Now you need to work out your new budget. List all your monthly expenditures. Do not forget to make a monthly allowance for those periodic payments like rates and insurances. Go through the budget and delete all unnecessary items like membership subscriptions and cable TV subscriptions. Delete everything that is not necessary to everyday living. If there is money left over after this analysis you can look at reinstating those things again later on.

Comparison Time

Now work out outgoing compared to income. Hopefully, this will now show a surplus. If this proves to be the case use this surplus to commence paying off the debt with the highest interest rate. Get the first one paid off and then work on the one with the next highest debt. You will now have a higher surplus each month so maybe you can reward yourself with reinstating cable TV or the gym membership, but take it slowly.

More Analyses

If, after doing your budget you are still behind the eight ball you will need to look at reorganizing your debt into one single loan at a better over all interest rate. Shop around to find the best deal. This may prove difficult but keep trying. If all else fails, try getting a better job that pays more or look at moonlighting in a part time job. Maybe you could live with relatives until you get back on your feet.

Start and Stay Committed

There are always alternatives but you must make a start on killing off the debt. Nothing will improve if you do not take action. Remember to break the credit card habit and write out and commit to a budget.

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