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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.

What Bill Should I Pay First?

January 22nd, 2009    Subscribe To Our Feed

What bill should be the first bill you pay each month? The “bill” should be the one to yourself. So many people say that they will start saving as soon as the credit cards are paid off or all the debt is gone. But guess what? Studies show that if you wait your likelihood of ever getting started is small. It seems our spending always expands to the level of our income.

So - pay yourself first. The recommendation is that you save 10% of your net pay. If you cannot start that big then try even 2% or 3%. The key is to make it automatic. Have the amount you are saving deducted from your paycheck or from your checking account into a savings account. This is one separate account or maybe several if you are saving for multiple goals. Make it difficult to access this money. Do not have an ATM card for this account. Use a bank that is out of town or across town from where you normally do your banking. Or use an Internet bank such as IngDirect or EmigrantBank.

Accumulate an emergency fund so that you do not have to run to your credit cards every time a crisis arises. Start saving for a special vacation or for retirement. Start saving for your child’s education. Be serious about not touching the money unless you really have to or have reached your goal. A sale at your favorite store, a dinner out or a new gadget being introduced are not emergencies.

If you are starting with less than 10% of your net pay then set goals to gradually increase the percentage. Agree to increase the amount once a quarter or once a year until you have reached the 10%. Or really become a saver and reach for 15% or 20% of net income. If you are late in starting retirement savings this level is almost a necessity.

Don’t wait. Start now. Just as we increase our spending when we have additional income we decrease our spending when less income becomes available. Just be sure that you are decreasing your spending and not just increasing your debt by trying to maintain the same spending pattern. The key is to make it automatic so you cannot get sidetracked. Are you not more important than the telephone bill or the electric bill? Put yourself first.

Get Control Of Your Credit Card Debt

October 28th, 2008    Subscribe To Our Feed

Everyone has some credit card “fear” right now. With the shaky economy, the holidays fast approaching, pressing needs such as home repairs or medical bills, chances are you may be faced with a credit card (or two or three) that is close to being “maxed out”. Wondering if you will ever get this card paid back to a flexible and comfortable minimum amount is a real life “fear”. This article will give some advice on how to get control and limit your credit card debt.

First, realizing there is a problem is paramount. That is not as simple as it sounds as many people simply charge and charge and charge and want to confront the debt later. Well, this is later…now is the time to put a stop to this hole in your finances and get control of the credit cards in your wallet. Do not make the mistake of pushing the problem under the rug and thinking it will go away. It will not.

Next, make a list of all your cards and the amounts due and the dates due for each card as well as the interest rate on each card. Then put the list in order as far as the highest interest rate with the lowest balances. This list is going to be your first accomplishment in the road to credit card financial responsibility.

Now pick out one, two or three cards that you feel you should work on based on the lowest balances and highest interest rate. Take the number of cards, the minimum payments and the first due date of the card. The first due date is your target date. What is going to happen is, you will take the minimum balances and add another payment to this amount. Double the payments that are due in other words. If it is affordable to take three cards at once and make double the payments, that is fine. If not, then take the number of cards that are affordable and double the payments by the first due date that is your target date.

And, by the way, make sure that you are not fooling yourself in what can be afforded to put towards these credit card payments. There are very few things in your life that is as important as getting these credit cards under control. Maybe you should pack a lunch, combine trips out, put off purchasing that new skirt or outfit, do not buy that new purse, say “NO” to events that put you in a financial bind, and, in general, find ways to save a little more money to put towards paying off these debts. Making small sacrifices really does feel wonderful when the debt goes down and control of your spending and your debt is restored.

Go through the list of cards this way and make double the payments by saving in other areas of your life. It will not be easy. Take a month and write down every penny that is spent, the amount and the item being purchased. There will be many areas that can be cut back on and put that money towards paying off your credit cards.

The idea is to pay down the cards that are costing you the most in regards to interest rate. You will be more enthusiastic about saving money to put towards the debt when you see positive results this way. You can even chose cards that have the smaller balances if you feel you need that positive reinforcement of seeing the accounts becoming “paid off” faster.

Of course, clearly the cards must not be used for any additional purchases. Simply act like you do not own a credit card for a short time. You cannot spend your way out of this debt and you must stop the spending so that the payback procedures can work. Pay cash and remember how it felt before you had credit cards; it is really a great feeling.

Remember, even a small amount adds up when you are paying off your principle and not your interest. Think of it this way: Your minimum monthly payment is your “interest” and your extra payment is your “paydown amount”. You will soon be wanting to add more to that paydown amount as you see the balances dwindle. You will also realize that the effort is worth it as the cards start showing a more positive balance. It makes breathing a lot easier once the debt is under control and within being paid off. It soon becomes a fun game to find more money to apply to the debt as you see the results of your paydown efforts. Debt alleviation makes a person feel in control and more likely to keep debt within reason in the future.

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