Uncommon Cents

Today’s guest post is by Jennifer Lohan, who is living proof that Uncommon Cents is very open to new bloggers; she just emailed me out of the blue and asked if she could post, asking for nothing in return, not even a link back to another blog! Thanks Jennifer!

Is it very difficult to get out of debt? It is easier to fall into debt than get out of it. However, if you are in debt, you can still get rid of them although it’ll take sometime to do so. This is because there are no shortcuts to a debt free life or you cannot stabilize your finances overnight. So, if you see billboards shouting out advertisements of debt relief companies claiming to make you debt free in few days, it is a trap.
 
If you enroll in a debt settlement, debt consolidation or any other debt help program, neither settlement nor debt consolidation companies can eradicate your debts in a jiffy! You have to allow the debt relief program to take its own course.
 
If you intend to consolidate your debts, you will find many debt consolidation companies operating in the debt help industry that have successfully helped debtors get out of debt.
 
How will debt consolidation companies help you to get out of debt?
These companies will talk to your creditors so that the rate of interest according to which you make payments is reduced. Reduction in interest rates means lowering of the monthly payments. In this way your debts become manageable and you can offload debts with ease. You will also get a payment plan that needs to be followed. The repayment schedule helps you to keep track of payments.
 
For-profit and non-profit debt consolidation firms – How do they affect you?
Debt consolidation companies may be for-profit or non-profit in nature. The for-profit firms will charge fees from you but the non-profit firms will charge minimum fees from you or will take a meager amount as donation.
 
Prior to taking help of a particular debt consolidation company, you can check the credentials from the Reliability report of the Better Business Bureau (BBB). Check the past records. A good debt consolidation firm will never send mails to you urging you to enroll in their program. If at all they promote their services they do so on a large scale which reaches the common people, not individually.
 
How will debt consolidation stabilize your finances?
Debt consolidation makes your debts manageable. As you start paying off your debts, your debt load decreases. In due course you get rid of debts. You are now able to manage your finances better. This gives you financial stability.
 
Debt consolidation companies will undoubtedly help you to get out of debt and stabilize your finances. Just make sure that you maintain regular payments and don’t fall behind or drop out of the debt consolidation program midway.

One of my coworkers, a divorcee with adult children who, like me, works multiple jobs, was asking about taking out a home equity loan to pay off some credit card debt. My response: it’s more important to reduce spending to live within your means than it is to pay this off in this manner, because all that’s happening is debt is being shifted from one pile to the other.

And that’s what it came down to. I could sit down with my coworker and go over every single bit of her budget to try to find areas to cut–piano lessons, gym memberships, cell phones for her adult kids–and none of it would matter if she didn’t have the discipline to actually do it.

A budget, after all, is just a plan; if she can’t follow through, it doesn’t matter how the math looks. What counts is the discipline to keep spending in check, and if she doesn’t have that, no amount of loans or plans will help.

Welcome to our September 6, 2009 Link Payday! Once again, we take a few minutes to look at some of the best posts in the personal finance blogosphere over the last couple of weeks:

Spilling Buckets covers something that’s not just about personal finance when they remind us to Don’t Become a Victim of Yourself. It goes in line with some of the things that have been going on in my life recently.

The Frugal Duchess tries to get us to do the impossible (I was just traveling in late July!) when she tells us How to Find Cheap Food at Airports. I particularly use her final hint: pack food! This is what cargo pants are for.

Trent from The Simple Dollar gives us some great advice and practical tips when he covers 21 Ways to Reduce Your Spending Without Making Your Life Miserable. Way one is the best: “Get rid of stuff you don’t use.”

Mrs. Micah does the math for us when she asks Wanna Pay $228.79 for a $200 TV? This just shows what a horrible idea charging something without paying it off in full at month’s end really is.

Finally, David at My Two Dollars covers a topic that is becoming more and more important as the unemployment levels continue at high levels when he asks What is COBRA Health Insurance?

And that’s our Link Payday for September 6, 2009!

Welcome to your late but ready now Link Payday for August 9, 2009. Let’s not take up any more time before checking out the best of the personal finance blogosphere over the last couple of weeks:

For something fun, Frugal Dad put together his Top Ten Songs About Money–The Frugal Dad Soundtrack. Funny, funny, funny.

JLP over at All Financial Matters asks Are Your Credit Cards’ Minimum Payments Going Up? It appears that some folks are having the minimum on their credit card payments going from two to five percent. While I don’t advocate keeping a balance on your cards, if you do, this could more than double what you’re required to pay and put a serious dent in your budget!

Beks over at Blogging Away Debt writes a letter about her School Tuition Nightmares. As a former undergraduate and graduate student, I can remember the financial struggles to get through those times–but I’m glad I did it.

My favorite personal finance librarian blogger, Mrs. Micah, tells us Where Your Library Fines Go as well as how to support your public library. I am a big fan of the public library, so I love to do things to support them when I can (but as she says, fines are not helping).

Finally, my buddy Ron over at The Wisdom Journal asks Who is the Fool in Your Life? Interestingly, it’s not about someone who is the opposite of smart.

And that’s our Link Payday for August 9, 2009!

One of my coworkers told me this during a lunch break. Knowing her, I was not surprised, although I’m not sure if there’s much of a way to help her:

“My husband is convinced housing prices will drop to the point we can afford to buy a house. But we’re not saving anything.”

This looks like a missed opportunity waiting to happen. The days of the freewheeling mortgage brokers are gone; it’s so much harder to get a loan now than it was when the housing market was booming it’s as if everyone has done a complete 180. Granted, it really needed to be harder than it was, because the way we got into this mess is by lending people who had no chance of paying it back–and who may have been a lot less than honest about their financial situation when applying for the loan–a lot of money. Turns out they couldn’t pay it back, so now the lenders are gunshy and wanting everything verified to the nth degree.

However, that said, it’s not impossible to get a loan–all that has to happen is that you need a strong credit score and a reasonable down payment.

My friend is in grave danger of missing the boat here. As evidenced by my mortgage refinance not long ago, rates are very low historically (even if it’s become impossible to get the 4.25% we did), and home prices are still coming down. But without saving for a down payment, there’s no way my friend is going to be able to get a new house when she and her husband think prices have come down enough.

Despite all of the changes over the years, the reality is still this: the basics for buying a house are good credit and a down payment. Without these–especially now–there’s no way to do what she and her husband want to, and without saving, they definitely won’t be able to get the house they’re hoping for anytime soon.

The overall effects of interest rates on the economy can be summed up pretty quickly–low interest rates encourage borrowing and help those who owe money; that encourages spending and therefore economic growth. On the other hand, high interest rates benefit those who like to save, as they’ll get better return on their money, and discourages spending, therefore discouraging economic growth. That said, on a micro level, who actually benefits from low interest rates?

The people who benefit most from low interest rates are those who owe money or are looking to borrow money. For instance, with the incredibly low interest rates on 30 year fixed mortgages available earlier this year, I refinances the mortgage on the house from the very decent 5.85% obtained a few years back to 4.25%, shaving hundreds of dollars off of the monthly payment. Also, if I wanted to borrow money to say, start a business, I could likely get a much better rate than I would have a couple of years back.

On the other hand, the very low interest rate climate hurts savers. My online savings accounts that were paying rates in excess of four percent are just over one percent now–and I’m afraid to check what the regular passbook savings account that my mother uses at the local brick and mortar bank is paying (not long ago it was paying a quarter of a percent when the online accounts were still above three percent). Folks who are looking for certificates of deposit as safe places to park money are having difficulty finding interest rates at three percent for almost any term (Bankrate says it’s possible to get 3.06% on a five year CD).

Remember that in recent years inflation has been about three percent per year, which makes it pretty clear that locking in a paying rate for a long period of time is a real risk if inflation shows up again with a vengeance; on the other hand, it’s a great time to refinance debt or buy a house if you can come up with a nice down and really can afford it over the long run. In any case, we all benefit from low interest rates if we owe money (or are looking to borrow), but all hurt by them if we’re saving somewhere.

I recently had a discussion with one of my friends who had told his girlfriend to go ahead and buy herself an iPhone because, “she deserved it.”

Similarly, this week at work when I discussed my thoughts about attending the Maui Photo Festival, namely that while I thought the festival itself was costly but worth it, and the airfare for me would not be a big deal (a 20 minute flight is not a big deal, really), housing and a rental car might be the real killers in terms of going.

“Just spend the money, Ryan,” I was told. “You deserve it.”

While I certainly would love to go to the festival (and still might), and I’m sure my friend’s girlfriend would love to have the iPhone, I’m not sure that convincing someone to spend money they may not have (in her case) or has but will make things much more difficult in the short run (in my case) by telling them they “deserve it” is really the best thing.

I’m sure we all feel like we deserve more and better than what we have; for instance, I often feel like I deserve a pay increase at work because of the effort I put in there. However, to use the excuse of, “I deserve it,” to live beyond my means might end up with my ending up “deserving” needless interest charges and the emotional drain of consumer debt that I’ve worked so hard to eliminate and avoid over the years.

While I’m all for rewards at the end of long amounts of saving or paying off debt, I’m not for the idea of giving myself some kind of “deserved” reward that ends me up in debt or destroying what I’ve spent long amounts of time working on. What I do indeed deserve is a secure financial future–and that’s one of the things that financial discipline helps me to obtain.

We’re back again. It’s been a real struggle to get everything done as of late, and while we haven’t missed a day of blogging here at Uncommon Cents, we’re having a lot of difficulty keeping up with Link Paydays. So with a sigh, here we go with a new edition highlighting the best of the last few weeks around the personal finance blogosphere:

JLP at All Financial Matters has a question I consider totally sensible: Can We Have a Recovery When People Have So Much Debt? I don’t know about you, but I certainly don’t want to encourage folks to spend even more money we don’t have–that’s how we got into this mess in the first place!

Lynnae at BeingFrugal.net writes about homeschooling and personal finance intersecting when she says that Character Matters. It’s a great question–do you pay back what you owe? Do you do do what you say you will? These are great questions to ask yourself when you work on not just your finances, but just about anything.

Frugal Dad takes yet another tack on how to work on an impossible situation–When Stranded in a Forest of Debt, Just Keep Chopping. I agree one hundred percent. Sometimes anything is better than nothing, and when you’re too overwhelmed to come up with a plan, at least you can attack something–anything–until you can recover enough to come up with one.

I’ve Paid for This Twice Already brings up a sad tale of trying to cancel a family phone plan for a deceased family member, and she warns (and after reading the post I think it would be appropriate to scream it from the rafters) Verizon Family Plan Members–Be Aware.

Finally, Mrs. Micah looks at May’s Budget Successes and Failures. While she was certainly worried about what it might look like, it wasn’t as bad as she thought it was and she and her husband were able to put a hefty amount of money toward her husband’s college loans. That’s a big win for them!

And that’s your Link Payday for June 21, 2009!

As I complete a wild sixteen of seventeen day work stretch (and I’d still be working if Kamehameha Day was not a state holiday here), my buddy Kyle of Rather-Be-Shopping.com comes to my rescue with a great guest post. Mahalo and aloha, Kyle!

I was reading an article the other day on Bankrate.com titled 7 Ways to Be a Dolt About Credit, that I thought was very interesting and worth sharing. If you are looking to buy a house or are trying to secure an auto loan this advice will really be useful. Here are the 7 ways to put your credit score at the bottom of the toilet, followed be a little commentary by yours truly.

~ Close Credit Card Accounts. This one is kinda weird to me. But you have to look at it from the view that by closing accounts you are reducing your amount of available credit. Apparently 1/3 of your credit score is a measurement of the amount of debt against the credit limit. If you have to close account, make sure they are your newest accounts as they carry less weight.

~ Don’t Use The Cards You Do Have. I have heard this one a lot. Make sure to use all your cards at least once or twice a year. The amount doesn’t matter, fill up your car with gas or buy a pack of gum. By keeping your accounts active you insure that the credit card company will continue to report your information to the credit bureaus. Just do it!

~ Run Up High Balances. According to Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, “The FICO ‘08 score does want to see a lot of credit, but it would rather see many low balances on several cards rather than one large balance.” If you pay off all your credit card bills every month I am not sure why it matters. But apparently it does.

~ Apply for New Credit Often. The bottom-line on this one is the fact that new credit accounts lower the average age of your credit history. So don’t open up more than 1 or 2 new credit cards per year. Also, try not to fall for the mall tactics of trying to get you to open a store credit card by offering a relatively small percentage off your purchase.

~ Don’t Pay Fines or Non-Credit-Card Bills. OK, this one is pretty obvious. Pay your bills and always pay fines. Even the smallest of fines that you ignore can really come back to haunt you.

~ Ignore Mistakes on Your Report. Check your credit report at least once a year and have the credit bureaus fix any inaccuracies. I have done this before and it is actually pretty easy to do.

~ Make Late Payments or Skip Them Entirely. Does this one really need an explanation?

It has been close to a year since I did a guest post here on Uncommon-Cents.net, and so keeping with past tradition, here are the best online coupons on my website right now. I hope they can help you save some money, especially on Father’s Day gifts. Thanks Ryan for letting me invade your blog once again!

Anne Klein.com
Free Shipping on your entire online purchase
Coupon Code: None Needed
Expiration: 7/05/09
More: Anne Klein Coupons

Barnes and Noble.com
Save 10% off any 1 item in your online purchase
Coupon Code: L3X9E4D
Expiration: 6/14/09
More: Barnes & Noble Coupons

Famous Footwear.com
Save $10 off your $50+ online purchase
Coupon Code: DAD10
Expiration: 6/21/09
More: Famous Footwear Coupons

Kate Spade.com
Save 15% off your entire online purchase (Discount appears at checkout)
Coupon Code: None Needed
Expiration: 6/17/09
More: Kate Spade Coupons

Kmart.com
Save $5 off your $50 or more online purchase
Coupon Code: KMART5OFF50
Expiration: 6/30/09
More: Kmart Coupons

Lord & Taylor.com
Save 25% off your entire online purchase
Coupon Code: FRIENDS
Expiration: 6/14/09
More: Lord & Taylor Coupons

Snapfish.com
Get 20% off your ‘Gifts for Dad’ online order
Coupon Code: DADSDAY09
Expiration: 6/21/09
More: Snapfish Coupons

Tractor Supply Company.com
Save 10% Off all Tools for Dad for Father’s Day
Coupon Code: DADTOOL
Expiration: 6/30/09
More: Tractor Supply Coupons

Vera Bradley.com
Get 25% Off Select Colors at Vera Bradley through this Link
Coupon Code: None Needed
Expiration: 6/23/09
More: Vera Bradley Coupons

What’s interesting about the recent economic downturn is that while the news is not great, there are some ways that it’s possible to make positive financial lemonade out of the lemons coming out of the financial situation.

Use lower rates to refinance your debt: We refinanced the mortgage at 4.25% for a fixed 30 year; we were doing fine with a 5.85% fixed 30, but this is even better. If you have debt, see what you can do to refinance it. You may also consider consolidating debt since there are tax advantages to a mortgage that there aren’t to other types of debt, but be careful: if you got into consumer debt by overspending, you must get your spending in line in order for this to work out for you long term or you’ll end up in exactly the same place.

Buy at sales, price reductions, closeouts, and liquidations: When the economy is this bad, laws of supply and demand come into effect–reduced demand results in increased supply, and sellers must reduce their prices in order to sell just about anything. If sellers actually go out of business, while unfortunate, often gives lots of opportunity for buying goods at discounted prices. If sellers are willing to let things go for a song and you’ve got the cash saved up to buy, you’re in the driver’s seat.

Keep investing: Don’t stop your investment plan. The best time to buy into a market (if you’re into market timing, which I’m not) is when the market is down. If you have the kind of investment plan I do, you’re buying in regularly anyway–just don’t stop. I know of one coworker who stopped investing when the market went south by 20%–and hasn’t gotten back in. She’s missing out on the current 30 plus percent gains that have been happening the last few months with any new money–money that could have gone into the market when the market was in full retreat.

There’s some pluses–not many of them, of course, but there are some–to an economic downturn. Take advantage of low interest rates, slow sales, and the retreat in the stock market by using your money wisely. If you’re prepared, you can do well even when the economy is putting out more lemons than the domestic automakers.