Consumer Interest Articles
October 2009
Mastering the Basics of Credit Scoring
CCCSSA Happenings
July 2009
Conserving Resources This Summer
Are You a Financially Savvy College Student?
Working with a Debt Settlement/Reduction Company
Have you been Smished?
April 2009
Announcing Financial Literacy Month
Should I Stay or Should I Go?
Set a New Trend - Budget
Become a Homeowner Today
January 2009
Handling Money Stress
If it sounds too good to be true
Mastering the Basics of Credit Scoring
Remember when your first grade teacher told you howimportant it was to know the basics? You
learned the ABC’s in order to read and write; you mastered counting to ten to
learn arithmetic. In these times, it is
essential that you know your financial basics, one factor of which is your
credit score.
What is a credit score?
Your credit score is an important number. It's how
creditors and lenders quickly decide if you are creditworthy. FICO scores range from 300 to 850 - the higher
the better. The Fair Isaac Corporation
(FICO) explains that your credit score is used to help creditors decide whether
or not to extend credit to you. Your score
indicates the amount of risk they are taking at the time of your application.
Learn your score.
It may surprise you that you can have three different credit
scores at the same time. This happens because most creditors do not report
information to all credit reporting bureaus: Experian, Equifax or TransUnion. However, knowing even one of your credit
scores can provide you with an overview of all three.
Raise your point
value.
There are definite steps
you can take to improve your credit score. You may be surprised to learn that the largest portion of your score is
based on your payment history. According
to Consumer Action, being late or missing any payment in the past two years
negatively affects the score, so do your best to never be late. If you have missed a payment, take the time
to develop a bill repayment plan to get back on track. Contact us if you need assistance with this
step. It may take a while to change your
habits, but it is well worth the effort.
Source: Fair Isaac Corporation, 2005
Another factor that raises your score is to maintain a positive credit
history; repeatedly opening and closing accounts has the opposite effect. Other factors considered include the amount
of debt you owe, your income, length of employment at your present job and the
type of credit for which you are applying.
Review reported information.
It is important to review your credit report for its
accuracy; if the report contains mistakes, take measures to correct the
information. There are a number of web
sites, such as Equifax, a credit reporting bureau, which include online
tutorials on the disputing process. Our
agency presents a free workshop called “Building a Better Credit Portfolio”
which demystifies the credit reporting and scoring process. We also provide private and confidential
credit report review sessions.
For
more information on credit scoring basics, contact our agency at 800.410.2227
or find us on the web at www.cccssa.org.
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CCCSSA hosts 2nd
Annual National Protect Your Identity Week, October 18-24, 2009.
We are offering Identity Theft Prevention Presentations in conjunction
with the event. Go to the web at www.identitytheftcounsling.org, at the bottom of the web page click on the Protect Your ID Day banner to learn how you may get
involved. All activities are free and
open to the public.
If you or anyone youknow thinks they may be a victim of Identity Theft, contact us at 800.410.2227
or email us at info@cccssa.org.
Reverse Mortgagesprovide solutions for qualified Senior Citizens.
When confronted with financial decisions, some senior citizens feel
stretched. Which item takes priority,
food, transportation, or healthcare? In
view of these costs and others, some senior homeowners
are exploring the Reverse Mortgage Counseling Program. A Reverse Mortgage allows qualified
homeowners, 62+ years and up to convert a portion of their home’s equity into
cash. Want more information? Give us a
call at 800.410.2227 or email us at info@cccssa.org.
CCCSSA offers
financial classes inNortheast San Antonio
To better serve the Randolph Metrocom community we now offer Money Principles For Today Workshops at
our NE San Antonio Office. To sign up
online at www.cccssa.org/Education,
then follow the links to the Workshops page.
CCCSSA Social media update.
Twitter: Want to stay current on financial industry updates and tips? Follow us on Twitter.com, www.twitter.com/cccssa.
Financial Fast Facts: Consumers can access NFCC video
tips (Financial Fast Facts), DVDs and PSAs on our web site. Go to www.cccssa.org/Education - follow
the links to the Education home page.
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Resources This Summer
Summer’s here, and we’re
experiencing our usual south-Texas heat, and the frequently accompanying water
restrictions. The need to conserve water
can remind us of conserving other scarce resources – in this case, our money!
A recent survey we took of our
staff showed our monthly electric bills run from a low of $43 to a high of over
$200. We found similarly that
phone/internet bills ran from a low of $45 to a high of over $150. Our water bills were all over the map, also.
Where do you fall in this
range? How can you drop your usage of
these modern utilities and save some money to put away?
Water
San Antonio Water System (SAWS)
suggests you conserve water by filling the dishwasher before cleaning your
dishes, rinsing vegetables in a sink full of water rather than under a running
faucet, and insulating your water heater and pipes. These sound like great ideas, but around our
house I found that we had to run the hot water each time because it cooled off
in the pipes which run through the slab.
There are a couple of nifty solutions; one recirculates your water
through the cold water line, so you don’t waste water; you can install it
yourself. Another possible
do-it-yourself project installs an instant-on hot water heater under your
sink. However, there is an even easier
way to get a small amount of water quickly heated; the microwave. I found I can heat a cup of water in about
1-1/2 minutes warm enough for many hot-water applications.
Electricity
Conserving electricity requires
that you first analyze your heaviest usage. Ceiling fans can somewhat reduce the need for air conditioning, but if
you’re not in the room, leaving them running just generates more heat. Make sure you check the air filters
periodically, and of course, turn off appliances when they are not in use and
lights when no one is in the room. It is
a good idea to have your A/C unit checked twice a year; if it is low on
coolant, it may run continuously, or even freeze up.
Here’s a quick refrigerator test
you can run yourself. Stand in your
sandals in front of the opened refrigerator door; how soon do you feel the cold
air on your toes? That’s how quickly the
cold air falls out, which then you will pay through increased refrigeration to
replace. Remember also that freezers and
refrigerators work more efficiently when they are at least a thirdfull; empty
units cause more cycling on and off. You
can often turn down your hot water heater in the summer, and this would be a
good time to install a timer to shut it off during the night. Contact your utility company for more tips on
electrical usage testing and conservation; often, they will come to your home
and conduct an energy audit. CPS Energy
will install a thermostat that gives you a 10% reduction if they can remotely
adjust it at times.
Automotive
How about one of those magnets
that improves your gas mileage? Just put
it next to the main fuel line, and tests have shown it will make no difference
whatsoever in your mileage! Oops. However, you can save fuel if you figure out
how to consolidate your trips; if you add in the cost of driving out for lunch,
you might be surprised to discover that you are spending as much on
transportation as for the food itself.
Instead of always driving solo, seek car-pooling and public
transportation opportunities. When you
purchase your next vehicle, think of going smaller, and of course we’ve all
heard that it is a good idea always to have your tires filled to the correct
pressure, not only for improved gas mileage, but because underinflated tires
can lead to tire failure.
Putting even one of these options into action can reduce
consumption levels. There are many
additional ways to save money to achieve your financial goals. We can help with ideas, including helping consumers
change habits, in our Money Principles For Today Workshop. Plan to attend by enrolling online, www.cccssa.org
or call us at 210.979.4300 /
800.410.2227 toll-free.
-George
Merkle, President & CEO
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Are You a Financially Savvy
College Student?
If you are in
college, you have invested in your career and long-term personal financial
future. You have needs and wants and
dreams to fulfill, but where do you begin?
Taking control of your financial situation will increase your “savvy”.
Create a Spending Plan.
Having a
written spending plan will help you monitor your expenses. Always be aware of checking and savings
account balances. Treat debit purchases
like checks by recording the amount in your check register. Tracking your cash spending habits will make
you more conscious of your daily spending. You may be surprised to see what you spend your money on and how quickly
it adds up.
Make Savings a Priority.
You may not
feel that you can save money while you are in school, but controlling your spending
choices helps savings become a reality. Do your research; find a financial institution that will allow you to
open a savings account with $5. This
small amount can add up, for example: five dollars deposited monthly over a
4-year period at 3.5% generates $263.71. Starting small will help you develop a savings habit, prevent the amount
from being a burden, and give you a nest egg to roll over into a more
aggressive account after graduation.
Pay Your Bills on Time.
Get in the
habit of paying all your bills in a timely manner. Consistently doing this will help you develop
good habits and keep your credit score high.
Review Your Credit Report
You are
entitled to one free copy a year of your credit report from each of the three
major credit reporting bureaus, (Experian, Equifax, TransUnion). We suggest you stagger the reports, obtaining one
at the beginning of the year, the next in the middle and the third at the
end. Reviewing your credit reports throughout
the year will help you catch mistakes and minimize fraud and identity theft
problems. You may access your credit
report from our web site, www.cccssa.org, by clicking on the link, “Order a
Credit Report”. There is no cost for
obtaining the copies. If you have
questions about your reports, call us for a free credit report review session.
Use Credit Wisely
Before
getting involved, learn all you can about credit. How you handle credit today determines your
access to it later. Successful consumers
have sound credit portfolio’s, they know the terms and conditions of their
credit accounts and are aware of their credit scores and debt loads. We suggest you have one credit card, and make
small purchases that can easily be paid in full when the bill arrives. Staying below your credit limit has a positive
effect on your credit score. To learn
more about credit cards, plan to attend our College Credit for Life Workshop, presented
the third Saturday of the month from 11:30 a.m. to 1:30 p.m. (except December).
Keep Student Debt Loads to a Minimum
When it
comes to student loans, please note that you must repay your loan whether or
not you graduate, if you can't find a job related to your program of study, or
are unhappy with the education you paid for with your loan.
Defaulting
on student loans can have serious consequences.
As mentioned in the May 30, 2009 Express-News article, “Tips on repaying
student loans,” your credit profile will be damaged and you will not be
eligible for any type of loans in the future.
If you have defaulted on a student
loan and need assistance reviewing your options, our agency provides student
loan repayment counseling. The initial session is free.
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Working with a Debt
Settlement/Reduction Company
“In debt?” “FeelingOverload?” “Don’t know where to turn?” Advertisements like these are plentiful.
Whether you reduce or settle your debts, the process can have a negative effect
on your credit profile especially when you hire a debt settlement company to
perform this service. Now more than ever, consumers need to know how to tell
the good help from the bad.
Debt Settlement/Reduction Process
Debt settlement
or reduction is a process through which your creditor agrees to accept less
than the full amount owed. Settlement companies often advertise that they can
negotiate reductions of 40 percent or more in the debt you owe. Then they set
up a repayment plan that typically takes between two and four years.
Settlement companies charge
significant fees.
Different
settlement companies have different fee structures, but there are two basic
approaches. In one model, the settlement company’s fee will be a percentage of
your total debt. The fees in that model
typically range from 13-20 percent. Another option the settlement company may
offer is to base their fee on the amount of debt reduction they can negotiate. Fees
under this model can be as high as 35 percent of the debt. In addition, many
settlement companies also charge a monthly fee that can range from about
$19-$89 a month for the entire program. (For a three-year program, if the
maximum monthly fee was assessed, it would total an additional $3,200.)
Upfront Fees
Some debt
settlement companies front load their fees. In other words, they collect a
large part of their fee before you receive any benefit. For example, a $50,000
debt could generate a fee of $7500. Stalling payment to creditors until the
fees are collected will probably destroy your credit profile.
Stop Paying Creditors.
A
settlement company may suggest that you stop paying your creditors instead they
direct you to begin making deposits into a special third-party account. The
settlement company will attempt to negotiate a settlement offer with your
creditor once enough money relative to the debt is on deposit. This may take
six months or more, although the exact length of time will vary with
circumstances. During this time, the balance on your debt can continue to grow
if interest and various penalty fees continue to be charged by your creditor. As
a result, you may owe more than when you started and your credit may suffer
because of your failure to make any payments on your debt. Even worse, legal
actions may be filed against you during this time.
1099-C Tax Form
The
consumer may be responsible for taxes on the forgiven debt. If the forgiven
debt totals $600 or more, you will receive a 1099-C from the creditor at the
end of the tax year and the debtor should report the same amount as income on
their tax return. This will substantially reduce the total savings from debt
settlement/reduction.
Credit Report Consequences
Debts paid off through settlement will generally show “Paid by Settlement” on your
credit report. If you later apply for new loans or credit, when reviewing your
credit report the prospective lender(s) will see that a previous debt was paid
by settlement, indicating that your repayment did not cover the total debt that
you owed, but that your creditor accepted a lesser amount.
Credit Score Consequences
The credit
score is based on information contained in the credit report, with the highest
consideration given to how you repay your debts. If you’re not repaying the
creditor or have missed payments, it will show on your credit report and
potentially lower your credit score significantly. Your reduced credit score
will limit future financial transactions, such as car notes and insurance
premiums. We suggest you make a careful analysis to understand if the increased
income tax and the higher cost of future debt hinders the initial “savings”
that debt settlement companies advertise.
Did you Know?
-
If a debt settlement company cannot negotiate
the promised reduction, or if you have to leave the program early, all of the
fees paid could be lost before you realize any benefit.
-
Your debt may actually grow larger when you work
with a debt settlement/reduction firm because negotiations between the
settlement/reduction firm and creditors may not start for several months after
you signed up. Creditors will generally continue to charge late fees and
interest each month during that time.
Debt
settlement/reduction companies are virtually unregulated in most states. There
are no common industry standards for the services they offer, the fees they
charge, the way they promote themselves, or the information they disclose. If
you choose to deal with them, you do so at your own risk.
There is Another Option
Our agency
is not a debt settlement or debt reduction company. We do not have a minimum or
maximum debt requirement in order to work with you. Because every person’s
situation is different, your debt management plan is based on who you owe money
to and how much you owe. Contact us at www.cccssa.org or 800.410.2227 for more
information.
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Have you been Smished?
Along with
technological advances come new scams, the latest is called “smishing,” which
stands for SMS (Short Message Service /text message) fraudulent messages. Similar
to phishing, text message attacks are sent to cell phone users.
What could
be more irritating than a text message asking you to confirm the purchase of a
$1500 computer you did not buy? Or how would you react when you learn you’ll be
charged $2 a day until you confirm the dating service you never ordered?
Scam artists
are counting on your quick response. When you go to the contact web site or the
800 telephone number to resolve the mistake, you are guided to a thief
pretending to be a Customer Service representative. They assure you the matter
will be resolved, they just need the following: credit card/debit card number,
CVV code on the back of your credit card, ATM card PIN, social security number,
and/or email address. Of course whatever the threatening message warns you
about never happens; and the web site and phone numbers are equally false.
What can
you do to counter this crime? Be aware. The only legitimate business that will
notify you by text message about changes, purchases, upgrades, etc. is your
cell phone provider. Anything else is probably a scam.
If you are
concerned about what you should do in this case, contact our Identity Theft
Specialist at 800.410.2227, or email us at info@cccssa.org.
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Consumer CreditCounseling Service Announces
April as Financial Literacy Month
In April 2009 Americans will celebrate financial literacy
month. The month was designated by the
United States Congress in 2006 to increase public awareness about the importance
of financial education in the United
States and the serious consequences that may
result if one lacks an understanding of personal finances.
Personal financial literacy is important to
ensure that individuals are prepared to manage money, credit, and debt. It also
is essential so that individuals become responsible workers, heads of
households, investors, entrepreneurs, business leaders and citizens.
The Value of Financial Literacy
Being
financially literate means knowing how to manage money, use credit effectively,
build assets and make sound financial decisions. It is not related to the amount of your
income. It means knowing what to do with
your paycheck once you have earned it.
The value of financial literacy needs little explanation to
the visitors and clients of Consumer Credit Counseling Service of Greater San
Antonio and Budget & Credit Solutions in Austin. They know our confidential counseling and
educational services offer the skills needed to meet the financial challenges
of their own lives.
We encourage you to take advantage of the financial
information and insights we make available through our counseling, classes,
publications and web site, especially when you are confronted with financial
challenges now and again.
The Consumer Credit Counseling Service of Greater San
Antonio team is committed to providing you with financial education and
resources to improve financial literacy.
To learn more about Financial Literacy
Month events, contact CCCSSA at 1.800.410.2227 or find them on the web at www.cccssa.org.
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Should I Stay or
Should I Go?
Back in 1981, a band known as The
Clash recorded their only number-one hit, “Should I Stay or Should I Go?” Unfortunately, that is an all too familiar
refrain among homeowners facing foreclosure.
“Getting into the house of your dreams is just the first step. The long-term objective is staying there,”
said George Merkle, President and CEO. “However, if making the mortgage payment is a struggle month after
month, if it is going to present a hardship to your family, then other options
should be considered.”
A home is usually a person’s largest
investment, and thus it is one that should be protected, but not at all
costs. A recent NFCC-MSN Money
Financial Literacy Survey revealed that one in every 10 Americans with a
mortgage, or roughly 10 million adults, report being late or missing a mortgage
payment in the last year. Today’s consumers
often take drastic steps to satisfy the mortgage payment like payday loans or
withdrawing money from their retirement plans at work.
Obviously, a payday loan should not
be a long-term solution to a monthly shortfall. Paying extremely high interest rates is never good. Likewise, individuals continually tapping
into their retirement plans could end up with no house and no money for
retirement.
Average consumers do not know the
difference between a short sale, a deed in lieu, forbearance or a loan
modification, nor should they. That’s
where professional help becomes essential; the good news is that there is help
available, and the help is free at CCCSSA.
Statistics show that over half of
those whose homes are foreclosed on never speak with their lender/servicer
prior to foreclosure. This may be due to
the perception that nothing can be done, but today there are options not
previously available.
The struggling homeowner does not
have to go through the process alone. Certified housing counselors at CCCSSA stand ready to help
homeowners evaluate their options.
If your mortgage is at risk, call
for help, the sooner the better. Let a
trained professional review your situation and find the resolution best-suited
to your individual circumstances. Will
you always be able to stay in your home? No. Is there life after
foreclosure? Certainly. If you ever needed a friend in the business,
now is the time.
Foreclosure Prevention
Basics Workshop Added to our Roster.
Consumers who are concerned
that their mortgage is at risk due to changing finances may join CCCSSA onSaturday, April 18th from 9 to 11 am for the introduction of a new workshop,
“Foreclosure Prevention Basics”. The workshop
is designed to give consumers new insights into keeping their home during
difficult economic times. Call CCCSSA to reserve your space: 210.979.4300 or 1.800.410.2227 toll-free or go to the web
at www.cccssa.org.
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Set a New Trend -
Budget
Nowadays it’s
trendy to be thrifty!
More people
from all walks of life are embracing financial basics; they realize how
essential a good budget is. Being in the
“In crowd” means replacing countless trips to Starbucks and maddening searches
for the latest designer fashions with well-planned purchases at discounted
prices. In these uncertain economic
times, having a budget in place helps people realistically obtain financial wellness. Budgeting is trendy because it reduces uncertainty.
Struggling
to maintain a certain lifestyle is now replaced by other essential words of “planning” and “controlling”. Like a diet however, the
planning part is easy, it’s the putting it into action part that makes it
work. Here are some suggestions to
consider.
Put it in Writing.
You may be pretty
sure of how much money is coming into your household and how much you are
spending on a monthly basis, but without a written budget the only proof of it
at this moment is a bank statement and some crumpled-up receipts. The
process of writing goals down along with your plan to achieve them establishes
a feeling of commitment and improves your budget’s effectiveness. A written goal is less likely to be adjusted
when minor issues come up.
Know Who Gets Paid First.
Even though you may
have plenty of money right now, if you had to live on less, who would or
wouldn’t get paid? This goes beyond
cutting out frugal expenses and asks who really
comes first. Consumer Credit Counseling Service
of Greater San Antonio recommends you make housing, transportation, healthcare, utilities, food, and
secured debts highest tier of priority in your budget.
Account for Everything.
It is extremely
important when organizing a workable budget that you are honest and accurate. If your income is somewhat flexible be
conservative. Track expenses for one
month, some expenses will require more tracking than others. Review flexible living expenses such as
groceries, gasoline, and entertainment, and if necessary reduce and set limits.
Keep and organize all receipts and
statements to simplify the tracking process.
Expect the Unexpected
A workable budget helps you expect the unexpected. Not only have you budgeted enough to cover
the basics, such as rent, utilities, insurance, you have also reserved money
for periodic expenses. Even though
expenses like car maintenance, taxes, and special occasions don’t come up on a
regular basis, planning ahead and putting that money away provides a financial
comfort zone. Then you are better
prepared to handle those larger ticket items, like medical bills or automotive
repairs.
Good Budgeting Equals Zero.
This doesn’t mean you are left with nothing after paying all the bills, rather
it means there are no loose ends. Know where all of your money is going and
make sure you are paying yourself utilizing a category for savings.
Maintain your budget.
After a short period of time, review budget items and make revisions, making
any estimates more accurate based on actual expenses. A budget will show you where you are spending
your money and provide structure and guidance for you. Budgets should match
your needs and lifestyle, when necessary add more categories.
For more
budgeting information and techniques that will help you on the road to financial
success, come see us. Our budgeting
counseling sessions are free and confidential, as is our Money Principles For
Today Workshops. To learn more about our
services call us at 1.800.410.2227 or visit us on the web at www.cccssa.org. There’s never a better time to
call Consumer Credit Counseling Service of Greater San Antonio.
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Become a Homeowner Today
Recognize that with
some careful planning, realistic goal-setting and a clear understanding of the
costs involved, home ownership can be achievable.
Every day, CCCSSA
helps homebuyers navigate the overwhelming amount of available information so
the home-buying process isn’t so stressful or intimidating.
We suggest the following tips for
potential homebuyers when exploring homeownership opportunities:
Determine the right time for
homeownership.
If you know you
want to own a home, whether it’s today or in a few years, you first should
determine what kind of a home you can afford to buy. How much money will you be
able to borrow? What types of mortgages are available and which mortgage is
best for you? What can you really afford? Before calling or meeting with real
estate professionals or potential lenders, be sure to have these answers to
these questions.
Analyze how much money you have saved.
There are up-front costs associated with buying a home, such as a down payment,
home post-purchase inspection, appraisal, and closing costs that can range from
3 to 6 percent of the cost of the house as well as additional costs such as
movers and repairs.
Be realistic about increased
maintenance costs.
Compare your
current expenses to the ongoing costs of a home purchase. How does your current
rent or mortgage compare to the new monthly mortgage payment? Don’t forget that
with home ownership you owe taxes and need insurance, as well as other costs like
utilities and maintenance. It is likely that you’ll need more furnishings, both
indoors and out. And, once you’re the proud owner, responsibilities such as
plumbing and roofing repair fall to you.
Examine your credit report.
Before shopping for the dream house or meeting with the mortgage lender, obtain
a free copy of your credit report at www.annualcreditreport.com or by
calling (877) 322-8228. Your credit report is used extensively by
potential lenders to evaluate your credit worthiness. Your credit score can
impact your interest rate and costs for other items such as homeowner’s
insurance. Most times, the higher your score, the better chance you have of
getting a lower interest rate.
Decide what type of home you want.
Prior to house
shopping, a prepared homebuyer will develop a checklist of “must have” versus
“would like” features to compare properties. When creating the checklist,
consider the following: how much space your family needs; the style and layout
you prefer; where you want to live; and what amenities are “must haves” such as
a garage, large backyard, appliances, etc. Also consider distance from work and
family, environmental and utility factors, neighborhood and school zones and
other non-physical preferences.
Do some “window shopping.”
To find the right
home, check as many leads as possible. Let your friends and acquaintances know
you are looking to buy. Drive through neighborhoods and check out the “for
sale” signs and then look them up on the Internet. Newspapers and shoppers’
guides are full of listings.
Shop for a mortgage that’s best for you.
Select a mortgage
and loan terms that are most favorable to your financial situation. Shop around
for the best deal, which may begin with a financial institution where you
already have a financial relationship, such as a checking or savings account,
or from friends, family, co-workers and real estate professionals.
Sign up for a free or low-cost
homeownership session.
To find out if
homeownership is right for you, determine how much home you can get with your
money, what mortgage lenders look for in approving a loan, and how first-time
homebuyers and low and moderate income households can stretch your borrowing
power. Owning a home can be within reach for educated homebuyers. For more
information about becoming a homeowner, contact CCCSSA at 210.979.4300 or
1.800.410.2227 toll free, or find us on the web site at www.cccssa.org.
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Handling Money Stress
With the recessionary
economy, low interest rates, and the bear stock market, many people are feeling
the pressure of money stress. The good news out of all this bad news is that
there is something we can do about money stress.
Money Stress defined.
The
American Psychological Association says there is no exact definition of money
stress. However, people can experience money stress when making financial
decisions about paying bills on time, and worrying about living within their means.
Like other types of stress, dealing with money can affect a person physically
as well as emotionally. And if left untreated, this type of stress may lead
some to seek relief in unhealthy ways.
Elizabeth
Scott, About.com's Guide to Stress Management, has written about, counseled and
coached people on effective stress management and healthy living strategies for
13 years. She reports that people with money stress can turn to drinking,
overeating or smoking to reduce their anxiety about money. Loss of sleep and
feelings of frustration and hopelessness are common responses as well. Some people
cut back on items like health care to pay for basics of food and shelter. While
this may work in the short term, smaller health issues can easily turn into larger
problems when unchecked.
Money Stress reduction techniques.
Consumer
Credit Counseling Service of Greater San Antonio has found that clients who
take the following steps indicate they feel much less money stress. Why not
give it a try?
1. Create a budget.
Contrary to
what many think, a budget isn’t restrictive. It is an effective financial
management tool that helps you to avoid debt and overspending. Many people have
no idea where their money went at the end of the week. An important practice in
money management is to track your spending. Track all of it for a month, and
you will have a good idea what you are doing with your money. And you can
modify your spending and plan accordingly. Once you know what you are doing
with your money, you can actually plan your spending, and create a budget. Having
a budget puts you in control of your finances and makes it easier to live
within your means.
2. Get organized.
Be sure to
put all your financial papers in the same place. You can organize your papers
into the following categories: bills, agreements/contracts, tax returns,
insurance policies, mortgage documents, investment/retirement statements, and
warranties or service contracts. This saves you time, as you won’t have to
search for misplaced documents.
3. Simplify.
If you can help it,
don’t buy anything. Don’t spend money. If you already have 3 pairs of black
shoes, don’t buy another until you wear 2 pair out. If you have 5 pairs of
jeans, you probably don’t need another pair. Get the picture? You can even have
a garage sale and get rid of things you don’t need.
4. Keep your checkbook balance
up-to-date or watch your online bank account.
This will
help you to prevent overdrafts and unnecessary fees. Don’t forget to calculate
banking and auto draft fees that banks and credit cards can charge, and if you
are paying these fees look into other ways to avoid paying these charges.
5. Set up a
savings account and an emergency fund.
In order to save money you have
to make saving the priority. If you pay bills and buy things you want first,
you probably won’t have money left over to put into savings. So if you really
want to save money, you have to put a percentage of your earnings into savings
before you start paying for bills and buying stuff. If possible, join your work
401k/403b or start investing in a long-term account – don’t worry about the
fact that interest rates are currently low. Ten percent of your net income is a
good savings amount to aim for, but build up to it. Start at 1% if that is all
you can do, but put some money away, and start building up your savings.
Another important habit to
acquire is to fund an emergency fund. Put a small portion of your take-home pay
into an interest bearing account each month and forget it’s there. Promise
yourself that you will not pull any money out short of a true emergency.
6. Spend wisely.
When
shopping instead of looking for the cheapest package, look for the best value. Spend
wisely and save by researching pros and cons, consumer ratings and best prices
on products or services you plan to keep for a while. Returning merchandise
takes time and money. You can avoid that hassle with some research before
making your purchase.
Buy used,
not new. Almost everything depreciates the first day that it is owned. If you
can buy a car 1-3 years old, you save thousands of dollars and have a product
that is relatively new, and often still under factory warranty. You can do the
same for furniture, household items, appliances, etc. Where do you look for
good used bargains? Try your local thrift store, garage and estate sales, and
craigslist.com. When looking at garage sales, also look for community events,
like church or school rummage sales. And don’t forget moving sales where people
have a lot of goods to offer. Following these practices can also reduce your
money stress as you realize you are spending less.
If you have
some extra money, pay off your high interest debt; renovate or repair your
home, but don’t start a project you can’t finish; open the college savings
account that you’ve been putting off.
7. Tackle your debts.
Credit card
debt may be preventing you from achieving many of your goals. If you’re in a
financial hole, stop
charging. It is impossible to become debt free while still
adding to your debt load each month. Make your purchases with cash or a debit
card. This way, when the money’s gone, the spending stops.
When
repaying your debts, get in the habit of paying more than the minimum. This
will reduce the amount of time and interest that you owe. And money you save on
interest can go to savings.
8. Know what is on your credit reports.
Americans are
allowed one free credit report from each of the major bureaus every 12 months. You
can order all three reports at the same time or stagger your requests. Ordering
your reports at different times during the year gives you the opportunity to
reduce money stress by staying current on your credit status, without having to
pay for additional reports. To avoid any unwelcome surprises, it's important to
see a copy of your credit report before you apply for credit such as car loans,
mortgages, or credit cards. Errors in credit reports can be common. Go to www.annualcreditreport.com
to access the reports online. Contact our agency for an appointment at
800.410.2227 if you need help interpreting the data.
9. Be aware of the risks of credit fraud.
Identity theft and
credit card fraud are serious issues, but there are ways to protect yourself. Never
let someone else borrow your credit card. Do not leave your card or receipts
lying around for anyone to see. Never give out your credit number to a caller unless
you can confirm it is legitimate company or organization. If in doubt, don’t
give it out.
10. Get help if you are in financial
trouble.
If you feel stressed about your personal
financial situation, affordable and reliable financial help is only a phone
call away. We are at www.cccssa.org or call us at 210.979.4300 or
1.800.410.2227 toll-free.
You can also
learn more about reducing your money stress by participating in our ongoing financial
management workshops. Classes resume the second week of January.
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If it sounds too good to be true
Last month
a huge Ponzi scheme was uncovered, one that had fleeced mostly wealthy people
around the world and leaving many of them completely broke. Some victims said
they initially thought it sounded “too good to be true,” but they invested
anyway – and now have lost all of their money. In these times, it’s good to
heed the advice that if it sounds too good to be true, it probably is. When people
seek quick-fix solutions to their financial difficulties, they often cause more
problems than they solve. Unfortunately, as demand for better credit grows, the
opportunity for scams becomes more prevalent.
Credit Repair Scams
We are all
bombarded through the media – including lawn signs -- with too good to be true offers
to “fix” our credit score (even overnight!). Some credit repair scams may even require
you to dole out large sums of money to fix the problem with a new miracle
method. Having bad credit removed from your credit report for a fee may sound
tempting, but as any honest credit expert will tell you, aside from correcting
errors on your credit report, it takes time and good credit habits to improve
your credit score.
The Federal
Trade Commission warns us to watch out for credit repair scams, especially
those that include the following:
-
The company wants you to pay before services are provided;
-
The company does not inform you, free of charge, of your rights or options for handling debt on your own;
-
The company does not want you to contact the three major credit reporting bureaus directly;
-
The company tells you they can get rid of most negative credit information even if it is accurate;
-
The company suggests you reinvent your credit identity by applying for an Employer Identification Number instead of a Social Security Number;
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The company advises you to dispute all information on your credit report regardless of its accuracy or timeliness.
Debt Settlement
Offers that
promise a quick resolution of your debts are common. While the possibility of
being “debt free in 12-36 months” may be attractive, it’s best to research what
the offer entails before giving them your business.
The problem
is that the majority of debt settlement companies are “for profit” and not very
well regulated. Consequently, there are many dishonest debt settlement
companies in existence today. Even honest ones will collect fees for something
you can do yourself.
Debt
settlement is not debt consolidation.
Settlement means to resolve your debt at a negotiated reduced balance. When you
hire a company to settle your debts, take the time to select one that fully
informs you of your options. You will likely pay high fees to participate in
their program. It is also important to review their method of settling debts
before proceeding. When you agree to third party negotiations, ask them upfront
what happens to your funds if the offer is rejected by a creditor.
Be
suspicious of companies that ask you to arrange to have all your bills sent to
them while you pay their deposit. Because building up these funds can take a
while, your debts may be turned over to a collection agency which can open the
door for harassing phone calls. In addition, even if you save money in their
program, you may owe income tax on the “forgiven” debt, and your credit score
will be damaged for years.
Have you been victimized?
Report any
fraudulent credit repair or debt settlement services to the Texas Attorney
General Offices at 1.877.FTC.HELP.
To avoid
being the victim, CCCSSA recommends that you do your
research and find an agency that best fits your needs. You can contact the
Better Business Bureau to find if there are any pending investigations with a
company. The Federal Trade Commission warns against relying on Chambers of
Commerce or other trade associations where membership is based solely on a fee.
CCCSSA can help you set up a realistic budget as well as arrange
repayment plans that are acceptable to you and your creditors. For an objective
analysis of your situation, call us at 210.979.4300, 1.800.410.2227 toll-free,
or go to the web at cccssa.org.
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