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How to Stick to Your Holiday Budget Without Looking Like a Cheapskate

Santa Carrying Shopping BagsThe holiday season is upon us and ’tis the time for big spending. In fact, according to the personal website Magnified Money Americans that are already in debt sank an additional $986 in credit card debt over the holidays in 2015.

Why do we end up spending so much? Some of it is probably due to social pressure. After all, this is the season for giving, right? And if you don’t give generously you could look like a cheapskate. And the stress of dealing with holiday debt can be bad. One study done in 2015 found that more and more shoppers admit that the’ve fallen prey to the seasonal pressure to spend beyond their means.

Fortunately, life doesn’t have to be like this. There are ways you could realistically stick to your holiday budget and without looking like Uncle Scrooge.

Suggest a limit

If what’s keeping you in a cycle of debt is buying presents for all the members of your family, then you need to speak up. Contact your relatives and suggest an alternative to the usual gift giving. For example, you could suggest a mystery Santa where everyone draws a name and then buys a really nice gift for that person.

Give the gift of your skills

What’s your skill? Is it photography, wood carving, art, knitting or sewing? Use that skill to create handcrafted gifts for your family members. Gifts you made yourself will be cherished much more than something you bought on Amazon.com. Several years ago, I received paintings from two of my grandchildren that are hanging on my wall to this day and will stay there so long as I own this home. And this is just one example of things you could make for your family members that they would love.

Pay with your points

If you have racked up a lot of points with one or more of your credit cards, then now’s the time to cash them in and use the money to buy gifts. If you’re lucky some of your credit card issuers will have special relationships with retailers that will give you more spending power per point. You could also use your points to buy retail gift cards, which make really great gifts.

Don’t believe you absolutely have to reciprocate

Did a coworker or friend you’re not really that close to surprise you with a gift? We know you’ll feel pressure to reciprocate but it’s not necessary. Don’t run off to the mall to buy something to match the gift you received, which would only add to the balance on your credit card. What you could do instead is give the person a hearty thanks and then follow this up with a hand-written card or you could maybe treat her or him to a drink after work.

Consider re-gifting

This is certainly not something you want to do very often but it does have a time and place. While re-gifting certainly shouldn’t be looked at as a way to clean out a closet it can be done. However, if you choose to do a personal item – especially if it’s been opened – this should be based on whether or not the recipient would really love to get it. A good example of this is a first edition book that’s just been collecting dust on your bookshelf. This would definitely be an appropriate re-gift. Another thing that’s acceptable to re-gift is a family heirloom that you could pass on to another member of your family.

Gift those people that made your life better or easier or both

Reserve some money in your budget to gift those people that have worked hard to make your year better or to bring some joy into your life. This would include people like coaches, babysitters and teachers. There’s no need to go overboard here but this is a way to show your appreciation in the form of a thoughtful gift. In fact, here’s another area where something homemade would be spot on.

Learn to resist the pressures

You may feel pressured to gift people just because they do something for you. As an example of this, you could feel pressure to gift the guy that picks up your trash once a week or the person that delivers your newspaper. Resist these pressures unless you feel that the person did something for you above and beyond the call. Did the newspaper carrier slog through a foot of snow to deliver your Sunday paper? Then he or she might be worth a gift. But if a neighbor girl babysat for you just a couple of times throughout the year then you don’t absolutely need to gift her. We all feel a lot of pressures during the holiday season but if you want to stay on budget you need to learn to resist some of them.

Zombie Debts and How to Fight Them

You thought some of those old debts had gone away for good. Better think again as you could be haunted by zombie debts .

zombies

What are zombie debts?

There are several types of zombie debts. The most common type is where a debt collector has resurrected it. Debt collectors are normally paid on a commission basis. This gives them a lot of motivation to collect from you – even on one of your very old bills. A second type is where you made a payment on an old debt, which brought it back from the grave.

How zombie debt can happen

How does zombie debt happen? Your creditors regularly remove old debts from their books and sell them to third-party debt collectors and usually for just a few cents on the dollar. This means that the debt collectors can make money even if they only collect part of your original debt. This is the incentive the debt collector has to resurrect your bill even if you incurred it many years ago. These collectors are “scavenging” for debt and are often called debt scavengers.

The most common types

The most common types of zombie debts are those you owed but had forgotten about or ones where you thought you had paid the creditor. Others include charges made fraudulently because you were the victim of identity theft, debts that were discharged in a bankruptcy and those that had gone beyond their statute of limitations.

Be careful, be very careful

Because zombie debt is old debt it a can be a real danger. This can be especially true if the debt collector is using high-pressure tactics so it’s hard for you to know whether the debt is really legitimate. Your debts could have been sold over and over, the information may have changed and the debt collector could be trying to collect on an erroneous debt. If you make a payment on an old debt this will restart the statute of limitations, which would make you susceptible to being sued.

Get all the facts

If a debt collector calls you about a very old debt the first thing you need to do before making a decision is get all the information you can. Even if you feel seriously pressured don’t commit to making a payment even for as little as $10. Ask the debt collector instead for a validation letter. This letter will have all the details of your debt including the name of the original lender, the amount you owe and how you could challenge it. This information should help you confirm that the debt is yours and that you haven’t already paid it.

Know your state’s statute of limitations

The next important thing to do is to determine whether your debt has passed your state’s statute of limitations. The debt collector won’t probably give you any information about this so you will need to research your state’s laws about what’s called time-barred debt. The bottom line is that you can’t be sued legally if the debt has passed your state’s statute of limitations. But be aware that debt scavengers do buy debts where the statute of limitations has passed as they hope they can persuade (or trick) you into paying voluntarily.

Don’t resurrect the debt

Don’t under any circumstances say that you owe the debt – either verbally or in writing – and don’t pay anything until you’ve determined that the debt is really yours and whether the statute of limitations has passed. If you make even a small payment this will resurrect the debt and restart the clock on its statute of limitations.

If you are sued

A debt collector could sue you. If they do and you receive what’s called a summons and complaint, don’t ignore it. Go to an independent source to determine how to contract the court where the suit was filed. Contact the court to see if it’s real because If it’s a phony lawsuit it’s number will also be phony. If the lawsuit is real, you’ll need to act quickly because there will be a limited amount of time for you to respond. And if you fail to respond to the summons you could forfeit your right to dispute the lawsuit and the collector might get what’s called a summary judgment. If this happens, the debt collector could actually garnish your wages.

Understand that you have rights

You do have rights as spelled out in the Fair Debt Collection Practices Act. For example, if you’re being hassled by a debt collector over a zombie debt you could write a letter asking it to stop contacting you. If you do this the collector must either stop contacting you or send you a letter that it will be suing you.

Check your credit reports on a regular basis

It’s important to check your three credit reports (from Experian, TransUnion and Equifax) to see if a zombie or scavenger collector has illegally reported one of your old debts. If so, you have the right to dispute this per the Fair Debt Collection Practices Act and have it removed.

The Very Bad News About Improving Your Credit Score

credit card debt problemsDo you have a poor credit score of 500 or below? Then you may not realize this but you’re wasting money because you’re paying higher interest rates and higher insurance premiums. If you want to rent a house or apartment you may find it tough because of your poor credit score. And if you decide you’d like to buy a house you may find it impossible to get a mortgage loan.

Pay no attention to them

Have you seen or heard ads promising to get your credit score improved overnight? Well, pay no attention to them. Here’s the very bad news. Improving your credit score isn’t a sprint. It’s more of a marathon. In fact, it could take you several years of diligent work before you saw any real improvement in your score.

Understanding how it’s calculated

Do you know how your credit score is calculated? Our guess is that you don’t. So here’s the answer. Your credit score is calculated based on five components. The most important of these, which accounts for 35% of your score, is your credit history or how you’ve used or misused credit. There’s not much you can do about your history because it’s history.

The next most important component used in calculating your credit score is your credit utilization. This is expressed as a ratio. You can calculate yours by totaling up all of the credit you have available and then dividing it into the amount you’ve used. For example, if you have $6000 in credit available and have used $2000 of it, your credit utilization would be 33%, which is okay. However, if you calculate your credit utilization ratio at 40% or higher this is one of the reasons why you have a poor credit score.

Improving your credit utilization

Here’s an area where you could make an improvement. The two ways to improve your credit utilization is to get new credit or pay down your debts. While you might be able to get new credit it would be better to pay down your existing debt, which could take some time. Suppose you owed $7000 yielding a credit ratio of 70% (total credit available of $10,000). If you could pay down that $7000 debt at the rate of $300 a month, it would take you at least 10 months to get that debt paid down to less than 40% where you should then see some increase in your credit score.

The third component used in computing your credit score is the length of your credit history. It’s calculated based on how long you’ve had credit and how long it’s been since your last action. This is another one you can’t do much about. If you’ve only had credit for three years, then your length of credit history is basically three years.

The final two

The final two components in your credit score is your credit mix and what’s called “other factors”. Each accounts for 10% of your credit score.

Your credit mix is the different kinds of credit you have. What lenders want to see is that you have a good mix of revolving credit and installment loans and that you’ve managed them sensibly. You might be able to improve this component by getting some new types of credit. Of course, you shouldn’t use any of it as this would have an adverse effect on your credit utilization.

Be sure to get your credit reports

If you haven’t seen your three credit reports recently – or ever – you need to get them. They’re available free from the three credit bureaus (Experian, Equifax and TransUnion) or on the website www.annualcreditreport.com. If you read your reports carefully you’ll have a better understanding of why your credit score is what it is. You may find late payments, defaults or even accounts that were sent to collection. You could also find errors in your credit reports that are hurting your score. You can dispute any such errors by sending a letter to the appropriate credit bureau along with whatever documentation you have to prove the error. Getting errors removed from your credit reports could improve your credit score depending, of course, on what else is in your reports.

Budgeting Mistakes and How to Fix Them

疲れたビジネスマンYou have a budget? Congratulations. Having a budget is the first and most important step towards smart money management. In fact, it’s virtually impossible to do a good job of managing your money without a budget. However, creating a good budget is not an easy task. And even after you have one it’s easy to make mistakes. Here are eight of the biggest blunders people make in budgeting and how they can be fixed.

Neglecting to have a system

What system do you use for tracking your spending? If you don’t have one, it’s important to get one. You could use a budgeting app such as Mint or an old school system like Mvelopes. The fact is that if you don’t have a system for tracking your spending you won’t know where your money’s going and won’t be able to make adjustments to your budget as prove necessary. It really doesn’t matter which system you use. The critical thing is to pick one and then stick with it.

Creating too rigid a budget

Despite what you might think you won’t spend the identical amount of money in the same categories every month. You need to have enough space in your budget to accommodate seasonal fluctuations such as Christmas holiday shopping and summer vacations. If you create a budget that’s too rigid you may find it hard to stick to it, which would derail all of your best planning.

Impulse purchasing

Even the best of budgets will prove useless if you refuse to stick with it. You will need to cut down considerably – or even totally eliminate – impulse shopping and the habits that lead you to it. For example, if your Achilles’ heel is jewelry, stay away from jewelry stores. If you just can’t pass up the latest and most fashionable shoes, then don’t go to shoe stores or the mall.

Not accounting for quarterly and semiannual bills

One of the biggest blunders made by even the smartest of budgeters is forgetting their quarterly and semiannual bills. You need to leave room in your budget to cover them so that they don’t jump up and poke a hole in your budget when they’re due. Bills in this category include things such as annual tax bills, insurance payments and vehicle maintenance payments. Next time you have a few minutes, sit down, go over your old checking account records and make a list of your semiannual and quarterly payments. Then adjust your budget to make sure the money will be there when those payments come due.

Forgetting to save

A good budget needs to include money for saving as well as monthly expenses. The sad fact is that if you’re not saving regularly for retirement you’ll probably never be able to retire. You also need to make room in your budget for an emergency fund. The “experts” say an emergency fund should be the equivalent of six months’ living expenses but that’s a pretty lofty goal. A good start would be to save $1000, which would be enough to at least cover an emergency auto repair or medical bill.

Not budgeting for long-term financial goals

You really need to have some long-term goals and be saving toward them. This could be as little as just $10 a month to fund a new bedroom set or summer vacation. Having a goal and seeing that you’re making progress towards realizing it can be a real motivator to help you stay on your budget.

Refusing to be flexible on your fixed expenses

You may think that your fixed expenses such as rent or your mortgage payment, cable bills, utilities and insurance premiums can’t be altered but they can be. If you’re having a problem sticking to your budget think about downsizing to a smaller house or apartment, cutting your cable or trading in your car for an older one. Getting an older car should even lower your insurance premiums. In this era of Netflix, Hulu and Amazon Prime there’s just no reason to stay with a cable company. Most of today’s TVs have built-in tuners to receive local channels so that all you need to do to enjoy network broadcasts is buy a small antenna. Couple this with a subscription to Netflix or Hulu and you will be able to get just about all the programming you could want and for a fraction of what you’re paying for cable.

Failing to review your budget

If you’re not reviewing your budget every month you’re making a big mistake. This is especially important when you begin budgeting so you will be able to catch any expenses you forgot or any miscalculations you made on your regular bills. And if you do find inaccuracies you will need to tweak your budget to fix them.

4 Tips About Debt You Should Know by Now but Probably Don’t

疲れたビジネスマンHow many clichés have you heard about money like “money is the root of all evil”, “a fool and his money are soon parted” and “he who pays the piper calls the tune?” There must be several hundred of them and they’re all true. Money has always played a large part in every society all the way back to the Mesopotamian era.

While you may think you know about debt and money there are four tips you should know by now but probably don’t.

All college degrees are not created equal

If you’re typical you graduated from college owing money and maybe a lot of money. In fact, this past year’s graduates have an average of more than $36,000 in debt. The ideal is that you’d now be able to earn enough to pay for your basic expenses without getting any further into debt. But this all depends on whether you chose the right degree. If your degree was in healthcare or computer engineering you’re going to earn considerably more over the course of your career than if you majored in, say, art history or music theory. This is just the way the world works. Of course, if you’ve already graduated and have a degree in some low-paying area, there’s not much you can do to change that. One thing you could do is look into getting a master’s degree in a discipline that would pay better. While this would, of course, increase your student debt it would also raise your income significantly.

Don’t buy a house

Your parents may have told you that it’s a smart investment to buy a house and it makes more sense to pay on a mortgage then to keep paying a landlord. This advice is based on the idea that buying a house will help you build a lifestyle and give you excess cash flow. However, the cold, hard truth is that buying a home is really a horrible investment that produces lower returns than just about anything else you could invest in.

So, instead of buying a home, look for areas to live with a cheaper cost of living than where you now live. Remote and virtual teams have become very commonplace these days so that you no longer necessarily have to live in an expensive city to have a great career. If you could move to a smaller city but still earn a big-city wage this alone could be enough to get your finances on the right track.

Pay yourself first

Do you have you $1000 in a savings account? A recent study revealed that the majority of Millennials don’t. Were you taught to think of saving as your earnings less debt, taxes and your discretionary spending. The problem is that for too many people this equates to zero dollars or worse due to the scarcity of jobs that pay well while the cost of living continues to rise. Another cliché about money, “pay yourself first”, has endured for so many years because it’s true wisdom. If you reprioritize your finances, it’s likely that you could save 10% to 15% of your income while still enjoying a decent lifestyle.

Buy only stuff you can afford to pay for up front

It’s important to only buy things you can afford to pay for up front regardless of how much you’re earning and saving. This is true even if you do decide to make a major purchase such as a car or house. Don’t fall for one of those $0 or low down payment plans. The more you pay up front, the less the purchase will cost you. This means you’ll not only save money on interest but you’ll also spend less time later paying it off.

In addition, when you pay for purchases upfront this simplifies your financial life. If you put a major purchase on a credit card or get a loan to pay for it, then you’re creating a debt that will hang over you for years or even decades. You and another person with identical salaries could be in very different financial situations just because of how you paid for major purchases.

It’s the old way of doing things

If your parents drilled into your head that it’s critical to get a college degree and buy a house, just keep in mind that’s the old way to do things. If this really was the answer, the average US household debt would not be $132,158.