Money Management

Debt Consolidation Loans – Proceed With Caution

April 10, 2014 by Kevin Mercadante

If you have more debt than you are comfortable carrying, debt consolidation loans can seem like an oasis in the desert. It’s a way of taking a large number of smaller debts – each with its own annoying monthly payment – and rolling them into a single loan, with one lower monthly payment than the collection of payments you’re making on your various debts.

But as good as the theory of debt consolidation loans seems to be, proceed with caution. Debt consolidation loans don’t always do what you hope they will, and sometimes they can even make your situation a good deal worse.

How Debt Consolidation Loans Can Go Wrong

When people consider taking out a debt consolidation loan, they seldom give serious thought to the potential pitfalls that they have. There are number of ways that debt consolidation loans can go wrong, and here are just a few:

Though they usually lower your overall monthly payments, they don’t reduce the amount of money that you owe
By reducing your overall monthly payment, they often pave the way for you to take on additional debt
If you don’t stop borrowing after you take a debt consolidation loan, the consolidation will have been absolutely pointless
Debt consolidation loans can make debt easier to live with, and that does not create the kind of budget discipline that leads to an improved overall financial situation
Debt consolidation can become a revolving arrangement, in which you do a consolidation loan, that’s followed by an even larger one, a larger ones still, in a process that often has no end

In short, debt consolidation loans can lead you on a one way road to ever higher amounts of debt.

The Cycle of Perpetual Debt

Point #4 above warrants special consideration, since it lies at the root of the cycle of perpetual debt a lot of people find themselves in. Many debtors look for ways to make their loans easier to live with. This may reduce budgetary stress in the household, but it doesn’t actually make your debts go away. In fact, if you become too efficient at debt consolidation, you run the very real risk of turning short-term debt into permanent debt.

How does that happen?

As debt consolidation loans become larger, they tend to carry longer repayment terms at higher monthly payments. At the extreme, debt consolidation eventually morphs into either a home equity line of credit or a cash-out refinance of your primary mortgage. At that point your debt consolidation become something close to a permanent obligation.

Once short-term debt has been converted to permanent debt, secured by your home, you’re debt slate is once again wiped clean. This can be an excellent strategy to get out of debt if you are fully committed to avoiding all forms of debt in the future. But for many people who do the ultimate form of debt consolidation – a mortgage on their homes – the path is simply cleared to accumulate more debt.

This entire arrangement – and it is not an uncommon one – puts you squarely on a path of perpetual debt.

How to Make Debt Consolidation Loans Work For You

Debt consolidation can actually work! By lowering your monthly payments, it does free-up your budget, and give you a host of options that you didn’t have before. But none of that will do any good unless your realize that getting out of debt requires sacrifice.

What kind of sacrifices are we talking about? Here are just a few examples:

1) Recognize that rearranging debt is not the same thing as paying it off –
A huge part of the success or failure of any debt consolidation loan is the way that you view it from the very start. You may need to change your thinking! If your primary purpose is simply to lower your monthly payments, the consolidation loan will probably only lead you deeper into debt. But if you see it as a more efficient way to payoff your debt it could be the very tool you need to help you get out of debt forever.

2) Eliminate the level of spending that got you into debt in the first place –
One of the biggest negatives with debt consolidation loans is that people who take them convince themselves that they don’t have to change their spending habits. That thinking is completely wrong, and a recipe for disaster. The entire reason that you go into debt in the first place is because you spend more money than you earn. That arrangement will have to change – you’ll have to learn to live beneath your means. That’s where the sacrifice come into play, but there is no way that you can be successful with a debt consolidation loan without it.

3) Swear off borrowing at least until the debt consolidation loan is paid off completely –
If you borrow more money shortly after taking a debt consolidation loan, you’re defeating the entire purpose of having the loan in the first place. Adding more debt on top of the debt you already have with a consolidation loan, will simply put you deeper into debt. Once you take a debt consolidation loan, you must avoid taking any new loans, at least until the debt consolidation loan is paid off in full.

4) Become a committed saver –
Probably the best way to avoid debt in the future is by becoming a saver. If you have money in the bank, you’ll be less likely to borrow money, particularly using credit cards. If you can start saving money while you are paying your debt consolidation loan, you’ll be able to really accelerate the process once the loan is paid in full. You can then direct what used to be the monthly debt consolidation payment into your savings.

In order for a debt consolidation loan to be completely effective, you have to view it as the first step in a very long-term process. The whole purpose of the debt consolidation loan is to clear the decks of your old debt, so that you will be able to go forward with a clean slate, and to develop an entirely new and more effective financial strategy.

To Own Or Rent? Proceed Wisely

March 28, 2014 by Twila Van Leer

Home ownership is the American ideal. But there are good and valid instances in which renting is a better alternative. Look at them carefully before taking the leap into a mortgage.

If You Make Frequent Moves

If you know that your job is going to require that you relocate every few years, or if a bit of “wanderlust” is part of your makeup, you’d be foolish to be burdened with home ownership everywhere you went. Home purchases and sales involve costs, with fees on both sides. Even in a positive market where property values intend to increase, you aren’t likely to break even.

When A House Payment Would Break You

It isn’t just the monthly payment. There tends to be more out-of-pocket expenses with home ownership. Maintenance and repairs, for instance. When debating the factors, add about a thousand dollars a year to the mortgage money for such costs. Best to leave those to another owner while you pay a set rent if things are looking tight.

If you are looking at homes, notice that some of them are in serious disrepair, probably from just this circumstance. The owners can afford the payment, but not the upkeep. Assume that this could happen to you too, if the margins are too skimpy. Maybe, like some home purchasers, you believe you can take care of upkeep and repairs yourself, but if the demands get beyond your capacities, you’ll end up paying a contractor. Being house poor is hardly a desirable offset for the perceived blessings of owning.

What Your Area Offers

If in your neighborhood a home typically sells for $300,000, with a monthly payment of $1,800, but rentals can be had for $1,000 a month, the math isn’t hard to do.

Unless you can easily manage the $1,800, the rental seems the better option. What you lose in such a scenario is the tax advantage that a mortgage offers. But the $800-per-month savings in rental payments goes a long way toward offsetting that advantage. And you needn’t look at the additional costs of maintenance and repairs, which amounts to even more savings.

Making Major Life Changes

A personal financial crunch, divorce, being widowed, relocation, starting a new job — these and many other unexpected life events are all good reasons that you may need to rethink ownership vs. renting, at least temporarily. Any situation that creates a new reality for you should demand such a rethink. In any major life upheaval, renting could provide the flexibility you need before things settle into that new reality. Not being tied to a mortgage could help you safely bridge gaps when things don’t go as you had thought they would.

If owning a home is your dream, go for it. But remember that renting is a good option until the dream comes true.

10 Tips To Break Bad Banking Habits

February 17, 2014 by Sherry Tingley

You may be losing money every month because you aren’t aware that some of your basic banking habits can be pricey. Some common mistakes that people keep making come to the attention of banking analysts and are shared with you in this guide to keeping more of your money in your pocket.

Tip #1 – Stay Current With Your Account Fees

You may have opened your bank account 20 years ago when there were no fees charged to you. Take the time to talk to your bank and ask them what fees they can charge your particular type of account. It may be time to change the type of account you currently have.

One woman was getting charged $27 a month and went into the bank to complain. Her account was designed to encourage savings and would charge a $1 per transaction fee each time she made a withdrawal or processed a transaction. Setting up a different type of account would save her $324 a year.

Tip #2 – List Dates Of Your Automatic Withdrawals

Nothing is as frustrating as checking your online balance, thinking you have money to spend and then not realizing that an automatic withdrawal is pending. Forgetting about the pending withdrawals can be draining your bank account.

Go online and download a month’s worth of activity. Filter out all the automatic withdrawal transactions and figure out exactly what dates the amounts are deducted. Keep the information in a spreadsheet or print it out and carry it with you.

Tip #3 – Discover The Location Of Approved ATM’s

When you withdraw money from ATM’s that are not associated with your bank, you can get charged fees in varying amounts. The fees might not be big, but they could easily put you into an overdrawn status. Now those fees can be large and will make you cringe.

Find the ATM’s that are near your work, where you dine out and near where you shop and use them. One customer had $50 worth of ATM fees in a month. When asked why he couldn’t find approved ATM’s his response was that he knew where they were, he just couldn’t be bothered with walking across the street. Walking across the street could potentially save him $600 a year.

Tip #4 – Save Loose Change

It may be annoying to carry loose change, but having a strategy to deal with it can really add up to some decent money. When you get home from work or shopping, just toss the loose change in a large jar. When the jar gets full, bring it into the bank and use their coin machine to count it and return you with paper currency. You’ll be surprised how much is really in that jar. Take care of the cents and the dollars will take care of you.

Tip #5 – Check Online Accounts Daily

Face it. Some people don’t even do this monthly. One customer went into her bank and was very upset. She had no money in her account. Upon investigation, it was discovered that she had a joint account with an ex-partner and she had never had his name removed from the account. For five years the partner had been stealing from her account in small increments. It was only when he decided to take it all that she even noticed.

Tip #6 – Reduce The Number Of Accounts

Some of us get creative with our savings or checking accounts, opening too many to even remember what they are for. Balancing and tracking all that information is very time consuming and for most people too much of a hassle to handle.

Then there are those people who are flattered when they get a sales pitch to open a new credit card. They think it is cool that someone else says they have great credit so they open another account. Having too many credit cards provides you with too many temptations.

Limit the number of accounts you have. Trim down the number of your credit cards to make them easier to manage. Trim down the number of checking and savings accounts if tracking and managing them becomes too easy to make costly mistakes.

Tip # 7 – Distinguish Between Wants and Needs

The difference between what we think we need and what we actually need, can be enormous. Overspending can lead us to overdrawn account fees, excessive credit card use and a feeling of being out of control.

Advertisers are relentless when they pitch us so we really have to be aware of our own needs. Designer clothes, handbags, eating out, multiple Ipads and cell phones may have their appeal, but they can’t be classified as needs. Spend money on your needs first.

Tip # 8 – Maintain Minimum Balances

If your bank requires you to have at least $300 in your account, find out what fees they can charge if you drop below that amount. If you have believe you are entitled to spend money if you see it in your account, take a new approach. Deposit the minimum balance and in your record keeping system don’t add that amount into your perceived balance. That way the money will always be there. Just leave it alone.

Tip #9 – Check Your Excess Withdrawal Fees

Some accounts will penalize you for withdrawing money. They are designed to encourage you to save and can charge per transaction. Ignoring the terms of the account incurs more expense than you will ever earn on the interest.

Tip – #10 – Set Up Mobile Alerts

Some banks will let you set up text alerts that go directly to your mobile phone. You can text in requests to see your account balances, account activity, make transfers and find ATM locations near you.

Alerts can also be set up to send you a text under specific conditions that you choose. Remind yourself when your balance falls below a threshold or learn when a deposit has been made.

Use technology to make your life simpler, avoid bank fees and live a happier life.

What bad habits do you want to break?

2 Dozen Red Roses For Valentine’s Day

February 6, 2014 by Sherry Tingley

Valentine’s Day! You Gotta Love It!

Every year, the February 14 love fest sets off a frenzy of rose-buying that is unparalleled throughout the rest of the year. Most of the time, a rose is a rose is a rose, but on Valentine’s Day, it’s the classic way to make your sentiments known, being the international symbol of passion and love.

Men are most inclined to put out their shekels for roses, mostly red, to tell the women of their dreams that they care. Sixty-six percent of them believe that ladies prefer red roses. In fact, according to ProFlowers, 76 percent of women would make another choice. Predictably, however, they will go into ecstasies when the red roses show up. Go figure.

Regardless of this classic mismatch in the statistics, a mostly-male customer pool will order millions of roses this year, at a cost of $70 to $120 or more per two-dozen bunch. And, being men, the great majority will wait until three days before Valentine’s to put in their orders. They are the ultimate procrastinators, sellers know.

Fortunately, ProFlowers expects the last-minute rush. Its customer service people can take more than 100,000 calls per day, and in short order, more than 14 million roses, mostly in bunches of two dozen, will be on their way to the women who inspired the choice. That represents some 20 percent of Pro-Flowers’ annual business.

Although women want to be cherished every day of the year, the majority of them look forward to Valentine’s Day as the one on which declarations of love are expected and cherished. Julia Roberts, starring in the film “Valentine’s Day, has posted notice in advance that it will be a great day for herself and husband Danny Moder. “We’re just going to be making out for the full 24 hours,” she predicted.

Ironically, Ashton Kutcher, one of the stars of the TV comedy “Two And A Half Men,” who also appeared in the movie, has very dissimilar feelings about the holiday itself. “I hate Valentine’s Day,” he stated emphatically. “I think every day should be a day of romance. Then, on Valentine’s Day, you should get to tell whomever you hate that you cannot stand them. There would be one day of hating and 364 days of love.”

The most common sentiments expressed by women to men – We want you to take our breath away. It reinforces our choice of partner. We want to know we picked a guy who is proud to be ours and wants the whole world to know it. Really, it’s the ultimate bragging rite for our gender.”

Despite Kutcher’s Valentine bah-humbug, the annual rush for roses is waiting in the wings. To make the selection online, here are some sources. (These list only the roses. Each of these outlets also has many other selections to choose among.)

Proplants.com	2 Dozen	$59.97
Proflowers.com	2 Dozen	$69.96
1-800-flowers.com	2 Dozen	$84.99
Flora2000.com	2 Dozen	$99.99
FromYouFlowers	2 Dozen	$118.99
FTD.com	2 Dozen	$199.96
Teleflora.com	2 Dozen	$199.96

Another Way To Say I Love You

Don’t forget about ordering your love checks not only for Valentine’s Day, but all year round!

Saving Money On Superbowl Sunday

January 31, 2014 by Sherry Tingley

Football Stadium Food Display – Photo From Philly.com

Football Fans Unite

Face it. You’re in good company — among the tens of thousands who don’t hold tickets to Super Bowl XLVIII, the football event of the year. So while MetLife Stadium in East Rutherford, N.J., is packed to the hilt with screaming fans Sunday, yelling for either the Denver Broncos or the Seattle Seahawks, you’re stuck with hosting an at-home version.

Last year, some 108 million people watched the Super Bowl in settings ranging from posh parties (entry fees ranging from $200 to $2,000 each) to home theater TV rooms or the local sports bar.

Whatever suits your fancy, if you find yourself the host and/or hostess to the gang, make it easy on yourself. Don’t let the decorations, goodies and clean-up take precedence over the game. If all you score is a colossal headache by Sunday night, you’ll have defeated the whole purpose.

Delegate

First of all, get help. Enlist other enthusiasts in your group to share in the chores. Gather at the largest available home and divide out the food. This is one of those occasions when potluck can work. If you fear too much overlap, keep a sign-up sheet so you don’t end up with twenty bags of chips and no dip. Otherwise, pre-assign items that are easy on the budget and on the preparation. Sideline fussy dishes with lots of ingredients. Buy with coupons and buy in bulk. Inexpensive snacks such as pretzels, chips and nuts help satisfy appetites before, after and even during the big meal. The idea is to enjoy the munchies while enjoying the game.

Pizza Deals

Pizza is popular and when it’s Super Bowl time, many of the well-known outlets have special deals that let you feed a crowd without breaking the bank. A few of the online deals being advertised include: Dominos: Choose any two or more two-topping medium pizzas for $5.99 each. Or eight pieces of chicken, an oven-baked dinner or stuffed cheesy bread, also at $5.99. Papa John’s, which is noting its 30th anniversary, has a large one-topping pizza for only 30 cents with the purchase of a large pizza at the regular menu price. The chain also has an online coupon, code pjmvp that allows you to order $15 or more online and get a free three-topping pizza. Pizza Hut has a deal that gives you two medium two-topping pizzas and two sides (or a third medium one-topping pizza) for just $19.99. As kickoff approaches, the deals are changing faster than a chalkboard game plan, so check with Living on the Cheap’s Dining Page before you make up your mind.

Dishwashing

Used to be paper plates, cups and other items saved money. But prices for these paperware items have soared in the past few years. Use your own dishes if you have enough to go around. Have guests bring their own, if necessary. You may gain in dish washing what you lose in savings on purchases, but refer back to suggestion No. 1 above. Share the chores.

Dollar Stores

The neighborhood dollar store might surprise you with the number of items you could pick up for decorating. A few pompoms and streamers can go a long way. Of course if you’re partial to either of the competing teams, focus on the colors that suit. That would be orange and blue for the Broncos, blue and lime green for the Seahawks.

Make It Easy

Most of all, remember rule No. 1. Make it fun and easy. Don’t tackle more than you’re game for, and keep some perspective as you cheer for your team. There will always be a Super Bowl XLVIX.

Bonus Recipe

This is one of the easiest recipes to make that people just love. It serves 6 to 8 people and is very filling. Certainly enough for a meal.

Cheesy Vegetable Chicken Soup

2 cups chopped broccoli
4 cups cubed potatoes
2 cups sliced carrots
2 cups diced celery
1 1/2 cup chopped onions
4 cups sater
6 chicken bullion cubes

Boil the above ingredients in a large covered pan for 20-30 minutes. Drain off most of the water.

3/4 c. flour
1 cube of butter
3 cups of milk
dash of white pepper
1 lb. of Velveeta cheese
3 cans cedar cheese soup
4 cooked chicken breasts – cut into small pieces

Mix everything but the chicken together in a frying pan. Stir constantly on medium heat until soup like consistency. Add chicken. Pour into vegetable mixture. Keep warm in crock pot. Enjoy your Superbowl Sunday party!