30-Second Financial Gut Check
August 26, 2009 by Jean Keener, CRPC, CFDP · Leave a Comment
If you’re like many Americans right now, you’re worried about your finances. Even if nothing has particularly changed for you in the past year – perhaps you still have the same job, same mortgage payment, same retirement accounts – you likely now have a gnawing sense of insecurity about what the future holds. And if something has changed for you – like loss of a job, a pay-cut, increased credit card interest rates, or a looming foreclosure – your worry level may be magnified by a factor 10 or more. Even though we’ve had a nice run in the stock market over the past 5 months and there is some encouraging economic data in the news, that sense of confidence that many felt just a year ago is nowhere to be found.
So, is your worry justified? I’m going to give you 5 quick questions to answer. It’s the 30-second financial gut check. If the gut check reveals that you have reason to worry, you can take the anxiety and use it to motivate yourself to take action. On the other hand, if it shows that you’re really doing ok, then you can use this gut check to start getting your confidence back.
- Are you spending less than you earn?
- Do you have an emergency fund equal to at least 3 months’ fixed expenses (6 months if you’re a highly compensated employee or in a volatile industry)?
- Do you regularly save for retirement or any other goals at the levels needed to fund them?
- Do you have zero debt or is your debt level going down?
- Have you taken steps to manage financial risks – either by avoiding the risk, saving the funds to cover the cost of potential losses, or purchasing insurance?
If you can answer yes to all of these 5 questions, you have great reason to start feeling more confident. You are taking the basic steps necessary to create a solid financial future. Great job! Now it’s time to focus on the next steps which are making sure your investments are working hard for you, that you’re not paying too much for products and services, that you’re optimizing tax-efficiency, and that your estate plan is in order.
If you can answer yes to 3 or 4 of them, you still have good reason to feel confident. Depending on the severity of the 1 or 2 issues that you said no to, you may be really close to mastering the financial basics. The key for you is to address the 1 or 2 issues as soon as possible.
If you answered no to 3 or more of the questions, it may be time to let your sense of anxiety be a motivator for you. There are some life transitions – for example, when you’re starting a new business, in career transition, or adjusting to the loss of a family member – that you may answer no to every single question. If the situation is temporary, especially if you’ve prepared the financial reserves to weather it, there’s no cause for concern. It’s when these situations extend themselves over years and become accepted as the status quo that alarm bells need to go off.
If you answered no to 3 or more questions and your situation is not temporary or prepared for, you have multiple warning signals that your financial situation is precarious. It’s time to take immediate steps to increase your income levels and/or reduce your expenses. You need to develop a plan to bring your financial life into balance. Many financially successful people have been in this situation and through creativity and hard work gotten themselves on the right track. It is attainable by coming up with a plan, making tough choices, and then working your plan. Good luck!
Keep an eye on your credit
June 29, 2009 by Jean Keener, CRPC, CFDP · Leave a Comment
The Credit Card legislation passed last month should ultimately help consumers. However, in the short term, many people are being squeezed. We have a combination of factors:
- banks attempting to shore up their financial statements by reducing the available credit on credit cards, home equity lines of credit, and business credit lines
- credit card companies seizing the opportunity to raise rates and fees while they still can
- far fewer 0% and low-interest balance transfer offers available
What does this mean to you?
If you are carrying any consumer debt or rely on a line of credit for emergencies, you need to keep an eye on it. You need to read all your mail from lenders and especially watch for changes in your terms including interest rate changes, shortened grace periods, reduced credit limits, or increased fees.
If you’re carrying balances and your interest rates are going up, take action.
- Come up with a plan to pay off the debt as soon as possible.
- Investigate competitor’s offers.
- If you have cash in excess of your needed emergency funds, go ahead and pay off the balance now.
If you’re relying on a home equity line of credit for emergency funds and it’s reduced below what you need, take action.
Start accumulating a cash emergency fund immediately. Here are 10 tools to do this. Long-term, it doesn’t make sense to be at the whims of creditors for your financial security. Cash in hand is the only way to ensure you can handle the unexpected without doing long-term financial damage.
Bottom line, don’t just ignore changes in your credit terms. You need to be a conscious credit consumer. Your best best is to avoid credit card debt all together. But if you are carrying some revolving credit, take steps to ensure that current lending conditions don’t do permanent damage to your financial future.
New credit card law provisions
May 27, 2009 by Jean Keener, CRPC, CFDP · Leave a Comment
The key provisions of the credit card law that Obama signed last Friday, May 22 are below. But first, my two cents …
I’ve heard a lot of talk about how these changes might make it more difficult to get credit and could result in higher fees in general and annual fees in particular for people who are using credit responsibly right now. It’s possible, but I tend to think that these issues were more a result of lobbying by the credit card companies than anything that will come to fruition. There will still be competition for credit card usage, and providers will need to make their cards attractive — especially to those that are the best credit risk. So while it may be harder to find cards with no annual fees, my guess is that a year from now there will still be options available to those with a solid credit history. We’ll have to wait and see, and in the meantime enjoy the increased communication and more reasonable policies from the credit card companies.
On May 22, 2009, President Obama signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the Credit CARD Act of 2009).
Amending the Truth in Lending Act, the Credit CARD Act of 2009 requires a creditor on an open end consumer credit plan (credit card) to notify a consumer in writing of any change in the annual percentage rate (APR) on the account at least 45 days prior to the change. The notification shall also inform the consumer of the right to cancel the account before the effective date of the rate increase. If the consumer cancels the account, this action shall not constitute a default on the account, and shall not trigger an obligation to repay the account in full.
Creditors are further prohibited from increasing the annual percentage rate (APR) applicable to an existing balance on an open end consumer credit card account unless specific conditions apply. The APR may be increased only if: (1) the index on which the rate is based changes, (2) it is a promotional rate that has expired, (3) a consumer fails to comply with a hardship workout plan, or (4) the account falls 60 days past due.
What’s more, if a rate increase is due to the consumer falling 60 days past due on the account, the creditor must inform the consumer that the rate increase will be terminated (and the rate restored to what it was before the increase) once the creditor receives the minimum payments due in a timely fashion for six months.
Other features of the Credit CARD Act of 2009 include:
- If different APRs apply to separate portions of an outstanding balance, the amount of any payment beyond the minimum payment due must be applied to that portion of the balance with the highest APR.
- Creditors are required to send statements to consumers at least 21 calendar days before the due date of the next payment.
- Creditors must provide on each billing statement a written disclosure indicating how many months it will take to repay the existing balance if only the minimum payment due is made each month, and what the total cost (principal and interest) of doing so will be. The disclosure must also indicate the total cost of repaying the existing balance due, including principal and interest costs, over 36 months.
- Payment due dates shall be the same day of each month. If the due date is a date when a creditor does not receive or accept payments by mail (e.g., weekends and holidays), the creditor must not treat a payment received on the next business date as a late payment.
- Creditors are prohibited from charging a consumer an over-the-limit fee unless the consumer authorizes the creditor to complete the transaction that causes the balance to go over the limit (opt-in). The creditor is further prohibited from imposing an over-the-limit fee in a subsequent billing cycle unless the consumer obtains an additional extension of credit in excess of the credit limit during that subsequent cycle.
- Extension of credit to consumers under age 21 is prohibited, unless the consumer demonstrates the independent means of repaying the debt or has a cosigner over 21 capable of repaying the debt. The creditor is required to obtain the approval of any cosigner to increase the credit line of an account for which the cosigner is jointly liable.
- Creditors are prohibited from charging a fee based on the manner in which a payment is made (e.g., on line, by telephone).
- Gift cards and certificates must disclose in writing on the card or certificate any dormancy or inactivity fee information, including the amount of the fee and how often it may be imposed (not more than once a month). What’s more, the issuers of such cards or certificates must inform the purchaser of these fees before the purchase. Such fees may not be imposed for the first 12 months after issuance. Such cards or certificates may not have an expiration date before five years after the card or certificate is issued.
The sections of the Credit CARD Act of 2009 about notification requirements concerning rate increases take effect 90 days after the date of enactment. The remaining portions of the Act take effect nine months after enactment.
IOUSA on CNN this weekend
January 8, 2009 by Jean Keener, CRPC, CFDP · Leave a Comment
I just learned that IOUSA will be airing on CNN this weekend. I plan to set the DVR to make sure I get to watch it. It’s a documentary about America’s addiction to debt that’s received outstanding reviews. Here’s the info:
The public has spoken, and we’ve listened. In response to demand for information about our country’s financial challenges, CNN/U.S. will air the broadcast premiere of the acclaimed documentary I.O.U.S.A. on on Saturday, January 10 at 2:00 p.m. EST and on Sunday, January 11 at 3:00 p.m. EST. Accompanying the documentary will be an unscripted panel discussion with policy leaders about various economic solutions currently under consideration.
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This exclusive televised event will air only on CNN, and will be hosted by Ali Velshi and Christine Romans, co-anchors of CNN’s Your $$$$$, the network’s weekend business roundtable program. |
Throughout I.O.U.S.A.’s broadcast premiere, Velshi and Romans will engage a distinguished group of panelists, including Pete Peterson, Chairman of the Peter G. Peterson Foundation and former U.S. Commerce Secretary; Dave Walker, President and CEO of the Peter G. Peterson Foundation and former U.S. Comptroller General; Alice Rivlin, noted economist and former Director of the Office of Management and Budget; and Bill Bradley, a Managing Director of Allen & Company and former U.S. Senator and Democratic presidential candidate, in discussions about issues raised in the film and their ties to current economic events.
Learn more about the film at www.IOUSAtheMovie.com. And be sure to spread the word about the U.S. broadcast premiere!
How to get a free copy of your credit report
November 2, 2008 by Jean Keener, CRPC, CFDP · Leave a Comment
Under the Fair and Accurate Credit Transactions Act of 2003 (FACTA), every consumer is entitled to a free credit report every 12 months from each of the three credit bureaus. To get your free annual report, you can contact each of the three credit bureaus individually, or you can contact one centralized source that has been created for this purpose. Besides the annual report, you are also entitled to a free report under the following circumstances:
- A company has taken adverse action against you, such as denying you credit, insurance, or employment (you must request a copy within 60 days of the adverse action)
- You’re unemployed and plan to look for a job within the next 60 days
- You’re on welfare
- Your report is inaccurate because of fraud, including identity theft
If you are not eligible for a free report, you can buy a copy from each of the three credit bureaus. You may be charged up to $9.50 for each copy.
How do you order your free annual report?
You can order your free annual report online at www.annualcreditreport.com, by calling 877-322-8228, or by completing an Annual Report Request Form and mailing it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
Alternatively, you can contact each of the three credit bureaus:
- Experian National Consumer Assistance Center, www.experian.com, P.O. Box 2104, Allen, TX 75013-2104, (888) 397-3742
- Trans Union LLC, Consumer Disclosure Center, www.transunion.com, P.O. Box 1000, Chester, PA 19022, (800) 916-8800
- Equifax, Inc., www.equifax.com, P.O. Box 740241, Atlanta, GA 30374, (800) 685-1111
If you make your request online, you should get access to your report immediately. If you request your report by phone or mail, you should receive it within 15 days.
What information will you need?
Whether you go online, call, or write for a copy of your credit report, you will have to provide certain information so that your file can be located, and your identity can be verified. If you order by phone, you will be asked to speak, spell, or key information into the phone. Generally, the information requested includes:
- Name
- Address
- Spouse’s name (if applicable)
- Previous address
- Social Security number
- Home phone number
- Name of employer past and present
- Date of birth
Tip: If you write to a credit bureau for a copy of your credit report or for any other reason, you should include the same information in the letter.
Will you be able to ask questions about your report if you call?
When you call to order a copy of your credit report, you will not speak to a real person. You will hear a series of recorded messages. You will be given prompts and asked to respond by speaking or keying your response into the phone. It is very simple and self-explanatory. In most cases, your credit report will be processed within 48 hours.
Why would you want to get a copy of your credit report?
Your credit report is important because it can affect whether you get a mortgage or other type of loan, insurance, or employment. You should review your credit report to make sure it is accurate, complete, and up to date. Reviewing your report can also help you guard against identity theft.