Complete a Financial Check-up
Before Beginning Holiday Spending

GailCunninghamBy Gail Cunningham

The NFCC encourages consumers to be aware of their current financial situation before beginning holiday spending, and provides the 2014 Holiday Financial Reality Check-up to evaluate their readiness to take on new debt.

Consumers may still be receiving the summer vacation and back-to-school bills, but should not lose sight of the fact that the holiday spending season is just around the corner. This makes it vitally important for a person to understand their current financial situation before taking on new debt obligations. Doing otherwise could result in damaging an already fragile financial situation.

The NFCC recommends that consumers take the Holiday Financial Reality Check-up quiz to determine if they are in a position to begin holiday spending. Complete the following sentence with a true or false answer: “Concerning my current financial situation, I…..”

  1. Know how much I currently owe on each credit card.
  2. Am receiving collection calls and notices.
  3. Have money saved to pay cash for holiday expenses.
  4. Will be adding new debt on top of old debt if holiday expenses are charged.
  5. Have reviewed my credit report and score in the past 12 months.
  6. Am near the maximum amount allowed on my lines of credit.
  7. Am current on my vehicle payment.
  8. Have applied for a payday loan, title loan, or credit card cash advance in the past 12 months.
  9. Have savings in addition to that earmarked for holiday spending.
  10. Have overdrawn my checking account more than twice in the past 12 months.

A person is in good financial shape to begin their holiday spending if they answered true to all odd-numbered statements. Consumers answering true to even numbered statements should use this quiz as a wake-up call to take action about their financial situation before it spirals out of control, and certainly before taking on additional holiday debt.

Reaching out to an NFCC member agency for help is one of the smartest things a person can do. Allowing a trained and certified financial professional to review the financial situation now can put a person into a much better position to enter the holiday spending season.

To be automatically connected to the NFCC member agency closest to you, dial (800) 388-2227, or visit the NFCC website at www.NFCC.org to find an agency online.

Gail Cunningham manages Media Relations for the National Foundation for Credit Counseling.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Leave Behind the Paycheck to Paycheck
Struggle and Build up Your Savings

MarkFoster_CCOABy Mark Foster

People who are living paycheck to paycheck are basically living in financial survival mode which is a stressful, exhausting, and a dangerous way to live. Fifty-nine percent of adults age 44 or younger do not have even $500 saved, according to the Social Security Administration. It wouldn’t take much of an emergency to derail a family’s finances if they only have a few hundred dollars saved up – an ER visit, paying the deductable on a car accident, having to repair a home appliance, etc.

Saving is an essential goal to have. Emergencies are a fact of life. It’s not a question of “if” you will ever have an emergency, but “when.” So having money saved is a necessity. It’s been widely recommended that adults save three to six months of their annual net pay. While this is a good long-term goal to have, it can unintentionally be very discouraging to those who have little or no money saved. A good short-term goal may be to save $500. Set short-term, mid-term, and long-term goals and write it down and post it where it will be a regular reminder to work toward your goals.

The most successful savers will have a budget to keep them focused and goals to motivate them to stay on-budget. Tracking expenses for a month to see where your money is actually going is an important first step to creating a realistic budget. Oftentimes someone will find a blind spot in their spending, such as spending too much on entertainment or dining out, and tracking expenses will discover this and allow the person to make necessary adjustments to a budget. With expenses tracked and a budget in place, it will be much easier to build an emergency savings cushion.

It’s typically easier to reduce or cut expenses than it is to earn more money. So review your spending. Look for ways to cut back or things to cut out entirely, at least until you reach your minimum savings cushion.

Mark Foster is Director of Education with Credit Counseling of Arkansas (CCOA). CCOA is a member of the National Foundation for Credit Counseling. To schedule an appointment with a Certified Consumer Credit Counselor contact CCOA at 800.889.4916, or visit CCOA online at www.CCOAcares.com.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

 

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 Don’t Let Back-to-School Tasks
Sneak Up On You

alderman_color_1By Jason Alderman

Parents, if this is your first time at the back-to-school rodeo let me share a few lessons my wife and I have learned the hard way. Chances are you’ll be spending the next few weeks filling out piles of pre-enrollment paperwork, lining up carpools, and of course, taking the dreaded shopping excursions for clothes and school supplies.

If you’re a first-timer or simply need a back-to-school refresher course, here are a few suggestions that can help you save time, money and sanity:

Get organized. Maintain a correspondence file from your kid’s school for things like registration requirements, report cards, permission slips, required vaccinations, school policies (absence, illness, discipline, etc.), contact information for teachers, aides and classmates’ parents, etc. Ask whether the school has a website, online calendar, or email list you can join. Also, create a family master calendar noting registration deadlines, school holidays, vacations and field trips, doctor’s appointments, your work events, carpool schedules, parent/teacher meetings, athletic and arts events, parties, etc.

Back-to-school shopping. Between new clothes, classroom supplies, and extracurricular activity fees and equipment, many parents end up spending hundreds or even thousands of dollars per child. Ideally, you’ve been setting money aside all year. If not, you’ll need to determine what you can afford to spend on school-related expenses without blowing your overall budget.

Here are a few organizational and money-saving tips:

  • Before you shop, make a comprehensive list for each child. Use previous years’ expenses as a guide and compare notes with other parents and school officials.
  • Engage your kids in the budgeting process. Share how much money is available to spend and get them involved in prioritizing expenses between “needs” and “wants.”
  • Use this as an opportunity to teach the art of compromise: If your kids truly want something outside the budget, work together to determine how they can earn the difference. And, as an inducement to save money, agree to split the savings if you come in under budget.
  • Go through your kids’ closets and have them try on everything. Make an inventory of items that fit and are in good shape, and take it when shopping so you don’t accidentally buy duplicates. (While you’re at it, share, sell or donate unneeded items.)
  • Spread clothing purchases throughout the year so your kids don’t outgrow everything at once. Many stores hold fall clearance sales to make room for holiday merchandise.
  • Although shopping online can save money, time, and gas don’t forget to factor in shipping and return costs, which could undo any net savings. If your kids are old enough put them in charge of online comparison shopping and coupon clipping.
  • Ask which school supplies you’re expected to buy. Go in with other families to take advantage of volume discounts and sales.
  • Find out how much extracurricular activities (athletics, music, art, etc.) cost. Account for uniforms, membership dues, private lessons, field trips, snacks, etc.
  • Rent or buy used sporting equipment or musical instruments until you’re sure they’ll stick with an activity. (Try PlayItAgainSports.com and similar outlets.)
  • Factor in public transportation, school bus, or carpool expenses.
  • Learn what your school charges for meals and weigh their convenience (and nutritional value) against the cost of home-prepared lunches and snacks.
  • Know when it’s important to spend more for higher quality. Cheaper notebook paper shouldn’t matter, but you shouldn’t risk buying poorly made shoes that might hamper proper physical development.
  • Before buying new clothing or accessories, look for “gently used” items in the closets of your older kids, friends and neighbors, at garage sales, thrift and consignment stores, and at online sites like Craig’s List.
  • Many states offer a sales tax holiday for back-to-school purchases. Go to the Federation of Tax Administrators website and search for “Sales Tax Holidays” to see if and when your state is participating.
  • Before checking out, ask the salesclerk if there are any available coupons or discounts. Even if you don’t have your own coupon, many clerks, when asked nicely, will scan one for you to ensure that they make the sale.
  • At this time of year, some credit card reward programs offer extra points for office supply stores or other back-to-school retailers. Another strategy: If you’re short on cash but have lots of reward points, use them to buy gift cards for stores you frequent.
  • Back-to-school loss leaders begin to pop up in discount and office supply stores around mid-July.
  • Follow your favorite retailers on Facebook and Twitter where many post special savings for their followers.
  • Review the school’s dress code so you don’t waste money on inappropriate clothing.
  • Clip newspaper and online coupons. Many stores will match competitors’ prices even if their own items aren’t on sale. Plus, many consolidation websites post downloadable coupons and sale codes for online retailers, including: CouponCabin.com, CouponCode.com, CouponCraze.com, DealHunting.com and Dealnews.com.
  • Mobile shopping apps let in-store smartphone and mobile browser users scan product barcodes and make on-the-spot price comparisons, read reviews, download coupons, buy products and more. There are hundreds of popular apps including Price Check, ShopSavvy and PriceGrabber.

Bottom line: If you get organized before setting out on back-to-school shopping, you can save money, time and aggravation.

Jason Alderman is Senior Director, Global Financial Education, with Visa, Inc.           

This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Poll Respondents Admit Personal Finances
Keep Them Awake at Night

GailCunninghamBy Gail Cunningham

Close to four in five respondents (79%) to the NFCC’s July poll admitted that their personal finances keep them awake at night. The second highest number of responses came in a distant second, with 13 percent indicating that they sleep like a baby. The remaining choices were marital concerns, job security, and problems with the children which each had single digit responses.

In addition to the obvious credit problems resulting from overwhelming debt, financial concerns can wreck marriages, tear families apart, and put a person’s job in jeopardy due to being distracted while at work. Debt is like a dark cloud that follows a person 24 hours per day. They wake up with it, take it to work with them, and as the NFCC poll confirmed, they take it back to bed with them.

There are two pieces of good news that can be gleaned from the poll. First of all, the respondents were able to identify the source of their distress, and secondly, they went to a reliable and trusted resource, www.DebtAdvice.org, for help. Their next step should be to reach out to an NFCC member agency for customized and solution-oriented assistance.

If someone has personal finance issues, they are not alone. The 2014 NFCC Financial Literacy Survey revealed that 71 percent of consumers, or roughly 179 million people, admitted to having personal finance worries, with not enough savings, job issues, debt, and credit topping the list.

Regardless of the problem, NFCC member agencies stand ready to help through the many services they provide, including the following:

  • Budget and debt counseling;
  • Financial education and literacy courses;
  • Debt management programs;
  • Housing counseling, including first-time homebuying, foreclosure prevention, and reverse mortgage;
  • Student loan debt repayment counseling, and
  • Bankruptcy pre-filing counseling and pre-discharge education.

NFCC members provide financial counseling and education to millions of consumers each year, with clients receiving comprehensive money management services based on their individual needs. Spending an hour with a trained and certified NFCC financial professional can put a person on the road to financial recovery. To be automatically connected to the agency closest to you, dial (800) 388-2227, or go online to www.DebtAdvice.org.

The NFCC’s July online poll question and answers are below:

What keeps you up at night?

  1. Financial worries = 79%
  2. Marital concerns = 2%
  3. Job security = 4%
  4. Problems with the children = 2%
  5. Nothing, I sleep like a baby = 13%

Note: The NFCC’s July Financial Literacy Opinion Index was conducted via the homepage of the NFCC website (www.DebtAdvice.org) from July 1–31, 2014, and was answered by 2,148 individuals.

Gail Cunningham manages Media Relations for the National Foundation for Credit Counseling.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Read Contracts Carefully Before Signing

alderman_color_1By Jason Alderman

If you always stop to read the fine print before signing anything, congratulations – your parents trained you well. If you don’t, beware: Your signature could commit you to a long-term gym membership you don’t really want, an apartment you can’t afford, or worst of all paying off someone else’s loan you cosigned.

Broadly defined, contracts are mutually binding agreements between two or more parties to do – or not do – something. It could be as simple as buying coffee (you pay $3 and the restaurant agrees to serve you a drinkable beverage), or as complex as signing a 30-year mortgage.

Once a contract is in force it generally cannot be altered unless all parties agree. And, with very few exceptions (e.g., if deception or fraud took place), contracts cannot easily be broken.

Before you enter a contractual agreement, try to anticipate everything that might possibly go wrong. For example:

  • After you’ve leased an apartment you decide you can’t afford the rent or don’t like the neighborhood.
  • Your roommate moves out, leaving you responsible for the rest of the lease.
  • You finance a car you can’t afford, but when you try to sell, it’s worth less than your outstanding loan balance.
  • You buy a car and only later notice that the sales agreement includes an extended warranty or other features you didn’t verbally authorize.
  • You sign a payday loan without fully understanding the terms, and end up owing many times the original loan amount. (The same goes for pawnshops and car-title loans.)
  • You buy something on sale and don’t notice the store’s “No returns on sale items” policy.
  • You click “I agree” to a website’s privacy policy and later realize you’ve given permission to share your personal information.
  • You buy a two-year cellphone plan, but after the grace period ends, discover that you have spotty reception and it will costs hundreds of dollars to buy your way out.
  • You buy smartphone insurance, but don’t discover until after it’s been stolen that they can replace it with a refurbished model.

Financially inexperienced teenagers and young adults often make these kinds of mistakes, so discuss the implications of signing contracts with your kids well before they turn 18.

Cosigning a loan. This can be particularly risky. If the other person stops making payments, you’re responsible for the full amount, including late fees or collection costs. Not only will your credit rating suffer, but the creditor can use the same collection methods against you as against the primary borrower, including suing you or garnishing your wages. Still, there may be times you want to cosign a loan to help out a relative or friend. The Federal Trade Commission (FTC) has a handy guide that shows precautions to take before entering such agreements. If you’re trying to help your child establish a credit history, another alternative would be to make him or her an authorized user on one of your accounts. They’ll get their own card, and you can usually restrict the amount they’re able to charge. But be aware: Authorized users aren’t legally responsible to pay balances owed, so oversee account activity closely.

Cooling-off rule. If you buy something at a store or online and later change your mind, you may have a difficult time returning it. But if you bought an item in your home (e.g., from a door-to-door salesman) or at a location that’s not the seller’s permanent place of business (e.g., at a fairground or hotel room) you may be protected by the FTC’s Three-Day Cooling-Off Rule. Under this rule, the salesperson must reveal your cancellation rights at the time of sale and give you two copies of a cancellation form (one to keep and one to send) and a dated copy of your contract or receipt. Note that numerous exceptions apply. If your purchase is eligible under the rule, however, you have three business days in which to ask for a full refund.

A few additional reminders about contracts:

  • Ensure that everything you were promised verbally appears in writing, especially such terms and conditions as interest rates, down payments, discounts, and penalties.
  • Make sure all blank spaces are filled in or crossed out before signing any documents –including the tip line on restaurant and hotel bills.
  • Don’t be afraid to ask to take a contract home for more careful analysis or to get a second opinion. A lawyer or financial advisor can help.
  • Don’t be pressured into signing anything. If salespeople try that tactic, walk away. (Be particularly wary at timeshare sales meetings.)
  • Keep copies of every document you sign. This will be especially important for contested rental deposits, damaged merchandise, insurance claims, extended warranties, etc.
  • Take along a “wingman” if you’re making an important decision like renting an apartment or buying a car to help ask questions and protect your interests.
  • Be wary of “free trial” offers. Read all terms and conditions and pay particular attention to pre-checked boxes in online offers. Failure to uncheck them may bind you to unwanted terms and conditions.

Bottom line: Contracts protect both parties. Just make sure you fully understand all details before signing on the dotted line.

Follow Jason Alderman on Twitter: http://twitter.com/PracticalMoney

Jason Alderman is Senior Director, Global Financial Education, with Visa, Inc.            

This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Financial Essentials Checklist
for the College-Bound

GailCunninghamBy Gail Cunningham

Many young adults are leaving home for the first time, yet remain ill-prepared to independently manage their personal finances. This is predictable considering that less than one-half of the states mandate a course in personal finance as a requirement for high school graduation.

Further, the 2014 NFCC Financial Literacy Survey revealed that the majority of adults say they learned the most about personal finance from their parents, which is true whether mom and dad possess good or bad financial habits. Proving that parents may not be the best teachers of personal finance, more than four in 10 survey respondents, 41 percent, gave themselves a C, D or F on their grasp of personal finance. Therefore it should be no surprise that many young adults smart enough to get into college remain ignorant of even the most basic financial skills.

Whether it’s off to work or off to college, parents put a lot of time and money into preparing their child to leave home, but often neglect the basic life skills associated with personal finance. With just a few weeks until the young adult children will head out the door, the time is now for a crash course in personal finance.

The NFCC provides the following Personal Finance 101 checklist of basic knowledge everyone living on their own for the first time needs to possess in order to start off on the right financial foot.

  • Start with budgeting - Learned early, the discipline to live within a budget is a skill that will pay benefits for a lifetime. Parents should be transparent with their child about how much money is available for expenses and jointly create a workable monthly budget. Once on their own, students should track their spending to know where their money goes and stay in control of spending. This can be accomplished by tracking on paper, using a budgeting computer program, or a smartphone app. The method isn’t important, but knowing how the money is being spent is.
  • Understand basic banking. Even those who do not write many checks each month need to understand the importance of recording transactions in their check register and promptly balancing the bank statement. Along with checks, ATM withdrawals and debit card purchases should be recorded in the checkbook after each use, with a running balance tallied daily. Attempts to withdraw funds beyond the account balance could result in being declined at the point of sale unless other arrangements such as overdraft protection have been put in place. Since overdraft fees can quickly add up, it is best to keep track of the account balance and not exceed it.
  • Respect credit. Credit matters now and it matters later. Young adults under the age of 21 cannot obtain a credit card unless they can prove ability to pay or have a co-signer. Nonetheless, many will have plastic in their wallets when they leave home. Studies show that a disturbing number of college graduates have both student loan debt and credit card debt which can prevent them from moving forward with their professional lives. However, young adults also have the opportunity to graduate with a positive credit file which could help them buy a car, rent an apartment, obtain insurance, or land the job of their dreams. To have an unblemished credit report and a solid credit score, commit to paying each credit card bill in full and on time each month.
  • Be financially organized – Keep all financial records, bills, and bank statements in one location. A file or accordion folder in a locked file cabinet is ideal. Since spare time may be hard to come by, this system allows quick access to what is needed when it’s needed. Being financially organized ensures that bills are paid on time, late fees are avoided, and the credit report and score are not damaged.
  • Recognize the dangers of Identity theft – Identity theft is common on college campuses. The identity thief may not be a stranger, but someone in the room next door. Computers and phones contain a wealth of personal and financial information, and should be password protected. Social Security numbers are like gold to a criminal, and should be stored in a safe and locked location. Memorize the number and do not carry the card unless it is needed for one-time verification purposes, then promptly store it again. Be cautious when posting information on social media, as sites are frequented by thieves trolling for seemingly innocent postings that can be pieced together to equal enough data to steal a person’s identity.

Everyone makes money mistakes, particularly those who are still learning how to responsibly manage their finances. Knowing that blunders are likely, parents should decide if they’re going to bail their child out or put tough financial love in place. This is a family decision that is best made in advance, not in the midst of the emergency. However, it is critical that parents not allow the child’s financial mistakes to ruin their own personal finances.

The NFCC recommends that parents and their young adult leaving the nest make an appointment with a certified financial counselor at an NFCC member agency location. Hearing financial advice from a professional may have a stronger impact than hearing it from mom and dad. To be automatically connected to the NFCC agency closest to you, dial (800) 388-2227, or go online to www.DebtAdvice.org.

Gail Cunningham manages Media Relations for the National Foundation for Credit Counseling.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

 

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 Look at the Big Picture

MarkFoster_CCOABy Mark Foster

Impulse spending can land us in hot water. Buying a TV or digital camera because it’s on sale and we want it now can create problems for us if we don’t first look to see if we can afford it. Many people do stop and think before making a big purchase. However, many people overlook small purchases like a gourmet coffee because, hey, it’s only five bucks, right?

Ben Franklin said, “Beware of little expenses. A small leak will sink a great ship.” Regular, small purchases can and do add up. The big picture for that $5 coffee or pack or cigarettes each day is around $150 a month or $1825 a year! Think about how some of that money could be better used – to knock out a debt, take a vacation, add to your emergency fund, etc.

Track your spending for one month by writing down your spending on a small notebook or large envelope – whatever’s easy for you. Then add up how much you spent on dining out, entertainment, groceries, etc. Dining out and entertainment are two categories people can easily overspend on. Did you find any overspending? If so, it’s time to make some changes! It doesn’t have to be all or nothing. You don’t have to cut out your coffee completely, but perhaps cut it down to once or twice a week and drink home brewed coffee the rest of the time, for example.

So if you regularly buy some small purchases like gourmet coffee, be sure to ask yourself “What is the big picture on this spending in a year’s time?” If it’s fairly large, you might decide to better use some of that money elsewhere.

Mark Foster is Director of Education with Credit Counseling of Arkansas (CCOA). CCOA is a member of the National Foundation for Credit Counseling. To schedule an appointment with a Certified Consumer Credit Counselor contact CCOA at 800.889.4916, or visit CCOA online at www.CCOAcares.com.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Smart Savings Advice For College Students

Lauralynn-2014By Lauralynn Schueckler

College students have a lot to worry about these days like classes, tests, schedules, roommates, partying, etc. That could be why so many college students put budgeting and financial matters on the “back burner.” The problem is that young people often don’t understand that they are setting themselves up for financial failure when they graduate if they don’t have a budget and a strong financial plan.

Students receive many credit card offers in the mail, and the temptation for what they perceive as “free money” is incredibly high. If you’re not cautious, you could wind up with more debt than just your student loans after you graduate. It is a good idea to open at least one credit card while in college to help build up your credit history and creditworthiness. However, it’s very important to use that credit wisely and pay off the balance in full each month. If you practice good habits with a credit card, you can establish a strong credit history and an excellent credit score further on down the road.

The CARD Act of 2009 prevents students who are under the age of 21 from applying for credit cards without proven income or a co-signer on the account. You could talk to your parents about co-signing on a credit card for you. Just remember that if you miss a payment on that card, then it won’t just be the lender you have to deal with, your parents will not be happy either. This is where creating a budget and laying out your financial future could come in handy. Show your parents that you can be responsible and act like an adult when it comes to your finances. If you create a realistic budget, set some goals, and know that you’ll have enough money each month to pay off the balance; then your parents are probably more inclined to co-sign for you.

As a college student, budgeting is one of the most important skills that you can learn. Practice disciplined money management by creating a budget and sticking to it. Remember, sacrificing now and living within your means will make it easier for you to get out of debt faster once you’ve started on your career path, and hopefully those student loans won’t hang over your head.

You can help to manage your debt by making interest-only payments while you’re still in college. You’ll want to speak to your loan service provider about this. Since the interest will begin to accumulate, making payments while still in school will help you chip away at the debt. Student loans are considered to be smart debt because of the asset that college gives you (a degree). Not only is it a valuable learning experience, but it helps with your employment opportunities as well.

Lauralynn Schueckler is the Online Marketing Specialist at Advantage Credit Counseling Service. She is the author for Advantage CCS’s Blog called Dollars & Sense. Advantage Credit Counseling Service is a member of the National Foundation for Credit Counseling. Contact Advantage Credit Counseling at 866.699.2227, or visit them online at www.advantageccs.org.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Urban Institute Study Raises the Question
Why People are not Reaching Out for Help

GailCunninghamBy Gail Cunningham

The recent study released by the Urban Institute reveals that 35% of Americans have accounts in collections. So what keeps consumers from reaching out for help?

NFCC member agencies assisted more than 1.5 million people last year with their financial concerns, but that is a only a fraction of the 77 million Americans who have debt in collections. It is a shame that so many are struggling financially when help is easily accessible and affordable.

Consumers may be hesitant to reach out for help due to misconceptions about financial counseling. Below are some of the false beliefs that consumers admitted in the 2014 NFCC Financial Literacy Survey:

  • Financial counseling costs too much. The truth is that counseling through an NFCC member agency is either free or low cost. One of the requirements for agency membership in the NFCC is that no service will be denied based on an inability to pay. Cost should never be a barrier to finding the financial help needed.
  • It would be embarrassing to discuss my situation. It is highly likely that the trained and certified financial professional you visit with has encountered a financial problem similar to yours, and is skilled at resolving comparable issues.
  • Financial counseling agencies only offer advice, not real solutions. Although financial education is critical to financial success, when a person has debt beyond what he or she can responsibly manage, NFCC members do offer concrete options, such as a Debt Management Program (DMP). A DMP allows consumers to continue to service their debt, repaying it in full, but often with a more affordable monthly payment, a lower interest rate, and late fees and over-limit fees stopped or lowered.
  • Seeking credit counseling might damage my credit report and score. Credit counseling is not reported to the credit bureau, thus could not have a negative impact on a person’s credit report or score. However, if a person elects to repay their debt through a DMP, the creditor may make a notation on the credit report of participation in the program. Nonetheless, graduates of the DMP often emerge with improved credit scores due to having paid off the debt through consistent monthly payments.
  • Debt settlement or bankruptcy seems like better solutions. Both debt settlement and bankruptcy are serious financial decisions which can negatively impact a person’s credit report and score for years. Before opting for either, a person should first rule out all other alternatives.

There are severe financial consequences resulting from unmanageable debt, realities that should not be ignored.  Consider the following:

  • A blemished pay history reflecting late or missed payments tarnishes a person’s credit report which could result in a lower credit score;
  • A low credit score often equals a higher interest rate when borrowing money, making the cost of credit more expensive, and
  • A negative credit record could diminish access to additional credit needed for emergencies or unplanned expenses.

Further, the stress of unmanageable debt has destroyed marriages, shattered families, and contributed to lost jobs. No one ever scripts financial ruin as a part of their life plan, but when financial distress occurs, it is a very real part of a person’s daily activities, as debt is a burden people carry with them 24 hours per day.

The NFCC, the nation’s largest and longest serving network of nonprofit financial counseling agencies, stands ready to help all American families who are struggling with financial issues, whether they be around debt, housing, foreclosure prevention, or simply creating a workable monthly budget.

Don’t delay seeking help. Finding answers and solutions to your financial concerns starts by reaching out to an NFCC member agency. To be automatically connected to the agency closest to you, dial (800) 388-2227, or find an agency online at www.NFCC.org.

Gail Cunningham manages Media Relations for the National Foundation for Credit Counseling.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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 Popular Money Advice You Shouldn’t Take

MaryHuntHeadshot-New as of 2-5-13By Mary Hunt

Money advice—it’s available everywhere. But that doesn’t mean you should take it. The wise person knows how to separate the good from the bad. Here are a few timely examples:

Bad advice: Do not save money for yourself until you have paid off your credit cards. Direct every cent you can scrape together to pay down your credit card debt as quickly as possible. It’s not smart to earn 1/2 percent interest on money you save while you are paying 20 percent or more on your credit card debt.

Good advice: That bad advice sounds great, but let’s get real. If you do not have an emergency fund, what will you do next month when your car breaks down or next summer when you lose your job? You will run back to your credit cards for a bailout. Unless you are aggressively building an emergency fund, you never will get out of debt because unexpected expenses always come up. Instead, you should pull back to making only minimum payments so you can start saving money now. You need to stash all the cash you can, to be used only in a dire emergency. Once you have that fund in place, you will be ready to tackle your credit card debt with a vengeance!

Bad advice: Purchase whole life insurance for children. The cash value will pay for college. It guarantees insurability should that child develop a health issue later that would make him or her uninsurable, and it will pay for the child’s funeral if that becomes necessary.

Good advice: The only purpose for life insurance is to replace income for dependents who would become financially destitute if the breadwinner were to die. If you want to save for college, life insurance is not the way to do that. Instead, set up a 529 savings plan or another type of savings or investment vehicle. If you are concerned about a funeral (statistically, the chances of a child’s dying are very small), create a funeral account. As for the insurability issue, chances that your child will become uninsurable for health issues are very slim. Unless you have money to burn, buying life insurance on non-wage-earning individuals who have no dependents is a terrible waste of money.

Bad advice: Do not pay off your mortgage, because you would lose a valuable tax deduction. Mortgage interest on your principal residence is a deductible expense on your federal tax return. Even if you can pay off your mortgage, don’t do it. If you don’t have a mortgage, get one so you can claim this tax advantage.

Good advice: Deductibility is not a wonderful thing. It’s a “consolation prize” to ease the pain of having to pay interest. If you pay $12,000 a year in mortgage interest and you are in the 22 percent tax bracket, you get to deduct $12,000 from your gross reportable income. That means a tax savings of $2,640 ($12,000 x 22 percent equals $2,640). You pay $12,000 to get back $2,640. Does that sound great to you? If so, I’ll give you a better offer. Send me $12,000, and I’ll double it and give you back $5,280. Deal?

Mary Hunt is the founder of DebtProofLiving.com and author of 23 books, including her latest, “The Smart Woman’s Guide to Planning or Retirement.”

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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