NFCC Challenges Americans to Declare
Financial Independence This Fourth of July

GailCunninghamBy Gail Cunningham 

Each summer Americans take pride in celebrating the Fourth of July, the day that commemorates the 1776 adoption of the Declaration Independence proclaiming the country’s freedom from what is now known as the United Kingdom. This July 4, 2014 the NFCC challenges Americans to declare their own personal financial independence by making a commitment to become free from the bondage of debt.

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. Aside from the personal problems associated with debt, consider the following financial reasons to take action and begin to resolve your debt issue now:

  • 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;
  • A tarnished credit record could diminish access to additional credit needed for emergencies or unplanned expenses;
  • With an unrealistic amount of money earmarked for debt repayment, saving investing is often neglected, and
  • Planning for future needs such as college or retirement is often delayed due to a lack of money.

People may mistakenly think they are responsibly managing debt by making the minimum payments due on time every month. They don’t bother to calculate how long it will take them to become debt free, or how much they will have paid in interest. Consider the following example:

With a $10,000 credit card debt at 18 percent interest, even if a person never adds any purchases or fees to the account, and makes a monthly on-time payment of two percent of the balance, it will take them 48 years to become debt free.  Further, that original debt of $10,000 will cost them $36,825, with $26,825 going toward interest.

There is a way out from under the oppressive weight of debt. NFCC Certified Consumer Credit Counselors help millions of people each year overcome financial challenges and find the financial stability they seek. To be automatically connected to the NFCC member agency closest to you, dial (800) 388-2227, or find an agency online by visiting www.NFCC.org.  Ask about the Sharpen Your Financial Focus™ program which includes financial diagnostic tools, workshops, and one-on-one sessions with financial professionals, putting you on the path toward a debt-free lifestyle.

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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 Plan for Flat 10 Years
Just in Case

20051110PX Gary Silverman (4)By Gary Silverman

Today’s discussion could save you a lot of heartache when it comes to your retirement nest egg. That is…if you are not at or near retirement. If that’s you, I’m too late. If you are the type of person I can help the most, in your 20s or 30s, you are least likely to read or follow my recommendations. But I must try, and try I shall. So here’s the advice:

Assume that the 10 years just prior to your retiring your investments will average a total of zero percent return. That’s right, zero, nada, 0, nothing.

If I have a 56-year-old in my office who is planning on retiring at age 66 and wants to know what they should expect out of their investments for the next 10 years, I tell them zero (this works in both dollar and percentage terms). The reason is in history. The stock markets have had periods where, not only is there no growth across 10 years, but you might end up with a little less than you started.

This is a problem even for those who have more time to plan. If you were counting on a particular rate of return from your portfolio over a 40-year period, you’ll be in trouble if the last 10 years gives you nothing. For example, let’s assume you are 26-years-old and want to retire at 66 with a nest egg of $3 million. Assuming an 8% rate of return, you determine you must put in $860 per month starting today. So far, so good.

But what happens, when at 30 years in, we begin a decade with zero returns? You would have less than $1.3 million in your investing account—that’s less than half of what you wanted by age 66. That’s right—the very decade that you need to more than double your money in you might end up getting diddly-squat instead.

The easiest way (at least on paper) to protect against this is to back up your goal by 10 years. While this might make you immune to a flat decade, there’s a little reality check that goes with it. Since in our example you only have 30 years to save, your per-month savings rises to over $2000 per month—more than double what you needed to save under the 40-year plan.

Mathematically, it makes sense…you’re guarding against a situation where you’ll have less than half saved, so the answer is to more than double your savings. But just because it makes sense doesn’t make it palatable or possible for most savers.

To be clear, if you hit a flat decade just before retirement all is not lost. You’ve either got time for the markets to get going again or you really don’t need that much money. But we’re human, and markets like this create some uncertainty which can lead to worry, and then panic. Panic makes people do stupid things.

So fear not. Instead know that this is a possibility, and then know what you are going to do to mitigate the problem. Are you going to save more each month, be prepared to delay retirement, or work out a smaller budget? By planning for all or many of these scenarios, you reduce your chance of waking up to a not-so-fun surprise when it’s time to retire.

Gary Silverman holds the Certified Financial Planner (CFP®) license, and is a member of the Financial Planning Association (FPA®). Gary is the founder of Personal Money Planning, a retirement planning and investment advisory firm. Find out more about Personal Money Planning at the company website or follow on Facebook.

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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 Couple Celebrates Five Years
of Remaining Debt Free

GailCunninghamBy Gail Cunningham 

Paying off close to $123,000 of debt in less than five years is a great accomplishment. Remaining debt free for five more years is arguably even more amazing, but that’s exactly what Kandy and Russ Hildebrandt have done.

As the NFCC Clients of the Year from 2009, the Hildebrandts are now celebrating their five-year anniversary of being debt free. They are proof that overwhelming debt does not have to control a person’s life, and that unhealthy financial habits can be successfully overcome and replaced with skills that lead to a lifetime of financial stability. Kandy now echoes even more strongly what she said back in 2009 after becoming debt free: “When they tell you it can’t be done, don’t believe them.”

Reflecting on their journey, Kandy commented, “We can thankfully say that we learned our lesson well. Today we have our mortgage and one major credit card – which we use judiciously – and pay the balance in full each month. We have not paid a penny of interest for unsecured debt since completing the Debt Management Program through Family Means Consumer Credit Counseling Service, an NFCC member agency based in Stillwater, MN.  That’s not to say that we haven’t been tempted, but when we think of where we once were financially and how hard we worked as a family to dig out, there is no going back to the bondage of debt again.”

In the years since becoming debt free, the Hildebrandts have faced the same economic challenges many other Americans have experienced. For example, even though the cost-of-living has continued to increase annually, they have not had a pay raise during the past five years. This required the Hildebrandts to prolong the cost-saving mentality that served them so well while paying off their debts.

The following are examples of cost-cutting measures the Hildebrandt family has continued to make use of during lean economic times:

  • Relying on window air conditioners for three years after the central air-conditioner could no longer be repaired;
  • Going without a second vehicle until the funds were available to buy another one with cash;
  • Utilizing thrift stores, garage sales, and online auctions have allowed them to buy used versus new and provide significant savings along with the satisfaction of finding a great deal;
  • Installing rain barrels to save on water bills during the summer months and using the water on the vegetable garden they planted, and
  • Periodically working double shifts in order to save on commuting expenses.

“Giving faithfully to our local church, living within our means, cutting back when we need to, providing first for the necessities, and accommodating our desires within a framework of delayed gratification are all things that still encompass our life after debt,” continued Kandy. “While we may not be living the high life, we have all our needs (and even some wants) met, and more importantly, we possess the peace and joy that comes from living a well-ordered financial life.”

The Hildebrandts insist that there’s nothing special about them. Kandy’s advice to those facing seemingly insurmountable debt: “Anyone can do what we did if they embrace the help that is available through an NFCC member agency, and are willing to change their financial habits and maintain a “whatever it takes” mentality.”

In a few short years, you could be celebrating like the Hildebrandts are today, but you need to take the first step. To find a solution to your financial concerns, reach out to an NFCC member agency. To be automatically connected to the agency closest to you, dial (800) 388-2227, or to find an agency online, visit 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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 Leave Your Children More Than Money

NealeGodfreyBy Neale Godfrey

Parents and grandparents work, plan, and hope that they will be able to leave a financial legacy to their kids and grandkids.  In a HuffPost Blog I asked: Parents: Are You Prepared? It was a discussion centered around getting your financial house in order: wills, life insurance, guardians for your children, and final wishes – to provide for the well-being of your children in the event of an unexpected loss of one or both parents.

In addition to the financial, there is another component to your children’s legacy that you should consider – the softer side. This is the very essence of your family that you want to pass on to the next generation. Most likely, information, mementos, photographs, genealogy, and even recipes that you probably wish had been handed down to you in a concise and organized way.  This is an expanded version of a time capsule which I call The Vault.

Many of us have fading photographs of past generations of relatives whose names and relationship are forgotten. We hold onto them because they belonged to our parents, and maybe even their parents, but they hold little emotional connection to us. Who hasn’t sat at a Thanksgiving table  reminiscing about a great aunt’s special stuffing – wishing some family member had thought to write down the recipe? What is the story behind your child’s tiny cowboy boots that you have kept tucked away in a drawer for twenty years? Where did they come from? Who gave them to your child, and what did you think when you first saw them?

There is even a current TV show, My Grandmother’s Ravioli, based on the premise that host Mo Rocca regrets that he never learned to cook from his grandmother, so he travels around the country learning other family’s cooking traditions from other grandmothers and grandfathers. This is the perfect encouragement to not let this happen to you.

The Past

  • Assemble a family tree. This doesn’t have to be cumbersome and extensive, just work with the names and dates that you can easily gather. If you want to get more complicated, you can use computer software or a website dedicated to genealogy.
  • Go through those old photographs and select ones that are important to you, being sure to note the names of those pictured, when, where, and occasion. I suggest you have professional copies made that will stand up to the passage of time. If you scan and save images, the technology to view them later may no longer be available.
  • Heirloom jewelry or objects should have their history attached to them.
  • Put together a family recipe booklet. Gather favorite recipes from family members, and include photos that coordinate. You can also make a list of your kids’ favorite foods over the years. It will be fun to look back at their evolving tastes.
  • Gather ephemera  such as yearbooks, wedding invitation, birth announcements, refrigerator art, and newspaper clippings, and preserve them in acid-free paper.

The Present

  • Have your kids help you organize family photos, talk to them about the relatives and friends in the photos as you write the information down.
  • Arrange for your kids to interview extended family members and make an informal dossier for each interview.
  • Throw inter-generational cooking parties so you and your kids can learn from older family members.
  • Go over the items from the past with your kids. Begin a dialogue about your family history, customs, traditions, and beliefs.
  • Take notes at gatherings and holidays. Capture the special moments and record your thoughts.

The Future

  • Put aside special gifts for the future. Set aside Grandfather’s gold pen, along with a letter, to be opened at a Bar Mitzvah or a strand of pearls for your granddaughter to wear on her wedding day. These will be loved if you are there to present them in person, and will take on special importance if you are not.
  • Write letters to the future. How about a note about how you feel when your kid goes off to the prom, that you can present at their wedding? Don’t forget to include notes to future generations.

Charity

Talk to your kids and grandkids about your favorite charity. Explain why the cause is dear to you and why you have a special relationship with that charity. Leave an endowment, in your family name, to the organization and suggest your heirs follow in your tradition of giving.

Gather your treasure trove of family lore and traditions and store them in well-marked, fire-safe strong boxes – The Vault. Periodically update information as your family changes. Your important financial documents: wills, deeds, insurance policies and valuables, should be kept in a safe deposit box at your bank branch. Along with the financial papers, put notes, instructions and the keys or combinations to the family memory cache.

The Vault offers a tangible way for generations of your family to have a continuing connection – an annuity for the soul.

Neale Godfrey is the New York Times #1 Best Selling author of 27 books, and financial literacy curricula for kids and parents. She created the topic of “kids and money” while President of The First Women’s Bank when she opened up The First Children’s Bank, and an Institute for Youth Entrepreneurship in Harlem in 1988.

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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 Single Mom Overcomes Obstacles
to Provide Home for Son with Down Syndrome

GailCunninghamBy Gail Cunningham

National Homeownership Month is the ideal time to remind Americans that owning a home represents much more than a mortgage. Tia Early, the NFCC Professional Achievement and Counseling Excellence (PACE) Housing Client of the Year, is the picture of what a mother will do to provide a home for her son, redefining perseverance along the way.

Tia Early is no stranger to tackling tough situations and making the best of them. In 1999, when she was 8 months pregnant with her son, Hurricane Floyd came to Florida. She packed her car with her critical belongings, loaded up the dogs, and went to a friend’s house in Georgia. Coming home a week later, she was grateful that her rental home did not sustain any damage.

She was also grateful that she returned home when she did, as her son, Nicholas, decided to arrive a month early. As a single mom, she was ready for the challenge of motherhood. However, that challenge took on a new meaning when she was told that her baby boy had Down Syndrome. Not missing a beat, Tia took the news in stride and vowed at that moment that Nicholas would always have the best opportunities she could provide. Those opportunities included a home of their own.

By 2002, Tia was working as a computer programmer and making a salary of $65,000 per year. Keeping her eye on the prize of homeownership, she saved for her down-payment, set money aside for emergencies, and established a solid budget for her house payment and maintenance. She was proud when she and Nicholas moved into a home they loved and could afford.

But her company decided to downsize and outsourced all the programming functions. Tia immediately slashed her budget to the bare minimum and started looking for work. Determined not to use her severance, she found a new job within a month. Although the new job paid substantially less, $40,000, Tia persevered taking on additional assignments and tasks at work. Her employer quickly realized her value and she received regular salary increases and bonuses. She monitored her budget closely and continued to maintain her emergency savings account.

Then the economy dealt Tia an unwelcome blow. In 2008, as the economic crisis loomed, Tia was laid off again. Familiar with the drill, she immediately slashed her budget and started looking for work. This time, however, the best salary she could command was $30,000 annually.

Although many people would have considered giving up, these setbacks made Tia even more determined. By now, she and Nicholas had survived a lot, so it was no time to quit. She had done all she could on her own, but she was four months behind on her mortgage and knew she needed professional help finding a solution. That’s when she turned to NFCC member agency, Family Foundations, in Jacksonville, FL.

“I had to have a home. I have a special needs child so I can’t just live at a homeless shelter,” said Tia. “Rent was just as much as a house payment, so I didn’t know how I was going to make it. That’s when I went to Family Foundations.” Tia worked closely with John Doyle, her Housing Counselor, to obtain a mortgage modification. Despite being turned down multiple times over an 18-month period, Tia and John kept persevering until they finally achieved a modification that was affordable and sustainable with her new salary.

Tia and John did not limit their action plan to simply looking for foreclosure prevention relief. They took a holistic approach to her situation and jointly developed a comprehensive plan for her to not only achieve financial stability now, but to reach her long-term goals. Together, they determined that the computer programming field might not offer the job stability she so greatly needed, thus an alternate career path was in order.

Having her mortgage modified to a manageable level gave Tia the freedom to pursue a new career. She decided that she wanted to work in a field where she could directly help those in need, and because of her experience with her son, she had first-hand knowledge of the impact she could make on the lives of those who are not able to fully take care of themselves. Having determined that nursing was the right career path, she began classes and obtained work as a Certified Nursing Assistant in a nursing care facility close to her home, and is now attending college to become a Registered Nurse, working full time and taking care of her son.

Tia is thankful that her counselor at Family Foundations provided her with more than a short-term plan to relieve her immediate crisis, but also helped her construct life goals. She is confident that her new career will provide her with the long-term stability she has so desperately sought all these years, a stability that will allow her to raise her son to make the most of his life.

Tia has advice for others who may find themselves struggling to make their house payment. “Take the step to seek help. You will be in control of your finances instead of your finances controlling of you. It is not taboo to get help. You have to put pride aside and just do it.”

“Tia is a wonderful example of perseverance through difficult times,” said Dawn Lockhart, president of Family Foundations. “What impresses me most is how she followed every detail of her Personal Action Plan in order to build a long-term solution for her future and for her son’s future. Her new career as a Registered Nurse means she will have stable income and she now knows how to manage every aspect of her expenses.”

NFCC member agency professionals are experts at helping people get into the house of their dreams and stay there. A house is usually a person’s largest investment. It’s also where memories are made. To ensure that you make a smart buying decision, or for foreclosure prevention solutions, take Tia Early’s advice and reach out for help to an NFCC member agency. To be automatically connected to the agency closest to you, dial (800) 388-2227, or to find an agency online, visit 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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 A New Breed of Prepaid Cards

alderman_color_1By Jason Alderman

Anyone who’s ever lacked access to traditional checking, savings, and credit card accounts knows how difficult it can be to manage personal finances. Everyday tasks like cashing payroll checks, paying bills, shopping online, and renting a car can be much more difficult and expensive – not to mention dangerous, if you’re forced to carry large amounts of cash to pay your bills.

That’s why many people use prepaid cards. Prepaid cards look and work much like regular debit cards except that instead of being funded through your checking account, you load money onto the cards by cash, check, funds transfer or direct deposit by an employer or government entity.

“More Americans are turning to prepaid cards as a way to manage money, but our research shows that these cards should be made more consumer friendly,” said Susan Weinstock, who directs consumer banking research at The Pew Charitable Trusts, a nonprofit organization that provides nonpartisan reporting and research on a broad range of social and economic issues.

Prepaid cards often come with a host of fees, rules and restrictions that can be difficult to decipher and compare. As Visa Inc. President Ryan McInerney noted, “Consumers have been confused by an often complex prepaid landscape, where not all cards are created equally.”

But that’s about to change.

Visa, my employer, recently announced a new designation for consumer reloadable prepaid products designed to simplify fees, improve consumer protections and create opportunities for cardholders to improve their financial health. The new classification was developed in conjunction the Center for Financial Services Innovation (CFSI) and The Pew Charitable Trusts, both major industry thought-leaders.

To qualify for the new Visa prepaid designation, prepaid programs must meet a rigorous set of standards. “We felt it was important to go beyond current marketplace regulatory requirements and bring transparency to this growing product area so that consumers better understand the fees, protections and benefits associated with cards,” said McInerey.

Prepaid cards that meet these requirements will receive a seal – think Underwriters Laboratory or Good Housekeeping – that will be visible on card packaging and materials. Key features include:

Simplified fee structure and disclosures – a flat monthly fee that includes all basic day-to-day activities. Consumers will not be charged:

  • Fees for transactions being declined.
  • Customer service fees.
  • Fees for in-network ATM withdrawals or balance inquiries.
  • PIN or signature transaction fees.
  • Fees for cash back at point of sale.

Prepaid cards with the new designation will not include overdraft coverage, which means you can’t accidentally spend more than the card’s balance and thereby incur an overdraft fee. In addition, they will come with consumer-friendly communication of fees (e.g., prominent mention of fees and other disclosures), and a quick-use guide for finding the best ways to use the product at the lowest cost.

Greater level of consumer protections  

  • Funds linked to the card must be insured by the Federal Deposit Insurance Corporation or the National Credit Union Association.
  • Dispute resolution rights as outlined in the Federal Reserve Board’s Regulation E.
  • All cards are covered under Visa’s Zero Liability policy.
  • Access to Visa’s Prepaid Clearinghouse Service, which offers enhanced fraud protection.

According to Cecilia Frew, Visa’s head of U.S. prepaid products, CFSI was instrumental in helping to shape the new prepaid card designation. “We drew on CFSI’s Compass Principles, a set of aspirational guidelines they developed with key financial industry participants, that define how providers can work toward a vision for the future in which financial services are safe and actively contribute to improving people’s lives,” said Frew.

To learn more about how prepaid cards work, visit this Consumer Financial Protection Bureau website, or my read previous blog, The 411 on Prepaid Cards.

To Follow Jason Alderman on Twitter: www.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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 Father’s Day Advice from Financial Experts

GailCunninghamBy Gail Cunningham

Advice is only as good as its source, and in this case the advice comes from those who have decades of experience providing financial guidance: executives of NFCC member agencies.

When asked to complete the sentence “If I knew then what I know now” with what they’d have done different financially, those who offer financial advice and solutions to consumers each day provided the following fatherly advice – from the head and the heart – for people beginning their financial journey:

  • Require myself to wait at least 24 hours before making any major purchase; and I’m not sure 48 hours wouldn’t be a better suggestion. I still regret the emotional and impulsive decision that I made when I saw that old “Smokey and the Bandit” Trans-Am parked on the car lot many years ago. Despite the puddle of fluids accumulated on the passenger side floor-board, this was my dream car and I went in and signed paperwork without even taking it for a test drive. Worst financial decision ever!Although numerous hikes from a car broken down on the side of the road did provide a lot of exercise, I let my “wants” override my “needs” and paid for it over many years. Now, I find that if I just sleep on it for a day or two and give my mind a chance to consider all of the consequences and possibilities, I make a much more financially responsible decision.
  • I have three wonderful sons. They are all big strapping men who are kind, gentle, and intelligent. When they were growing up I, like many of my generation, spoiled them. I didn’t require them to mow the yard or do any of the chores that my father put me through. (He was a former tech sergeant during WWII.) When I became a dad I vowed that I would not make my sons do the required labor that my father imposed on me. What I should have done was seek a happy medium. Earning money and understanding the relationship between working hard and financial reward is so important. There’s a hunger that comes with wanting something so bad you will work tirelessly to earn the income to achieve it.
  •  My agency continues to see clients with overwhelming student loan obligations, and this year we’re seeing graduates with more debt than any other class before them. Therefore, I would stress the importance of saving for college. This is something I’m working on with my own kids and something I hope they pass along to theirs. A person can start by setting up a 529 plan or even just creating separate savings accounts for each child at an early age. Also, consider having them contribute to it so they are a part of the process. It might even make them study harder.
  • Seek professional management of your retirement savings early in your career. I saved a lot relative to my earnings and have been relatively conservative in my spending habits, but I have seen the real benefit of having someone follow my investments and pick the best managers for my retirement savings. It has really made a difference.
  • I would have lobbied earlier and harder to have financial education included as part of my school district’s curriculum.
  • Know that there are two ways of getting everything you want in life: 1) work harder and accumulate more, or 2) desire less. When I accepted number 2, life was much more enjoyable.

NFCC member agency professionals not only know how to find solutions to people’s financial problems, but they genuinely care about those in financial distress.  Many have spent their entire professional lives in the financial counseling sector helping others achieve long-term financial stability.

Money problems can impact people of any age, race, or income level. NFCC member agencies help millions of people each year to find a way out of their financial dilemmas. Don’t wait to reach out for help, as that will likely only make the situation worse.  The NFCC’s Sharpen Your Financial Focus™ program may be the answer you’re seeking. To learn more about the program, dial 855-374-2773, or go online to www.SharpenToday.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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 5 $mart $pending Tips

MarkFoster_CCOABy Mark Foster

Every day we’re faced with hundreds of choices. Here are five smart spending tips to help make good financial decisions:

1) Buy used whenever feasible. Good quality used furniture, for example, can save you a bundle versus buying it brand new. Buying a used car can save you a ton of cash by letting someone else take the hit on the new car depreciation.

2) Wear something out before replacing it. Just because you can afford to go buy a new refrigerator, washing machine or car doesn’t necessarily mean that you should. The longer you can keep using a machine that’s working fine, the longer you’ll keep that money in your pocket.

3) Avoid instant gratification. Stop and think before buying. Spending impulsively or emotionally can wreck our finances. Always ask yourself if you need it and can you afford it.

4) Avoid falling into the monthly payment trap. It’s easy to rationalize expensive purchases by saying it’s a small monthly amount, but too many payments can financially drown you.

5) Be slow to buy new technology. Gizmos and gadgets drop in price after being out for awhile. Unless you need it for work or school, let the price drop some first.

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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 Explore Medicare Before You Turn 65

alderman_color_1By Jason Alderman

Each day, approximately 10,000 Baby Boomers turn 65 – and thereby become eligible for Medicare. Many would argue that unlike most signs of getting older, that’s a good thing, considering how expensive individual health insurance has become.

But becoming eligible for and actually enrolling in Medicare are two very different things. In fact, if you miss the initial window to sign up for certain parts of Medicare and later decide to enroll, you could wind up paying significantly higher premiums for the rest of your life.

If you’re approaching 65, you might want to become familiar with these Medicare basics now, rather than waiting until you need to make last-minute decisions:

Medicare provides benefits to people age 65 and older (and those under 65 with certain disabilities or end-stage renal disease). For most people, the initial enrollment period is the seven-month period that begins three months before the month in which they turn 65. If you miss that window, you may enroll between January 1 and March 31 each year, although your coverage won’t begin until July 1.

Medicare offers several plans and coverage options, including: 

Medicare Part A helps cover inpatient hospital, skilled nursing facility and hospice services, as well as home health care. Most people pay no monthly premium for Part A, provided they or their spouse have paid FICA taxes for at least 40 calendar quarters. However, deductibles, copayments and coinsurance may apply, depending on the service provided.

Medicare Part B helps cover medically necessary doctor’s services, outpatient care, durable medical equipment, and many preventive services. It’s optional and has a monthly premium – $104.90 for most people, although higher-income people pay more. For most people there’s a $147 yearly deductible; after that’s met, you’ll be responsible for 20 percent of the Medicare-approved amount of the service, provided the doctor or other provider accepts Medicare. Note: There’s no annual limit for out-of-pocket expenses.

Medicare Part C (a.k.a. Medicare Advantage) plans are offered by Medicare-approved private insurers as alternatives to Original Medicare Parts A and B. They’re usually structured like typical HMO or PPO plans. Most cover prescription drugs and some include additional benefits such as dental and vision coverage for an extra cost. You’re usually required to use the plan’s doctor, hospital, and pharmacy provider network which may be more restrictive than providers you can access through Parts A and B.

Medicare Part D helps cover the cost of prescription drugs. It’s optional and carries a monthly premium. These privately run plans vary widely in terms of cost, copayments and deductibles, and medications covered. If you’re enrolled in a Part C plan that includes drug coverage, you don’t need Part D.

Medigap Insurance. Many people opt to purchase additional Medigap (or Medicare Supplemental) insurance, which is offered by private insurers and helps pay for many items not covered by Medicare, including deductibles, copayments, coinsurance and sometimes, coverage when traveling abroad. Some employers and unions offer Medigap coverage to their retirees.

Medigap plans can vary widely in terms of cost, covered benefits, and states participating so compare your options carefully. Note that Medigap policies don’t pay for Medicare Advantage plan deductibles and copayments, so if you want to join an Advantage plan, you may want to cancel your Medigap coverage. Also, if you already have an Advantage plan, it’s illegal for anyone to sell you Medigap insurance unless you are switching back to original Medicare Part A and B coverage.

Keep in mind:

  • People who aren’t eligible for free Medicare Part A (usually because they didn’t pay sufficient FICA during their working years) may be eligible to purchase it provided they also buy Part B. (Monthly premiums cost up to $426.) However, if they don’t sign up when first eligible, they may have to pay a late enrollment penalty.
  • With Parts B and D, you’ll often face sizeable penalties if you don’t enroll when first becoming eligible – Part B premiums could increase 10 percent for each 12-month period you were eligible, but didn’t sign up (the Part D late enrollment penalty is somewhat more complicated to calculate); however, if you’re currently covered by an employer’s plan you can enroll later without penalty.
  • Terms of Medicare Advantage and Part D plans such as premiums, copayments and covered medications can change from year to year, so carefully review enrollment materials from your current plans to make sure they still match your needs.

Understanding and choosing the right Medicare options for your individual situation can be a complicated and time-consuming process. For assistance, call 1-800-633-4227 or visit Medicare.gov, where you’ll find:

  • Helpful publications, including Medicare & You 2014, a detailed guide that explains Medicare in easy-to-understand language.
  • Tools to compare prescription drug plans, hospitals, nursing homes, home health agencies and Medigap plans in your area.
  • A resource to find local doctors and other health practitioners who participate in Medicare.
  • Services covered by various Medicare plans.
  • Enrollment instructions.

AARP also provides a great Medicare Starter Kit that answers many common questions.

Bottom line: Choosing the right Medicare coverage is not as easy as shopping for a new pair of pants, so be sure to allow plenty of time to explore how the program works.

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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 NFCC Poll Reveals Many Reluctant
to Assume Risk of a Mortgage

GailCunninghamBy Gail Cunningham

In recognition of June as Homeownership Month, the NFCC today released the results of a recent poll revealing that close to one in five respondents do not believe that taking on a mortgage is worth the risk. This attitude is consistent with the U.S. Census Bureau’s current report highlighting the declining rate of homeownership. The present rate of 64.8 percent representing the first quarter 2014 is the lowest homeownership rate in almost 19 years.

The housing crisis, recession, and continued economic instability appear to have shaken the confidence of many Americans, particularly when it comes to big-ticket items such as a house. However, the unwillingness to take on a mortgage loan may be a smart decision for some, as many borrowers have learned the hard way that homeownership does not come with a guarantee of continually increasing equity.

Although the benefits of owning a home are many, until a person is fully prepared to assume responsibilities such as a mortgage payment, home and lawn maintenance, improvements, and taxes and insurance, renting may be right for them. Homeownership is about much more than buying a home. Renting until they are in a position to buy can help a person avoid a costly mistake, including the negative ramifications of foreclosure.

Consider some of the benefits that renting provides:

  • Allows time to prepare for homeownership which can pay off. Saving money for a downpayment can decrease the amount of monthly mortgage payments, and building a stellar credit report and score can result in a lower interest rate on the loan.
  • Mobility.  A 12-month lease is a fraction of time compared to a 30-year mortgage. If it becomes necessary to move for any reason, a renter is not shackled to their home until they sell it.
  • Less money required up front.  Security deposits are much less than broker’s fees and closing costs.
  • Avoids costly purchases such as appliances, some of which are often included with the rental.
  • Renters insurance is less expensive than homeowners insurance.
  • Money is not tied up in the home, making it more readily available for emergencies or other needs and opportunities.
  • Luxuries that may not be affordable independently such as a swimming pool, tennis courts, gym and party room are extras often available through apartment complexes.
  • Avoids costly maintenance and repairs.  Upkeep of a home takes both time and money, whereas expenses associated with repairs are typically included in the cost of the rent.
  • No Homeowners Association fees.  Maintenance of the grounds and common areas is usually included as part of the rent.
  • Utility bills are sometimes included in the rental payment, making budgeting much easier

It is critical to remember that buying a home represents a large financial obligation extending over a long period of time and is usually a person’s largest investment. Consumers should consider homeownership only after careful deliberation and when the timing is right for their unique situation.

If buying a home is the ultimate goal, take advantage of an NFCC member agency homebuyer workshop. To find out more information, or to have personalized answers to your homebuying questions, reach out to an NFCC certified housing professional by calling (800) 388-2227. To find an agency online go to www.NFCC.org.

The NFCC poll question and answers are below:

Which of the following best represents your attitude toward owning a home?

  1. Owning a home remains a critical part of wealth building = 82%
  2. A mortgage is a risk I’m not willing to assume – 18%

Note: The NFCC’s May Financial Literacy Opinion Index was conducted via the homepage of the NFCC website from May 1–31, 2014, and was answered by 829 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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