Inbudget Credit and Finance Advice Control your debt and credit through proper budgeting

It’s holiday food-drive season, and requirements this year are growing.  Records show people are generous in most areas, but the food banks are seeing a drop.   Let your conscience and ability  guide your giving.

Posted under Credit Repair

The DOW is down at 8,000 level from its peak at 14,000 level.  The daily ups and downs are so extreme that the index can move over 100 points in just a few minutes. This can make any investor — new or experienced — nervous and doubtful.

Should I get out of the stock market?
Should I get back in?, or
Should I invest in something else entirely?

Recently, a reader asked “I would just like to know if right now is a good time to buy long term investments because the market is low right now?” Well, here’s an excellent article on  pitfalls that you must watch out for when investing in mutual funds.

My answer is very simple, anytime is the right time to invest if you have the right long-term investment strategy in place.    I don’t believe in finding the hottest investment and plow my money into it.  Sure you could win big, but you could also win big by gambling or playing lottery too — but you know their returns on investment (or lack thereof).

What’s the investment strategy that makes anytime the right time to invest?

1. The traditional “Diversification”

The decision between picking a handful of the “best” investments and diversification is a personal one.  For me, I believe in the latter.  I am more comfortable with a diversified investment portfolio than having a handful of potential winners.  By having a diversified portfolio with low asset correlation, the chances are different asset classes will rise and fall in value at different rate.  This basically lowers the risk of your overall portfolio and smooth out the performance level.

2. Regular Contribution

Second is to invest regularly into the investment portfolio.  This is easily accomplished with 401k contributions, or you can set up an automatic investment plan for your other accounts.  Similar to dollar cost averaging, regular contribution allows you to buy more shares when the prices are high and less when the prices are low.

For example, let’s assume Joe buy 0 of VFINX per month:

Date
Price
Shares

January
7.02
0.7873

February
2.89
0.8137

March
1.75
0.8214

April
7.67
0.7833

May
9.31
0.7733

June
7.83
0.8487

July
6.85
0.8558

August
8.54
0.8436

September
7.37
0.9314

October
.34
1.1193

November
.70
1.2392

The key thing to notice here: Joe is buying more as the price goes down, and less as the price goes up.

3. Redistribution

As I mentioned earlier, the pieces within the investment portfolio tend to grow at different rates.  This gives you another opportunity to buy low and sell high my rebalancing your portfolio.  Specifically, once your asset allocation becomes drastically different from your original allocation, you could rebalance your portfolio.

In the example above, you are cashing out of bonds and other non-equity investments to buy more equity — i.e., large-cap, small-cap, and international.

This is easily accomplished with 401k, but a little trickier in other types of accounts.

I know that this lazy and steady approach to investing is not for everyone, but give it a try.  You may find that it works better than you think.

Here are a few more articles from other bloggers:

Invest As Much As You Can Now, So You Will Have Options Later at Cash Money Life
How to Profit from a Stock Market Crash at The Dough Roller
An Expert Weighs In: Is Now The Time To Buy? at All Financial Matters
10 Signs Of A Stock Market Bottom at The Digerati Life

Posted under Credit Repair

There was a bout when lenders didn’t requirement to slogging with you if you couldn’t pay. Now they appetite to escape foreclosure, lawsuits or repossession almost as lots as you do.

Posted under Credit Repair

But weighing the options is the culminating way to meet your state requirements beyond potentially wrecking your finances. Poring bygone insurance alternatives is nobody’s notion of a fun spell.

Posted under Credit Repair

Struggling to make your payments?  Is it the luck of the draw of who is getting paid next? Be honest with yourself and your spouse.  Promise each other that you will remain calm and rational then sit down and list EVERY bill that is owed, note the status and the amount past due.  1.  2.  Remember that committing to making changes in your spending habits is a great step toward improving your financial health and finding relief from the debt.  Budgeting, spending control, and not procrastinating are all ingredients to the success you deserve.  Start today. Companies lose millions of dollars a year to bad debt write offs.  If they have any business sense, they will do whatever it takes to help you settle the balances.4.  Depending on your circumstances, each type of program can provide a level of relief in dealing with the debt.  Debt repayment programs are professionals in negotiation, often reaching an agreement with your creditors regarding the amount you owe, interest, and repayment terms.  These programs have the potential of reducing your debt at a greater rate than other counseling programs, but you must weigh the damaging effects that it will have on your credit.  I advise that you make every effort to manage your debt and repayment on your own.  There are many resources available to educate yourself on the best ways to tackle the concerns.  There is nothing wrong with seeking help when you need it.  I would rather see the money spent on fees be applied toward your debt. Finding yourself in a situation when your payments exceed your income can be both frightening and frustrating.  It is important to know the differences between these programs and the long term impact that it can have on your credit.  Stress created by calls from collections departments, arguments with your spouse over what bills should be paid first,  and your families basic needs not being met, can destroy a family.  There are some basic rules to follow to begin to relieve some of the stress comes with financial problems.  We will cover these briefly and offer insight regarding the difference between credit counseling and debt repayment programs. Get through the toughest day of your life.  Once the debt is categorized and you fully understand where each account is in the repayment process, now it is time to make the calls.  Contact each creditor, be honest with your situation and arrange an acceptable payment plan if possible. Categorize the debt by order of importance.  List your debt that affects your basic needs first.  Housing, transportation, and utilities would be my primary concerns.  Follow those with anything that is at risk of repossession or being sent to collections.  Then anything left can follow.  3. Assess your situation once all calls have been made.  Are you still in a position where you cannot meet all of your obligations?  Hopefully not but if you are, read on.There is a huge difference between credit counseling programs and debt repayment programs.  Fees vary and the impact on your credit differs greatly.  Both are run by “for profit” and non-profit organizations.  Don’t fool yourself though, they both incur expenses to do business and a majority of the cost is covered by fees associated with their services.  Some companies receive percentage “Kick-backs” on balances that they “help” you settle.Credit counseling are programs designed to assess your debt situation much in the way you did earlier.  After assessing your bills and income, they will provide insights on the best avenues for repayment and may even set up a schedule of payments for you.  You are not contracted with these organizations and because of that, you are completely responsible for the repayment of your debt and managing the creditors calls.  On a positive note, unlike most debt repayment programs, working with a credit counselor does not impact your credit score or credit report.  Their goal is to work through you to help you re-shape your budget in order to eliminate debt, provide relief from the stress being caused and hopefully help you develop good spending happens so that you no longer are at risk for developing bad debt.  I can not stress enough the importance of ensuring the organization you are considering is reputable and offers clear explanation of how they will protect your personal information.Debt repayment programs are a completely different avenue for debt relief.  The services offered range from credit management advice to a complete take over of your debt management.  You will likely be required to sign a contract with the organization, allowing them to negotiate on your behalf over interest, balances, and payment schedules.  In return, the company may assess fees that are charged monthly, generally included in your payment and possibly in addition, percentage fees for the negotiations.  Fees vary and I caution that you fully understand all fees that can be assessed.  I pride myself in being unbiased with the information that I bring to you, but a debt repayment program would be one of the last avenues that I would advise if you are seeking debt relief.  Creditors can and will report to the credit bureaus that you have entered into a debt repayment program.  This information gives the perception that you are no longer able or willing to meet your obligations and can stay on your report for up to 7 years.  The only longer standing hit to your credit with public information is a bankruptcy which will haunt you for up to 10 years.

Posted under Credit Counseling

But weighing the options is the pre-eminent way to meet your hardiness requirements beyond potentially wrecking your finances. Poring spent with in insurance alternatives is nobody’s notion of a fun tour.

Posted under Credit Repair

Companies today will try to fashion you feel special with benefits such as VIP restrooms and uncommunicative parking — if you have information where to look. Forget frequent-flier miles.

Posted under Credit Repair

I quoted The New York Times as follow:

Temporarily suspend mandatory annual withdrawals from Individual Retirement Accounts and 401(k)s. What Should I Do?”>My 401k Is Losing Money. Allow savers to withdraw 15 percent, up to a maximum of ,000, without paying a penalty as the law currently requires for withdrawals before age 59½. Current rules require investors to start selling stocks at age 70½. What Should I Do?Put Savings On Autopilot and How I Saved 0,000Should I Borrow From My 401k Plan?

Copyright © 2008 Pinyo B. These withdrawals are subject to normal taxes.

However, I do like the idea of not forcing people to withdraw their money if they don’t need to.  This will allow poor performing portfolio more time to recover and keep more money in the stock market.

Why I Don’t Like The Early Withdrawal Plan

There are many reasons why I don’t like the plan.  First, the high opportunity cost that many people may not realize.  Let’s say you are 30 years away from your retirement and you withdraw ,000.  At a 7% average annual growth, that ,000 could grow to over ,000.  Sure, it’s nice to have the money now, but at what price?

Second, what does this really accomplish besides depleting our savings and future retirement fund?  Is it (A) to help spur the economy, (B) to help homeowners pay their mortgages, (C) to help middle class face financial hardship?  May be there are other reasons, please feel free to add yours below.

To Spur The Economy

If the hope is to spur the economy, then I don’t think it will work well.  Let’s see, you withdraw ,000 and spend the money.  As a result, businesses do better due to influx of cash and the stock market may perform a little better.  However, the huge outflow of money from retirement accounts will have the opposite effect.  In this case, I think it’s a wash and doesn’t really do anything except making everyone poorer in the long run.

To Help Homeowners Pay Their Mortgages

If you are one of the homeowners who can’t afford your mortgage because you recently lost your job this may help you stay afloat for a few months.  Hopefully, you’ll get a new job before the ,000 runs out, but job is extremely hard to find in this economy.  So it may or may not work out.

If you are one of the homeowners who can’t afford your mortgage because the teaser rate on your variable rate mortgage ended, then I don’t think ,000 will help you for very long.  Eventually, you’ll run out of money unless you can make up the difference in a few short months — i.e., by spending less or earning more money.

Here’s another article I wrote about saving your home from foreclosure.  Some of these suggestions are quite drastic, but at least you are not trading your future for your home.

To Help Middle Class Face Financial Hardship

This is similar to the situation above. (digitalfingerprint: 69e8f4bf5bcfffdcbe9b25dc563db782)

If you don’t have enough money to deal with living expenses, raiding your retirement funds is just a short-term solution that will hurt you in the long run.  Again, spending less or earning more money is the proper solution.

Now that we are talking about saving money, here’s a huge list of money saving ideas that you can peruse.

Conclusion

I understand that this proposal is just one of many ways to help shore up the financial crisis and economic hardship faced by millions of Americans.  Hopefully this will provide some financial relief, but this is the last thing you should consider.  Don’t forget the long-term implications when you are raiding your retirement funds, and make sure that the money you take out really does help.

Here are a few tips on how to handle the slow economy:

Handling My Finances in a Slow Economy at Single Guy Money
Tips to Survive a Struggling Economy at Being Frugal
Living In A Down Economy - Determining Your Bare Bones Budget at I’ve Paid For This Twice Already…
5 Strategies to Survive An Economic Slowdown at Moolanomy
Smart Moves and Hedges in a Bad Economy at The Wisdom Journal

Related Posts:

Obama Versus McCain And Your Retirement SavingsWhat’s Wrong with this 401k Asset Allocation?

Posted under Credit Repair

 3. Companies lose millions of dollars a year to bad debt write offs.  If they have any business sense, they will do whatever it takes to help you settle the balances.4. Be honest with yourself and your spouse.  Promise each other that you will remain calm and rational then sit down and list EVERY bill that is owed, note the status and the amount past due.  1.  2. Finding yourself in a situation when your payments exceed your income can be both frightening and frustrating.  It is important to know the differences between these programs and the long term impact that it can have on your credit.  Stress created by calls from collections departments, arguments with your spouse over what bills should be paid first,  and your families basic needs not being met, can destroy a family.  There are some basic rules to follow to begin to relieve some of the stress comes with financial problems.  We will cover these briefly and offer insight regarding the difference between credit counseling and debt repayment programs.  Depending on your circumstances, each type of program can provide a level of relief in dealing with the debt.  Debt repayment programs are professionals in negotiation, often reaching an agreement with your creditors regarding the amount you owe, interest, and repayment terms.  These programs have the potential of reducing your debt at a greater rate than other counseling programs, but you must weigh the damaging effects that it will have on your credit.  I advise that you make every effort to manage your debt and repayment on your own.  There are many resources available to educate yourself on the best ways to tackle the concerns.  There is nothing wrong with seeking help when you need it.  I would rather see the money spent on fees be applied toward your debt. Assess your situation once all calls have been made.  Are you still in a position where you cannot meet all of your obligations?  Hopefully not but if you are, read on.There is a huge difference between credit counseling programs and debt repayment programs.  Fees vary and the impact on your credit differs greatly.  Both are run by “for profit” and non-profit organizations.  Don’t fool yourself though, they both incur expenses to do business and a majority of the cost is covered by fees associated with their services.  Some companies receive percentage “Kick-backs” on balances that they “help” you settle.Credit counseling are programs designed to assess your debt situation much in the way you did earlier.  After assessing your bills and income, they will provide insights on the best avenues for repayment and may even set up a schedule of payments for you.  You are not contracted with these organizations and because of that, you are completely responsible for the repayment of your debt and managing the creditors calls.  On a positive note, unlike most debt repayment programs, working with a credit counselor does not impact your credit score or credit report.  Their goal is to work through you to help you re-shape your budget in order to eliminate debt, provide relief from the stress being caused and hopefully help you develop good spending happens so that you no longer are at risk for developing bad debt.  I can not stress enough the importance of ensuring the organization you are considering is reputable and offers clear explanation of how they will protect your personal information.Debt repayment programs are a completely different avenue for debt relief.  The services offered range from credit management advice to a complete take over of your debt management.  You will likely be required to sign a contract with the organization, allowing them to negotiate on your behalf over interest, balances, and payment schedules.  In return, the company may assess fees that are charged monthly, generally included in your payment and possibly in addition, percentage fees for the negotiations.  Fees vary and I caution that you fully understand all fees that can be assessed.  I pride myself in being unbiased with the information that I bring to you, but a debt repayment program would be one of the last avenues that I would advise if you are seeking debt relief.  Creditors can and will report to the credit bureaus that you have entered into a debt repayment program.  This information gives the perception that you are no longer able or willing to meet your obligations and can stay on your report for up to 7 years.  The only longer standing hit to your credit with public information is a bankruptcy which will haunt you for up to 10 years. Categorize the debt by order of importance.  List your debt that affects your basic needs first.  Housing, transportation, and utilities would be my primary concerns.  Follow those with anything that is at risk of repossession or being sent to collections.  Then anything left can follow.  Remember that committing to making changes in your spending habits is a great step toward improving your financial health and finding relief from the debt.  Budgeting, spending control, and not procrastinating are all ingredients to the success you deserve.  Start today. Struggling to make your payments?  Is it the luck of the draw of who is getting paid next? Get through the toughest day of your life.  Once the debt is categorized and you fully understand where each account is in the repayment process, now it is time to make the calls.  Contact each creditor, be honest with your situation and arrange an acceptable payment plan if possible.

Posted under Credit Counseling

Cities and towns can buy HUD’s worst properties for a buck each and use grant money to rehab them — or candidly raze neighborhood eyesores.

Posted under Credit Repair