Bankruptcy 101 - From What It Is To What Happens At Court

CHAPTER 7 BANKRUPTCY
By Martin Hoffman*

FINAL THOUGHTS UP FRONT

The purpose of the Bankruptcy Law is to give an honest debtor a "fresh start" in life by relieving the debtor of most debts. Often, clients wait too long to consult an attorney and waste exempt assets such as pensions, or mortgage their property in a futile attempt to avoid Bankruptcy. Many attorneys offer free consultations; the reader is encouraged to obtain a comprehensive consultation concerning your rights and remedies.

HOW DID YOU GET INTO THIS POSITION

The most common causes of bankruptcy include medical expenses, loss of a job, accidents/disability, business failure, divorce, and the current foreclosure crisis.

Consumer and commercial bankruptcy filings are on pace to reach 1.5 million or more this year. You are not alone.

WHAT IS BANKRUPTCY

Bankruptcy is the judicial process that allows debtors to discharge (eliminate) or reorganize debt. In many cases, you can discharge all or most of your debt and still keep all or most of your assets.

Bankruptcy cases are handled by the United States Bankruptcy Courts, part of the Federal Court system.

This essay will concentrate on Chapter 7 or ‘liquidating bankruptcies’.
In a Chapter 7 Bankruptcy, the Debtors will discharge all debts permitted to be discharged and keep all exempt property (see below). In a Chapter 13 Bankruptcy, a debtor may reorganize his debt and pay all or a portion of the debt over a period of three to five years.

EXEMPT PROPERTY

Even though you are filing for Bankruptcy, the Law allows you to keep certain assets free from the claims of your creditors. The assets that you are allowed to keep are considered exempt property. The exemptions available to you are decided by Federal Law and/or by the law of your state of residence. Usually, you can keep your home, pension plans, several thousand dollars worth of personal property (such as cars, furniture, bank accounts, jewelry, etc.), many types of insurance benefits, alimony and child support. Often, the exemptions are sufficient to protect all of your property, and nothing will be lost in the bankruptcy proceeding.

DISCHARGEABLE DEBTS

Not all debts are dischargeable in bankruptcy. You will not be able to discharge most tax debts, child support or alimony, most student loans, or to prevent a secured creditor (e.g., home loan, car loan) from foreclosing/repossessing the property that secures the debt. You may, however, be able to reaffirm the debt, which means that you can agree to pay the secured debt despite the bankruptcy in order to keep the secured property.

BEFORE YOU FILE

Your lawyer will ask you to provide certain documents in order to process your case. These ordinarily include a copy of your latest tax return, copies of deeds, mortgages, titles to vehicles, and a copy of your driver’s license and social security card. At some point, before filing a petition, you will also have to produce up to one year of your bank statements and 60 days worth of pay stubs or other verification of your income.

The Bankruptcy law requires you to take credit counseling (education) before you can file for Bankruptcy. This is often done through the Internet, and takes approximately one hour. After filing for Bankruptcy, there is a second, shorter counseling session that is required. Only credit counseling organizations and debtor education course providers that have been approved by the U.S. Trustee Program are permitted to provide counseling.

THE MEANS TEST: ARE YOU ELIGIBLE TO FILE

A ‘means test’ is required under the current law to determine your eligibility to file for bankruptcy under Chapter 7 of the Bankruptcy Code. The test is only applicable to consumer debt; if your debt is primarily business debt, you may not have to pass this test.

The means test is performed by comparing your average income for the past six months (CMI-current monthly income) to the median (average) income for households of the same size in the your State of residence. If your income is less than or equal to the state median income, you "pass" the means test and may file Chapter 7. If your income exceeds the median income, there are additional calculations and deductions that may allow eligibility.

FILING FOR BANKRUPTCY

The filing of a Petition begins the Bankruptcy case. The Petition is a document that sets out (1) what you own, (2) the amount and to whom you owe the debt, and (3) requests Bankruptcy protection and relief. Once the Petition is filed an automatic stay goes into effect- this means that no creditor can take further action against you. All collection efforts, including phone calls and lawsuits such as foreclosures and garnishments (levying on the debtor’s wages) are brought to an immediate halt. A husband and wife ordinarily file a Joint Petition.

THE BANKRUPTCY HEARING

Several weeks after your Bankruptcy petition is filed, you will attend a hearing in the Bankruptcy Court called a 341 hearing (or First Meeting of Creditors). A court appointed official called a ‘Trustee’ conducts the hearing. The hearing itself usually takes only a few moments unless the Trustee finds something unusual or incomplete in your Petition or accompanying documents.

If the value of your property is greater than your available exemptions, the property will be sold and the difference will be distributed to your creditors. You can also elect to pay the difference and keep the property.

The Trustee can try to have your case dismissed if there is evidence of fraud, perjury, or ineligibility.


BANKRUPTCY DISCHARGE

Unless there is litigation involving objections to the discharge, the debtor will usually automatically receive a discharge. The Clerk of the Bankruptcy Court will mail a copy of the order of discharge to all creditors, the U.S. trustee, the trustee in the case, and the trustee's attorney, if any. The debtor and the debtor's attorney also receive copies of the discharge order. Typically, this occurs about four months after the date the debtor files the petition with the clerk of the bankruptcy court.

This essay is intended to make you more informed about your rights and the Law of Bankruptcy and is not a substitute for competent legal advice. Please consult a licensed attorney in your jurisdiction regarding your specific case.


*Martin Hoffman is an attorney licensed to practice in Florida and New York. He is a senior partner at Hoffman, Larin and Agnetti PA, with offices in Miami, Fort Lauderdale, Islamorada and Key West. Mr. Hoffman can be reached at mhoffman@hlalaw.com or at 800-803-5555.

Medical Expenses A Common Cause Of Bankruptcy

September 25, 2009 in Healthcare


The following guest post was submitted by Kevin, web content writer for Resqdebt.com. For more helpful tips on how to save money and stay out of debt, visit Resqdebt’s website at www.resqdebt.com.

When Americans think of a person trapped in enormous amounts of debt, inevitably they think of irresponsibility. They think of fast cars and fancy stereo equipment. They think of people living the high life who could not afford it. In short, they think of a deadbeat. If statistics are any real measure, this impression could merit a change – and a touch of sympathy.

Far from financial irresponsibility, medical expenses are among the most frequent causes of families falling into debt and eventually filing for bankruptcy. The precise percentage of medical bankruptcies is in dispute. However, it is generally acknowledged to be a significant number.

Estimates for the number of “medical bankruptcies” have a wide range. A Northwestern University researcher has placed the figure at 17 percent of all bankruptcies. A group of Harvard researchers have recently increased their estimate to more than 50 percent. According to a Federal Reserve report, households with high medical debt are 28 times as likely to file for bankruptcy as other households. Most recently, an August report from the UCLA Center for Health Policy Research estimated that one in seven Californians carries some form of medical debt. With the nation gripped in a discussion about public financing of medical care, the number of medical bankruptcies has become a topic of note.

Medical bankruptcy can arise in several ways. The most common and obvious is the medical bill charged to the ill patient. When the patient personally suffers a chronic disease, deals with a condition that requires expensive treatment, or must pay for pricey medication, then it can be easy to run up thousands of dollars in costs. Insurance can help, but sometimes is not enough. However, there are other ways that medical expenses can drive a person or family into debt.

Many times the medical benefit is not for medical procedures performed on the person himself. They stem from helping to finance the medical care of a loved one. Sometimes this means caring for an elderly father or mother. Sometimes, tragically, this means caring for a sick child.

Also, some researchers describe “hidden costs” of medical bankruptcy. Often, these expenses consist of medical expenses placed on credit cards or paid on credit in some other way. This is an unwise thing to do. Once the expenses are placed onto the credit card, they become a target for interest and fees.

While medical expenses drive many people to bankruptcy, that is not the only option for handling overwhelming medical debt. Other options exist that can help a debtor take care of their debt before reaching that point. Among these methods are credit counseling, debt consolidation, and debt settlement. Each method can help debtors resolve debt and rebuild their financial health.

“Medical expenses are a common reason that people come to us,” said Heath Tudor, community liaison for Resqdebt, a debt settlement provider in Allen, Texas. “The unfortunate thing is that it randomly strikes good people. The fortunate thing is that it gives us the opportunity to help good people.”

Source: Frugal Dad

6 (scary) Fast Cash Loan Types and 3 (better) Alternatives

If you’re hoping to get a personal loan, be wary of where you look!



You’ve got limited options when you have bad credit and are in a financial bind. While a lot of people may not have much sympathy for consumers who have fallen into this trap, I can see just how easy it is to get in this position. What if you just don’t make enough money? What if you work a menial job and end up with a chronic illness? A lot of people are one accident or health problem away from going broke. And I’m talking about the responsible ones!

I can sympathize with this predicament because I live in a state that has a very high cost of living (trickle up effect, thanks to the uber-wealthy around here), but most of us are still regular workers of regular means, trying to get by. Teachers, for example, aren’t paid the mega bucks to easily afford a $2,400 monthly rent on a small home.

I can therefore understand (not condone) just how borrowing money often seems to be the only way when you’re confronted with unanticipated expenses. So I was hoping to offer this article as a way to warn consumers of certain loans that the New York State Office of Financial Empowerment considers “dangerous”. I’ve added a sixth based on my personal experience. With overpriced loans, you can wind up in deep debt.

Fast Cash Loans: The Costs Aren’t Worth It
1. Tax Refund Anticipation Loans
When you just can’t wait to get your tax refund back from the government, you might be tempted into a Refund Anticipation Loan (RAL). These high interest loans are offered by tax preparers based on your anticipated tax refund. Typically you wind up spending around 10 percent of your expected refund on interest and fees. The check only takes two weeks to arrive which equals 300 percent annual interest on an RAL. Patience is a virtue that will help you avoid costly RALs and make the most of your tax refund money.

2. Pawnshop Loans
Expensive electronics, musical instruments, guns or jewelry are often used as collateral to obtain pawnshop loans. The loan you’ll get from a pawnshop is usually less than half the pawned item’s resale value. When you pawn something, you get a few months to repay the loan; if you fail to pay up, the pawnshop is allowed to keep and sell the property. You’ll be paying dearly for the privilege of receiving that quick cash, as pawnshops will charge you interest, storage costs and insurance fees. Once again, many borrowers wind up paying about 300 percent interest on pawnshop loans. If you can’t come up with enough cash, you’ll spend significantly on storage fees or wind up losing a treasured item. I actually know a few people who own pawnshops, and they are some of the wealthiest people in their town — it’s clear why!

3. Rent To Own Loans
Specialized shops offer you the opportunity to rent electronics, furniture and appliances until you own them. If you miss a payment on rent-to-own goods, the store can repossess the items. Here’s what’s crazy about this: even if you’ve paid more than market value, you can lose what you paid out along with the merchandise! Research reveals the sad fact that around 75 percent of rent-to-own customers actually lose their cash and goods when they are unable to make the payments. Now if you’re actually in the minority and you get to keep the stuff, the news isn’t any better: even if you pay off the goods and own them, you are likely to pay double or even triple the market value for rent-to-own items. Either way, renting to own is a waste of money. So why do people do this? Because they are unable to delay gratification.

4. Cash Advances On Your Credit Cards
You have a credit card so you have access to cash, right? Well, you may think twice about gaining access to that cash when you consider what it will cost you. When you take a cash advance on your credit card, the interest rates charged are higher. Typically, a cash advance fee is also charged, which amounts to an additional percentage of your balance. The scary part? Interest paid for cash advances often exceeds 20 to 25 percent. That’s a lot to pay for a little cash!

5. Overdraft Protection Loans
Some banks may offer you overdraft protection for your checking account, which is nothing but a loan that lets you draw money from an account with a zero balance. The bad news is that average overdraft fees are anywhere from $25 to $40. If you’re set on wanting to make sure you don’t overdraw your account and you want to have a “safety net” in place, then another possible alternative is to have your checking account use your savings balance to cover overdrafts. While there is usually a fee for this as well, it’s usually much less than the cost of an overdraft.

6. Payday Loans
To get a payday loan, you apply for one with a lender, showing them proof that you can pay. After signing a loan agreement, you send the lender a postdated check which they hang on to while they hand off the cash to you. After the length of the loan’s term (which is very short, usually a couple of weeks), the lender will cash your check, which will include the amount you owe plus interest and fees. Now if you know you’re going to have trouble paying for this on time, you can “roll over” the loan and file for an extension, which will trigger an additional fee. The interest charged on payday loans is often 300 percent or more, making them a poor choice when you’re already short on cash.

Alternatives To Bad Loans and Quick Cash
All this sounds scary enough for you? There are better approaches to digging yourself out of a tough financial hole, including:

1. Find the lowest cost loans available. Try low interest credit cards, balance transfer credit cards or even a lending network like Lending Club (you can check here for more details about Lending Club, but you need to have good credit to qualify). If you absolutely need access to cash and must take out a loan, find the cheapest loans that you can qualify for.

2. Simultaneously, cut down on spending and go on a strict budget. Admittedly, this may not be an easy solution, but this is the most prudent way to free up or obtain some liquidity without it costing you an arm and a leg. While implementing belt tightening strategies, you could also concurrently pursue additional income opportunities. Finding other ways to make money is my favorite approach to solving this problem.

3. Still insist on getting a quick loan? Then pay it off fast! Now if you’re going to go for the easy cash anyway, make sure you know what it costs you, and try to pay it off as quickly as possible. But you’ve been warned!


Source: The Digerati Life

Considering Bankruptcy? These guys can help...

Clark & Washington, P.C., Georgia Bankruptcy Law Firm

Valuable information for anyone considering bankruptcy.
http://www.cw13.com/index.html

Chapter 13 Articles

Chapter 7 Articles

How to Make Living on One Income Work

There are many reasons couples may end up living on one income. Some want to be home to take care of their children while others may be dealing with layoff or medical issue. Whatever your situation, living on one income can be tight, but it certainly isn’t impossible. There are, however, some things that you need to think about and give some serious planning before you make the leap into single income territory.


Here are just a few:

• Stop eating out. While eating out is fun, it is also expensive if you do it on a regular basis. Cut back to once a month and you’ll save quite a bit by cooking at home instead.
• Work out a budget ahead of time. While everyone should have a budget, it can be even more important if finances are going to be tight. Sit down with your significant other and figure out what your expenses will be and where you can cut back.
• Have a cushion. If you can, go into a one income situation with a comfortable amount of savings to get you through should any unexpected situations arise. There will likely be a learning curve when it comes to living on one income and you’ll need a little padding to get you through those first few months and to prepare for all those incidental expenses that crop up.
• Buy new only when you need to. If you’re going to live on one income your days of buying everything new may be at an end. That doesn’t mean you can never have new things, but focus on getting them where it really matters rather than just purchasing everything new. Clothes, cars and furniture are available in abundance used, and are often of perfectly good quality.
• Research frugal solutions. There are loads of resources on the web that are designed to help you save money around the house. Spend a little time with your significant other searching through this information to find out if you can apply any of these solutions to your own home and save every penny you can.
• Determine what’s really important to you. If it really means a lot to you to stay at home with your kids—more than say, taking a vacation to Mexico—figure out a way to work your budget so that your priorities are highlighted and the things you can do without are deemphasized. You may have to forgo some pleasures but you’ll appreciate it in the long run.
• Do a trial run. If you know you’re going to be going down to only one income, start living on just that for a few months so that there is less of a shock when the time comes. You’ll be able to work out the kinks while you still have that other income as a backup.

Source: Financial Highway

Testimony of a One Car Couple

Up until a few months ago, if someone would have asked my wife or me to get rid of one of our cars, we would’ve just snickered and responded, “Impossible!” But then it happened… I wrecked my car.

A bit of background
From the time we met in 2003 up until seven months ago, my wife and I had always viewed two cars as a necessity. Then on Thursday, December 19th, 2008 I rear-ended a pickup truck at a busy intersection and wrecked my 2001 Jeep Cherokee.

At the time, my Jeep was worth about $5,000 and the initial quote to repair the damage was upwards of $9,000! In other words, it was totaled. I called a mechanic friend up and asked if he could come by and give it a once over to see if anyone he knew could do the body work for a reasonable amount of money. He obliged.

As it turns out, he did have a business associate who, despite being a wee bit unreliable, would be able to do the work for around $3,000 parts and labor. I jumped at the chance.

As the weeks rolled by and my Jeep was still “being fixed,” I grew increasingly impatient and my wife was far from happy. After all, she was the one responsible for carting me around until my Jeep was back in working condition.

The weeks turned into months, and now here we are in the middle of the summer and I still don’t have my Jeep back! We’ve certainly learned an important lesson about “getting a good deal,” but that’s a topic for another post.

Today I want to focus on how we successfully adapted to becoming a one car family. without killing each other, or hating the end result.

Changes we’ve made
My wife and I work in different towns, so she started dropping me off at a bus stop on her way to work. From there, I was able to catch a bus straight to my workplace. The stop was right off an expressway exit for her, so it took little more than five extra minutes each morning.

To save money, I purchased bus passes in 10 ride increments and wound up paying $1/ride. After work, I would catch a bus back to the dropoff/pickup spot and wait for my wife to arrive on her way home. We coordinated the pick up times via phone, and it worked out quite well.

Once summer came, and my wife began her three month vacation, things changed a little. Some days (fewer than I would like) I ride my bike about 10 miles to and from work. On days that I don’t ride, my wife gets up with me and drives me in.

I don’t want to spend too much more time talking about how we get around with just one car, so I’ll just say this: We do our best to coordinate our schedules, and we go out of our way to accommodate each other. A side benefit is that we get to spend more time together.

Read tips for making it work at The Five Cent Nickel

The Top 12 Most Frequently Used Pantry Items (and what to do with them)

Learning the kitchen ropes for the first time? Gathering all ingredients, following the recipe, and avoiding a grease fire is all you can handle. And you seem to find recipes that require obscure necessities like capers and kalamata olives. What you need, newbie cook, is to stock your pantry with the most common ingredients and work within those parameters.



1. Cooking Oils
If you plan on making anything stovetop, oil is essential. You'll want to use virgin olive oil as much as possible--since it's a healthier option--but many things don't taste right cooked in olive oil. Keep some vegetable and peanut oil on hand to broaden your cooking options.

2. White Flour and Sugar
From baking to soup thickening, you'll need to have a bag of flour handy. If you need to brown a chicken breast, dip the chicken in egg then in flour before cooking stovetop. Far too many recipes call for flour, so don't venture into a cookbook without it. Sugar is used in much more than just desserts--keep a pound sealed in the pantry for a dash of sweet.

3. Cream of Soups
The cooking soups I use most often are cream of mushroom, cream of celery, and cream of chicken. Add these to tuna casseroles, pot roasts, and anything that needs a creamy punch. Purchase the low sodium/low fat varieties to cut back on the calories.

4. Apples and Oranges
These seem to last forever. Go for the mixed fruit bag that includes red apples, green apples, and oranges and you'll have a great selection of fruit that won't turn mushy soon after purchasing.

5. Noodles
Keep a bag of egg noodles (for stroganoff or casseroles) and some basic wheat spirals. Paired with some cooked ground beef and Prego sauce, you'll whip up a cheap tasty meal for pennies. I sometimes cook more noodles than I need for a recipe and use leftovers to make cold pasta and mini-tuna casseroles later in the week.

6. Breadcrumbs
From toppings to meat filler, a simple box of breadcrumbs goes the distance. Steer clear of the Italian seasoned variety--put your own oregano, basil, garlic, and parsley in to save money.

7. Spices
The seasonings I need most often are sea salt, garlic powder (or minced garlic, but not garlic salt), onion powder, parsley, basil, rosemary, thyme, oregano, Lowry's seasoned salt, chili powder, and crushed red pepper. On the sweet shelf you can always find vanilla extract, almond extract, nutmeg, honey, and cinnamon. I also combine baking soda, baking powder, and cream of tartar in with the sweets since you'll add them to baked goods.

8. Oatmeal
If you can acquire a taste for oatmeal, your pocketbook will be in good shape. A bowl of oatmeal make with milk and brown sugar costs just around $.40. Make oatmeal chocolate chip cookies and add oatmeal as a filler for meat loaf when you're in a pinch.

9. Chicken and Beef Broth
Buy several cans of both--you'll use more than you think for flavor across the cooking spectrum. If you need to save money buy bullion and make your own with boiling water. It only takes an additional 5 minutes to heat the water and add your own flavoring.

10. Canned Meats and Vegetables
The best tasting ones are chunk light tuna in water, chicken, green beans, all other beans, corn, and tomatoes (mainly for cooking). A good rule of thumb is only buy canned if you can find it frozen. Most of the frozen veggies are healthier and tastier, but some can't be beat in the can.

11. Quick Mixes
I like to keep a couple of mixes--Bisquick Heart Healthy, Betty Crocker white cake, Fiber One muffins--for the just in case scenario. When company comes over last minute it's nice to have something ready that doesn't take a huge effort to assemble.

12. Cold Necessities
Always keep eggs, milk, butter (the real thing, no transfat), and a block of cheddar cheese to keep your cooking options open. Check expiration dates--sometimes the organic products have a much longer shelf life. You may pay a bit more for the product but it can perch in your fridge for more time.

Source: Go Frugal Blog - Ashley Grimaldo is obsessed with finding free stuff, whether she needs it or not. She loves playing with words, crunching ice, and is convinced she missed her calling as a professional ice skater. In between changing diapers and pureeing baby food, Ashley is launching an official campaign to make maternity pants an apparel industry standard.

5 Things the recession has taught me so far

Fed Chairman Ben Bernanke recently said that the recession is very likely over. I'm not sure I believe it all the way (do you guys?), but I'd be lying if it doesn't sound hot. It's been a wild & crazy past 18 months, and it's nice to hear that our world isn't going to hell in a hand basket for once.



I swear, if the media stopped portraying all this gloom and doom we'd be much better off. Everyone knows that humans are emotional - you say one wrong thing and CRASH! There goes the market. But I guess the opposite would also hold true. After all, here I am helping spread the 4-5 word phrase Bernanke just spoke of ;) At least it's a positive influence though.

Regardless, I've learned a lot over this whole ordeal and I'm sure I'll learn even more. I really like that about life - $hit can be flying all over the place, yet you can usually take away some new lesson or preventative measure to help you down the road. The bigger the problems, the bigger the learning curve too! (at least that's how I see it)

5 Things the recession has taught me so far:

It IS actually possible to spend less! All I have to do is NOT go into Target, TJ Maxx, Best Buy or the mall ;) That, and PAY ATTENTION TO MY FINANCES!

No job is ever safe. I've learned that you can't stay at one company forever, so always keeping your eyes open and active keeps me sane and away from an unexpected surprise one day.

Nature is one of the best gifts to us. And it's free! Since I'm not shopping as much, I'm now going on more and more walks. I totally forgot what fresh air felt like.

Networking is M-A-G-I-C. It really is a matter of who you know these days, so keeping in touch with old friends and colleagues is something that will def. pay off in the long run - esp. if they're in your same field. My favorite way to stay in touch is over beers and 1/2 priced appetizers at happy hours! Something a few of us bloggers did last night actually.

Everyone wants to master their finances! This might be one of my favorite things right now. You're hearing personal finance spout all over the place and all of a sudden learning about money is "cool!" You & I have ALWAYS known this of course, but at least the others are catching on ;)

So whether the recession is over or not, do me a favor and remind yourselves of all the positive stuff going on in your lives these days. We can't control the economy, but we sure can change the way we're living! Here's to a happy (and hopeful) recovery my friends.

Source: Budgets Are Sexy

Exclusive: Coupon Sherpa promises to make coupons reliable again

There's no shortage of coupon sites on the Internet, which makes standing out a difficult task ... and all that more impressive when a new competitor emerges.

WalletPop was able to score an exclusive interview with Luke Knowles, the founder of Coupon Sherpa and FreeShipping.org, to find out what he thinks will make Coupon Sherpa the number one source for coupons on the Internet.

WalletPop: Luke, thanks for your time. Can you tell me what makes Coupon Sherpa special?

Coupon Sherpa: We see some problems with online coupon websites and we wanted to create a coupon website so that it would help our iPhone app. So we thought, why don't we be the ultimate coupon website that's missing right now.

"The biggest problem with coupon websites is that a lot of times you go to coupon sites and the coupons just don't work. You know, they don't work or they're expired and the sites just leave them up there so there's not a whole lot of quality control.


"So with Coupon Sherpa we're really going after that word 'reliable.' We want to be 'the reliable coupon website,' that you can trust. We're aiming for a success rate of 99.9% with our coupon codes. I know human error does creep in but we're going to put the quality control measures in place to account for that.

At the same time, besides just being the reliable coupon website, we want to provide all different types of coupons. Most sites focus on online coupons, like coupons codes, because that's the only way they can make money. So we want to be online, printable, grocery and pretty soon we'll add local coupons. So we want to be the one resource you need for coupons.

WP: When you say local, do you mean my local coffee shop can get online and put a coupon up?

CS: Yes, so coupons for what's around you, those coupons that are available near you.

WP: It's great to hear that a coupon site is tackling the problem of reliability. Earlier this week WalletPop posted about the incredible number of shoppers who will continue a purchase even if their coupon is rejected. Something like 50% of consumers will actually continue and make an online purchase.

CS: "Right, yeah, you've probably experienced this a hundred times. Coupon sites will list all these coupons and they don't work. There's no quality control there. So we're working directly with the merchants to get coupons specifically for them. If they aren't directly from the merchant, we test them.

WP: You're working directly with merchants. Can I still submit a coupon I find?

CS: "You can share coupons with us. Now we're not just going to put it on, we'll put it on if we find that it works, but we're going to make sure it works before we put it up. Sometimes that will involve us doing a fake checkout or doing additional research on the Internet to try and find an expiration date.

WP: Tell me a little more about the social aspects of your site.

CS: "We're trying to do the social thing; you can tweet any coupon and you can vote coupons up or down 'Digg' style.

WP: What's your favorite coupon from Coupon Sherpa right now?

CS: "It'd have to be the $25 off of a $100 purchase at Sports Authority. I also saved something close to 40% off of my Banana Republic purchase at an outlet mall recently using the Coupon Sherpa iPhone App.

WP: Are there any other Coupon Sherpa features coming that you can tell us about?

CS: "We're going to be creating an 'Ask Coupon Sherpa' feature on our site where it ties the whole site into Twitter. People can ask questions to Coupon Sherpa related to saving money or coupons or deals. He'll answer them real time on Twitter as well as answer some in more detail on the 'Ask Coupon Sherpa' section of the website."

WP: Thanks for taking the time to tell us about Coupon Sherpa, we appreciate your efforts to make coupons easier and more reliable.

For being a relatively new coupon website, Coupon Sherpa boasts an impressive number of major retailer coupons, and the current selection backs up the quality of quantity approach that Knowles claims will set Coupon Sherpa apart from its competitors. Right now there are good coupons for Target, Kohls, Finishline and many others to use online and plenty more that you can print out and use in store.

It's up against some hefty competition, but Coupon Sherpa is off to a good start -- it already saved me 20% on a pair of dress shoes!

Source: Wallet Pop

How To Pay Rent By Volunteering For Science Experiments

This is a guest post from Hank.



I recently earned $40 the easy way. I was just sitting in my doctor's office minding my own business when a nurse from the office next door stopped by to ask for volunteers. It seems that they were doing a medical study on the adverse effects of vaccines. I was given the money for about thirty minutes of my time, a brief medical questionnaire, and five small vials of blood. Not bad for a half hours worth of "work".

This wasn't the first time that I had been exposed to earning money for the benefit of science. I grew up in a medium size southern town that had a fairly large teaching hospital. Not only were there lots of medical students running around the hospital's hallways, but there were also a lot of medical experiments being conducted too.

I remember hearing about one experiment that the medical college was conducting while I was a senior in high school. For $5,000, the research doctors at the school would cut off one of your big toes, sew it back on, and then measure how the loss of the toe affected your balance. All my friends and I thought that it would be so cool to have all of that money. It was a lot for a kid in high school, but none of us ever were ever gutsy enough to try for it.

Earning Money From Science:

So, of course, this recent medical study got me thinking. Can someone earn enough money from science to pay your rent? I think you can. Here are a few examples of how you can make money by giving back to help science.

Sell Plasma. Most people don't know about selling plasma. Blood plasma is prepared by spinning a tube of fresh blood in a centrifuge until the blood cells fall to the bottom of the test tube. It is just like giving blood. While you can make approximately $240 a month if you donate twice a week, it is nothing that you can get rich off of. There are also a few negative connotations associated with selling plasma, although I personally know of several respectable people from the "good side of the tracks" who sell plasma to supplement their income. Let's face it, teachers do not get paid enough (but, that's a subject for another time.)

Sell Eggs. Many women can make around $5,000 by selling their eggs to companies who resell them to women who cannot give birth. The only problem with this plan is that it takes a lot of time and patience, and there is a small surgical procedure that the woman has to go through in the end to retrieve the eggs. I knew of one lady who was trying to earn money this way, and it took months of paperwork and several doctors visits before they would even consider giving her a dime. This isn't the option to pursue if you need money in a hurry (or if you're a guy!), but it may be well worth your effort if you are patient.

Sell Sperm. Every year, approximately 75,000 American children are born thanks to a sperm donor. To qualify as a sperm donor, many sperm banks require that you be between the ages of 18 and 38, have a clean medical history, have high quality semen samples, and be able to pass a rigorous psychological and genetic screening. You must also be able to provide a medical history of you and your relatives going back several generations. The payoff can be handsome though at about $100 per visit and several visits needed each month.

Medical Experiments. Like I mentioned above, you can get paid up to $300 per day or more to participate in clinical or medical trials that test new or improved ways to treat an illness or condition. Or, you can participate in research studying a particular phenomenon or a new search for a disease's cure. In my case, I was paid to be in the control group of the study because I had never had a reaction to any vaccines. The possibilities of finding the study that is right for you should not be too hard since the possibilities are almost endless. You can get paid to participate in studies for things such as sleep deprivation, time isolation, alcohol, caffeine, nicotine studies, exercise, diet and nutrition studies, psychology studies, the list goes on & on.

Others. There are several other ways to make money in the medical arena that could be explored as well. You can consider becoming a surrogate mother which can pay tens of thousands of dollars. Or, you can sell your hair for few dollars per inch. There are many ways you can get paid for helping science. The hard part may just be finding them.

While these medical procedures listed above are not all inclusive, they can give you an idea of the possibilities that are out there. No one medical experiment, testing, or donating can solve all of your financial needs, but you can earn a decent supplemental income from some of these programs. Maybe you do not want to deliver pizzas in order to help you get out of debt faster. Maybe donating plasma is a better answer for you personally.

Source: Budgets Are Sexy

10 Bad Habits That Lead to Financial Disaster

By Richard K. Gustafson

I ran across a very good article that discusses "bad habits" that lead to debt problems. Below is a link to the full article at www.bankrate.com, but I thought I'd briefly share the highlights with you.

The ten bad habits are:

1) Misusing Balance Transfers - All of us have found offers for new credit cards that provide a "teaser" rate. "Transfer balances and pay no interest for a year" is a common sales pitch. While it can be a good idea to manage debt by taking advantage of these types of offers, you still have to be disciplined and concentrate on paying down the debt. The common mistake is that the person continues to use the card and creates new debt.

2) Not Checking Credit Reports - Some people believe that there is no value in checking credit reports because they don't think they can do anything to change what the reports say. This is not true. Insuring that your credit report is accurate and challenging inaccurate information can help improve your credit score. An improved credit score opens opportunities for credit at lower interest rates. Lower interest rates can save you a lot of money! For more information, visit www.creditrepair.com.

3) Failing to Alert Creditors About Financial Hardships - Some creditors have in-house programs you can qualify for if you alert your creditor to an anticipated problem. If you wait until you are behind on payments, you may not be eligible for some of the programs the creditor could have offered you if you were current on payments.

4) Failing to Budget - Budget your money and stick to your budget. Don't forget about those yearly or quarterly expenses. Make sure you take them into account.

5) Using Retail Store Accounts - I'm sure you have experienced shopping at a department store and being offered the store's credit card. They are tempting as you are offered 10% off your purchases, or sometimes even more! The downside is if you don't pay it off at the end of the month, retail credit cards have much higher interest rates than Visa, Mastercard, or American Express.

6) Procrastinating on Creating an Emergency Fund - Make sure you begin saving a little money each month into a savings account. You never know when a trip to the hospital could lead to a loss of income. You should be prepared for these events. Most experts tell you to have at least 3-6 months of your budgeted expenses saved in a savings account. This money can help get you through a medical situation or a job loss.

7) Paying Bills in No Particular Order - If you can pay all of your bills at the end of each month, obviously it doesn't matter what check you are writing first. But, if you are going to fall short one month, you need to prioritize which expenses are more important so you can pay the important ones. Rent/Mortgage, transportation, utilities, and other "basic living expenses" should always be the priority over credit cards, retail store cards, etc...

8) Charging Purchases Instead of Using Debit Card or Paying Cash - If you have the money in your pocket to pay cash, why charge on the credit card? I know, it's only $20 here or there, right? But what about when you do this three or four times a month. Suddenly, you have balances on your credit cards that could get out of control if you don't pay them each month.

9) Making Credit Payments Late - You might be tempted to simply "eat the late fee" on credit cards if you're struggling to make payments. Try to avoid this temptation as paying late could cause your interest rates to triple. In fact, missing payments to one credit card could could cause ALL of your interest rates to triple on ALL of your credit cards.

10) Making the Minimum Payment Only - Paying minimum balances is better than not paying, but if all you are doing is paying the minimum you won't make much progress paying your debt. Try to pay at least a little bit extra each month. Obviously the best option is to pay off the entire balance each month. Try working a part-time job or overtime and using the extra earnings to pay down debt.

Here's the link to the full article: www.bankrate.com/brm/news/debt/debtmanageguide/mess4.asp?caret=8 If the debt gets overwhelming, you may want to seek out bankruptcy information. By Richard K. Gustafson

I ran across a very good article that discusses "bad habits" that lead to debt problems. Below is a link to the full article at www.bankrate.com, but I thought I'd briefly share the highlights with you.

The ten bad habits are:

1) Misusing Balance Transfers - All of us have found offers for new credit cards that provide a "teaser" rate. "Transfer balances and pay no interest for a year" is a common sales pitch. While it can be a good idea to manage debt by taking advantage of these types of offers, you still have to be disciplined and concentrate on paying down the debt. The common mistake is that the person continues to use the card and creates new debt.

2) Not Checking Credit Reports - Some people believe that there is no value in checking credit reports because they don't think they can do anything to change what the reports say. This is not true. Insuring that your credit report is accurate and challenging inaccurate information can help improve your credit score. An improved credit score opens opportunities for credit at lower interest rates. Lower interest rates can save you a lot of money! For more information, visit www.creditrepair.com.

3) Failing to Alert Creditors About Financial Hardships - Some creditors have in-house programs you can qualify for if you alert your creditor to an anticipated problem. If you wait until you are behind on payments, you may not be eligible for some of the programs the creditor could have offered you if you were current on payments.

4) Failing to Budget - Budget your money and stick to your budget. Don't forget about those yearly or quarterly expenses. Make sure you take them into account.

5) Using Retail Store Accounts - I'm sure you have experienced shopping at a department store and being offered the store's credit card. They are tempting as you are offered 10% off your purchases, or sometimes even more! The downside is if you don't pay it off at the end of the month, retail credit cards have much higher interest rates than Visa, Mastercard, or American Express.

6) Procrastinating on Creating an Emergency Fund - Make sure you begin saving a little money each month into a savings account. You never know when a trip to the hospital could lead to a loss of income. You should be prepared for these events. Most experts tell you to have at least 3-6 months of your budgeted expenses saved in a savings account. This money can help get you through a medical situation or a job loss.

7) Paying Bills in No Particular Order - If you can pay all of your bills at the end of each month, obviously it doesn't matter what check you are writing first. But, if you are going to fall short one month, you need to prioritize which expenses are more important so you can pay the important ones. Rent/Mortgage, transportation, utilities, and other "basic living expenses" should always be the priority over credit cards, retail store cards, etc...

8) Charging Purchases Instead of Using Debit Card or Paying Cash - If you have the money in your pocket to pay cash, why charge on the credit card? I know, it's only $20 here or there, right? But what about when you do this three or four times a month. Suddenly, you have balances on your credit cards that could get out of control if you don't pay them each month.

9) Making Credit Payments Late - You might be tempted to simply "eat the late fee" on credit cards if you're struggling to make payments. Try to avoid this temptation as paying late could cause your interest rates to triple. In fact, missing payments to one credit card could could cause ALL of your interest rates to triple on ALL of your credit cards.

10) Making the Minimum Payment Only - Paying minimum balances is better than not paying, but if all you are doing is paying the minimum you won't make much progress paying your debt. Try to pay at least a little bit extra each month. Obviously the best option is to pay off the entire balance each month. Try working a part-time job or overtime and using the extra earnings to pay down debt.

Source: By Richard K. Gustafson on Legal Helpers Blog

Here's the link to the full article: www.bankrate.com/brm/news/debt/debtmanageguide/mess4.asp?caret=8 If the debt gets overwhelming, you may want to seek out bankruptcy information.

Senate committee takes on Web-based 'loyalty' marketing companies

Nobody wants to get nailed with unexpected credit card charges in this economy. Who's got money to waste?



If you've ever been startled by tiny little charges appearing on your monthly statement that contain the words "rewards," or "club" you swear you didn't pay for, there's a fairly good chance you've done business with Webloyalty, Vertrue or Affinion, though you didn't know it at the time. A boatload of consumers are with you.

And that's why these three companies, all privately owned, half an hour drive from each other on I-95 in Stamford and Norwalk, Conn., recently found themselves the subject of an investigation by the Senate Commerce Committee. From what I've heard, they haven't been particularly cooperative so far.



But when it comes down to it, none of them have had to be. The FTC really hasn't done much, despite some excellent suggestions.

In the past, Webloyalty has acted as if it had something to hide, developing something of a reputation over the years for trying to bury negative information about itself -- though its efforts to do so with an investigation we did at Consumer Reports Webwatch in September 2005 led to what could live today as a lesson for companies about how not to go about this sort of thing.

Hint: Don't publish a client list on your Web site if they've hired you to SEO their bad results off the first page of search returns. Take the lead from Kekst, the PR company Webloyalty (and AIG) hired. They're known for not publishing client lists.

However, Webloyalty may have learned from past mistakes. Webloyalty's corporate PR office e-mailed me after I Twittered that I was looking for former employees of these three companies -- no luck, I probably would have done better hitting some of the bars in downtown Stamford -- to ask if I needed anything.

I wanted to know: How is the company considering changing its practices in light of the congressional investigation? "Although the incidence of individuals who appear to have clicked through our process without reading what they were doing is quite small as compared to all of our members, even a few is too many," Beth Kitchener, Webloyalty's vice president of corporate communications, said in an e-mail exchange. "The class action lawsuit settlement as well as the issues raised by the Senate Commerce Committee put an exclamation point on the need to get this number as low as possible."

As of Aug. 1, Kitchener said, one key change is that Webloyalty "now require[s] customers to enter the last four digits of the credit card they used for the purchase they just made from our marketing partner to confirm they want to charge that same card for a Webloyalty membership. If they enter a number that doesn't match, we don't sign them up."

That seems to be a step in the right direction. Many consumers take requests for surveys and $10 rebates after a transaction as coming from the Web site they just did business with, which could be Chase or Orbitz or some other well-known brand, and don't expect some kind of quasi-identity-theft in the background, even if they enter some blow-off e-mail address just to get to the next screen.

An extra step requiring the consumer to actually part with credit card information a second time, should make a difference. Interestingly, Kitchener said, "None of our competitors have adopted this form of affirmative consent. We hope they will follow our lead."

So: Let's ask the same question of Vertrue and Affinion. Is Webloyalty right? Or are you changing your practices? How? More next week.

Source: Wallet Pop

Rebuilding Your Credit After Bankruptcy

Filing for bankruptcy is a serious blow to anyone’s credit; however, it is possible to rebuild your credit standing within a reasonable amount of time. The amount of time it takes to rebuild your credit varies from person to person; but, for for most who file, bankruptcy is actually the first step on the road to rebuilding your credit standing rather than the last.

When deciding to file bankruptcy, it is important to understand that Bankruptcy can remain on your credit report for up to 10 years. However, when you consider that a collection lawsuit, repossession, or foreclosure will also remain on your credit report for the same period of time; bankruptcy may be the best option since the bankruptcy eliminates your obligation to the underlying debt. This is an important consideration when you consider that in a repossession, you will be responsible for the remaining outstanding balance. Moreover, although a bankruptcy may stay on your credit report for 10 years, it will only take a few years after a bankruptcy discharge to rebuild your credit.

Step 1: Filing Bankruptcy

Believe it or not, the bankruptcy discharge itself, which liquidates all, or most of your actual debt, improves your income-to-debt ratio instantly. This, by itself, will help to increase your credit score.

Step 2: Obtain Credit and Use It

After your discharge, you will receive credit card and other solicitations fairly shortly. Most of these will be high-interest, low limit credit cards. Normally, I would recommend that you avoid these offers like the plague; however, it is a simple truth that you have to be in debt to establish credit. Therefore, I recommend that you obtain one of these cards and actually use it, sparingly.

Bankruptcy eliminates your past credit history. Therefore, you must establish a new credit history to rebuild your credit score. By using the card and making payments, you will establish a new credit history. Your use of credit is reported to the credit bureaus and will help accomplish this goal.

Step 3: Stay Current and Lean From Your Bankruptcy Experience

I hope that Bankruptcy was a learning experience. Follow these rules when using your credit card.

Do not use your credit card if you do not have the money to repay it. A credit card is a tool; not a crutch.
Use your credit card only for emergencies or large necessities and don’t use it again until the balance is paid.
Never carry a balance on your card more than two months of disposable income.
Pay more than your minimum balance. If you cannot afford to pay more than your minimum balance, then you can’t afford a credit card and should wait to try to rebuild your credit.
Never transfer a balance unless you actually intend to close your account with the card you are transferring. Most people get in trouble by transferring balances and then running up a new balance on their old card. GET RID OF IT!
Do not get a “store card.” The cards you get from Home Depot, Macy’s, and Target have interest rates that usually exceed 30% and cannot be used anywhere else. Stay away from them!
YOU DON’T NEED MORE THAN ONE CREDIT CARD; EVER!
As time goes by, you will begin to rebuild your credit score. You can eventually replace the high interest credit card with one that has better terms. However, don’t start overextending yourself. Learn from your bankruptcy experience!

Step 4: Avoid Credit Traps

Credit card companies are sneaky. They will offer all sorts of “offers” such as “90 days same as cash” or “no interest for six months.” However, don’t fall for these traps. Ninety percent of consumers do not repay the principal balance within the “interest free” period and if you have even $1 left owed on the principal, you will be charged interest on the entire balance. For example, if you purchase a dishwasher for $500 with no interest for six months. At the end of six months you still owe $5.00; the credit card company will then charge you the full six months interest on the entire $500 purchase.

Step 4: Monitor Your Credit Report

As a Massachusetts resident, you are entitled to 2 free copies of your credit report from each of the credit reporting agencies per year. Therefore, you should monitor your credit report every six months. If you find an error on your credit report, or find that a creditor that was discharged in bankruptcy is still reporting, you should report the error with the credit reporting company. If you still have problems fixing the error, you should contact your bankruptcy lawyer who will probably be able to help you.

This is by no means an exhaustive list; but just a guide. Credit is a two edged sword and should be used wisely. If you obtain new credit and do not control your spending, then you will likely be back in the same boat that you were in when you filed bankruptcy in the first place; only you will not have the option of filing again for 8 years. If you live in Massachusetts and you are considering bankruptcy, please feel free to contact us. Your consultation is free.

Source: Dax B. Grantham at the Grantham & Cencarik Blog

How to Face a Family Financial Crisis

An anonymous GRS reader submitted a question last week that hits close to home:

I have a family member that this past year has been in serious financial trouble. He is one of the most ambitious and intelligent people I know and I would have never imagined him getting in this kind of trouble. His ambition may have been his downfall as he keeps shooting for the stars and has fallen short on some of his business ideas, which may have put him in a more vulnerable position when the economy turned south.

He is now living in debt and struggling to put food on the table for his wife and four young boys. He has had to live on credit cards for several months and they are all maxed out. I have never seen first-hand anyone in this much trouble.

My question to you is, When faced with job loss and depleted savings, how can you avoid going into credit red? At what lengths would you go to to avoid living on credit cards and missing payments on just about everything? In the situation, is credit rating even worth anything?
As I say, this situation hits close to home. Last year, I wrote about my little brother, Tony. (I say “little brother”, but he’s 36 now.) Tony’s family got caught up in the mortgage mess, buying a home in Bend, Oregon at the height of the bubble — and before their home in Portland had sold. Six months earlier and things would have been fine. But things weren’t fine. They couldn’t sell either house. The market went to hell and they lost both homes to foreclosure.

Tony now faces circumstances similar to those described in the question above. He’s learning that there’s no easy solution to a family financial crisis. His father-in-law recommends “earning your way out of the problem”. That’s a fine theory, but not always practical. Tony and his wife work hard, but they’re only able to earn so much. I think that he — and people in similar situations — should also:

Cut spending to the bare minimum. This can be difficult. It can be tough to shift from normal spending to frugality, especially if you’re accustomed to middle-class luxuries and a middle-class lifestyle. But when facing a financial crisis, it’s imperative to reduce spending as much as possible and as soon as possible. You must stop the bleeding before you can treat the wound, before it can heal.

Consider drastic measures. Sometimes it’s not enough to stop the bleeding. To stretch the metaphor, sometimes you need to amputate. If you’re in a financial crisis, you may have to take drastic action, maybe even selling a car — or your home. Most people are unwilling to consider steps like these, which only leads them further into debt. These folks need to…

Be brutally honest. It’s easy to say, “I’m in trouble now, but it’s only for a month or two. I’ll keep doing things as normal by using my credit cards.” If you find yourself in a financial crisis, try to take an objective look at your situation. Get outside advice from friends and family. Be willing to listen to what they tell you. Sometimes others are better able than we are to see the slack in our budgets.

Avoid touching retirement savings. When faced with financial peril, it’s easy to look at the large sums sitting in your retirement accounts and think they’ll provide the life preserver you need. In nearly every instance, though, you’re merely postponing the pain. Your retirement savings are there to provide for you when you’re no longer able to provide for yourself. They’re not an emergency fund.
I’m sure that other Get Rich Slowly readers have family members in similar situations. Perhaps you’re even struggling yourself (or have done so in the past). Based on your experience, what advice can you offer other folks who are struggling in this economy? What can be done to avoid sinking deeper and deeper into debt?

And as an ancillary question, what can we do to help family members in need? What should we do? I’ve told Kris that if Tony and his family find themselves in danger of living on the street, we’ll make room for them in our house. But what about before that? At what point do I loan him money? (Or gift him money?) Or should I just be here to offer advice when he needs it?

Source: Get Rich Slowly

If You're Thinking About Mixing Money And Family, Read This First

I've had both good and bad experiences loaning out money to family members, but renting from them and paying their mortgage is beyond my comfort level. In theory it should all work out fine (after all, you're blood right?) but in the real world people tend to get hurt or taken advantage of.

Unfortunately, an ol' college friend is experiencing just that - getting stepped on because he doesn't want to ruin his relationship with both his brother and his dad. My friend means well, but it's time he starts to consider his options before he loses even more of his sanity...and money! Here's a play by play of what's going on:

My friend Good Brother (as he shall be named from this point forward) decided to live with Bad Brother and pay him rent (aka part of Bad Brother's mortgage) as well as 50% of the utilities.
For 2 years Good and Bad Brothers were happy.
Then one day Bad Brother decided to go back to school and move half-way across the country.
Good Brother was sad to see him go, but happy Bad Brother was pursuing his dreams.
Bad Brother asked Good Brother to help him fill the occupancy while he'd be gone (2+ years), and since Good Brother is, by nature, Good, he had no problem helping him out.
Good Brother tried and he tried and he tried, but the recession had finally hit and he couldn't find a suitable renter. It had now been THREE months and it just wasn't working.
He explained to Bad Brother that his asking price was too high (all the while paying 100% of the utilities now), and that his brother needed to lower the price and the rental terms.
Bad Brother wasn't having it and decided to try himself - only Bad Brother was more talk than he was action (and Good Brother didn't realize he was being taken advantage of yet) so they let ANOTHER three months pass only to remain where they originally started- without a 2nd renter.
It turns out another culprit had come into play - lack of motivation. The reason? Crazy Dad.

You see, trying to make things better and "help out," Crazy Dad had decided to subsidize the amount of the 2nd half's rent so that his son (Bad Brother) would have enough to pay the mortgage each month. While nice in theory, this has only caused more delays in finding a roommate as the sense of urgency has quickly disappeared.
On top of it all, Crazy Dad and Bad Brother believe Good Brother needs to be held responsible for filling the vacancy - family duties and all.

Good Brother is now pissed.

As it stands - now SIX MONTHS later - Good Brother is still paying 100% of the utilities & the vacancy has yet to be filled. Only now, Good Brother is starting to realize that it's not his responsibility to find this elusive roommate, and he's thinking of moving out. Why should he continue paying an extra $150 every month or continue getting bashed for not finding a roommate? Is this really HIS responsibility? Personally, I think not. The one who owns the house should be the one maintaining and paying for it - no one else. Ask his father or brother, and they'll tell you differently though.

Now, there's probably more to it than what Good Brother tells me, but the reason I post all this is to illustrate the importance of being careful. Mainly, being careful when it comes to mixing money with family members. Some of the times things work out great! But it's those other times that really put a strain on your relationships, and the times I hope you're able to avoid.

So please please PLEASE think it through when considering money arrangements with your loved ones. If you decide to go for it, write down in complete detail the arrangements you'll be making so everyone's on the exact same page. We all think it could never happen to us, but money has a strange way of breaking families apart. So please, be careful out there :)

Source: Budget Are Sexy

12 Clever Substitutions That Save Money (Nearly) Effortlessly

One of my favorite ways to trim money from my spending is to find simple little substitutes for my regular expenses. If I can trim a few bucks from the cost of household supplies, routine purchases, and other things like that, over the long run, that can add up to a lot of money with virtually no change in my life. Here are twelve of my favorites (not including my “infamous” homemade laundry detergent).

Laundry Softener -> Vinegar
Instead of buying expensive laundry detergent, just use half a cup of white vinegar to the “softener” cup in your washing machine. It accomplishes the same effect as softener – it makes your clothes really soft – plus it breaks down the laundry detergent, making the clothes much better for people with sensitive skin or allergies. What about the smell? Once the clothes are dried, you smell nothing at all. You can buy four gallons of vinegar for $6, meaning the cost per load is about $0.05, while a load’s worth of Downy costs about $0.15. You save a dime per load and your clothes are less chemical laden.

Ziplocs -> Reusable Containers
Ziplocs – especially the small ones – usually wind up in the trash after one use. On the other hand, a reusable container can last for years. Since a typical Ziploc costs about $0.10 and you can get a reusable Rubbermaid container for about $1.00, you break even on the container after about twelve uses or so (the cost of washing the container in the dishwasher is estimated there) and everything thereafter is pure savings.

Dishwashing Detergent -> Simple Homebrew
Instead of using liquid or powder dishwashing detergent (and paying a stiff premium for it), just take an old milk jug, put two teaspoons of liquid dish detergent and four teaspoons of baking powder in it, then slowly fill the jug with warm water, sloshing it while you do it (even better, just slowly add the soap as you’re adding the water). Then put that jug under the sink. Each time you do a load, fill up the cup with the homebrew. It works like a charm. The jug will provide enough for eight to ten loads of dishes for about a penny each, compared to about thirteen cents per load for ordinary detergent.

Knife Set -> Chef’s Knife
You’re just getting started in the kitchen and you think it’s time to get yourself a big ol’ knife set. Don’t. Unless you’re doing crazy things in the kitchen, all day every day, you really only need one knife – a chef’s knife. Head down to your local retailer and check them out. One good chef’s knife will make kitchen work easier than an entire block’s worth of other knives. It’s really all you need – I can’t even remember the last time I used a knife besides that one. Just learn how to properly hone it and sharpen it (both are easy – check out this YouTube video).

Windex -> Vinegar
Seriously. Just use vinegar instead of Windex when you clean your windows. It cleans off almost anything on a window and doesn’t streak and, more importantly, doesn’t leave a film behind as Windex often does. Just put some vinegar in a spray bottle – maybe that Windex one that you didn’t buy a replacement for – and just wash windows as normal. You’ll be quite happy with the results – and you’ll save about a penny per squirt.

Paper Towels -> Reusable Cotton Cloths
Cotton cloths work better, absorb more, and you can get a five pound (!) box for about the same price as a jumbo pack of paper towels. But what about the WASHING? It’s easy – just keep a ton of them in a drawer in the kitchen and use them for spills and filtering and other purposes until they’re dirty, then just toss them into any load of socks or underwear or towels. Even a big handful take up barely any room at all and before you know it, you’ve refilled your supply. Better yet, you’re not buying any more paper towels and you’re reducing your garbage.

Drain Cleaner -> Baking Soda and Vinegar
Remember those nifty volcanoes that kids tend to make for science fair projects in grade school? The basic mixture that made them bubble up was baking soda and vinegar – it expands nicely and pushes itself into everything. Perfect for clearing a clogged drain, no? Just put in a quarter cup of baking soda, chase it with half a cup of vinegar, then cover the drain and wait fifteen minutes. Once that’s done, chase it with a gallon or so of boiling water. This will clean almost any drain and save you from blowing unnecessary amounts of money on a big bottle of Drano. This also works as a toilet bowl cleaner – it’ll foam up like crazy at first, but after fifteen minutes, you’ll be able to scrub your toilet with a brush with ease.

Television -> Old Computer
If you need a new television somewhere, why not just use an old computer instead? A computer that’s five years old with a ‘net connection can easily be a substitute for a television. You can watch tons of programs full screen on Hulu and many channels offer a full screen stream, too, plus it’s simple to watch DVDs on a computer as well. Even better, you can stow the box somewhere out of the way (in a cabinet, perhaps) and just leave the monitor somewhere easy to access. This can be a great solution in a kitchen, where you can watch television on it or use it to call up YouTube videos to tutor you through a meal prep – plus you don’t have the cost of buying anything to get it working.

Oven Cleaner -> Ammonia
If you cook at home, you’ll eventually have to clean your oven – and it can be a nasty job. There are lots of products out there that claim to be able to make this process easy, but the easiest way I’ve found is far cheaper – and far easier. Just put a cup of ammonia in a glass bowl in the evening, put that bowl in your oven, and close the door. Let it sit overnight. The next morning, get rid of the ammonia and you’ll find scrubbing down the inside of your oven is suddenly quite easy. The burnt-on drippings from spilled dishes will come right up with no problems. Plus, a jug of ammonia is far cheaper than some spray-on solution.

Keep reading more tips here, on The Simple Dollar

12 Common Myths About Bankruptcy

One of our favorite law blogs, Grantham & Cencarik, in Boston, posted this the other day:

I have been practicing Bankruptcy law in Massachusetts for over eight years. Throughout that time, I am confronted with clients who come into their intake interview with several misconceptions about bankruptcy. Therefore, I decided to compiles a short list of the most common myths about bankruptcy based on what I have heard from my own clients through the years. If you are considering bankruptcy, and are afraid because of what someone told you that you shouldn’t because…. I hope that you take the time to read this.

1. Under the new Bankruptcy Laws Everyone has to repay their creditors. False: In 2005, the bankruptcy laws were changed to provide a test to see who can qualify for a Chapter 7 Bankruptcy. Essentially, if someone has sufficient income, and the ability to repay a portion of their debt, then they will have to file a chapter 13 which will require them to enter into a court supervised repayment plan with their creditors. The new law does not prevent people from filing and in most situations people are still able to get the same relief now as before the law changed.

2. Once I file Bankruptcy my credit is ruined for life. Not Quite…while bankruptcy is a blow to your credit rating; it is not permanent. Because most people have numerous charge offs and sometimes even a collections lawsuit on their credit report before they decide to file, most people will actually seen an increase in their credit score within 1-2 years. Moreover, most of our clients report that they are able purchase cars and homes within 2 – 3 years.

3. Only deadbeats and losers file for bankruptcy. False…Most people file for bankruptcy after a life-changing experience, such as a divorce, unemployment or a serious illness. They’ve struggled to pay their bills for months and just keep falling further behind.
Moreover, some famous people who have filed bankruptcy who were (or are) successful include: Walt Disney, three US Presidents, Larry King, Donald Trump, and Henry Ford.

4. All debts can be discharged in a bankruptcy filing. False…certain debts cannot be discharged through bankruptcy. For example, child support, student loans and most taxes, and debts incurred by fraud (to name a few) cannot not discharged. This list has exceptions and is not exhaustive. If you have questions, contact a bankruptcy lawyer.

5. You can’t get rid of back taxes through bankruptcy. Generally speaking, this is true. However, under some circumstances income taxes are dischargeable. The rules concerning discharging taxes are complicated; so if you owe income taxes, an experienced bankruptcy lawyer can tell you if you can discharge the taxes.

6. Filing bankruptcy could cost you your job. No. The current bankruptcy code prohibits discrimination against an individual who is in bankruptcy or who has bankruptcy in the past.

7. You will never be able to own property again. Not True. Once you receive your bankruptcy discharge, you bankruptcy if finished. You can continue to live your life and can purchase and sell property like everyone else. Creditors will eventually lend to you again to help you with large purchases and you are able to purchase whatever you can afford.

8. Everyone will know I filed for bankruptcy. False. Bankruptcies, like all court records are public; however, in order to see the records, one has to actually go to the court and look for them. Bankruptcy is not published generally the only people who are going to know are those who you tell. Some people think that newspapers carry bankruptcy filing information, this is simply not true.

9. I will lose everything I own. Again this is false. Once you file bankruptcy, you will be able to keep certain property up to a certain value; this property is known as exempt. Most bankruptcies are known as “no asset” bankruptcies, meaning that you get to keep all of your property and all of your unsecured debts are discharged. Exemptions vary from state to state, so it is important to speak with an experienced bankruptcy attorney in your area.

10. Creditors can still harass me if I file for bankruptcy. Not Legally. When the bankruptcy is filed, automatic protection is put onto you and all of your property instantly. Creditors are not allowed to contact you for any reason, which includes calling or even billing you. If they persist in harassing you, you do have remedies available through the Federal Bankruptcy laws.

11. I can be turned down for filing bankruptcy. Mostly False. So long as you are honest on your petition, don’t try to conceal assets and don’t lie about your income an experienced bankruptcy will be able to file you in the proper chapter bankruptcy and your debts will be discharged. The bankruptcy statute is designed to help ALL honest debtors who need help. If you lie on your petition, or try to conceal assets, then the justice department will seize your assets to repay your creditors and you will not have your debts discharged. Moreover, you could end up in jail.

12. Bankruptcy is easy; I don’t need an attorney. False. The bankruptcy code is extremely complex; so complex that a lot of attorneys choose not to practice in the field. If you fail to take all the proper steps leading up to filing bankruptcy, then you risk losing your home, and/or all of your assets. We have represented several clients who wanted to save money and who filed bankruptcy without an attorney and messed up on their petition and/or filed under the wrong chapter. They ended up paying us three or four times more in legal fees to fix the mess that they made than they would have paid us to file their bankruptcy in the first place.

By no means is this an exhaustive list and there are many more misconceptions out there. If you have any questions, then you should contact us and schedule a free appointment. You have nothing to lose and we can provide you with the facts you need to make an informed decision.

Source: Boston-Legal.com

Spending Filters and Delaying Gratification

In a recent article Matt Jabs from Debt Free Adventure discussed an interesting concept, Spending Filters. A filter is a device that removes unwanted items as they pass through it; a spending filter is something similar. Before making a purchase you run it through some of these filters to ensure you are not making a purchase for the wrong reasons.

Matt lists 6 filters:

1. Do I need it?

2. Ask for a discount

3. Consider alternative products/services

4. Compare prices

5. Be productive instead of spending

6. Use spending ledgers

Some other filters mentioned by readers in the comments section are:

1. Control spending

2. Need vs. Want

3. Will I need it in the future?

Although I like Matt’s concept of spending filters, I think that most of us use spending filters knowingly or unknowingly. I believe Matt has left out one important factor: self-discipline. If you do not have self control and the ability to delay gratification then the above mentioned filters will not be of any use to you – because at the end of it if you want, you’ll buy it.

Spending filters will only work if you have a desire to save and the self discipline to delay immediate gratification. If someone really wants that brand new car then putting it through spending filters won’t stop them from getting it. I can come up with tones of reasons why I really need the new car:

1. Buying used car will cost more in long run due to repairs.

2. No warranty for used car.

3. No guarantee that the car is truly in the condition the seller claims it to be.

4. New car will last me longer.

The list can go on and on. Just recently I had a family member go through this exact scenario – tones of debt, just one income, recently had a child and he was able to convince himself to lease a brand new car, probably the worst financial decision he could make at this time. Not only did we (the wife and I) put the purchase through the spending filters for him, but we also did detailed math and showed him in numbers how bad of a deal he was getting. However, he was convinced that he needs the new car and that there are no alternatives.

If you do not have sufficient self control, this concept will not work very well. Spending filters are subjective; you see things as you WANT to see them even with the filters on. If you have spending problems than your focus should not be on applying these spending filters, but learning how to delay your gratification and practicing self control to avoid impulsive spending.

Consumers are not in debt up to their neck because they do not understand the spending filters and wants vs. needs, but because they do not have sufficient self control and are accustomed to having everything they want now. This need for immediate gratification leads them to impulse buying, which leads eventually leads to spiraling debt and the cycle goes on.

If you are reading personal finance blogs then you fall into two groups:

First group are those who are financially responsible and want to learn more about saving, investing and personal finance.

Second group are those who have made some financial mistakes and fallen in debt, but are now are trying to get things back to normal.

If you fall into the first group then I direct you to Matt’s article to learn more about the spending filters and how they can help you, if you are in the latter group than I direct you to our article on how to delay gratification.

Source: Financial Highway

What Should I Bring To My Lawyers Office For My First Meeting?

Great post from one of our favorite Attorney Blogs: Gratefullawyer.com

The most important thing to bring is everything. Completing a questionnaire gives the lawyer the best view of your problems . The more information that we review. The better we can undestand your problems and tried to provide answers that address those problems

Bring all your bills, pay stubs, tax returns, information on your cars, household goods, bank account and retirement accounts. You can looked for a complete list on the website at the document list link.

Bring a set of questions that you want answered. We may not be able to answer all your questions at the first appointment but we will try to let you know if bankruptcy will help you.

In a down economy, what are the wealthy doing with their money?

Experts who work with the wealthy and observe their spending habits say rich folks are sitting on their cash. Just like the rest of us, they're worried about the future. Suddenly uncomfortable with the nation's financial volatility, the wealthy are revisiting their investment and savings strategies, says Chris Geczy, director of the Wharton Wealth Management Initiative at the Wharton School in Philadelphia.
"They're consuming less and saving more," Geczy says.

Like so many other Americans, "the mass affluent were overextended" in real estate and investments gone sour, he says. Now, they are more likely to invest in fixed-income vehicles.

"They're still scared of risk," he says.

Investment professional Nancy Rooney has noticed this fear, too.

"There is a subset who -- since September and October -- are frozen and so nervous," says Rooney, managing director and head of the Northeast investment business for private wealth management at J.P. Morgan in New York, which says it serves 51 percent of the Forbes 400 list of U.S. billionaires.

"They're looking at their principal left and realize, 'If I lose any more, I'll jeopardize my quality of life,'" she says.

Here are a few ways the wealthy are saving in the current recession -- and lessons average investors can learn from the rich.

Put safety first
Today, many wealthy people are thinking about safety over yield, Geczy says. The wealthy are scouring the Internet, looking for the best rates on CDs, money market accounts and other FDIC-insured options, he says.

"They're still hugging close to fixed income, Treasury bills and fixed assets," he says.

The FDIC only insures up to $250,000, so multiple savings accounts at solid institutions are key to liquid returns, says Tim Grizzle, a certified public accountant and CEO of Georgia Logic, an Atlanta-based financial planning firm for high net-worth individuals, who also wrote "Creating Wealth in a Turbulent Economy."

"Those who are cash-heavy spread the wealth over multiple banks to ensure FDIC insurance," Grizzle says.

Rooney says that when shopping around for a bank, it's important to look into an institution's overall financial health.

"Your biggest decision this year is where you're going to put your money," Rooney says.

As long as you choose a bank that's FDIC-insured, there will be no risk to the first $250,000 you deposit. However, if a bank fails and is taken over by the FDIC, your great rate could disappear, as there is no guarantee an acquiring bank will honor your previous institution's rate.

Banks that offer a much higher-than-average rate of return may be cash-strapped and at risk of failing, Geczy says.

On the other hand, competitive rates aren't necessarily a sign of trouble. For example, some online-only banks can offer great rates because they don't have the expenses of a brick-and-mortar bank, including everything from rent to electricity bills and janitorial services.

It takes a savvy researcher to discern the difference between a bank that's cash-starved and one that's an efficient operator. If a bank offers an unusually high return, ask questions, Rooney says.

"I wonder why it's above market -- why do they need deposits so desperately?" she says.


Protect against inflation
Like everyone else, the wealthy have to worry about rising prices eating into their savings. For now, inflation remains subdued; in fact, some experts are more worried about the prospect of falling prices, or "deflation."
Banks are paying out very low rates on savings instruments today. However, the return may be better than it appears, thanks to today's low inflation rate. For example, if you find a savings account with 1 percent interest in an environment where inflation runs minus 1 percent, you've netted a 2 percent rate of return.

Keep reading on bankrate.com

Overspenders to face tax audits?

A recent article in the Wall Street Journal reported on a new effort by the IRS to catch tax cheats. The IRS is going to compare data on mortgage-interest payments provided by financial institutions with homeowners' declarations of income on tax returns. The idea is that people must have more income than they reported to the IRS if they are able to make their mortgage payments, the bulk of which for homeowners with new loans from purchase or refinance, will be payments toward interest. Using data from 2005, the Treasury inspector general said that "tens of thousands of homeowners who paid more than $20,000 in mortgage interest" reported income that appeared "insufficient" to have covered their mortgage payments and basic living expenses. I don't doubt that fact, but I see an alternate hypothesis to explain the situation. These families are accurately reporting their income, but they are just spending more than they earn. They have houses they cannot afford, and they use Capital One to finance their basic living expenses so their income dollars can go to mortgage payments. Back in 2003-005 when these data were gathered, the credit market was loose and many families made up shortfalls in monthly living using credit cards, or in some instances, doing a cash-out refinance, and then living off the cash, expecting the housing market to sustain this strategy. Relying on debt to make ends meet has always carried risks, including bankruptcy risk. Should we add the risk of a tax audit to the reasons that families need to keep income and expenses in alignment?

Source: CreditSlips

How We Organize Our Finances

Here’s a quick rundown of how we organize our finances and our financial documents -

Extremely Important Documents -

We keep our tax returns, marriage license, birth certificates, car titles, etc. in a fire-proof safe. I have friends who keep such documents off-site in a safety-deposit box. The fire-proof safe works for us. I also have electronic copies stored on a removable hard drive.

Important Documents -

We keep cleared checks, bank statements, and other important documents under lock-and-key in a filing cabinet. I have an accordion-style file folder for each year’s documents. When a new year begins, I simply store the previous year’s folder in the filing cabinet and start a new folder. Bills, checks, bank statements, etc. are filed alphabetically.

Electronic Documents -

For bills or other documents that I receive electronically, I keep a few in a folder on my computer’s hard drive, and store back ups on a removable USB hard drive.

Online Accounts -

In my browser, I have created a bookmarks folder labeled financial accounts. I have links to all of my financial accounts saved in the financial accounts folder. When I want to pay a bill online or take a look at my retirement account, I simply select the financial accounts folder, and click open all in tabs. I then have access to all of my accounts. I can log in to as many accounts as I need.

Inventory of Accounts -

I have a list of all of our financial accounts (places where we have money saved). I have a printed copy and I have a copy on my hard drive. Click here to view and download a blank copy of the inventory of accounts that I use. I update this inventory once per quarter. If you use this inventory, be sure to store it in a place where you (and your spouse) and only you (and your spouse) can access it.

Budget -

I use a the very simple, easy to use You Need A Budget software to manage our household budget. Click here to read about the zero-based budget method that we use. (YNAB is a long-time sponsor of No Credit Needed. I’m more than proud to promote their products and I use their pro version every day.) It usually takes me less than 30 minutes to create our budget, and less than 10 minutes per week to actually “manage” our finances.

Cash -

I do not like credit cards, and there are times when I do not feel like using my debit card. I am a big fan of the cash management system known as the envelope system. Click here to view a short video where I explain how the envelope system works for me.

The Process -

At the beginning of each month, I’ll sit down and create a monthly budget. My wife will look it over, and we’ll make any changes that she suggests. My wife gets paid at the end of the month, so on the 1st or 2nd of each month, I’ll deposit her check in our local bank. Any monthly bills are immediately paid, via online bill pay. Cash is “deposited” in our envelopes. Any paper bill stubs that we might have are filed away in the accordion-style file folder.

Two weeks into the month, I receive my paycheck. I deposit it in the local bank and then transfer any money allocated for savings to our ING Direct savings account.

As I receive bills throughout the month, I place them on a little table in our kitchen. One week before the end of the month, I’ll open them, make plans to pay them, and file any that need to be filed.

My goal -

My goal is to keep my life (and my mind) as uncluttered as is possible. I like for things to be “just so”. Before I began to reduce my debt and work on my finances, I was extremely disorganized. Having learned my lesson (a hundred times over), I know strive to be very organized. I want to be able to spend my time on the more important things (people) in my life. So, I have put a lot of work in to creating some systems that work for me. Hopefully, you’ll find some systems that will work for you.

Source: No Credit Needed

The Best Ways to Boost Your Retirement

This is a guest post from Robert Brokamp of The Motley Fool. Robert is a Certified Financial Planner and the advisor for The Motley Fool’s Rule Your Retirement service. He contributes one new article to Get Rich Slowly every two weeks.

With the S&P 500 still down more than a third from its 2007 high, we’re all a little unsure about our retirement plans these days. So it’s time for some good old-fashioned elbow grease. A little effort now should make for a lifetime of security and peace of mind. And the first step is to run your numbers through financial calculators to estimate whether you’ll have enough saved to kiss the boss goodbye. (Metaphorically, of course.)

The calculators’ answers are important information. But what’s even more useful is changing the variables to see what most improves your chances for success. A retirement plan has a lot of moving parts — how much you save, where you live, when you start taking Social Security benefits — and some decisions will have a bigger effect on your nest egg than others.

The factors that have the biggest impact on a retirement plan vary from person to person. But to demonstrate how you can fiddle with your factors to analyze your own plan, let’s examine the retirement prospects of a hypothetical worker — whom we’ll call Hilda, as I’m a sucker for good German names — and see how dialing her numbers one way or the other changes her projected retirement income. Here are Hilda’s particulars:

Age: 55
Marital status: Single
Current income: $60,000
Desired retirement age: 65
Desired retirement income: $45,000
Estimated age at death: 95
Current savings: $100,000
Annual contributions to retirement accounts: $6,000
Assumed annual return on investments: 8%
For our analysis, we’ll use the “Am I saving enough? What can I change?” calculator found among the retirement calculators at The Motley Fool. Once you’ve entered your numbers and hit the “results” button, the calculator provides the number of months that it estimates your savings will last given your desired retirement income. In Hilda’s case, here’s the calculator’s analysis: “Your living expenses after retirement will be fully funded for 127 months.” Divide by 12, and you see that her money is expected to last 10.6 years. Unfortunately, that’s not good enough. If she wants to retire at 65 and expects to live until 95, she needs her money to last 30 years, or 360 months.

So what should Hilda do? Here are her options and possible outcomes, adjusted a single factor at a time.

Save More
Hilda’s current saving rate is 10% of her income. What if she ups that to 15%, or $9,000 this year? According to our calculators, that will make her income last 155 months — an additional 2.3 years. That’s a fine first step, but it still has her running out of money in less than 13 years.

Let’s say she, through a drastic lifestyle reduction, managed to contribute the maximum to her 401(k), which in 2009 is $22,000 for someone age 50 and older. That would supersize her portfolio enough to last an estimated 322 months, much closer to the 360-month mark. But she probably can’t save 36% of her income. She’ll have to look at other options.

Spend Less in Retirement
What if Hilda decides she can live on a retirement income of $40,000 instead of $45,000? After all, she’ll no longer be stuffing her 401(k) or paying Social Security and Medicare taxes (7.65% of each and every paycheck), and her income-tax bill will drop, too. Maybe she’ll also have eliminated her mortgage by then.

Dropping her annual income requirements by $5,000 adds 51 months (4.3 years) to her portfolio’s estimated lifespan. Not huge, but not negligible, either. However, Hilda feels this would be cutting costs a little too close. She wants to look at other possibilities.

Retire Later
What happens when Hilda continues to save just 10% of her income but retires at 68 rather than 65? In that case, she’d have three more years of saving, a higher Social Security benefit (because of her higher lifetime earnings and her beginning benefits later), and she’d need her money to last just 324 months.

In this case, her money would last 255 months, or 21.3 years. By retiring three years later, she’s doubled the longevity of her portfolio. But it still won’t last until age 95. However, if she retires just one more year later — at 69 — the calculator estimates her money will last longer than she will, which is the goal of any retirement plan.

Work in Retirement
Unfortunately, Hilda can’t stand the thought of working full-time for more than another decade. However, she’s open to the idea of working part-time for the first five years of her “retirement.” If she earns $30,000 in each of those five years, her portfolio’s life expectancy improves from 127 months to 237 months, or almost 20 years. That doesn’t get her to age 95, but it’s a significant improvement. In fact, for every year she works part-time in retirement, she adds about two years to the estimated endurance of her portfolio.

Quick note: Because Hilda’s “full retirement age” for Social Security purposes is 66, she shouldn’t begin taking Social Security until then if she’s still working. When you begin benefits before your full retirement age but then earn work-related income, your benefit can be significantly reduced.

Tap Home Equity
There are a few ways to use home equity to boost your retirement. Let’s see how Hilda could add these to her calculations.

First, let’s assume that she no longer needs her family-sized home. She actually has some equity in the home, so she sells it, buys a smaller home, and comes out with an extra $50,000. Realistically, given the state of real estate these days, it would take at least a year to sell her house and actually get that $50,000 into her hands to invest. If it earns 8% a year, it would add 58 months — almost five years — to the longevity of her savings. That’s a decent-sized boost, and that’s not counting the lower cost of heating, cooling, maintaining, and paying property taxes on a smaller home.

The other option is a reverse mortgage, which is when a bank pays you money based on the value of your home, and you don’t pay it back until you move. A reverse mortgage on a home currently worth $300,000 could provide a check of $1,200 every month that the borrower stays in the house, according to www.reversemortgage.org. Our retirement calculator doesn’t have an input field for reverse mortgage, but since it operates essentially like a pension, that’s where we’ll add the $1,200. Input “30″ in the “Years you will receive payments” field, and check the “First payment adjusted for inflation” button (but not the others). Click on the results and — voila! — Hilda’s retirement is fully funded.

While that’s encouraging, we should mention that it assumes Hilda’s mortgage is paid off before she takes out the reverse mortgage. If she moves before she passes away, she’ll have to pay off the loan. Plus, reverse mortgages can be expensive. So our preference is to put off taking out a reverse mortgage for as long as possible, perhaps using it only in the case of an emergency, such as needing in-home long-term care.

Change Your Expiration Date
Of course, Hilda’s original retirement plan is perfect as long as she dies within 127 months of retiring. All jokes aside, it’s worth remembering that we’re playing it very safe by assuming she’ll live to 95. According to the Social Security actuarial tables, only 10.3% of 55-year-old women make it to 95. If Hilda’s not in good health or longevity doesn’t run in her family, she might assume she’ll die at age 90. That doesn’t change how long her portfolio will last, but it does change how long she’ll need it to last.

A Mixture of the Factors
We looked at many variables in isolation, but the best solution for Hilda is to tweak several categories to find a combination of changes that she finds palatable. For example, if Hilda downsizes to a smaller home (resulting in a $50,000 investment a year from now), saves $200 more a month, delays retirement to age 66, and works part-time for the first two years of her retirement, her money will last until she’s 95. Considering all her options, Hilda decides these are adjustments she can live with.

The Bottom Line
Retirement calculators are very handy tools, but they’re not crystal balls. The results are based on many variables — such as inflation, investment returns, and Social Security benefits — that we can’t predict and could turn out worse than expected.

How should you handle this uncertainty? Run your numbers once a year, using updated account balances, savings rates, and benefits projections (for example, put in the estimated Social Security benefit found in the statement you receive in the mail three months before your birthday each year).

Also, different calculators provide different results, so don’t rely on just one. For additional opinions, check out:

FIRECalc (FIRE = financial independence/retire early)
The T. Rowe Price retirement income calculator
The ESPlanner (economic security planner)
The flexible retirement planner
TD Ameritrade’s WealthRuler
Despite their shortcomings, retirement calculators do a good job of estimating the value of one decision over another. For Hilda, the variable that had the biggest impact on her plan was retiring a few years later. But it will be different for other people. As one example, boosting a savings rate from 10% to 15% would have a much bigger payoff for younger investors than it did for Hilda, who was already within a decade of her target retirement date.

What will provide the most power to your plan? There’s only one way to find out. Visit a financial calculator and start plugging away.

Source: Get Rich Slowly