Debit cards and online banking have it easier to spend money and they’ve also made it easier to overdraft your bank account. Back in the days of cash and checks, you could easily figure out your bank account balance and how much you were able to spend. All you had to do was track your balance in your checkbook register. Add up the amount of checks you’d written and subtract it from your last known balance. Viola!
After you’ve swiped your check card several times throughout the day, paid some bills online, and withdrawn cash from the ATM, keeping up with your account balance is hard. Then, factor in way charges hit your account at different times and convenience becomes an ingredient in a recipe for disaster.
Many banks won’t stop you from using your check card when it could overdraft your account. In fact, some purposely process your transactions in a way that makes you overdraft. You can count on paying that fee for every item that posts to your negative balance. If you leave your account overdrawn for too long and you’ll start incurring daily fees for the negative balance.
Overdrafts weren’t always handled this way. A few years ago, banks would just reverse transaction and charge you a non-sufficient funds fee. After that, the merchant could present the transaction for payment a second time. If you still didn’t have the funds, you’d get hit with another non-sufficient funds fee. On top of all that, you’d have to pay the merchant directly for the transaction plus a returned check fee. You could end up paying $90 on a $10 transaction.
You can avoid overdraft fees by keeping up with your account balance and the purchases you make. Link your checking account to a savings account or line of credit that will fund any charges that exceed your balance. If you’ve already incurred some overdraft charges, talk to your bank’s customer service to find out if you can have them refunded.
Thursday, December 11, 2008
Hope for the Best, But Prepare for a Layoff Anyway
In this job market, it’s hope for the best, prepare for the worst. Companies are reporting layoffs daily. Unfortunately, job security isn’t at its peak right now. You should always plan for the unexpected, no matter how unlikely you think it might be, and that includes a layoff.
Update your resume. Make sure you’ve updated your resume to reflect your latest duties and accomplishments. If you wait until after you’ve left your job, you forget to add something important. Having your resume updated gives you one less thing to worry about as you search for a new job.
Network. Connect with friends and relatives who work in other companies. It’ll be easier to ask someone for a job favor if you’ve recently been in contact with them than if you haven’t spoken to them in years. Always look for opportunities to talk to new people. You never know who’s going to help you get into your next job.
Build an emergency fund. You can’t predict how long you’ll be looking for a new job. In the meantime, you’ll need some money to live on. An emergency fund will help you pay the bills until you get a new job. Put enough money in your emergency fund to pay three to six months of living expenses.
Pay off some debt. If you can get rid of some credit card debt while you’re still gainfully employed, you’ll have fewer bills to worry about if you lose your job. Build your emergency fund first, though. You can always float on minimum credit card payments until you’re able to pay first.
Get to know your unemployment laws. In the event of a layoff, new legislation could allow you to receive up to half your income for 39 weeks. Check with your state’s unemployment agency to find out more about the unemployment laws where you live.
A layoff is most painful when you’re unprepared for it. Take a few steps to stabilize your financial life and a layoff won’t hurt so badly.
To learn how to manage your debt, click here.
Update your resume. Make sure you’ve updated your resume to reflect your latest duties and accomplishments. If you wait until after you’ve left your job, you forget to add something important. Having your resume updated gives you one less thing to worry about as you search for a new job.
Network. Connect with friends and relatives who work in other companies. It’ll be easier to ask someone for a job favor if you’ve recently been in contact with them than if you haven’t spoken to them in years. Always look for opportunities to talk to new people. You never know who’s going to help you get into your next job.
Build an emergency fund. You can’t predict how long you’ll be looking for a new job. In the meantime, you’ll need some money to live on. An emergency fund will help you pay the bills until you get a new job. Put enough money in your emergency fund to pay three to six months of living expenses.
Pay off some debt. If you can get rid of some credit card debt while you’re still gainfully employed, you’ll have fewer bills to worry about if you lose your job. Build your emergency fund first, though. You can always float on minimum credit card payments until you’re able to pay first.
Get to know your unemployment laws. In the event of a layoff, new legislation could allow you to receive up to half your income for 39 weeks. Check with your state’s unemployment agency to find out more about the unemployment laws where you live.
A layoff is most painful when you’re unprepared for it. Take a few steps to stabilize your financial life and a layoff won’t hurt so badly.
To learn how to manage your debt, click here.
Friday, December 5, 2008
You Could Pay Taxes on Settled Debts
Debt settlement offers relief on one end, but it may come back to bite you on the other end. The IRS (Internal Revenue Service), the agency responsible for tax collection and tax law enforcement, requires businesses to report any cancelled debts over $600. Not only does the business report the debt cancellation to the IRS, it’s also required to send you notification of the reported cancellation. The business gets a tax break that could be funded by you.
You’re required to report cancelled debts on you income tax return. Reporting the debt increases your taxable income and could potentially put you in another tax bracket, especially if you were teetering on the edge of brackets to begin with. That means you could end up owing Uncle Sam if you didn’t have enough money withheld to cover the increased tax responsibility. If you’re getting a refund, your check would end up being less.
Debt cancellation counts whether the business forgave the entire debt or just part of the debt (like with debt settlement). It doesn’t matter whether you used a debt settlement firm or whether you negotiated the debt yourself, a cancellation is a cancellation.
To learn more about debt settlement, click here.
If the debt was cancelled due to a bankruptcy discharge or because you were insolvent, you won’t have to pay taxes on it. Insolvency occurs when your liabilities (debt) are more than your assets.
If you receive a 1099-C Cancellation of Debt form from one of your ex-creditors or lenders consult with your accountant or tax preparer to find out whether you’ll have to include the cancelled debt on your tax return and how the debt cancellation will affect your tax liability.
If you would like to learn more about bankruptcy, click here.
You’re required to report cancelled debts on you income tax return. Reporting the debt increases your taxable income and could potentially put you in another tax bracket, especially if you were teetering on the edge of brackets to begin with. That means you could end up owing Uncle Sam if you didn’t have enough money withheld to cover the increased tax responsibility. If you’re getting a refund, your check would end up being less.
Debt cancellation counts whether the business forgave the entire debt or just part of the debt (like with debt settlement). It doesn’t matter whether you used a debt settlement firm or whether you negotiated the debt yourself, a cancellation is a cancellation.
To learn more about debt settlement, click here.
If the debt was cancelled due to a bankruptcy discharge or because you were insolvent, you won’t have to pay taxes on it. Insolvency occurs when your liabilities (debt) are more than your assets.
If you receive a 1099-C Cancellation of Debt form from one of your ex-creditors or lenders consult with your accountant or tax preparer to find out whether you’ll have to include the cancelled debt on your tax return and how the debt cancellation will affect your tax liability.
If you would like to learn more about bankruptcy, click here.
Pulling From Retirement Should Be the Very Last Resort
Times are tough, sure enough, but if you’re pulling from your retirement now, what are you going to live on when you’re 65? With the uncertain future of social security benefits, retirement savings could be the only income we have in the coming years. That’s why it’s so important keep retirement funds untouchable.
A recent survey by Bank of America shows that 18% of respondents took an early withdrawal from their retirement funds because of the economic crisis. Of those that pulled from their funds, 25% withdrew money for credit card bills, 22% for mortgage payments, and 22% because of a job loss.
There’s another reason that to leave retirement savings alone – early withdrawal penalties. If you withdraw money from your retirement before you’re allowed, the withdrawal is taxed and subject to a 10% early withdrawal penalty. If the withdrawal comes from a SIMPLE IRA that you opened within the past two years, the penalty is 25%.
The early retirement withdrawal penalty and shortage of retirement funds aren’t worth it, especially when you have other options.
Do you have access to savings, non-retirement investments, or an emergency fund? Withdrawing money from any of these places is better than taking money out of your retirement.
Do you have valuable assets you can sell? Before you pull money from retirement, try selling some high-valued assets like jewelry or a vehicle. The profit may very well be enough to get you through the tough times leaving your retirement savings intact.
If you’ve recently been laid off through no fault of your own, you may be entitled to unemployment benefits from the government. A new law may allow you to receive up to 39 weeks of unemployment. Your state’s unemployment agency will be able to tell you whether you qualify for unemployment, the amount you’ll be able to receive, and how long you’ll receive the benefit.
If you are behind on your mortgage payments, click here.
A recent survey by Bank of America shows that 18% of respondents took an early withdrawal from their retirement funds because of the economic crisis. Of those that pulled from their funds, 25% withdrew money for credit card bills, 22% for mortgage payments, and 22% because of a job loss.
There’s another reason that to leave retirement savings alone – early withdrawal penalties. If you withdraw money from your retirement before you’re allowed, the withdrawal is taxed and subject to a 10% early withdrawal penalty. If the withdrawal comes from a SIMPLE IRA that you opened within the past two years, the penalty is 25%.
The early retirement withdrawal penalty and shortage of retirement funds aren’t worth it, especially when you have other options.
Do you have access to savings, non-retirement investments, or an emergency fund? Withdrawing money from any of these places is better than taking money out of your retirement.
Do you have valuable assets you can sell? Before you pull money from retirement, try selling some high-valued assets like jewelry or a vehicle. The profit may very well be enough to get you through the tough times leaving your retirement savings intact.
If you’ve recently been laid off through no fault of your own, you may be entitled to unemployment benefits from the government. A new law may allow you to receive up to 39 weeks of unemployment. Your state’s unemployment agency will be able to tell you whether you qualify for unemployment, the amount you’ll be able to receive, and how long you’ll receive the benefit.
If you are behind on your mortgage payments, click here.
Getting a Good Loan Rate
These days getting approved for a loan is hard. Getting approved and getting a good interest rate is even harder. But, it’s not impossible.
If you want to get a good interest rate on a loan, the most important thing to have is a good credit score. Without a solid credit history, you can forget the competitive interest rates. These days, lenders are looking for credit scores of 720 or higher to give loan applicants a good rate. So before you fill out a loan application, check your credit score. That way, you’ll know whether you’re ok to apply for a loan, or if you need to do some work on your score.
For those who need some credit score work, one of the quickest ways to see a boost in your score is to dispute inaccurate items from your credit report. If your credit score is below 720, check your credit report to make sure there are no errors. If you do find a mistake, dispute it with all three credit bureaus to make sure your complete credit history is correct.
To look at all three of your credit reports, click here.
The other thing you’ll need to get a good interest rate is a verifiable income. The days of stated-income loans are long gone. With a stated-income loan, the lender would “take your word for it” so to speak in exchange for a higher interest rate. You got the loan without the trouble of proving your income. The bank got extra money. Everyone was happy. It doesn’t quite work like that. You need to be able to prove your income with recent paystubs, bank statements, and income tax returns. Some self-employed individuals who take large businesses deductions might have trouble even getting approved for a loan, much less get a good interest rate, even with good credit scores.
Finally, you’ll need to reduce your debt. Lenders want to see your debt-to-income ratio below 36%, even after you’ve taken on the new loan. You can calculate your debt-to-income ratio by dividing your total monthly income by your total monthly debt payments.
If you want to get a good interest rate on a loan, the most important thing to have is a good credit score. Without a solid credit history, you can forget the competitive interest rates. These days, lenders are looking for credit scores of 720 or higher to give loan applicants a good rate. So before you fill out a loan application, check your credit score. That way, you’ll know whether you’re ok to apply for a loan, or if you need to do some work on your score.
For those who need some credit score work, one of the quickest ways to see a boost in your score is to dispute inaccurate items from your credit report. If your credit score is below 720, check your credit report to make sure there are no errors. If you do find a mistake, dispute it with all three credit bureaus to make sure your complete credit history is correct.
To look at all three of your credit reports, click here.
The other thing you’ll need to get a good interest rate is a verifiable income. The days of stated-income loans are long gone. With a stated-income loan, the lender would “take your word for it” so to speak in exchange for a higher interest rate. You got the loan without the trouble of proving your income. The bank got extra money. Everyone was happy. It doesn’t quite work like that. You need to be able to prove your income with recent paystubs, bank statements, and income tax returns. Some self-employed individuals who take large businesses deductions might have trouble even getting approved for a loan, much less get a good interest rate, even with good credit scores.
Finally, you’ll need to reduce your debt. Lenders want to see your debt-to-income ratio below 36%, even after you’ve taken on the new loan. You can calculate your debt-to-income ratio by dividing your total monthly income by your total monthly debt payments.
The Bailout List
Under the Emergency Economic Stabilization Act of 2008, more commonly known as the $700 bailout, the government promised to loan money to the nation’s banks to prevent Wall Street from completely crashing. The funds would be released in two $350 phases.
So far $161.5 billion has been given to banks. Another $108.5 billion has been applied for.
Who’s Got the Money?
So far, we know that AIG has been given some of the bailout money. Other banks include:
· Citigroup - $45 billion
· AIG - $40 billion
· JPMorgan Chase - $25 billion
· Wells Fargo - $25 billion
· Bank of America - $15 billion
· Goldman Sachs - $10 billion
· Merrill Lynch - $10 billion
· Morgan Stanley - $10 billion
· U.S. Bancorp - $6.6 billion
· Capital One - $3.5 billion
· Regions Financial - $3.5 billion
· SunTrust - $3.5 billion
Several smaller, more local banks have also received money. See a complete list of bailed-out banks at the New York Times.
Will consumers get a bailout?
The Federal Reserve announced a program that would assist banks in meeting consumer and small business needs. The Term Asset-Backed Securities Loan Facility would help banks issue consumer and small business loans including student loans, auto loans, credit card loans, and SBA loans. The Federal Reserve Bank of New York plans to lend $200 billion to this effort. Another $20 billion will come from the $700 billion bailout.
So far $161.5 billion has been given to banks. Another $108.5 billion has been applied for.
Who’s Got the Money?
So far, we know that AIG has been given some of the bailout money. Other banks include:
· Citigroup - $45 billion
· AIG - $40 billion
· JPMorgan Chase - $25 billion
· Wells Fargo - $25 billion
· Bank of America - $15 billion
· Goldman Sachs - $10 billion
· Merrill Lynch - $10 billion
· Morgan Stanley - $10 billion
· U.S. Bancorp - $6.6 billion
· Capital One - $3.5 billion
· Regions Financial - $3.5 billion
· SunTrust - $3.5 billion
Several smaller, more local banks have also received money. See a complete list of bailed-out banks at the New York Times.
Will consumers get a bailout?
The Federal Reserve announced a program that would assist banks in meeting consumer and small business needs. The Term Asset-Backed Securities Loan Facility would help banks issue consumer and small business loans including student loans, auto loans, credit card loans, and SBA loans. The Federal Reserve Bank of New York plans to lend $200 billion to this effort. Another $20 billion will come from the $700 billion bailout.
How to Get Through the Recession
Though the government avoided saying the “r” word for months, it’s been officially announced that the United States has been in a recession since December 2007.
Your job could be at risk. Cutting jobs are one of the ways companies keep down their operating costs. The country has already reached its highest level of unemployment since 1996 and more companies announce massive layoffs. You never know if your job is next so it’s a good idea so have an emergency fund of three to six months of living expenses to hold you until your next job.
It could be hard finding a job after a layoff. The overall number of jobs has decreased and that makes it hard to find a job once you’re unemployed. Use your emergency fund wisely and take advantage of your state’s unemployment insurance.
Update your resume now. If you get laid off, you’ll be able to start looking for a new job immediately. Take advantage of any skills training your current job offers. The more skills you have the more attractive you will be to future employers.
Keep your credit card debt under control. Though you may be tempted to rely on credit cards or loans to help you get through the recession, it’s better to keep your debt level low. That way, in the unfortunate event of a job loss, your debt bills will be lower.
Lock in your mortgage interest rate. Part of the recession was caused by increased mortgage payments on adjustable rate mortgages. As mortgage payments increased, consumers had less money to spend on consumable goods. Work with your lender to modify your loan with a fixed interest rate. Or, try to refinance your mortgage into a fixed-rate mortgage. Though your payments might be higher than they are currently, you never have to worry about them increasing.
Your job could be at risk. Cutting jobs are one of the ways companies keep down their operating costs. The country has already reached its highest level of unemployment since 1996 and more companies announce massive layoffs. You never know if your job is next so it’s a good idea so have an emergency fund of three to six months of living expenses to hold you until your next job.
It could be hard finding a job after a layoff. The overall number of jobs has decreased and that makes it hard to find a job once you’re unemployed. Use your emergency fund wisely and take advantage of your state’s unemployment insurance.
Update your resume now. If you get laid off, you’ll be able to start looking for a new job immediately. Take advantage of any skills training your current job offers. The more skills you have the more attractive you will be to future employers.
Keep your credit card debt under control. Though you may be tempted to rely on credit cards or loans to help you get through the recession, it’s better to keep your debt level low. That way, in the unfortunate event of a job loss, your debt bills will be lower.
Lock in your mortgage interest rate. Part of the recession was caused by increased mortgage payments on adjustable rate mortgages. As mortgage payments increased, consumers had less money to spend on consumable goods. Work with your lender to modify your loan with a fixed interest rate. Or, try to refinance your mortgage into a fixed-rate mortgage. Though your payments might be higher than they are currently, you never have to worry about them increasing.
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