Here’s what it means on a monthly basis:

Balance:                      $10,000
Old Payment (2%):      $200
New Payment (5%):    $500

Previously, the amount of the payment was approximately 2% of the balance - now it will be 5% and the only way you can keep a lower payment is to close the account and take a higher interest rate.

I moved my car loan to a Chase card 2 years ago at 3.99%. Last month the payment was $187 and I paid $301.

Next month the payment will be $472!

I think I was targeted because I haven’t used the card for any purchases (that
wasn’t a requirement of getting the card or doing the balance transfer) so they’re trying to get their money back sooner and be able to use it on a more profit generating customer.

After months of watching the the banks get bailouts because they’re “too big to fail” all the while reducing credit limits and increasing interest rates, this is
the next version of “Flipping the Bird” at American consumers.

Along with the bailouts have come bank mergers so there’s less competition and they’re not worried about going bankrupt.

By the way, what they’re doing is completely legal and the new Credit Card Act of 2009 does not address this situation.

What can you do?

• Expect more banks to follow Chase’s lead - so it’s time to review your credit card balances and step up your efforts to pay them off.

• Look for smaller or local banks or credit unions willing to offer better deals.There’s a big vacuum coming in this area and hopefully other financial institutions will see opportunities the “big boys” are leaving on the table.

• Let your Senators and Congressional representatives know you are outraged when the big banks continue to take advantage of the American taxpayers.File a complaint with the Federal Trade Commission (FTC) at https://www.ftccomplaintassistant.gov.

• Be sure to read any letters or correspondence from your credit card company because it’s probably telling you that they’ve changed the terms.

• Adjust any automatic payments you’ve set up or they’ll sock you withlate payments and penalty interest rates.

• Stop using the card until the balance is paid off. Don’t close the account unless you have to because it can affect your credit score.

• If these increases in payment will put you over the edge, consider talking to a bankruptcy attorney. If bankruptcy is in your future, it’s best to do it early so you can get it behind you and move on to restoring your credit.

In the end, the days of easy credit with low interest rates and big limits are gone for now. Look to your spending plan to live within your means and get the debt paid off.

Listen to my thoughts on the changes we’ll see with the new Credit Card Act of 2009 at http://www.MendYourMoney.com/perfect.html.

Want to see how soon you can get debt-free? Find out with my Pay Debt Quickly kit!

a

Did Your Bank Flip You “The Bird”?

Question: I have an extremely low APR (6.24%) with one credit card company, and am pretty good at making my payments on time, if not early. However, another credit card company has raised my APR to 29.99%. They’ve offered to close my account at a set APR of about 3% or so but I’m afraid of how it will affect my credit. What can I do about it? Thank you! ~ Renee

Answer: Hi Renee, that’s a great question. Normally I would discourage you from closing your credit cards because it can hurt your credit score.

However, if I was in this situation, I’d take the hit on my credit score for the short term and get that 3% interest rate! If you owe $10,000 and your minimum payment is $260, it will take you 11 years and you’d pay $24,231 in interest!

If your interest rate is 3% and you continue to pay $260, you’d  have it paid off in about 3 years and the total interest would be $527! That’s a big difference!

In time, your credit score will recover and, you’ll save a lot of money in the meantime!

You may want to get my Pay Debt Quickly so you can create your own debt payoff plan. It’s fun to see what a change in interest rate or increasing your payment will save you in interest charges!

a

Should I Close My Credit Card?

Last month, President Obama signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CCARD) also known as the Credit Cardholder’s Bill of Rights that’s been called “sweeping legislation that reforms the credit card industry” and a homerun for consumers. Is it? Let’s see…

Here’s some good news for consumers:

• Credit card companies can’t raise your rates on existing balances unless you’re 60 days behind.
• If the rate does go up, you can get the old rate back if you pay the minimums on time for 6 months.
• They can’t raise rates for at least a year after you open an account.
• If you close your account, the interest rate is frozen.
• Teaser rates must last at least 6 months.
• If you have multiple interest rates, anything more than the minimum goes to the balance with the highest interest rates.
• Cardholders must be given the option of having a fixed credit limit that cannot be exceeded, and card companies cannot charge overlimit fees on cardholders with fixed limits.
• Cardholders may elect to have transactions that would cause them to go overlimit declined.
• Overlimit charges can only be charged when a purchase, rather than a fee or interest charge, causes the credit limit to be exceeded.
• Overlimit charges can only be applied once during a billing cycle.
• No interest can be charged on fees (such as late fees or overlimit fees)
• Your bills must be sent out 21 days before the payment due date (current requirement is 14 days)
• No one under 21 can get a credit card without a co-signer or proof that they are able to repay the credit (a job)
• You can pay your bill by mail, phone, electronic transfer or online without additional cost unless you need to pay at the last minute.
• Consumers must get 45 days notice of any change in the terms.
• Gift cards can’t expire for 5 years and they can’t charge fees against the balance for not using it.
• No more universal default (one company could increase rates if you had a late payment to another creditor even if you had a good on-time payment record with the first company)
• They have to tell you how long it will take to pay off the balance if you only make minimum payments and the total amount of interest you’ll pay.

Here’s the bad news…

• Changes don’t go into effect for 9 long months.
• Expect credit card companies to jump up your rates between now and then even without a late payment.
• Credit card companies say that reward programs will be canceled, low-interest teaser rates won’t be available and overall credit may be harder to get. They may also re-institute annual fees and try to find other ways to increase their bottom line.

What should you do now?

• Pay your debt on time. This has always been important but is even more important now. Don’t give them a reason to hike your interest rates.
• Create a plan to pay your debt off. This is the hardest area for most people to do because they just don’t know how to pay their debt off in the most efficient and cheapest way. Check out my Pay Debt Quickly kit which WILL create a month-by-month plan for you to follow - it’s easy once you have a plan!
• Don’t close old accounts and keep all your cards active by putting a couple of small purchases on them every month. Pay off, of course.
• Watch your statements every month because some of the credit card companies may actually start implementing these changes even before the deadline.
• Watch your mailbox for instructions from your creditors regarding choices you’ll need to make to your account.
• Use your points or other rewards now because the plans are sure to get less generous or even eliminated.

It’s about time credit card holders are finally getting a break!

a

Are Credit Cardholders Finally Getting A Break?

• Tax Trap #1: Unemployment Income isn’t taxable. Sorry, the tax man does  wants a cut of the action even when you’re unemployed. The easiest way to handle the taxes is to have them withheld just like a paycheck.

• Tax Trap #2: Killing Your Golden Goose When You Raid Retirement Accounts. The last accounts you want to tap are your retirement accounts for several reasons. Since the amount you take out is taxable, the IRS requires that 20% be withheld to cover the taxes.So, if you request $10,000, you’re only going to get $8,000. Since the $10,000 would be added to any other income you have for the year, you may be pushed into the next tax bracket (see Marginal Tax Brackets) and the $2,000 may not even be enough.PLUS, there will be 10% penalty that can’t be reduced by any other credits.Your state will tax the income and may also charge penalties for withdrawing early.

• Tax Trap #3: IRAs can cover certain expenses such as re-training expenses paid directly to a qualified educational institution, health insurance premiums or even early retirement, BUT, you have to handle the withdrawals exactly right or you’ll be socked with taxes. Check with your tax preparer and/or financial advisor.
• Tax Trap #4: Debt Settlements are taxable unless you fall into certain categories. So, if you have a $10,000 balance and the creditor takes $5,000 and call it paid off, you’ll receive a 1099-C for the amount of debt that was canceled. Be sure to take this document to your tax preparer. There are some special rules for debt that is canceled through foreclosure. Debt discharged through bankruptcy are not taxable.
• Tax Trap #5: 401(k) Loans are taxable if you leave your job (for any reason). If you borrow from your 401(k) and are laid off or leave for any reason including disability, your loan becomes due immediately. If you are unable to pay it back, it will be considered a distribution and you will be taxed on it and pay the 10% penalty. However, you would have received the entire amount requested with no taxes withheld like the above example. Therefore, you will have to come up with all the taxes and the penalty on your own. It may take a couple of years for them to actually catch up to you and the IRS will add taxes and penalties in the meantime.

Before you start taking money out of accounts, meet with your tax preparer and do some tax planning to make sure you don’t cost yourself money in taxes, fees or penalties.

Just About Perfect is generouslly offering a free 3 month membership to anyone who is unemployed. Use the Just About Perfect coaches to help you get on the right track, right now!

a

Unemployed? Top 5 Tax Traps!

I counsel a LOT of people about money. I see the same mistakes being made over and over again.

If you’ve made ‘em, don’t worry. I’m here to help you do it right THIS year! The fact is, moneymakers need a money coach, just like gymnasts need a gymnastics coach and Tiger Woods needs a golf coach.

As your Money Mending coach, here are the mistakes in thinking and behavior I want you to avoid:

* Don’t think of your refund as free money - or lottery winnings. It’s not! That refund is your hard-earned dollars that you loaned Uncle Sam interest free - all last year.

* Don’t spend the refund - or OVERSPEND it - when you haven’t gotten the cash in your hands yet.

* Don’t spend the whole refund to pay down debt.

OK. So now you’re Money Smart about what NOT to do with that refund in 2009.

Next, here are my EASY Money Mending moves that YOU can make to best handle your income tax refund this year.

First, divide your refund into thirds - 3 equal amounts.

Why 3 equal amounts? Because we want to use that refund - however small or large - to handle the past, the present and the future.

Use one third to handle the PAST by paying down debts. Start with your most pressing debt…either the one with the highest interest rate, or the one with the biggest consequence for not paying it down.

Use one third for something you need or want in the PRESENT. If you can, use that money to have some FUN. Do something that is NOURISHING to you - something that makes you feel GOOD. How about a mini-vacation, or an evening of fine dining and great entertainment, or a day at the spa?

***Of course, if the brakes on the car are shot, or you have some other pressing need, you’ll need to do that FIRST.***

Finally, use one third to handle some aspect of your FUTURE. Here are several Money Mender suggestions for you to think about.

*Put money in your Anti-Emergency Fund - Read more about that here: http://www.mendyourmoney.com/create-your-own-anti-emergency-fund/.

*Put money in your Sleep EZ Fund or save for your retirement through your 401(k), 403(b), IRA (traditional or Roth).

*Put money into college education funds (Coverdell IRAs or 529 plans) for your kids or grandkids.

Why is this “thirds” approach such a great idea? Because you’ll be taking care of a variety of wants and needs - AND taking several easy Money Mending steps forward towards your BIG goal of financial freedom!

THAT is how you can have MORE fun with YOUR tax refund in 2009.

As always, if you have any questions, please go to my web page www.MendYourMoney.com for contact information. I’m here to be YOUR coach, and make sure YOU succeed.

Cindy

PS…Now is also a GREAT time to “check out your paycheck”:

* Re-evaluate how much money you are contributing to your 401(k) or 403(b).

* If you got a whopping refund, remember you were just sticking YOUR money in Uncle Sam’s pocket. No point in giving Uncle Sam an interest free loan! Adjust your deductions so that you have just enough taxes withheld from your paycheck.

PPS…Get your free “A Financial Course In Miracles” sampler package including Prosperity EFT video,  at www.AFinancialCourseInMiracles.com.

a

How to Have More Fun With Your Tax Refund in 2009

The possibility of losing your home to foreclosure can be terrifying. The reality that scam artists are preying on the vulnerability of desperate homeowners is equally frightening. Many so-called foreclosure rescue companies or foreclosure assistance firms claim they can help you save your home. Some are brazen enough to offer a money-back guarantee.

Unfortunately, once most of these foreclosure fraudsters take your money, they leave you much the worse for wear.

Fraudulent foreclosure “rescue” professionals use half truths and outright lies to sell services that promise relief and then fail to deliver. Their goal is to make a quick profit through fees or mortgage payments they collect from you, but do not pass on to the lender. Sometimes, they assume ownership of your property by deceiving you. Then, when it’s too late to save your home, they take the property or siphon off the equity. You’ve lost your home to foreclosure despite your best intentions.

If you think you may be facing foreclosure, the Federal Trade Commission (FTC), the nation’s consumer protection agency, wants you to know how to recognize a foreclosure rescue scam. And even if the foreclosure process has already begun, the FTC and its law enforcement partners want you to know that legitimate options are available to help you save your home.

How the Scams Work

Foreclosure rescue firms use a variety of tactics to find homeowners in distress: Some sift through public foreclosure notices in newspapers and on the Internet or through public files at local government offices, and then send personalized letters to homeowners. Others take a broader approach through ads on the Internet, on television, or in the newspaper, posters on telephone poles, median strips and at bus stops, or flyers or business cards at your front door. The scam artists use simple and straight-forward messages, like:

“Stop Foreclosure Now!”

“We guarantee to stop your foreclosure.”

“Keep Your Home. We know your home is scheduled to be sold. No Problem!”

“We have special relationships within many banks that can speed up case approvals.”

“We Can Save Your Home. Guaranteed. Free Consultation”

“We stop foreclosures everyday. Our team of professionals can stop yours this week!”

Once they have your attention, they use a variety of tactics to get your money:

Phony Counseling or Phantom Help

The scam artist tells you that he can negotiate a deal with your lender to save your house if you pay a fee first. You may be told not to contact your lender, lawyer, or credit counselor, and to let the scam artist handle all the details. Once you pay the fee, the scam artist takes off with your money.

Sometimes, the scam artist insists that you make all mortgage payments directly to him while he negotiates with the lender. In this instance, the scammer may collect a few months of payments before disappearing.

Bait-and-Switch

You think you’re signing documents for a new loan to make your existing mortgage current. This is a trick: you’ve signed documents that surrender the title of your house to the scam artist in exchange for a “rescue” loan.

Rent-to-Buy Scheme

You’re told to surrender the title as part of a deal that allows you to remain in your home as a renter, and to buy it back during the next few years. You may be told that surrendering the title will permit a borrower with a better credit rating to secure new financing - and prevent the loss of the home. But the terms of these deals usually are so burdensome that buying back your home becomes impossible. You lose the home, and the scam artist walks off with all or most of your home’s equity. Worse yet, when the new borrower defaults on the loan, you’re evicted.

In a variation, the scam artist raises the rent over time to the point that the former homeowner can’t afford it. After missing several rent payments, the renter - the former homeowner - is evicted, leaving the “rescuer” free to sell the house.

In a similar equity-skimming situation, the scam artist offers to find a buyer for your home, but only if you sign over the deed and move out. The scam artist promises to pay you a portion of the profit when the home sells. Once you transfer the deed, the scam artist simply rents out the home and pockets the proceeds while your lender proceeds with the foreclosure. In the end, you lose your home - and you’re still responsible for the unpaid mortgage. That’s because transferring the deed does nothing to transfer your mortgage obligation.

Fraudulent foreclosure “rescue” professionals use half truths and outright lies to sell services that promise relief and then fail to deliver.

Bankruptcy Foreclosure

The scam artist may promise to negotiate with your lender or to get refinancing on your behalf if you pay a fee up front. Instead of contacting your lender or refinancing your loan, though, the scam artist pockets the fee and files a bankruptcy case in your name - sometimes without your knowledge.

A bankruptcy filing often stops a home foreclosure, but only temporarily. What’s more, the bankruptcy process is complicated, expensive, and unforgiving. For example, if you fail to attend the first meeting with the creditors, the bankruptcy judge will dismiss the case and the foreclosure proceedings will continue.

If this happens, you could lose the money you paid to the scam artist as well as your home. Worse yet, a bankruptcy stays on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job.

Where to Find Legitimate Help

If you’re having trouble paying your mortgage or you have gotten a foreclosure notice, contact your lender immediately. You may be able to negotiate a new repayment schedule. Remember that lenders generally don’t want to foreclose; it costs them money.

Other foreclosure prevention options, including reinstatement and forbearance, are explained in Mortgage Payments Sending You Reeling? Here’s What to Do, a publication from the FTC. Find it at www.ftc.gov.

You also may contact a credit counselor through the Homeownership Preservation Foundation (HPF), a nonprofit organization that operates the national 24/7 toll-free hotline (1.888.995.HOPE) with free, bilingual, personalized assistance to help at-risk homeowners avoid foreclosure. HPF is a member of the HOPE NOW Alliance of mortgage servicers, mortgage market participants and counselors. More information about HOPE NOW is at www.995hope.org.

Red Flags

If you’re looking for foreclosure prevention help, avoid any business that:

• guarantees to stop the foreclosure process - no matter what your circumstances
• instructs you not to contact your lender, lawyer, or credit or housing counselor
• collects a fee before providing you with any services
• accepts payment only by cashier’s check or wire transfer
• encourages you to lease your home so you can buy it back over time
• tells you to make your mortgage payments directly to it, rather than your lender
• tells you to transfer your property deed or title to it
• offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale
• offers to fill out paperwork for you
• pressures you to sign paperwork you haven’t had a chance to read thoroughly or that you don’t understand.

If you’re having trouble paying your mortgage or you have gotten a foreclosure notice, contact your lender immediately.

Report Fraud

If you think you’ve been a victim of foreclosure fraud, contact:

• Federal Trade Commission
• Your state Attorney General
• Your local Better Business Bureau

For More Information

To learn more about mortgages and other credit-related issues, visit www.ftc.gov/credit and MyMoney.gov, the U.S. government’s portal to financial education.

a

Beware Foreclosure Rescue Scams

Do you think you’d be able to pass a Consumer Financial Stress Test?

The National Foundation for Credit Counseling created a Consumer Financial Stress Test based on it’s 2009 Consumer Financial Literacy Survey.

See how you’d do…

Q: On a scale of A to F, what grade would you give yourself in terms of your knowledge about personal finance?

Results: It appears that many of us would not be moving to the front of the class, as 41 percent of U.S. adults, or more than 92 million people, gave themselves a grade of C, D or F on their knowledge of personal finance.

Q: Which best describes how you manage your money?

Results: Less than half, 42 percent, keep close track of their spending, with 7 percent, or nearly 16 million, admitting they don’t know how much they spend on food, housing, and entertainment, and do not monitor their overall spending.

Q: What best describes your financial situation?

Results: 26 percent, or more than 58 million adults, admit to not paying all of their bills on time, with 13 million admitting to having debts in collection, or are seriously considering filing for bankruptcy, or have done so in the last three years.

Q: In which ways did the terms of your mortgage turn out to be different than what you initially expected?

Results: 42 percent, or more than 94 million people currently have a mortgage. Of those, 28 percent say that the terms of their mortgage somehow turned out to be different, including either the payment amount or terms of the loan, the interest rate or its duration, or they had no knowledge of the required Private Mortgage Insurance.

Q: Do you have any savings excluding retirement?

Results: One-third of adults, close to 72 million people, report that they have no savings. Of those with no savings, more than one in four report that, if faced with an emergency, they would charge that expense to a credit card or take out a loan, thus adding to their debt load.

Q: What percentage of your household income do you save toward retirement?

Results: More than 74 million people do not put any part of their annual household income toward retirement. This number is up from 28 percent in 2008 to 33 percent in 2009.

Q: Compared to one year ago, how has the current economic climate affected your spending, and if you are spending less now, if your financial situation were to improve, would you be likely to spend more?

Results: Although 57 percent of adults report spending less than they were a year ago, 45 percent of those now spending less admit that if their financial situation were to improve, they would resume their previous spending habits.

Q: Have you ordered a copy of your credit report, and do you know your credit score?

Results: In spite of it being free, nearly two-thirds, or 144 million people, have not ordered a copy of their credit report in the past year. Additionally, more than one-third admit that the do not know their credit score.

Did you pass the Stress Test?

The good news is that all these items can all be fixed - starting with small, practical steps that will really make a difference in your finances and in your life. Begin by reading other articles at the Mend Your Money.com site or call me for help at 541-387-2995.

The 2009 Financial Literacy Survey was conducted by telephone within the United States by Harris Interactive on behalf of the NFCC on March 13-16, 2009 among 1,000 adults ages 18. For more information about the NFCC, go to www.nfcc.org.

a

Can You Pass A Consumer Financial Stress Test?

Question: I always seem to have car emergencies. Isn’t there a better way to live?

Answer: Create an “Anti-Emergency Savings Fund “for normal and necessary expenses that do not occur every month. For example, you can pay your property taxes with your mortgage, save 1/12 of it every month, or just have an “emergency” when it shows up every year. By saving small amounts every month, you will actually have the money available to pay your property taxes when they are due. No more surprises!

The same is true with other types of normal expenses like car repairs, home repairs, school fees, holiday gifts, medical bills, etc. Even vacation!

I like to keep my funds in the best bank on the planet - ING Direct. ING lets you have as many accounts as you want without any minimums or fees - and they best just about the highest interest rates out there! And the best feature is “nicknaming” them all. That way I can look at my “home repair” account or “vacation” account and know exactly how much I have available! Of course, they’re FDIC insured. Get their Electric Orange high interest savings account.

a

Emergencies!

Question: Cindy, can you give me some specific ideas for how to save money on everyday stuff? Thanks. ~ Janice

Answer: Sure, Janice, frugal living does not have to be about a life of deprivation. The frugal life is one of thrifty shopping, careful choices, and a saving mindset. Making just a few adjustments in five areas of your normal life will help you become a frugal person. Readers: if you have ideas, please add them to the comments below.

Groceries are one of the most expensive items on any budget.

• Be sure to take a list with you to the grocery store; this will help to cut back on impulse items. If you are still concerned, then why not take a friend shopping with you. Exchange lists at the store and each of you can gather up the other’s groceries, virtually eliminating all impulses.
• And don’t forget to cut out coupons. It may take some time, but it will add up in the end.

Menu Planning Central can make your meal planning a pleasure and save you hundreds of dollars and precious  hours you can spend with your family. Get your free Menu Planner and Shopping List!

Frugal people still vacation, AND they do it wisely.

• You can really stretch the vacation dollars by traveling during the shoulder season or off-season, although it’s a good idea to check to see if local attractions will be open if you want to attend.
• Since much of a vacation budget goes to housing, why not spend your vacation visiting family? There is the joy of bonding with relatives, but you also get to stay for free.
• Being frugal doesn’t mean that you have to stay home all the time. If you do a little looking around, you are sure to find that many of the museums, zoos, botanical gardens and other places offer free or discount days. For those that don’t offer the free days you can check to see if a group discount is available and then call up your other frugal friends for an outing.
• For movie nights, check with the local library to see if they have movies available to check out. There are lots for you to do, and you can do much of it without ever spending a dime.

Clothing is one of those items that civilized society has deemed necessary. The clothing manufacturers, who realize our dilemma, often charge outrageous prices.

• Buying out of season (buying winter clothes in the summer and vice versa) will help to cut this item in your budget.
• Instead of buying new, check out your local thrift store or second-hand store where prices are a fraction of the retail (and sometimes the clothes still have the original tags). Consignment stores in big cities often have lots of great bargains.
• An even better way is to just trade with friends. Hand-me-downs are the frugal person’s best friend.

One item that it is not always wise to buy new is the automobile.

• While there is nothing wrong with having a nice car, if you can’t pay for it with cash then it is probably not worth it. Drive what you have while you save up, and then purchase with cash. Just having the money in hand will give you a lot of negotiating power. Today, many of the used car dealers include some type of warranty with their cars, making the purchase even more secure.

The frugal lifestyle can be more enjoyable than any other. There is money for the things you truly want to do and there is no worry about how the bills will be paid each month. By being a little thrifty here and there, by thinking about your choices before you make them, and by developing a mindset of savings, you can live a fulfilled frugal life.

a

5 Areas in Your Life to Live Frugally

Question: I’m a doctor and my finances are a mess! I make good money but I’m behind in taxes, I have too much credit card debt and I bounce a lot of checks. What can I do? ~ Dr. Debbie

Answer: Hi Dr. Debbie, I’ve worked with a lot of different Health Care Practioners and your situation is shared by many.

First, most of you start off with a lot of student debt and many years of deprivation.

Suddenly, you’re making a “lot” of money. Some make up for lost time by purchasing a lot of toys, others get behind in paying their income taxes. Either way, you woke up one day and found yourself in trouble, right?

While there are some basic things you can do, this is a good time to start working with someone like me to address your particular situation. Just like your patients, there’s no “one size fits all”.

Here are some basic things to do:

• Get a clear vision of where you’d like to be in 6-12 months. These goals can help you make spending and saving choices that will help you achieve the goals.
• Start using cash for purchases instead of your credit cards. If you have credit card balances, any new purchases get charged interest immediately — no grace period.
• Take the minimum credit card payments from this month and make the same payment every month regardless of what the card says. If you’re not using your credit cards for new purchases, the balances will start to go down.

These same items work for all professions and walks of life. It is hard to do this on your own, call me and I’ll work with you. Everying is so much easier and faster when someone shows you the way instead of having to figure it all out for yourself!

If you need help getting out of debt, the all-new Pay Debt Quickly Kit is the answer to your prayers.

a

The Doc’s Finances Are Deathly Sick!

Categories keep expenses organized. When you look back at ATM receipts, you can tell when you withdrew the money but not what it was for. The same goes for entries on a statement. Paper and online statements don’t put deposits and withdrawals into categories. The added information lets you know where to subtract the money from in your budget.

Start with a few simple ones. Don’t make things complicated right away. Most people are already less than enthusiastic about putting together a personal budget so the more painless the better.

List all of the income and expenses from the last full month. Go one by one and decide what would best describe that item in a budget. Here’s the basic list I use:

• Income
• Savings
• Anti-Emergency (see Create your own Anti-Emergency Fund)
• Fun and Self-Development
• Charitable Contributions
• Home
• Food
• Clothing
• Dependent Care (all the kids and pet expenses)
• Insurance
• Health Care and Self Care
• Personal Business (stamps, paper, ink cartridges, bank fees)
• Transportation
• Old Debt Repayment (the balances you’re paying off on your credit cards)

For example, a payment to the water company would go under “Home”. Your son’s soccer uniform payment can fall under “Dependent Care”. If you have more than one child, you can create a category under each of their names for any expenses related to their hobbies.

Subcategories can be created for each of these to leave a place to record specific bill amounts.

This is actually the fun part. There is no limit on categories. In fact, the more specific you can be the better it will be when the time comes to choose between needs and wants. Unnecessary expenses can be eliminated over time to streamline your spending.

If you use a check register (a “cash register, LOL!) to record ATM withdrawals and checks written, leave a space to enter the category name for the entry. Later, when you review spending, you can pinpoint where the money is going. Finding points of overspending is part of the reason for creating a budget in the first place.

You may want to stick to broad categories if you are tracking spending in a specific area. That one area can be more detailed and the rest of the expenses lumped in bigger categories.

Even if you don’t think that you need a budget because you don’t spend much money, it is a useful tool.

Setting up a personal budget for your home teaches valuable organizational skills. This is a help when tracking investments or growing your business. Bad spending habits here can cost you profit dollars.

Since reconciling categories can be a tedious job, set a time once a week or once every two weeks to enter these figures in a spreadsheet, a ledger book, or into a software program designed for personal finances. After a month or two, when you have started to make changes in spending, you can reconcile your entries on a monthly basis.

If you want Financial Peace, Prosperity and Joy, go to “A Financial Course In Miracles” and download our free Sampler Package with both left brain and right brain tools to help you achieve the financial peace you’ve always dreamed of.

a

Categories Rule!

Question: Cindy, do you have any quick and easy ways to make extra money? I’m interested in putting some into savings and paying off some debt, too. Thanks. ~ Jayne

Answer: Good question, Jayne. There are many ways to make extra cash even when you are working full time. One of the best ways to make more money in your spare time is to do something you love and to find someone who will pay you for it. Here are a few and I invite readers to add their ideas in the comments below.

• Collectors, computer savvy individuals, and the natural salesmen can all make a few bucks by setting up an eBay account and selling all the items they have stored around the house. If it’s boxed up and covered with dust then you aren’t using it. Why not send it to someone who will truly appreciate it, and you can appreciate the cash in its place.

• Almost every weekend, somewhere in the United States, some city or town is holding a fair or festival that offers booth spaces for crafters. Get your hobby to work for you by attending some the festivals and selling the items that you have been giving away as gifts. It might help to visit a few first to get a feel for the different crafting trends and the best locations for your booth space.

• Digging in the dirt is not for everyone, but almost everyone loves having a beautiful yard. If you have a green thumb, then why not offer to share that with others. It might be surprising how many people will take you up on the offer. It will probably be downright shocking how much they are willing to pay for the service. I know I’d love to have some help in this area!

• If you don’t want to labor away in other people’s yards, then why not sell the fruits of your labor from your own yard. Pot up some of the multiplications your plants have grown and sell them at the local flea market. Find a local farmers’ market to sell excess fruits, vegetables or flowers.

• Take seasonal or temporary work - as long as it doesn’t interfere with your full-time job and you still have some time to yourself. A part-time job can be the perfect way to make that extra income you need for a special goal.
• Affiliate yourself with a great product like Send Out Cards which I use to generate more referrals for my work as well as offer it to others who want to use it (and I make a commission). Do you have anyone who needs a special thank you or congratulations or just a “Hi”, go to https://www.sendoutcards.com/cindymorus to send them a card on me.

If you need some extra income or just want to make some quick or easy cash, then look at what you have. Sell off anything that you don’t need or want, use your skills or talents to meet needs that others may have, or take a part-time job to reach the financial plans you have for your future.

Good luck to you, Jayne!

a

Quick and Easy Ways to Make Extra Money

This is part of our Financial Literacy Month Question and Answer series

Question: I want to start a business. Do I need a separate checking account? ~ Monica

Answer: Monica, with a small business it is very easy to mix business and personal expenses especially when you’re just starting out.

For some people the business started out as a hobby or a way to make a little extra money on the side. There wasn’t much thought to profit or a permanent enterprise at the time. All of the money funneled into one account.

Then, things began to snowball and soon you were making money hand over fist. As a sole proprietor working for yourself, the government categorizes you as “self-employed” for tax purposes. Once you make over $400 in a year, you have to pay taxes on your business profit. Having only one account makes things much more confusing for you and your tax accountant.

Business expenses are items or services directly related to the business and its management. Business expenses can be deducted on your tax return if you are self-employed. Personal expenses cannot. If everything is in one account it is hard to separate the two convincingly and may raise a red flag with the IRS.

If you haven’t already, start a separate business checking account. All business deposits and expenses should be paid for out of this account (including your salary).

Keeping things separate also helps you to see if your business is profitable (the major goal of owning your own business, of course).

Get a business checking account at the best bank on the planet - ING DIRECT!

a

Separate Accounts for Business and Personal Expenses

Before this law, if your home was foreclosed and your home was sold for less than you owed, you would be taxed on the difference as if it were income. This was also true if your mortgage company agreed to reduce your loan balance - the difference would have been taxable.

Wow! That could be a lot of money for some people in certain parts of the country in some cases as high as 35% depending on your income. If it was 35% and your home’s mortgage was reduced through negotiation or foreclosure by $100,000, you would owe $35,000.

The new law says that if you renegotiate your morgage (or forclose) through December 31, 2012, there will be no taxes to pay on the amount of debt that was cancelled up to a $2 million dollar limit and it must be your primary home. If debt is forgiven on a second home or rental property, you will have to pay taxes on the amount of debt forgiven.

One more wrinkle is that if you refinanced your home and took cash out to pay for credit card debt, autos or other purchases, you may not qualify for the forgiveness. Check with your tax preparer to find out all the details.

a

Mortgage Debt Forgiveness

• If you didn’t get the full Economic Stimulus check last year, you may still be able to get it this year especially if your income is lower due to unemployment or investment losses. Your tax preparer will need to know how much you received last year. If you don’t remember how much your check was, you can find out at “How Much Was My 2008 Stimulus Payment” at the IRS site. Once your taxes are completed, you’ll find out if you’re going to get additional Economic Stimulus money. If you owe taxes, it will reduce the amount owed. If you’re getting a refund, it will be included. If you earned over $75,00 (single) or $150,000 (married), the credit starts phasing out.Babies born in 2008 may also be eligible for the $300 stimulus payment. If you claimed your child last year but supported himself in 2008, he may be eligible for up to $600.
• Some of your capital gains may not be taxed at all. If you’re taxable income puts you into the 10% or 15% income tax brackets (read about Marginal Income Tax Brackets), you won’t pay any capital gains taxes. Even if you are in a higher bracket, some of your gain might qualify for the zero rate.
• Breaks for Higher-Income Taxpayers. Some of the Bush Administration tax breaks are still phasing in (many will expire in 2011 unless Congress acts to keep them in place). In 2008, itemized deductions and personal exemptions phaseouts were increased - resulting in lower taxes. The itemized deductions phase-outs start at adjusted gross income of about $159,950 for most taxpayers with exemptions at $159,950 for single filers and $239,950 for joint filers.
• $7,500 Credit for First-Time Home Buyers. If you bought your first home (or hadn’t owned a home in 3 years) between April 8, 2008 and July 1, 2009, you may qualify for a credit of 10% of the purchase price up to $7,500 on your 2008 return.If you buy in 2009, you can take the credit on your 2008 return or amend if you purchase after filing. The current economic stimulus bill may change this so check with your tax preparer.

  The credit is really a no-interest, 15 year loan that will be paid back each year ($500 per year).

As Congress debates the new economic stimulus bill, there may be many changes that affect your taxes. Your tax preparer stays up-to-date with all the new information so don’t wait until tax time to check in and do some tax planning.

a

“Not To Miss” Tax Perks for 2008

1.    Believe in Yourself: If you don’t believe you’ll be wealthy, I can pretty well guarantee you won’t be! (Hint: it’s not just a matter of how much money you make…). Master your psychology before you do anything else.

2.    The Jones’ are Broke: Don’t be one of them! Most millionaires live simply and avoid debt because they’d rather have financial independence than fancy cars, huge houses and lavish vacations.

3.    Know your stats: Know your net worth, balance your checkbook, plan your spending (and saving), pay off your debt, have reserve funds for the unexpected. Spending less than 2 hours a week on “the books” can pay off a million times over.

4.    Save Early and Often: Saving just $2.74 per day will guarantee you $1,000 in a year! Take advantage of all savings opportunities through your employer and save money out of each paycheck, too. Tuck away any money that comes to you outside of your job to build your wealth.

5.    More Than One Way to Make Money: We’re taught in school how to work and get jobs but that’s not enough. Learn to invest, learn a new marketable skill to make money on the side, be on the lookout for new and different ways to make money than just a job.

***************************************

FREE Download: My friend, Kelly McCausey of Mom’s Talk Network has generously agreed to offer my readers her Family Budget Checklist. If your family finances are getting a little unruly and you want to do more with you money and for your family, here’s a quick checklist guide to help you out.

Find out what you should include in your budget (some things you may not have thought of before) and what to do with that information. Click here to get yours (PDF)* This is a PDF document and you will need the free Adobe Acrobat Reader software to view it. If you don’t have this software, you can get it here.

a

5 Steps to Building Your Wealth

Of course, these don’t have to be done in any particular order!

Just pick one or two that particularly apply to your situation.

1. Create your 2009 filing system. This might include new file folders, a new box to hold them or space in a filing cabinet with easy access.
2. Set up a folder to collect all the important 2008 tax documents which will be arriving soon. Sure to arrive at your house are W-2s, 1099s, mortgage statements, etc.
3. Set up an appointment with your tax professional early so you get the appointment of your choice. This also gives you a deadline to get your information ready! If you’re self-employed, the next quarterly estimated tax payment will be due on January 15.
4. Review last year’s investments especially in your 401(k), IRA’s etc. Find out what financial planning resources your company or 401(k) plan administrator offers and set up an appointment to talk to them. For non-company portfolios, talk to your investment advisor. You have until April 15 to make contributions to IRA type accounts (check with your tax preparer for eligibility).
5. What about Quicken or Microsoft Money? If you don’t use software to balance your checkbook, pay your bills and keep track of your savings and investments, this is a great time of the year to get started. My personal favorite is Quicken Online and it’s free!
6. Medical Insurance reimbursements: If you haven’t submitted all your medical bills to your insurance provider, now is the time to do so. If you have a Health Savings Account, you may also be able submit those.
7. Will and Estate Planning. No one likes to think about dying, but the best thing you can do for your family is to make sure they are taken care of by creating a will and making sure you have adequate life insurance. Think how easily you’ll sleep knowing you have provided for your family even if you are no longer there. Visit Nolo’s Online Will Maker to make a legally valid will directly online.
8. Speaking of insurance… If you haven’t reviewed your health or home and auto policies in the last couple of years you might find you can save money and/or have better coverage. For example, if you still have a $250 deductible (which was my first deductible in 1979!), you will probably save by increasing it to $500 or $1000. Try to set aside some of your savings for deductibles in case you need them.
9. Create your own Anti-Emergency Fund! We all know those car and home repairs, school fees, medical expenses and vacations are going to happen. Why not determine how much you’ll need and save 1/12 of it each month? To read more go to: Create Your Own Anti Emergency Fund.
10. Holiday Bonus or Money Gifts: If you received a financial gift this holiday season, hold on to it for at least 30 days while you decide what you really want to spend it on. All too often financial windfalls are spent before they even arrive. Consider dividing it into thirds: 1/3 to the past, 1/3 to the present and 1/3 to the future. Past might include paying down debt, present could be something you need or want now and future could be retirement, college savings, or a special vacation.
11. Financial Goals for next year: Think about where you want to be next year at this time financially. If you want to save $1000, put aside $2.74 each day and you’ll be there! Break down your financial goals into monthly, weekly and daily amounts and watch how quickly your savings will grow. Read more about it at: The PDQ Factor. Visit ING DIRECT to set up an Orange Savings account now!

Happy New Year!!!!!

Credit card companies work hard to keep you in debt. If 2009 is your year to reverse the vicious cycle, grab your Powerful Debt Reduction Strategies Guide to help you start conquering your debt in 4 simple steps. A $67 value, it’s yours free at Pay Debt Quickly.

(c) Mend Your Money - All Rights Reserved

a

Top 10+ Ways to Jumpstart your New Year’s Finances!

Have you ever heard of the PDQ Factor? Probably not, but you probably have heard of the acronym PDQ, which means “pretty darn quick” and that can be expensive: think fast food, fast cars, and fast women. This PDQ, The PDQ Factor will save you money. In fact, it can even make you wealthy over time.

To illustrate…take an empty glass and set it under the water faucet. Now turn the faucet to a single drip, or a slow trickle if you’re really impatient, and watch the glass fill up. It takes a while but it does get full. If you were thirsty, it wouldn’t have been nearly as fast as turning the faucet to full force but it was just as effective. The PDQ Factor is the slow trickle equivalent in the world of money. It stands for Pennies, Dimes and Quarters. Nickels count too, they just messed up the snappy title so we left them out; but don’t you leave them out of your investment toolbox.

Here’s an easy plan to make an extra $1000 this year. It won’t take much time or energy-really none at all. By investing just $2.74 a day - the cost of a designer coffee drink; a bad drive-thru meal; or 8 quarters, 5 dimes, 4 nickels, and 4 pennies, in just 365 days you will have an additional $1000 in the bank. Did you know that accumulating wealth is this effortless? Make a plan, stick to it and watch success sneak up on you in teen-tiny increments.

With no pain and all gain you’ve just set a financial goal; a goal that can be effortlessly reached by making a very minor tweak or two in how you live your daily life.

Break down your goal and see how many PDQ’s it takes! And don’t forget to start today!

I like to keep my funds in the best bank on the planet - ING Direct. ING lets you have as many accounts as you want without any minimums or fees - and they best just about the highest interest rates out there! And the best feature is “nicknaming” them all. That way I can look at my “home repair” account or “vacation” account and know exactly how much I have available! Of course, they’re FDIC insured. Get their Electric Orange high interest savings account.

a

The PDQ Factor

With so many banks changing hands and merging, you wouldn’t want your paperwork to be destroyed or lost. 

Make sure ex-spouses are no longer your beneficiaries and that children who have come of age are properly designated as beneficiaries if that is your wish.

If you inherited an IRA, you’ll need to set up your own beneficiary.

If benefits are payable to the owner’s estate or to a charity, there is no “beneficiary“-anyone receiving these benefits must take them in full no later than the end of the fifth year following the year of death if the owner died before the required beginning date or over the owner’s remaining life expectancy-which ignores the fact that he’s dead-if he died after the required beginning date. 

Please check with your tax preparer or estate attorney as your situation may be different than described.

a

Update Your Beneficiaries

Example:
Helen creates beautiful ceramics as an outlet for her personal creativity. This year, friends and family started asking her if they could buy them from her. She didn’t really want to create a business or make a profit but she does have expenses. She sold $2,000 worth of ceramics in 2008. Her expenses were $3,500 but only $2,000 is deductible (subject to the 2% of adjusted gross income limitation) because that is the amount of income she earned. 

Warning: The IRS has noted taht claiming losses from hobby activities in excess of income is one of the ost common errors made on individual income tax returns. 

If the activity is a “hobby,” then income is reported on page 1 of Form 1040 as “other income” and expenses are reported as miscellaneous itemized deductions on Schedule A (subject to the 2%-of-AGI limit). 

If Helen wants to deduct the entire $3,500 of expenses even though she only has $2,000 of income this year, she will need to have profit in 3 out of 5 consecutive years. 

Please check with your tax preparer as your situation may be different than described.

a

Hobby Losses

• The principal place of any business in which the taxpayer engages. A home is treated as a principal place of business if it is used for substantial administrative or managerial activities and there is no other fixed location for the performance of these activities.
• A place of business used for meeting clients, customers, or patients.
• In connection with the taxpayer’s trade or business if the taxpayer is using a separate structure that is not attached to the dwelling.

Additionally, if the taxpayer is an employee, the business use of the home must be for the convenience of the employer.

Hint: The home office deduction of an employee is a miscellaneous itemized deduction subject to the 2% of adjusted gross income limitation.

If the space is in a separate building, not attached to the taxpayer’s residence, it will qualify so long as it is used exclusively and on a regular basis for business purposes.

Business expenses related to space in a home used regularly (even if not exclusively) as a storage unit for inventory or sample items (or both) are deductible if the home is the sole fixed location of the business.

One exception to the exclusive use test is if the residence is the only fixed location of a trade or business engaged in selling products at retail or wholesale, provided a separate, identifiable portion of the residence is regularly used for inventory storage.

Thus, where a part of a basement is used for this purpose, the proportionate part of the expenses will qualify, even though the basement is used for other purposes as well.

Another exception is where a residence is used to provide day care services to children, handicapped individuals, and the elderly on a regular basis.

Use Form 8829 to figure out your deductions and then enter on Schedule C if you own your business. Employees use Form 2106.

You’ll need to know the square footage of the space used exclusively for business purposes. A portion of your mortgage interest, property taxes, insurance and utilities are deductible. 

The first phone line into your home is not deductible although charges such as long distance calls, call waiting and equipment rentals are deductible. 

Please check with your tax preparer as your situation may be different than described.

a

Home Office Expense Deductions

• Union and trade-organization dues and convention expenses
• Work clothes, including cleaning and laundry
• Small tools (if useful life is less than one year; otherwise, a depreciation deduction is available)
• Subscription to trade and technical journals and newspapers
• Hiring of assistants and substitutes (if not paid for by employer)

The cost of work clothes and uniforms, including laundry or cleaning, is deductible if the taxpayer’s occupation is one that specifically requires special clothing that is not adaptable to general usage. The IRS lists the following as specifically deductible

• Special uniforms and/or equipment required by ballplayers, fire fighters, police officers, letter carriers, nurses, and civilian faculty members of military schools
• Theatrical clothes and accessories used by professional musicians and entertainers, if used solely in the course of their trade or employment
• Uniforms of air, rail, bus, and other transportation employees, if used solely in the course of employment
• The cost of protective clothing, including safety shoes and helmets, work gloves, oilskins, rubber boots, etc.

Note: If you can wear the same clothes when you’re not working, they’re not deductible. Last year, a Home Depot employee tried to convince me that her clothing was deductible - not. If you do deduct it and you’re audited, it will be disallowed and you’ll pay penalties and interest.

Fees paid to employment agencies for seeking or securing a job in the same line of business are deductible, as are expenses for drafting and printing of job resumes and traveling to job interviews.

Please check with your tax preparer as your situation may be different than described.

a

Employee Deductible Expenses

* If you have 2 jobs or 2 places of business, you can deduct the cost of traveling from the frist one to the second one. 

* If you claim home office deductions for a home-based business, you can deduct the cost of going to and from home to another business location or a job since the home is also a business location. Hint: keep excellent mileage records.

*  The mileage rate for 2008 taxes is 50.5 cents for the first half of 2008 and 58.5 for the second half. Hint: You’d be surprised how quickly that adds up and can help reduce your taxes. Using the standard mileage rate is usually easier than keeping track of all your expenses. It’s OK if the standard mileage rate exceeds your actual expenses. Hint: put aside some of the deducted amount in your Car Repair account because you’re “using up” your car.

* Parking fees and tolls you pay for business use are deductible. Hint: record these expenses in your mileage log. 

* The expenses of using a leased car for business can be deducted using the standard mileage rate.

* Employees claim business travel and other business expenses on Schedule A. List first on Form 2106 or 2106-EZ. Expenses must exceed 2% of Adjusted Gross Income. Hint: If you don’t itemize your deductions, you won’t be able to claim any unreimbursed business expenses. 

* Business owners claim their travel and business expenses on Schedule C and subtract them from Gross Revenue. They will reduce your profit and both income and self-employment (Social Security and Medicare) taxes.

Please check with your tax preparer as your situation may be different than described.

a

More Travel Expenses Tax Tips

If you’re behind on your taxes, now’s a good time to get caught up.

You can find the entire IRS ruling at: http://www.irs.gov/newsroom/article/0,,id=201115,00.html

a

IRS Lowers Interest Rates

* You can deduct the cost of travel only if it is an “ordinary and necessary” business expense. You can deduct travel expenses incurred in attending a trade, business, professional convention or meeting if there’s a true relationship between you trade/business and will benefit your business. If it’s for political or social purposes that don’t relate to your business, the expenses are not deductible. Hint: to deduct the costs of social events, make sure to document any business discussions and who you talked to; follow up with those people afterwards.

* If the travel is both business and pleasure, the traveling expenses may still be allowable if the trip is entirely within the United States and it can be shown that the primary purpose for the trip was to transact business. However, the cost of meals, lodging, and other expenses incurred during the pleasure portion of the trip are nondeductible. Hint: document, document, document. 

* If the you travel outside the United States for business purposes and engage in both business and personal activities, the transportation expenses to the destination must be allocated in proportion to the time spent for business purposes. There are some additional rules about international travel for both business and personal that you should review with your tax preparer. Hint: keep a detailed log in your calendar because the more info you have, the better in case of an audit.

* If your spouse or other family member goes with you on a bueinss trip, the expenses are not deductible unless they also work for your business and their presence has a real business purpose, too.

* A maximum deduction of $2,000 per individual each year is allowed for conventions held on U.S. cruise ships.

Please check with your tax preparer as your situation may be different than described.

a

Small Biz Travel Tax Tips