My Personal Finance Helper

Guide To Donate Your Car

2014-07-24T18:52:00.001-07:00

At Charity Navigator, our primary purpose is helping America's donors make informed giving decisions when they part with their hard-earned dollars by writing a check to charity. In recent years, however, more and more donors are attempting to help themselves, and help others, by donating their used automobiles to charity. This has become a massive business. In the year 2000, nearly ¾'s of a million people took a car donation deduction on their federal tax returns, thusly lowering their taxes by over $650 million.

As America's car donation system is currently construed, it is easy for donors to benefit greatly by donating their cars, albeit with a little risk. By following these 10 Charity Navigator Tips For Charitable Auto Donations, you can minimize that risk, and maximize the amount that actually gets to charity.

1. Find a Charity That Directly Accepts Car Donations
If at all possible, avoid the for-profit intermediary organizations that advertise so pervasively to handle your car donations. When you work with one of these organizations, they keep the vast majority of the dollars created from your donation. Even the most reputable of the agencies that handle these transactions keep nearly 50% of the car's value for their troubles (other, less scrupulous entities keep 90%, or even more). If you can find a charity that handles the transaction themselves, they can keep 100% of their profits. It's possible that the charities you already support have a car-donation program that you don't know about. Check with them first.

2. If Your Charity Doesn't Accept Cars, Take the Time to Find a Charity That Does, and Still Does Work You Respect
Remember that you're still making a charitable donation, and don't simply give your automobile away to any charity, just because they're a charity. Do a little research, and find a high-performing charity that does the kind of work you like, in the region you wish to target, and does that work well.

3. If It Runs, Drive the Car to the Charity
Worthy charities are going to have to pay someone else to handle a pick-up or a tow. This is yet another cost that cuts into the amount that gets to that organization's programs. If you can get the car to them yourself, do it.

4. If You Have to Use a Intermediary Agency, Research the Percentage that Gets to Charity
The IRS does not require the car donation agencies to contribute a set amount of the auto's proceeds to the intended charities; that amount is negotiated between the charities and the handlers. Try to find an agency that maximizes that amount, and call the charity to confirm that number before you give. The charities are reluctant to criticize the middlemen, because they don't want to lose the dollars they do receive, but state attorney generals are beginning to investigate and even prosecute these for-profit middlemen, for holding themselves out as charities and misleading the public on the amount that is actually reaching charitable causes.

5. Make Sure Your Intended Organization is a 501 (c) (3)
While many organizations can claim non-profit status, donations to 501 (c) (4) organizations are generally not tax-deductible. These are political organizations with permission to lobby our government; like Disabled American Veterans or the National Rifle Association. Make sure your intended recipient has 501 (c) (3) public charity status.

6. Transfer the Car Correctly to the Charity
Some charities will ask you to leave the assignment of ownership space on the charity donation papers blank, so they don't have to re-title the auto. If your charity asks this of you, find another charity. If you don't formally sign your car over to the designated nonprofit, you will be held responsible for any parking tickets that are subsequently incurred, or liable if it's used in a crime. Remember, the charity you give the car to will probably not use your car to deliver meals to the needy, but will simply sell it as quickly as possible. When someone buys it from them at auction and doesn't bother to register that car, it's still yours in the eyes of the law.

7. Value Your Car Correctly
With to the proliferation of car donations, the IRS became increasingly concerned about how taxpayers valued the vehicles they donated to charity. Not only did the agency increase heir audits in this area, but it also advocated for changes to the laws that govern such deductions. It succeeded with the passage of the American Jobs Creation Act of 2004 which prevented taxpayers from simply deducting the published fair market value of vehicles worth more than $500. Instead, the deduction is determined once a car is sold and the charity sends the donor a receipt indicating the exact amount the car garnered at auction.

8. Complete Your Paperwork
Non-cash donations are the most common triggers of audits, so it is imortant to keep thorough documentation of a car donation. Specifically, if your car is valued over $250, then you need to obtain and retain a written acknowledgement from the charity. Additionally, if your car is worth more than $500, you must complete section A of the IRS Form 8283 and attach it to your yearly taxes. Furthermore, if your car is worth over $5,000, then you must have an independent approaisal and fill out section B of IRS Form 8283.

9. Use Fair Market Value (FMV) for the Car
There are several exceptions which allow you to use the Kelley Blue Book or a NADA guide, but you must use the FMV, not simply the highest value listed for the year and make of your car. Use the FMV when:

instead of selling the vehicle, the charity keeps and uses it,
the charity makes improvements to the car before selling it,
your car is sold at a discounted price to a person with a low income,
or if the car is worth less than $500.

Otherwise, you can only deduct the amount that the charity sells the car for at auction as indicated on the written receipt the charity sends you.

10. Take the Time to Get It Right
It is true that the biggest winner in the car donation game is usually the donor, and not the charity recipient. But if you take your time, ignore the quick and easy television appeals, and find a reputable, high-performing charity that will make the most of your donation, we can all emerge victorious.

Donate Car For Tax Credit

2014-07-24T18:49:00.001-07:00

You've seen the ads: "Donate your car and get a tax break." Technically, that's true
But some people who give away an old auto might find their tax break smaller than they expected. And a few donors, thanks to the intricacies of vehicle gift guidelines, might be able to boost their deduction amounts.
Giving away a clunker to a charity was once straightforward. You could claim the old car's fair market value, that is, the amount a willing buyer would pay a willing seller for the product. Typically, you'd refer to auto valuation services, such as the Kelley Blue Book, to get an idea of the donated car's value, give it to your favorite nonprofit and then drive off with a tax break equal to that valuation amount. No more.
Because some taxpayers got greedy, claiming much more than their old autos were worth, lawmakers tightened the rules on how much you can write off for a vehicle donation. Now the precise tax break depends on the donor's claimed value of the gift and how the charity uses the vehicle.
"This puts taxpayers in the unusual situation of not knowing the size of their deduction when they make the donation," says Bob D. Scharin, senior tax analyst from the Tax & Accounting business of Thomson Reuters.

$500 limit

In most instances, a taxpayer must take into account a $500 threshold on vehicular gifts. This value amount applies to autos, boats and even airplanes. When the donated vehicle's value (based on credible fair market value analyses) exceeds that amount, claiming the deduction gets more complicated.
This valuation ceiling comes into play when a charity sells a donated vehicle. In this case, just how much a taxpayer can deduct depends on the amount the sale nets.
For example, you donate your old station wagon that's worth $1,000. Under the old rules, that would be the amount you could deduct. But now, if the charity turns around and sells your donation for $800, your deduction is limited to the lower sales price.

The charity must give you substantiation of the Internal Revenue Service-allowed donation amount within 30 days of when you turn your car over to the charity or, if the group sells the auto, within 30 days of the vehicle's sale.
If you haven't heard from the charity, give it a call and ask that it send, or resend, you the donation specifics. Plus, you now must include a copy of the acknowledgment, IRS Form 1098-C or an IRS acceptable substitute form that is sent to you and copied to the agency, with your tax return. Previously, such documentation was generally only kept by the taxpayer in case the IRS questioned a claimed deduction.

For more information, read Guide To Donating Your Car

Why Closing a Credit Card Account May Hurt Your Credit Score

2014-07-24T13:25:00.001-07:00

Once you have paid off your credit card, the next logical step would be to close the account, right? This may make sense, as you're done using the account. But even if this card was the first one you ever got or a newer one, you will be hurting your credit score by closing it abruptly. Keeping the account you have successfully paid off can actually help your score improve. Here are a few things you should know about canceling a credit card:

Raise your credit-utilization ratio
Your credit-utilization ratio is how much of your credit limit you're using. For instance, if you have an overall limit of $5,000 and your balance is $1,500, your ratio would be 30 percent. If you close the account, you would negate your payment success rate by raising this ratio.

Lower average age of accounts
The amount of time for which you have had a card will factor into your credit score, as length of credit history accounts for 15 percent of your score. This may not mean a lot for a card you just opened, but if you have had a card for a number of years, you could risk lowering the average age of all your accounts if you close an older card.

Take away diversity

Having different types of credit can actually raise your score. Lenders like to see that you can responsibly handle all types of credit, and closing an account can hurt your credit diversity. These types of accounts can include standard credit cards, installment loans, mortgages and department store credit cards.

If you're still on the fence about what to do for a paid-off account or one that you can't handle, there are a number of options you can try:

Talk with your lender about refinancing: Sometimes, you may want to close an account because you're having difficulty paying it off. High interest rates can be the main culprit for this, so see if you can refinance the account. You'll have to pay a transfer fee to deal with this, but a lower interest rate can help you make payments more easily.
Use it sparingly: You still need to use your card to build up your score. Instead of canceling the card, designate its usage for a small part of your budget, such as lunch once a week or gas for your car every two weeks. This way you'll still be using it and be able to pay it off at the same time.

Top 10 Student Loan Tips for Recent Graduates

2014-07-24T12:03:00.001-07:00

Whether you just graduated, are taking a break from school, or have already started repaying your student loans, these tips will help you keep your student loan debt under control. That means avoiding fees and extra interest costs, keeping your payments affordable, and protecting your credit rating. If you're having trouble finding a job or keeping up with your payments, there's important information here for you, too.

1. Know Your Loans: It's important to keep track of the lender, balance, and repayment status for each of your student loans. These details determine your options for loan repayment and forgiveness. If you're not sure, ask your lender or visit www.nslds.ed.gov. You can log in and see the loan amounts, lender(s), and repayment status for all of your federal loans. If some of your loans aren't listed, they're probably private (non-federal) loans. For those, try to find a recent billing statement and/or the original paperwork that you signed. Contact your school if you can't locate any records.

2. Know Your Grace Period: Different loans have different grace periods. A grace period is how long you can wait after leaving school before you have to make your first payment. It's six months for federal Stafford loans, but nine months for federal Perkins loans. For federal PLUS loans, it depends on when they were issued (see details). The grace periods for private student loans vary, so consult your paperwork or contact your lender to find out. Don't miss your first payment!

3. Stay in Touch with Your Lender: Whenever you move or change your phone number or email address, tell your lender right away. If your lender needs to contact you and your information isn't current, it can end up costing you a bundle. Open and read every piece of mail - paper or electronic - that you receive about your student loans. If you're getting unwanted calls from your lender or a collection agency, don't stick your head in the sand - talk to your lender! Lenders are supposed to work with borrowers to resolve problems, and collection agencies have to follow certain rules. Ignoring bills or serious problems can lead to default, which has severe, long-term consequences (see tip 6 for more about default.)

4. Pick the Right Repayment Option: When your federal loans come due, your loan payments will automatically be based on a standard 10-year repayment plan. If the standard payment is going to be hard for you to cover, there are other options, and you can change plans down the line if you want or need to. Extending your repayment period beyond 10 years can lower your monthly payments, but you'll end up paying more interest - often a lot more - over the life of the loan. Some important options for student loan borrowers are income-driven repayment plans such as Income-Based Repayment and Pay As You Earn which cap your monthly payments at a reasonable percentage of your income each year, and forgive any debt remaining after no more than 25 years (depending on the plan) of affordable payments. Forgiveness may be available after just 10 years of these payments for borrowers in the public and nonprofit sectors (see tip 10 below). To find out more about Income-Based Repayment and related programs and how they might work for you, visitIBRinfo.org.

Private loans are not eligible for IBR or the other federal loan payment plans, deferments, forbearances, or forgiveness programs. However, the lender may offer some type of forbearance, typically for a fee, or you may be able to make interest-only payments for some period of time. Read your original private loan paperwork carefully and then talk to the lender about what repayment options you may have.

5. Don't Panic: If you're having trouble making payments because of unemployment, health problems, or other unexpected financial challenges, remember that you have options for managing your federal student loans. There are legitimate ways to temporarily postpone your federal loan payments, such as deferments and forbearance. For example, an unemployment deferment might be the right choice for you if you're having trouble finding work right now. But beware: interest accrues on all types of loans during forbearances, and on some types of loans during deferment, increasing your total debt, so ask your lender about making interest-only payments if you can afford it.

If you expect your income to be lower than you'd hoped for more than a few months, check out Income-Based Repayment. Your required payment in IBR can be as little as $0 when your income is very low. See tip 4 for more about IBR and other repayment options.

6. Stay out of Trouble! Ignoring your student loans has serious consequences that can last a lifetime. Not paying can lead to delinquency and default. For federal loans, default kicks in after nine months of non-payment. When you default, your total loan balance becomes due, your credit score is ruined, the total amount you owe increases dramatically, and the government can garnish your wages and seize your tax refunds if you default on a federal loan. For private loans, default can happen much more quickly and can put anyone who co-signed for your loan at risk as well. Talk to your lender right away if you're in danger of default. You can also find helpful information at studentloanborrowerassistance.org.

7. Lower Your Principal If You Can: When you make a federal studentloan payment, it covers any late fees first, then interest, and finally theprincipal. If you can afford to pay more than your required monthly payment - every time or now and then - you can lower your principal, which reduces the amount of interest you have to pay over the life of the loan. Include a written request to your lender to make sure that the extra amount is applied to your principal! Otherwise it will automatically be applied to future payments instead. Keep copies for your records and check back to be sure the overpayment was applied correctly.

8. Pay Off the Most Expensive Loans First: If you're considering paying off one or more of your loans ahead of schedule, or trying to reduce the principal, start with the one that has the highest interest rate. If you have private loans in addition to federal loans, start with your private loans, since they almost always have higher interest rates and lack the flexible repayment options and other protections of federal loans.

9. To Consolidate or Not to Consolidate: A consolidation loan combines multiple loans into one for a single monthly payment and one fixed interest rate. If this is appealing, here are some pros and cons to consider. You can consolidate your federal student loans through the Direct Loan program, and this calculator can help you figure out what your interest rate would be. For private consolidation loans, shop around carefully for a low or fixed interest rate if you can find one, and read all the fine print. Never consolidate federal loans into a private student loan, or you'll lose all the repayment options and borrower benefits - like unemployment deferments and loan forgiveness programs - that come with federal loans!

10. Loan Forgiveness: There are various programs that will forgive all or some of your federal student loans if you work in certain fields or for certain types of employers. Public Service Loan Forgiveness is a federal program that forgives any student debt remaining after 10 years of qualifying payments for people in government, nonprofit, and other public service jobs. Find out more at IBRinfo.org. There are other federal loan forgiveness options available for teachers, nurses, AmeriCorps and PeaceCorps volunteers, and other professions, as well as some state, school, and private programs (see some examples).

How Student Loans Work From Start to Finish

2014-07-24T10:54:00.000-07:00

Student loans are a way to pay for higher education. Whether you love debt or you hate it, student loans are an investment in your future. They can make an education possible when there is no other way. This page covers the basics of student loans and points you towards additional resources.

Student loans are unique because they have some special features. You often get an attractive interest rate, and almost any student can borrow some money – regardless of income or credit history. Student loans offered through government programs tend to be the most attractive.

To get a student loan, your first step is to fill out the Free Application for Federal Student Aid (FAFSA). You should submit your FAFSA as soon as possible – you can make estimates and correct the details later.

Once you’ve completed your FAFSA, you’ll want to visit your school’s student aid office. Ask what kind of aid you might expect.

What is the FAFSA?

So that you’re prepared, familiarize yourself with some of the most common student loans:

Perkins Loans should be a first choice because of their low interest rate
Stafford Loans are easy to qualify for, and theinterest charges may be subsidized for some time
PLUS Loans allow parents to borrow very large dollar amounts so that you can cover all your costs

You can postpone repayment of your loans under a variety of conditions. This is called a deferment. While you’re in school, for example, you may qualify for an in-school deferment. When you’re in a tough financial spot you can often temporarily stop paying back your loans without any penalty or damage to your credit.

How Deferments Work

After you’ve finished your education, expect to pay those loans back. Most often your lender will set up an amortizing repayment schedule. If you’ve taken several loans over the years, you may want to consider consolidating your loans. Student loan consolidation has some unique benefits that you can’t find in any other type of loan.

7 Auto Insurance Buying Tips

2014-07-24T10:44:00.001-07:00

Last year, ten days before his 21st birthday, Bradley Dreyer was skateboarding against traffic alongside a row of parked cars in Sonoma, Calif. when a drunk, uninsured motorcyclist crossed the double yellow line and hit him from behind. Dreyer, who had been studying to be an ER nurse, sustained a severe brain injury.

With the help of lawyer Guy Kornblum, Dreyer’s parents got their own insurer, State Farm, to pay out both the full $100,000 of uninsured motorist coverage on their auto policy and their $1 million in umbrella coverage. But given Bradley’s continuing needs, they now wish they’d carried even more coverage. “We have to face difficult decisions,” says Bradley’s mom, Mary Kate Dreyer. “We don’t want to rob him of treatment now, but we need to preserve his estate for the future, what could be lifetime care.”

Pull out your policy now. There may be smart ways you can cut your premiums, such as raising your deductibles, dropping collision insurance on an older car, demanding special discounts or consolidating your policies with one insurer. But you might also need to pay for more protection from uninsured drivers and catastrophic injuries, warns Kornblum, who’s dealt with the fallout from severe auto accidents for 44 years.

In Pictures: 10 Reasons To Change Your Auto Or Home Insurance

1. Raise your deductibles

The easiest way to save is by increasing both the collision and comprehensive (damage due to vandalism, fire, flood) deductibles for damage to your auto. As a practical matter, if you have a $500 deductible and $700 of damage to your car, would you even put in a claim? Many folks wouldn’t for fear it would raise their rates. That’s one reason it makes more sense to have a $1,000 deductible, says Mark McConnell, a claims officer in Roanoke, Va. with ACE Private Risk Services. Consider “full glass” coverage if you’re worried about a ding to your windshield; it’s cheaper than a lower comprehensive deductible.

2. Get uninsured motorist coverage

This protects you and family members living with you should you be hit by a negligent driver who is uninsured or “underinsured,” even if you’re walking, bicycling or skateboarding at the time. According to the Insurance Research Council, at least 16% of drivers, and about a quarter of those in New Mexico, Mississippi, Alabama, Oklahoma and Florida, are uninsured. Underinsured? In California an “insured” motorist in the assigned risk pool can carry as little as $15,000 in bodily injury coverage per person and $30,000 per accident.

In many states uninsured motorist protection isn’t mandatory coverage, warns Diane Giles, a vice president at Marsh, a broker representing several high-end insurance carriers. That means you could have a policy without it, particularly if you shopped on price. The amount of uninsured/underinsured motorist coverage you carry should match your auto policy’s primary liability limits–meaning the maximum amount your insurer will pay the other guy if you cause an accident. Typically, that amount is $100,000 per individual and $300,000 per accident on a primary auto policy. That limit, in turn, should be where your umbrella kicks in. (Some umbrellas require your auto policy to cover as much as $500,000 per accident. Make sure there’s no gap in coverage between the two policies.)

3. Carry a big umbrella

An umbrella, or “excess,” policy kicks in where your liability coverage for your auto and home ends and is a necessity if you have any assets to protect. A $1 million umbrella is common, but $2 million is more realistic these days. “The more assets a person has, the bigger target they are” for lawsuits, says ACE’s McConnell. Recent jury verdict data show that 14% of personal injury liability cases result in awards in excess of $1 million, he notes. If you have teenagers driving, consider increasing your umbrella. The second million is cheaper than the first.

Warning: Although uninsured motorist coverage was included in the Dreyers’ old umbrella policy, many insurers now either don’t offer it or charge extra for it. Expect to pay $125 to $250 a year extra for $1 million of such coverage. “You need it,” insists Kornblum, who personally carries a $10 million Chubbumbrella with $5 million in uninsured/underinsured motorist coverage.

You can often save on an umbrella by buying it through the same insurer you get your auto policy from; go to an independent agent and ask for combined quotes from several carriers. Be sure to compare what each umbrella covers.

4. Hunt out obscure discounts

Certain discounts–say, for a good driving record–are usually applied automatically. But other credits require action on your part. For example, as you age, taking a defensive driving course (even one online) could earn you a credit. If you start telecommuting two days a week, call your insurer and ask for a discount. You may also be able to save by buying through a workplace discount program. If you have a teen driver, ask for the good student discount. (If the kid’s grades aren’t high enough, make him take the bus.)

5. Don’t buy a teen his own car

It’s usually cheaper not to add a third car when you’re adding a teen driver to a two-parent, two-car family, because insurers rightly assume the kid will drive less without his own car. (Even without a third car the average annual premium goes up 58% with a teen added, according to a recent Insurance.com study.)

The exception: If you and your spouse both drive new luxury cars with collision coverage, then you might reduce both premiums and family conflict by getting your kid a clunker without collision insurance. Warning: Some insurers charge as if the kid is driving the fanciest car in the garage, even if you swear he won’t. So you may have to sell your midlife-crisis Corvette or get a different insurer.

6. Avoid limited tort insurance

In some states, including Pennsylvania and New Jersey, you can buy “limited tort” coverage at a discount, but be wary of what you’re giving up. Limited tort means that, even if the other guy is at fault, you generally cannot collect payment for your “pain and suffering”–extra money that may be needed, say to get help around the house if you’re laid up. “We recommend clients select full tort,” says Giles.

7. Insure for a total wreck

If you’ve got a paid-up car older than five years or so (depending on the model) it may make sense to drop collision and comprehensive. That’s because if you wreck your car or it’s stolen, most insurers will pay out the depreciated value, which could be less than it takes to replace your older car. That’s also true if it would cost more to repair your car than it’s worth.

On the other hand, if you have a car loan outstanding or are leasing a car, consider topping up your coverage. MetLife Auto & Home, for example, offers “gap” insurance, which pays the difference between the depreciated value and the amount needed to pay off the loan or lease, and raises comprehensive/collision costs an average of 7%.

High-end carriers like Chubb and ACE offer the option of setting an “agreed value” at the start of each premium year for the amount you’ll receive if your car is totaled. It paid off for one of Giles’ adult daughters, whose VW Jetta was destroyed in a flood. The payout covered the remaining lease and left her with $4,000 for a deposit on a new lease.

11 Ways To Save Money Without Changing Your Lifestyle

2014-07-23T17:28:00.001-07:00

We’re all only too aware how difficult it can be to live a normal lifestyle without incurring a mountain of debt these days.

Sadly current world economic trends show this isn’t likely to change in the short term but in the meanwhile we’re all trying to find the best ways to save the little money we earn and still maintain our lifestyles.

Of course there are various daily activities where you can’t avoid spending money – for example you can neither stop buying food from the supermarket nor stop driving to work with an aim of saving money.

However, we don’t need to get overly concerned at this because we’re still left with some areas where we can make minor adjustments and rein in our spending habits. No matter how little each adjustment might make, we shouldn’t give up on saving because in the long run each little saving will mount up.

If you’re looking for ways to increase your saving, you’re at the right page. I’ve taken some time to research how to save money without changing the lifestyle you have been enjoying.

Some of the money saving tips that I found to work best are below. The tips may not seem to add up greatly at first but after a short time and certainly in the long run you’ll notice the difference and eventually it’ll start adding up.

So here’s my eleven ways for you to save money without changing your lifestyle:

You can avoid paying satellite or cable TV bills by streaming online to watch your favourite channels, including movies and sports. The movies and sports channels are usually free of charge and you still get latest news via the internet which is of course free of charge.
You can stop paying gym fees and instead resort to doing your normal exercise routine like running or walking and other self training activities. You’ll still maintain your physical fitness whilst saving money. For most people walking is actually the best exercise regime of all.
Avoid eating and drinking out as much as you can. Cooking at home has always been cheaper than ordering food or eating out. You’ll be able to buy much cheaper groceries that you can cook instead of buying in restaurants at inflated prices. You can also invite friends over for drinks instead of going out to drink.
Before buying anything, search around to find the best deal. Check the price of the article you want to purchase online as well as at retail shops before you decide to buy. Look for the best discounts available.
Are you paying too much for your life insurance? Insurance costs have decreased a lot lately but a lot of people are still paying high premiums that were negotiated years ago. Check whether you can save on life insurance costs today.
If you’re a student, you can avoid buying very expensive books and instead resort to downloading books or reading them online via e-books. If you’re considering continuing with a master’s degree, you can look for universities that offer free online education. Some of these universities include UK’s Open University.
Learn to say no. Enough said, whether it’s for yourself or for your noisy children.
Stop trying to keep up with your neighbours! Chances are they’re in debt too but trying to keep up appearances when you can’t really afford it is not much more than an expensive illness.
In my research, I found out that a lot of people spend huge sums of money paying their telephone bills. Instead of using prepaid and monthly contract phones to make your calls, you can switch to VoIP services that offer free calls all over the world. These services include Skype, Tango or Viber.
You can also downgrade to a much cheaper cell / mobile phone with less features. The essence of a mobile / cell phone is to communicate and a cheaper phone with limited complex applications also does the job. The reason I’m saying this is that statistics have shown that most people do not use these application at all thus they are just expenditures with no output.
Never shop without a list and don’t fall for the supermarket mind games when you shop! Supermarkets spend millions on studying spending habits and if you wander round the store without a plan you’ll be just as likely to fall for their tricks and end up spending more than you intended!

By carrying out these small practices and gradually changing your spending habits, you’ll increase your money savings without having to feel the pinch.

Start today and you’ll not regret the decision.

5 Tips To Protect Your Future Home Insurance Claims

2014-07-23T10:55:00.002-07:00

Generally speaking, we buy home insurance to avoid actually having to use it. We want to make sure that it’s there for us and protecting the place that we call home. But no homeowner really dreams about the day that they’re going to have to call in a claim.

Imagine having to call in a claim and hoping your insurance company is going to follow through. They take down all of the necessary information, but something odd happens: your claim gets rejected! Of course you can appeal, but the shock might be enough to cloud your head for a while.

No need to worry. There are plenty of ways to keep your home insurance claim from being rejected. You just have to make sure that you pay attention to the details.

1. Start Right From the Beginning

Buying a policy online is awesome, because you get covered quickly and you can move on to other tasks in your day. Unfortunately, people tend to ignore the signs that are all around them of a bad policy. You need to pay attention to any warnings that you get when you’re taking the policy out. You could be skipping over relevant information that you need to know if you’re ever going to put in a claim.

2. Be Honest!

There is nothing that can torpedo your chances of getting a claim approved if the house isn’t described as accurately as possible. You need to describe the materials that the home is built from, including those thatched rooftops that used to be all the rage. If the claims specialist comes out and finds that the house is materially different from the way that you described it to get the policy, the claim can be not only denied, but the entire policy could be cancelled. That just makes it even harder to get good insurance with another provider, because they’re going to worry big time if you’re lying to them as well. It’s better to pay a little more for good coverage than to find yourself without what you need.

3. Be Security Focused

Most insurance providers want you to do everything in your power to minimize risk on all sides. This means that you need to have a good alarm system and strong locks on all of the doors and windows. These details might seem small, but you can be that the claims specialist dispatched to the location will make a note of it. It’s their job to see exactly what you did to secure the property, so going out of your way to get these details right works in your favor.

4. Make Safety a Priority

Fire alarms, smoke detectors, weather radios, fire extinguishers and more are all great safety features that should be worked into your home. Don’t forget a carbon monoxide alarm, while you’re thinking about safety. CO is extremely dangerous because it’s odorless and it can actually kill an entire family if it’s left in the house long enough. Having a CO meter can help you out a lot when it comes to protecting your family.

5. Handle Maintenance Fast

Insurance companies are still companies, even though they’re in the business of taking care of people. You want to make absolutely sure that youíre looking at taking care of the maintenance around the house. If there’s a claim triggered, and you haven’t handled necessary repairs, the company may reject it on the basis of wear and tear. You don’t want that to happen, so make sure that you spend upfront money now to prevent problems down the road.

These tips can keep your claim from getting rejected, which in turn can save you thousands of pounds when disaster strikes. Having a strong savings account that you can tap when the worst happens is also a good idea. It can be hard to withhold money for a rainy day, but you have to make sure that you are trying your best.

How to Repair Your Credit

2014-07-21T07:18:00.002-07:00

If you're struggling with debt or your credit score is a little less than flattering, here are few steps you can take to repair or rebuild your credit on your own before accepting one of the many "debt consolidation" offers or resorting to bankruptcy. 35% of your credit score is made up by payment history, 30% is how much debt is owed, 15% is length of credit history, 10% is type of credit used, and the last 10% is how much new credit you're using.

Method 1 of 4: Repairing Credit Quickly to Make an Immediate Impact

Review your credit reports for accuracy. It's tough enough paying for your own mistakes; you don't need to be penalized for someone else's. Make sure that your credit reports accurately reflect your debts and payment history, otherwise you could be paying for it with a drop in your credit score.

Call your creditors and politely explain any errors you think may have been made. Be courteous and don't be rude. Ask them to revisit any potential errors and make sure to get the correction in writing if they do end changing your credit history. Having it in writing is your defense against changing minds, lost records, new management being more aggressive, or any number of other things.

Set up payment reminders on your bills. Paying on time, also called your payment history, counts for 35% of your credit score. To this end, you can easily set up automatic payment reminders on your bills so that you don't forget to pay or so that an agreed-upon amount is deducted from your account automatically. Whether and how often you pay your bills on time has a huge difference on your credit score.

Stop using your credit cards as much. This is another way of saying to live within your means. While you get your credit card debt under control, it's a good idea to rely chiefly on good, hard cash in order to pay off some of your debts. If you use credit in order to pay off debt, you're not really making a dent in your debt; you're just shifting your debt around.

See if you can't get an advance from a family member or friend. Offer to pay interest, of course, and definitely draw up a contract so that the debt becomes a legally-binding agreement. Use some of this cash to begin to pay off your debt.
Know that canceling your credit cards won't cancel your debt. You can cancel your credit card, but your debts will still follow you around, like death and taxes.
Don't cancel the credit card with your oldest line of credit. Canceling a card with the oldest line of credit may make your credit history appear younger, thereby hurting your overall credit score.

Method 2 of 4: Boosting Your Credit Score in Other Ways

Get a secured credit card if you need to build up your credit history. Secured credit cards work kind of like debit cards. You deposit a $300 sum with the bank, for example, and you'll have $300 credit limit on your secured card. Then use the card until you reach your limit. Replenish the balance and repeat until your credit score has risen.^[4]

Look for a secured credit card that charges 0% interest for the first 6 months, with no annual fees. These will ensure that you get the best bang for your buck.
Beware of the high interest rate and various fees often associated with a secured card. Pay in full, on time, every month to avoid most of those fees.

2
Join a credit union. They're more likely to give you loans in the future than a regular bank.
3
Aim for a low credit utilization ratio. This is a fancy word for how much debt you put on each of your credit cards. If the limit of your credit card is $3,000 and your card has a balance of $1,500, you're using exactly half of your available limit, meaning that card has a credit utilization of 50%. A credit utilization of 20% or lower is something that you should aim for.^[5]
- You can actually shift your credit around to massage your credit utilization. Say you have two credit cards — one with a large limit and small balance, and another with a small limit and large balance. Shift the debt from the small limit/big balance card over to the large limit card. The debt won't make as much of a dent in the card with the larger limit.
4
Add good credit accounts to your credit files. When you add good credit tradeline accounts to your credit profiles, you increase your credit score. If you add good credit accounts and have even one bad credit account deleted from your credit reports, your credit score could increase by as much as 80 points with just these two actions.
Method 3 of 4: Paying Down Your Existing Debt
1. 1
  Reach out to your creditors. Preferably, do this quickly, not after months of harassing calls. It is best done as soon as you realize you won't be able to make the requested payments. Most creditors are not as cutthroat as you think, and they will work with you to schedule smaller payments that fit your budget. After all, they'd much rather receive $20 payments for the next year than risk getting nothing in bankruptcy court.
  - This is where having a written budget can really pay off. Tell the creditor that you've worked out a budget, can afford to pay them $X per month or weekly, and offer to send them a copy of your budget. They're much more likely to accept your offer of lower payments if you can show good faith.
2. 2
  Decide whether to avalanche or snowball your debt. Total debt outstanding constitutes 30% of your credit score, so it's time to get your rating restored. Once you've decided how much you can pay against your debts, and negotiated any lowered payments, you must choose whether you're going to attack your debts one by one or piecemeal.
  - Avalanching your debt, as it's known, means paying off your debt one by one, often starting with the debt that has the highest interest rate. Start off with the most money you can possibly afford. Use that money to pay off debt with the highest interest rate. When that piece of debt is fully paid off, start paying off the debt with the next highest interest rate until all your debt is destroyed.
  - Snowballing your debt means paying off the lowest-balance debts first and closing them out before moving on to increasingly bigger debts. Snowballing can create an emotional victory early on, motivating the borrower to continue on his or her quest to financial independence.
3. 3
  If you can afford it, try to avalanche your debts instead of snowballing them.^[6] If you can focus on paying the highest-interest debt first, you'll actually find that you'll pay off your debt quicker, you'll save more money, and you'll get a better credit score at the end of the day. Although there's a psychological sense of gain in snowballing your debts, there's the very real financial gain of getting creditors off your back and reclaiming your credit score.
4. 4
  Consider borrowing against your life insurance in order to chip away at your debt. If you have a life insurance policy, think about borrowing against it. Borrowing from your life insurance policy will get you lower-than-commercial rates, giving you some wiggle room while you begin the serious push to financial independence.^[7] Yes, you will be technically borrowing money from yourself, but it's sound choice if you're left with no other option. Just be sure to repay the debt, as the debt. Plus, a little extra will be subtracted from the insurance policy payable to the beneficiary if you do happen to die.
5. 5
  Open two bank accounts. "What am I doing opening another bank account if I'm trying to get out of debt?" you may ask. Keeping two bank accounts, one for everyday expenses and one for repaying debt, is a smart way to force yourself to only spend so much. This eventually helps you dig your way out from a ditch of debt.
  - Transfer all the money you need for everyday expenses, like groceries, gas, mortgage, school supplies, etc. into one bank account, based on your budget (see below). Only put enough money in here to satisfy your basic budget, so that you force yourself to use only the amount of money that you have set aside. It's okay to set aside money in this account for emergencies and savings, as long as they are actually used that way.
  - In the second bank account, transfer all the rest of your monthly income. Use all the money in this account to pay off your debt, ideally by avalanching. At the end of each month, this bank account should only have a nominal amount — say $50 — in it. This means that the spending is going towards getting you out of debt.
6. 6
  Once you pay off your debt, make sure you get a settlement letter. Send a copy of it to the credit bureaus so they can update your credit report immediately. This should have an effect on your credit score and your ability to borrow money.
7. Method 4 of 4: Using a Budget
9. 1
  Create a budget. Following a budget seems to scare many people, perhaps out of fear of complexity or a fear that a budget curtails spontaneous spending. Budgets are neither hard nor constricting; in fact, a well-laid out and consistently followed budget can give you both peace of mind and freedom to spend more eventually. All you need to do is to get started.
  - There are many free budget tools available online, in software packages and through apps. The simpler the tool, the better for you and the increased likelihood you'll stick with it.
10. 2
  Calculate your income and your expenditures. The best way to figure your expenses is to track your spending for 30 days. Find out how much money is going to leisure activities and going out to eat. Then figure out how much money you can set aside each month to whittle down your debt.
  - Break your spending into individual categories, and then figure out which categories are essential and which ones aren't. Budget the essential categories first and then the inessential categories second.
11. 3
  Stick by your budget. Your budget won't be very useful if you don't stick with it. Knowing when to stop spending is a really hard skill to master, but it's one you'll need to master if you want your credit score to fly high once again. Do everything in your ability to abide by the budget like a law.
15. Tips:
16. You can get negative items removed from your credit report if they are inaccurate or incomplete. Write to the credit bureaus and tell them that the items are inaccurate or incomplete and you want them removed. When you dispute a debt the credit report agency has 30 days to receive a response from the creditor to validate the debt. If after 30 days they do not receive a response the Credit reporting agency by law will remove the entry from your report. Remember there are three agencies, so you have to write to all three.
17. That software doesn’t care if you pay your bill daily, weekly, bi-monthly or whatever – as long as the correct amount of money is sitting on your account by the due date. This is where computers can be fooled into thinking you’re much better with your credit by doing some simple things.
  - Divide your monthly payment into a weekly payment (or fortnightly)
  - Make your repayments more frequently (like weekly or fortnightly)
  - Round your new repayment amount up to the nearest $5
  - By doing these little things, the computer instantly recognizes that you’re paying more than you need to and you’re paying more frequently than required. This can improve your credit score and have the added benefit of making it harder for you to fall behind with payments in future.
18. Your credit report is your guideline. Each account on your credit report has a rating. A sample credit report will be provided to assist you with reading your report. The rating may change depending on the agency. A letter followed by a number indicates the type of account and the rating. If you have an account that is rated as an I1 that is an individual account that is paid on time. If you have an account that has a J1, that is a joint account. An I5 could mean trouble. Highlight everything that isn't a 1 and everything that is turned over to collections. Make a list on your computer from the lowest amount to the highest. Start with the lowest amount and either pay the debt or dispute it.
19. Many companies report things in error. Maybe your name is spelled the same way as someone else’s or perhaps they didn’t list a payment that was made. The point is errors happen and credit companies must respond within 30 days if you challenge an entry that was made if you think there’s an error.
20. You want to show that you are responsible with high balances, so you'll want to have high credit limits but a low balance. It actually helps to have a high balance that you've paid off.
21. Get a loan from your credit union or banking establishment, then immediately (that day) turn around and open up a savings account. Make payments on the loan from the savings account. Do not use the money for anything else! This will help improve your credit as you pay off the loan. Be advised, however, that the interest you pay on the loan will typically be larger than the interest earned on the savings account. Thus, toward the end of the loan, you will empty the savings account and still owe something. But if you can cover the difference, your credit score should be better as a result.

Top 10 tips for mortgage borrowers in 2014

2014-07-20T16:36:00.000-07:00

Top 10 tips for mortgage borrowers in 2014

The clock is ticking for buyers and homeowners who want to grab a low mortgage rate in 2014. But if you stay on top of your game, keep your finances in order and act quickly, you can still grab attractive mortgage deals.

These 10 mortgage tips can help you with your mortgage decisions in 2014.

1. Document your finances.

Lenders will be extra diligent when underwriting home loans in 2014, as new mortgage regulations go into effect in January. The rules put pressure on lenders to verify that borrowers have the ability to repay their loans.

Keep good records of your finances, including bank statements, tax returns, W-2s, investment accounts and any other assets you own. Be ready to explain any unusual deposits to your accounts. Yes, the $500 that Grandma deposited in your account for Christmas could delay your loan closing if you can't prove where the money came from.

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2. Lock a rate as soon as you can.

Rates will likely climb in 2014 as the Federal Reserve is expected to reduce the pace of the economic stimulus program that has long helped keep rates low. If you are planning to get a mortgage, lock in a rate as soon as you are comfortable with the numbers.

3. Refinance now -- if you still can.

Many homeowners lost the opportunity to refinance at a lower rate when rates jumped in 2013. But those who are still paying more than 5 percent interest on their home loans might still have an opportunity.
If you think you may be able to save with a refinance, but you are not sure, it doesn't hurt to try. Speak to a loan officer and take a look at the numbers to see if refinancing still makes financial sense for you after you consider how long it will take to break even with the closing costs.

4. Buyers, use your bargaining power.

As mortgage rates climbed, lenders lost a big chunk of their refinance business. In 2014, they will turn their attention to homebuyers and will fiercely compete for their business. Buyers should take advantage of bargaining power they gain with that increased competition. Shop around for the best deal and look beyond the interest rate on the loan.

5. Learn your rights as a borrower.

Mortgage borrowers will get many new rights as consumers this year when new mortgage rules created by the Consumer Financial Protection Bureau go into effect in 2014. If you run into issues with your mortgage servicer in 2014 or fall behind on your payments, make sure you are aware of your rights and put them to use.

6. Take good care of your credit.

It's nearly impossible to get a mortgage without decent credit these days. That will continue to be the case in 2014. If you are planning to get a mortgage, monitor your credit history and score until your loan closes. The best mortgage rates usually go to borrowers with credit scores of 720 or higher. You may still get a mortgage with a score of 680, but lower scores will mean higher rates or higher closing costs.

7. Don't overspend.

Lenders don't want to give out loans to borrowers who will have little money left each month after they pay their mortgages and other debt obligations such as credit cards and student loans. If that becomes the case, the lender will tell you that your DTI, or debt-to-income ratio, is too high and you don't qualify for a loan. Try to keep your monthly debt obligations, including your mortgage and property taxes, below 43 percent of your income.

8. Consider alternative mortgage options such as ARMs.

Mortgage rates are rising, but there are alternatives to grab a lower rate, depending on your plans.
A homeowner planning to keep a house for seven to 10 years could take advantage of lower mortgage rates by choosing a seven- or 10-year ARM instead of the 30-year traditional fixed-rate mortgage. Rates on adjustable-rate mortgages can be as much as one percentage point lower than on fixed-rate loans.
If you are not sure for how long you plan to keep the house, a fixed-rate loan is probably the better choice.

9. Considering an FHA loan? Reconsider.

FHA loans have long been popular among first-time homebuyers because they require low down payments and have somewhat less strict underwriting standards than conventional loans. But they come at a price. Mortgage insurance premiums on FHA loans are likely to continue to rise in 2014, and after recent changes, the borrower is now required to pay for mortgage insurance for the life of the loan. Try to qualify for a conventional loan before you apply for an FHA mortgage.

10. Don't panic.

Yes, mortgage rates will likely climb in 2014. But don't panic, thinking you have to buy a home now to grab a low rate. If you are shopping for a home, do your best to move quickly, but remember that this is one of the biggest financial decisions of your life. Get your mortgage and buy your home when you feel ready.

7 “Smart” Credit Tips That Aren’t

2014-07-20T11:33:00.002-07:00

There’s a lot of advice floating around out there about how to manage your credit cards and other debts to maximize your credit score. The trouble is, not all this wisdom is created equal, and some tips intended to help your credit can actually have the opposite effect. Here are seven supposedly “smart” tips we’ve heard bandied about recently that generally ought to ignored.

Asking for a lower credit limit

If you can’t control your spending, asking for a lower credit limit may indeed keep you out of trouble by simply capping how much you can borrow. But there’s also a risk to this approach. As MyFICO.com explains, 30% of your credit score is based on how much you owe. The formula looks at how much you owe as a percentage of how much available credit you have, otherwise known as your credit utilization ratio. So if you’re unable to pay off your debts, lowering your credit limit will increase your ratio — and damage your score. The impulse to impose external limits on your spending is understandable, and in some cases wise, but you’re better off focusing your energy oninternal restraint.

Paying off an installment account early

Paying off debts early might seem like a good way to improve your credit, but paying off an installment loan like a car loan early can actually ding your score because it raises your utilization ratio. For instance, if you have a $10,000 car loan with a $5,000 balance that you pay off in one fell swoop, your debt load will drop by $5,000, but your available credit will drop by $10,000 once the account is closed.

This isn’t to say you shouldn’t pay off a debt early if you find yourself with a windfall on your hands. An earlier payoff can save you a bundle in interest. But if you’re trying to raise your credit score, paying off a credit card rather than an installment loan is the way to go.

(MORE: 10 Steps to Spring Clean Your Finances)

Opening a bunch of cards at once

Since your utilization ratio is so important, a lot of people think that getting as much available credit as possible — immediately — will do the trick. But it doesn’t work like this, unfortunately. You can’t magically improve your utilization ratio by applying for a slew of cards in rapid succession because numerous inquiries and multiple brand-new cards both can lower your score, says Barry Paperno, credit expert at Credit.com. If you want more credit to improve your score, space out the process and be realistic about your situation; don’t take the hit to your score by applying for a card you know you probably won’t qualify for. (Banks and third-party websites that aggregate credit card deals both generally spell out what kind of credit score you need to obtain a particular card.)

Settling a debt for less than you owe

Negotiating with a lender and then settling the debt for less than you owe can be a smart move. But it can also hurt your credit if you do it the wrong way. You must get the lender or collections company to agree in writing to report the debt as “paid in full;” otherwise, it will be noted “settled for less than the balance.” It sounds like a small distinction, but having a debt — even a paid debt — listed as “settled” on your credit record can hurt your credit score, says Natalie Lohrenz, chief development officer and director of counseling at Consumer Credit Counseling Service of Orange County.

Using prepaid debit cards to rebuild your credit

John Ulzheimer, president of consumer education at SmartCredit.com, says a lot of borrowers have the misconception that prepaid debit cards and credit cards are equally good credit-building tools. They’re not. Prepaid cards “don’t do anything to help build or rebuild your credit and are not a viable long-term plastic solution,” he says. Although some prepaid card issuers say they help build credit, none currently report to the three major credit bureaus.

Instead, Paperno suggests a secured credit card, which requires you to put up a cash deposit equal to the amount you can spend. The effect on your cash flow is the same as with a prepaid card, but you’ll be building a credit history. That said, there two caveats to keep in mind. First, although most secured card issuers do report your activity to credit bureaus, check the fine print or call and ask to make sure it reports to at least one of the big three (TransUnion, Equifax or Experian). Second, watch out for fees; in a March ruling that disappointed consumer advocates, the Consumer Financial Protection Bureau reversed a regulation that limited some fees on these cards.

(MORE: 5 Ways To Repair A Trashed Credit Score)

Never using your credit cards

Some people approach credit like a poker game, with the mentality that you can’t lose money if you don’t play your cards. Although it’s always advisable to pay off your bill in full every month to avoid interest charges, not using credit cards at all can actually backfire when it comes to your credit score. If an issuer looks at your account and sees that there hasn’t been any activity for a while (how long varies, but more than a year is a good rule of thumb), they might close it. Losing that credit line hurts your utilization ratio, which can hurt your credit score. Lohrenz suggests charging a small amount regularly — maybe a recurring bill like a gym membership or Netflix subscription — and paying it off every month. Some issuers will let you set up automatic payments from your checking account, so you won’t forget to make those payments.

Checking your credit daily

Checking your credit score every day won’t hurt your score (when you request your score, it’s called a “soft pull,” which is different from the “hard pull” lenders conduct that does affect your score). But trying to parse why you gained or lost two points here or there will just give you heartburn and won’t give you any greater insight into how your score is calculated. Lenders generally report to credit bureaus every 30 days, so checking your score every day takes the focus off what really matters: how your longer-term financial habits affect your credit file.

How to Choose Your First Credit Card

2014-07-20T11:32:00.001-07:00

If you need a credit card, proceed very carefully...after all, as Mark Twain said "a banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain".

1.Look for a card that has good benefits. Good benefits may include low interest, promotional interest rates, no annual fee, no bank service charges, air travel bonus miles, credit points toward purchases, credit points toward long-distance phone calls, or credit points for gasoline.

If offered a promotional interest rate, find out the terms of payment and when the rate will expire. Most cards apply payments to lowest interest charges first, leaving your higher interest charges to collect interest until the entire amount is paid off.

Ask if there are fees and charges. There may be an annual fee, an application fee, an account service charge, an over-limit fee, a late-payment fee, a cash advance fee, and other miscellaneous fees. Compare these fees to other cards to see if they are trying to rip you off.

Check the interest rates. Some cards charge interest from the date of purchase. Some cards charge interest from the billing date. Pay all of your bills on time to avoid paying interest.

Find out if the card offers a standard monthly billing cycle. Some cards expect a payment every two weeks! Ask if there is a penalty for not using your card.

Apply. There are usually three ways to apply: through the mail, over the phone and on the internet.

Activate the card when you receive it. Follow the activation instructions included with the card, usually this can only be done from your home phone. They will try to sell you several services over the phone. Say no. Sign the back of the card before you use it.