Poorer Than You

Why You Should Join a Credit Union

Guest Author — Wed, 04 Nov 2009 12:39:51 +0000

The following guest post was contributed by Christine Howell, who frequently writes about Online Finance Degrees and college related topics for Online College Guru, an online college directory and comparison website.

Credit unions have been around since the 1840s when a group of weavers in England banded together to form the Rochdale Society of Equitable Pioneers. Credit unions continue to be pioneers in the financial world, providing a level of service to their members that traditional financial institutions cannot match. But why should you join a credit union? Here’s what’s in it for you.

Money, money, money

Credit unions typically offer higher rates of interest on savings accounts and lower rates for loans. This can put more money in your pocket every year, and save thousands over the life of the loan. Some federally charted credit unions are legally enjoined from charging interest rates over 18 percent on their loans; this can make a significant difference for consumers with troubled credit histories. Additionally, credit unions are not-for-profit organizations.

What does this mean for you?

For one, it means the credit union doesn’t have a vested interest in charging you outrageous fees for every transaction. Because all profits are redistributed among members (yes, this means you as well), credit unions are less focused on wringing every last cent out of their members and more interested in providing services for them. Most credit union credit cards don’t require an annual fee; free checking accounts and lower penalties for overdrafts are typical features of most credit unions.

Security

The National Credit Union Administration insures credit union deposits up to $250,000; this is similar to the protection the FDIC affords to depositors in traditional banking institutions. Credit unions have weathered recent financial difficulties remarkably well, due in part to the sense of community they foster among their members. When credit unions do fold, they are typically assimilated into another credit union, allowing consumers to continue banking as usual through the new organization.

Statistically, credit unions have outperformed traditional banks; this is especially true in recent years during the housing and financial crisis. In 2008, only 1.37% of all loans held by federally insured credit unions were delinquent. Only 1.19% of home loans were delinquent. These figures represented significant increases, but not the crippling blows that other types of banking institutions experienced over the same period.

Community

Unlike money deposited with large, impersonal banking institutions, the money invested with credit unions stays within the community and is put to work helping individuals and businesses in your own home town. The money you deposit, for instance, may go toward a new building project or a franchise opportunity that will offer services for the entire area. Because credit unions are largely locally-owned and operated, the entire community reaps the benefits of your investment.

The sense of community extends to new members as well. Many credit unions are open to high school or college alumni, members of local churches or religious groups, through work-related affiliations, or residents within a specific geographical area. No matter what your occupation or work status, there is likely a credit union in your area that will welcome you as a member.

Credit unions were established in the United States in 1934 by the Federal Credit Union Act. Franklin D. Roosevelt stated that credit unions were intended to “promote thrift and thwart usury,” and they have done just that for over 70 years. With more advantageous rates and better services than traditional banks, credit unions put their emphasis directly on customer service. Credit unions are not-for-profit; this places them squarely in the sights of traditional banks that see them as threats to the all-important bottom line.

If you enjoy paying exorbitant fees for substandard customer service, then credit unions are not for you. But if you are interested in saving money while investing in your local community, credit unions offer great benefits and security for your hard-earned cash.

Net Worth Update: October 2009

Stephanie — Sun, 01 Nov 2009 17:24:22 +0000

Did it go up? Did it go up?!? Did it go UP?!?

Oh yes, it went up!

Change: $112 or 0.29 %

Finally, a little breathing room! The last few months of moving and not finding full-time work right away really took a toll on me emotionally – and on my finances. But, things are starting to come solidly come together!

Work: Income is a little funny right now. I’ve got a huge freelancing job that’s 40+ hours a week, and the clients are pretty awesome. I love working with them. But, I still have to be careful about money. Because I’m an “independent contractor,” I have to take care of taxes myself – nothing is withheld for me. So, as I’ve always done with freelance income, one third of my income is put aside for such things. Between moving to a new state and having only 1 month of W2-type work this year… my taxes are just gonna suck.

Savings: Now that I’m working “full time,” I’m ready to ramp up my savings and siphon some of the two-thirds of my income (what’s not going to taxes) into my goals.

Weddings Fund, Formerly called my “Brother’s Wedding Fund,” I’m expanding it out because I was asked to be the groomswoman in my best male friend’s wedding. Also, I figure I myself may do the white-dress-and-veil thing, and there’ll be no money coming in from this bride’s family, so I’ve got to save for it myself. With the first wedding scheduled for the end of May, it’s time to really ramp up my contributions to this fund.
Retirement Fund, growing at a pitiful $5 per month right now, needs to be kicked into high gear. I still don’t think it’s a good idea for me to sign up for a Roth IRA that requires certain monthly minimum contributions, since I’m still on irregular freelancer income. I’d much rather save up $3,000 in my savings account and then open a Roth IRA at Vanguard. Not sure how long that will take me, but I have this pipe dream of doing it before April 15th so that I can open it for the 2009 IRA year. (IRA years go from January 1st of the year in question until April 15th of the following year. Yeah, it’s weird, I know.)
All other savings funds are going to stay the same… for now. I’m going to have to adjust my Savings Snowball a bit, but all that really needs to be changed is moving Retirement to the top.

Phew… so relieved to see that little line go up! Do you guys have any questions about this month’s net worth update?

How To Pay Off More Than One Debt

Stephanie — Wed, 28 Oct 2009 14:00:00 +0000

If you’ve only got one debt hanging over your head, paying it off isn’t rocket science: you pay as much as you can every month until the sucker is gone. But if you’ve got more than one debt to worry on, how do you prioritize them?

No New Debt

Before you even think about how to pull yourself out of a debt hole, you’ve got to stop digging the hole! Stop acquiring debt. Don’t use your credit cards if you’re carrying a balance on them from month to month. Use a debit card instead. If you’ve got some fancy home equity line of credit, don’t draw anymore from it. If you can’t stop acquiring new debt, you won’t be debt free. If you’re having trouble making ends meet without using debt, you need to drastically change something in your life.

What can you drastically change to stop acquiring debt? That’s something you have to figure out for yourself, but I can tell you what I did: I had to drop out of college for nine months and vow not to buy anything unless it was used (except food). Hopefully you won’t need to take as drastic of measures, but I’ll tell you something: it worked! I’m debt free now, except for my low-interest student loans.

Write Down Your Debts

No matter what theory of debt pay-off works for you (see below), each of them starts off the same way: making a list of all of your debts, including the total balance of each debt, the interest rate, the minimum payment, and a little something I like to call the “annoyance factor” of each debt. The annoyance factor should be a number, and it doesn’t matter on what scale (1-5, 1-10, 1-100, whatever!). Just as long as a bigger annoyance factor means the debt is more “annoying” to you than a debt with a lower annoyance factor.

There’s a spreadsheet below for entering all of this information into. First, here’s a quick explanation of the debt repayment theories.

The Three Theories of Debt Repayment

Lowest Balance theory: Pay off your debts in order from lowest balance to highest. This is best if you have a very emotional relationship with money, and you want to see progress quickly. If you would get frustrated and give up if it took you too long to pay off the first debt, this is the theory for you.

Highest Interest Rate theory: Pay off your debts in order from the highest interest rate to the lowest. This makes the most mathematically sense, and works well for number-oriented people. If you want the most dollar-for-dollar efficient method, this is the theory for you.

Annoyance theory: Pay off your debts based on how annoying they are to you, or how pressing it is to pay them off. If you have a debt from a company you really hate, or personal debts to family you want off your back before you deal with any other debts, this is the theory for you.

Free Debt Snowball Worksheet

Open the spreadsheet in Google Docs (it’s free and totally awesome, don’t worry)

Click File, then chose “Make a Copy” (this is very important – if you do not do this, you will not be able to edit the spreadsheet)

In your copy, you can now edit the spreadsheet and put your own debts in. Don’t forget to replace the “Example” with a debt of your own!

Now comes the fun magic of Google Docs. If you hover your mouse over the gray bar underneath any of the headings (Balance, Interest Rate, or Annoyance Factor), you’ll see that it turns orange and says “Sort.”

For the Lowest Balance theory of debt payoff, click the arrow on “Sort” under “Balance” and choose “Sort A > Z”
For the Highest Interest Rate theory, click the arrow on “Sort” under “Interest Rate” and choose “Sort Z > A”
For the Annoyance theory, click the arrow on “Sort” under “Annoyance Factor” and choose “Sort Z > A”

And now your debts are cleverly sorted for you, based on the payoff theory you’ve chosen. So all you have to do now is throw as much money as you can manage at the debt that’s sorted onto the top, and make the minimum payments on all the debts listed below it.

When your first debt is paid off in a few months (or, in some cases, years), you just have to open the spreadsheet again, delete the paid-off debt, and start throwing as much money as you can at the new top-dog debt!

The great thing about this is you don’t have to stick to any one of the theories if it isn’t working for you. You can start out with Lowest Balance, and if you decide to change to Annoyance later, you can just re-sort the spreadsheet and adjust your payments. See – who said change isn’t easy?

Have an Idea for How Twitter Can Improve the World?

Stephanie — Mon, 26 Oct 2009 14:00:00 +0000

If you’ve got an idea for how Twitter can be used to improve the world, and you can communicate it in less than 140 characters, up to $1,400 could be yours!

CollegeScholarships.org, the organization that once gave me a $100 scholarship for this blog (really!) is sponsoring something new called The 140 Scholarship. The entry requirements (from the site):

Currently attending full-time in post-secondary education; and

If you win, you must be willing to allow us to list your name, your picture, and your twitter username, and your winning Tweet on this page.

To enter, you’ll need to tweet your idea for how Twitter can be used to improve the world, and then put out a second tweet @Scholarship with the hashtag #Scholarship and a link to your tweet about how to improve the world.

Hint: to get the link to your tweet to post in your second tweet, click the time (ex. “2 minutes ago”) underneath your first tweet, then copy the address from your address bar when that tweet is alone on the page.

Hurry! The final day to submit your tweet is Thursday, October 29th 2009 – winners will be chosen and announced on October 30th.

The 140 Scholarship from CollegeScholarships.org

Also, you can follow me on Twitter: @stephonee

More from National Protect Your Identity Week

Stephanie — Fri, 23 Oct 2009 20:51:23 +0000

Are you doing all you can to keep your identity safe and snug with you, instead of out gallivanting with someone else? This week, I’ve encouraged you to use a locked mailbox, shred your documents, cut off junk mail at the source and clean out your wallet – but what else can you do?

First, have you really checked out ProtectYourIDNow.org yet? The site is full of quizzes, tips and even games to help you keep a lid on your identity. Learning how to protect yourself couldn’t be easier!

A few articles from the PoorerThanYou archives might help, as well. This isn’t the first time we’ve had an Identity Theft week here on PTY! Check these out:

Jury Duty and Other Identity Theft Scams
High Schoolers: Beware of Identity Theft
Tips and Tricks to Get Your Identity Stolen!

David at Money Under 30 has also been covering National Protect Your Identity Week with four posts of his own:

Seven Signs You’re At-Risk for Identity Theft
Beware Credit Card Skimmers and How to Spot Them
Beware Phishing Attempts and How to Spot Them
Everything You Need to Know About Protecting Your Identity

Or, I guess you can do as my friend Sam told me on Twitter and “Be an illegal immigrant and live as a hermit in the mountains.”

Clean Out Your Wallet [National Protect Your Identity Week]

Stephanie — Wed, 21 Oct 2009 16:25:32 +0000

If you have a “Costanza Wallet,” you know you need to clean that thing out! But even if you’ve just got a normal amount of stuff in your wallet, you’re probably carrying too much stuff in there. If you lose your wallet or it gets pick-pocketed, how much of your indentifying information is at risk?

Of course, you’ve got to carry some important stuff in there, or else what would be the point of having the wallet at all? But try to pair it down to just what you absolutely need. Clean out any receipts nightly, and if you put something in there just to use it that day, take that out at night as well.

What’s necessary for you is going to vary, but here are some guidelines for what shouldn’t be in your wallet:

Social Security Card: A locked fire-safe is the place for this, not your wallet! And really, how many times do you really need it? I’ve only used my physical SS card twice in my life: at the DMV. Don’t carry that thing around with you! If an identity thief wants to do more than just run up a balance on your credit card, your SS card is exactly what s/he needs.

Multiple Debit Cards: Debit cards are less secure than credit cards if they get stolen. Oh, I know, debit card companies will try and tell you that they’re “just as secure!” But think about it: if someone uses your debit card, that money goes straight out of your account. Then you have to file a dispute and wait for the bank to decide that the charge was fraudulent. While you’re waiting, that money is still missing from your checking account. With a credit card, you dispute before your statement ends, and you are never missing the money for the fraudulent charge. So carry just one debit card, if you need to.

Multiple Credit Cards: Yeah, you shouldn’t carry more than one of these, either. Chances are if you have multiple credit cards, you have a “main” one and then others for very specific purposes. Don’t carry those others unless you’re going out to do something that requires one of those cards. In that case, see if you can leave the regular card at home so that you’re still just carrying one credit card.

Also, scan every card in your wallet, back and front. This way, you’ll know what to report missing if you lose the wallet, and you’ll have the numbers from the backs of your cards that you’re supposed to call.

Bonus: What should you always have in your wallet? Baby pictures. A study in Edinburgh showed that pictures of babies in a wallet increased the chances that it would be returned if lost. Personally, I keep pictures of my niece and nephew in mine – because they’re cute and I adore them! I’m sure you’ve got some infant relative you can use as a security system in your wallet, as well.

Yeah, the cat in the picture is Captain Moneycat, the Consumerist cat. When I saw the picture was licensed Creative Commons on Flickr, I couldn’t resist!

Put a Stop to Junk Mail [National Protect Your Identity Week]

Stephanie — Tue, 20 Oct 2009 16:03:36 +0000

Do you know what identity thieves love? A paper trail! Honestly, it’s easier to steal something out of your mailbox or your trash than it is to steal your information online. In fact, in most places, only the former one is illegal! Now I’m sure you’re locking your mailbox and shredding your junk mail, but another precaution you should take is preventing “ID Theft Bait” (paper with your info on it) from ever existing.

So opt-out! Tell the direct marketers of this country that no, you don’t want a credit card offer every week or any mailings about totally awesome craft clubs! (I’m sure your craft club is awesome and not at all a scam, even though when I Googled your name I got a bunch of results that included the word “scam.”)

OptOutPrescreen.com is the site to put a stop to all of the annoying offers you get in the mail. It’ll stop all of the businesses that you don’t have a business relationship with from sending you junk mail. Hurray!

As for the businesses you do have a relationship with? Like the credit card that keeps sending your “courtesy checks” even though you never use them? Yeah, you’ll have to call each one of those directly and try to convince the customer service rep on the phone to stop sending you those. Here’s what works:

Rep: How may I help you today?

You: Uh, hi. So, you guys keep sending me courtesy checks for my account, and I don’t really want them sent anymore.

Rep: Oh, but those are [blah blah blah about why you actually want them even though you say you don’t and oh we can’t stop sending them blah blah blah]

You: Well, that’s nice and all, but I’m afraid that someone might be trying to steal my mail, which is why I signed up for paperless statements. [Technically, this is true. Or at least, you should be afraid!]

Rep: Oh, that’s terrible! Alright, we’ll stop sending those courtesy checks to you for now.

Hurray for less junk mail!

This post is a part of National Protect Your Identity Week. Be sure to check out www.ProtectYourIDNow.org and subscribe to this site to get all the ID theft prevention tips!

Get a Cross-Cut Paper Shredder [National Protect Your Identity Week]

Stephanie — Mon, 19 Oct 2009 12:57:00 +0000

I don’t need to tell you that you should be shredding all of the junk mail credit card applications and everything else that has personal info on it before you throw it out. You already know it! But hey, not everyone does something just because they know they should. So, if you’re not shredding your sensitive papers before throwing them out… consider this your kick in the butt to get a cross-cut paper shredder and get shredding!

(Before I had a shredder, we lived in a house heated by a woodstove. I would burn all of my junk mail!)

How to Shred Stuff for Cheap (or Free!)

Craigslist/Freecycle: These are great services for getting free stuff anyway, and a paper shredder is a perfect example of something you can get for free or cheap on one of these services. In fact, there was a free paper shredder listed just this Saturday on my local Freecycle mailing list. So you’ve go no reason not to look there!

Ask a Friend: In college, whenever I would off-handedly mention that I needed to buy a paper shredder, a friend of mine would just offer to let me use his. I think he underestimated the vast pile of stuff I had saved up to shred! But still, why not take advantage of such an offer while it’s on the table? If you feel like you’re taking advantage of your friend, just use their shredder to shred your most threatening documents.

Shredding Events: Keep your sensitive papers for shredding in a secure place (away from the prying eyes of roommates and dubious guests-of-roommates), and find out when there’s going to be a free, public shredding event in your area to take it all to. Your best friend in finding one of these events is Google! Search for “[your city] shredding event” and see what comes up. You can also check the Shred-It website to see if that particular company is sponsoring an event near you soon.

Ask for One: I got my shredder as a Christmas present from my brother and his fiancée. My family has gotten pretty used to the fact that I ask for super-practical things during the holidays! But hey, my brother was able to buy the shredder with his employee discount and I was more than happy to receive it!

Just Buy One: None of the above working for ya? Don’t be a tool – go buy a shredder* and start using it. Yeah, it’s that important.

This post is a part of National Protect Your Identity Week. Be sure to check out www.ProtectYourIDNow.org and subscribe to this site to get all the ID theft prevention tips!

*Affiliate link – I get like 4% if you decide to buy the shredder and it doesn’t cost you anything more. This is not the shredder I have, but it has good reviews for the price range. The shredder I have is not available online.

Protect Your Mail [National Protect Your Identity Week]

Stephanie — Sun, 18 Oct 2009 12:57:00 +0000

If your mailbox looks like this:

Instead of looking like this:

Then go find one of these when you want to send mail out:

All manatee and R2D2 mailboxes aside, I’m not joking. Do you know what thieves call those red flags like the one on the manatee mailbox? They call those “Steal Me flags.” To a thief, that flag sticking up in the air means “there’s something in here, and it’s probably a check or some other piece of information useful for identity theft.”

Only send your mail out from locked outgoing mail boxes, or the big blue boxes that thieves can’t reach into.

This post is a part of National Protect Your Identity Week. Be sure to check out www.ProtectYourIDNow.org and subscribe to this site to get all the ID theft prevention tips!

National Protect Your Identity Week

Stephanie — Sat, 17 Oct 2009 12:17:00 +0000

There are so many great holidays approaching: my second-favorite, Halloween, is right around the corner, followed one month later by my very favorite, Turkey-Coma-Day! We’re preparing to mask our identities by dressing as ghosts, ghouls, and slutty versions of beloved childhood characters, but we need to remember how important it is to protect our true identities from the things that really go bump in the night.

Thankfully, the National Foundation for Credit Counseling and the Council of Better Business Bureaus have teamed up to bring us National Protect Your Identity Week. Securing your identity against theft isn’t difficult, but we don’t all take the necessary steps to do so. We put things off, we think “that’ll never happen to me…” But last year it did happen to 10 million Americans, so you’re just gonna have to get off your butt and protect yourself!

No worries though, www.ProtectYourIDNow.org and Poorer Than You have you covered. On that site, you can take a quiz to assess your risk of identity theft, and learn some helpful tips to keep your identity safe. And starting tomorrow, I’ll be bringing giving you daily assignments for how you can protect your identity this week and year ‘round!

College students: pay particular attention to the tips available on the College Students and Identity Theft page.