The do’s and don’ts for Financial Success

Now more than ever it pays to be savvy when it comes to getting the credit you need to run your life. Luckily, you don’t have to be an expert to stay on the money. These simple steps could help you find financial success.

Do know what you owe…

In the current climate, you need to know exactly where you are before making plans – and what you really owe could come as a wake-up call. Instead of wading through files and old bills, you can find your credit accounts, from credit and store cards to loans, mortgages and even mobile phone accounts, listed in your credit report, along with your repayment record. You can see your Experian credit report for free with a 30-day trial of CreditExpert, the online credit monitoring and ID fraud protection service.

…and don’t stick your head in the sand

Therst thing you can do is nothing. Interest could be mounting up on borrowing you’ve forgotten, so you could end up owing even more in the long run.

Do keep up with your repayments…

It can be tempting to skip the occasional repayment if you’re having a tough month but you could rack up penalties and interest – and it will be recorded on your credit report for at least three years, where lenders will see it when you make a new application.

…and don’t be afraid to talk to your lenders

If you’re having financial problems it’s in their interest, as well as yours, to come up with a sensible solution. Together, you may be able to agree a new schedule of affordable payments, although this may mean that it will take longer to clear what you owe.

Do your research…

When you need a card, loan or credit account of any kind, research what’s on offer – visit personal finance and price comparison sites to see what’s out there and what matches your circumstances. You’ll stand a better chance if you ask for an appropriate and affordable deal.

…and don’t take a scattergun approach

There’s no point in firing off lots of applications in the hope that one of them will succeed. Not only could you get turned down, but you could damage your credit rating in the process. Each application will trigger a search by the lender and these leave a record on your credit report. If other prospective lenders see a lot of these, they could fear you’re overstretched, out of financial control or even suspect a fraud.

Do shred before you bin…

ID fraud is one of the UK’s fastest-growing crimes, so make sure thieves can’t get hold of personal or sensitive information from your rubbish and use it to borrow money in your name or max out your accounts.

…and don’t put too much in the recycling

You may think you’re doing your bit for the environment but you could also be offering a free gift to a thief. Remove the address or account information from all letters and documents before you put them in the box – even an old catalogue could put your ID at risk if a bin raider picks it up.

Do check your credit report regularly…

Lenders look at your credit report every time you apply to them and when they’re setting interest rates and other conditions, so it pays to be sure that all the information it contains is up to date and accurately reflects your situation. You’ll also be able to spot suspicious applications or transactions that could indicate attempted ID fraud.

…and don’t assume everything’s okay

If you haven’t received any payment demands or red bills, don’t assume you have a good credit rating. A simple clerical error or misunderstanding could damage your credit status, so make regular checks on your credit report part of your financial routine. A credit monitoring like CreditExpert can help – members receive an email or text alert every time there is a significant change, like a late payment recorded by a lender or a large change to a credit account balance.

Do put a shine on your credit history…

If you can demonstrate that you are a responsible borrower with a stable lifestyle, you have a better chance of getting the deals you want. You can improve your credit status by taking simple steps – for example, ask lenders to correct any errors in your credit report, close unused accounts and register to vote at your current address.

…and don’t assume the past is over and gone

If you’ve been bankrupt, taken out an IVA or had court judgments against you for debt, the evidence remains on your credit report for at least six years and even a missed repayment can be seen by lenders for at least three years. If special circumstances, such as illness, an accident, redundancy or divorce, were behind any past problems, you can add a note of explanation that lenders may take into account when deciding whether to make you an offer.

Do ask for help

If you’re having problems, get free, professional advice. Try Citizens Advice at adviceguide.org.uk, National Debtline at nationaldebtline.co.uk or the Consumer Credit Counselling Service at cccs.co.uk. As well as offering advice on how to manage and reduce your debts, these organisations have the legal right to negotiate with creditors on your behalf.

…and don’t be tempted by offers that are too good to be true

“There is no magic spell that will allow you to walk away from money troubles without any consequences and only you can sort out your credit status, so be wary of miracle cures for your financial ailments. They almost always cost you money you can’t “

Avoiding Bankruptcy - How To Avoid a Financial Problem

Bankruptcy may seem like a quick and relatively easy fix to a big problem, but it isn't. First, it can haunt your financial life for a decade or more, keeping you from owning a home, buying a new car, or even living the life you really want.

Maybe you're debt is beginning to weight you down. It's not to late t change some bad habits and reverse your financial woes. How can you avoid bankruptcy? Here's a good place to start:

Get Control of Your Spending:
Less than 43% of Americans today have more than $1,000 saved for a rainy day. Living paycheck to paycheck is a dangerous, considering that emergencies happen every day. Cars break down; people get hurt and miss work; unexpected pregnancies force women out of the workforce, and more. If you're struggling to pay your bills now, imagine the chaos an unexpected layoff would cause.

Sure, not everyone has the ability t save a large chunk of their salary, but almost everyone can put $5, $10 or even $15 a week away in a savings account. The key to living under your means, and avoiding bankruptcy, is creating a workable spending plan (ok, a budget), and stick to eat. First figure out the things that are essential; place to live, food to eat, a way to get to work, etc. Now, this doesn't mean that you need to live in an $1800 a month condo if you make $23,000 a year. It means finding an apartment or home that you can afford; a reasonably priced car (or take the bus), and regular old jeans, not the designer kind.

Remember, the point here is to spend less than you make, and that will mean sacrifice of some type. How much sacrifice depends on how far over your income your spending has become. Once you've figured out your necessity spending, then you can take a good hard look at your non-essential spending habits and limit that to what you can reasonably afford and still be able to have enough left to pay down your current debt and save for an emergency.

So, how much should you be spending? Most experts agree that a sound-spending plan should consist of the following ratio:

-35% of your net pay for housing costs (rent, utilities)
-15% for transportation ( car payments, gas, maintenance, insurance)
-15% for debt (credit card payments, student loans, personal loans, etc)
-10% toward savings
-25% for everything else (clothes, food, fun)

Following this ratio should allow you to live a comfortably debt-free life, freeing you of he worry of bankruptcy in the future.

Debt Consolidation:
Ok, so maybe it's too late to prevent financial trouble - you already have it. How can you stave off bankruptcy in order to get your financial house in order? If you own your home, and you're able to handle the payments, causing your home equity to consolidate your entire debt into one long-term loan may be the answer. Be careful though. Until you break the spending cycle that got you into trouble in the first place, this is only a temporary solution that can ultimately mean the loss of your home if you continue to wrack up debt after the consolidation is complete. If, however, you're prepared to pare back your expenses and attack your debt head on, then this may be a great way to buy a little time and keep creditors in check.

Debt Settlement:
Sometimes, even the equity in your home is gone and the well is simply dry. Creditors hate bankruptcy since they either never reclaim any of what you owe them, or get pennies on the dollar through payment options. So, once bankruptcy has become an option, contact your creditors and see if there's a possibility you can settle some of your debt in order to help you avoid bankruptcy altogether. Many are more than happy to forgive up to 60% of your current debt if they are guaranteed they'll get the last 40% in a timely manner. Be prepared, however, to prove your case. Face it, you haven't been very responsible thus far with your spending, or your bills, so they'll need a little convincing that things have changed and that you are indeed working hard to make things right.

Credit Counseling:
Oftentimes, people get into financial trouble simply because they don't know any better. Credit counseling can be a wonderful resource to help you get your spending under control, learn to live on a budget and handle debt settlement and consolidation for you. Just be sure that you choose a reputable service that has a proven track record.

While bankruptcy may seem like the best solution when creditors are calling every hour of the day or night, but, bankruptcy can often be avoided with a little ingenuity and some hard work.

Bankruptcy may seem like a quick and relatively easy fix to a big problem, but it isn't.

How To Use Brainstorming To Solve Your Money Problems

Advertising executive Alex F. Osborne first coined the word “brainstorming" in the early 1940’s. Since then literally millions of ideas, products and services have been created.

Every institution from Fortune 500 companies to Universities and Government agencies, have used the principle of brainstorming.

Fact: For every product in your home or office, chances are a person or group of people brainstormed about it.

They brainstormed on how best to create, market, sell, manufacture, advertise, or distribute it. This is how powerful brainstorming is.

One of the best things about brainstorming is that it can be used by anyone. You don’t have to be a C.E.O or army general. You can gain from brainstorming if you’re a housewife, janitor, student or unemployed.

Yes, you can use the principles of brainstorming for the largest project or the smallest project.

You can use it to plan a million-dollar ad campaign, or use it to plan what you’ll have for dinner tonight.

Practice the following steps. You'll soon be amazed at the ideas and solutions your fabulous brain will give you.

7 Steps For Effective Brainstorming Sessions

1. The brainstorming session can be done with one person or one hundred people. The rules are the same. The only requirement is the participants should know about the problem, business, product or subject of the brainstorming session.

2. Don’t use critical thinking. Critical or judgmental thinking slows down or kills the creative process at this stage. Because as hard as you may try, you can only think one thought at a time. When your creating you can’t judge and when you judge you can’t create.

3. Keep the session light, loose and free spirited. Humor has been known to help oil the wheels of our creativity. A large portion of our creativity is released through our humor.

4. Make sure you have a pencil and paper to write down any and all ideas, or if you’re in a group, designate someone to write down the ideas.

5. It’s best to set a minimum length of time or amount of ideas you want to get out of each brainstorming session. Setting a goal helps everyone to focus; it also helps everyone avoid wandering minds.

6. Write down the problem, the goal, or the subject at the top of a piece of paper. For example, “Ways To Attract More Customers". Next number each idea you or the group comes up with. Write down every idea, the good, the bad, and even the ugly. Remember, the goal is to get as many ideas listed on paper as possible.

7. Next evaluate the most do-able ideas and take action.

That’s the 7 tips for effective brainstorming sessions. Follow them and watch the ideas flow.

Financial Problems

If the "buy now-pay later" way of life has left you facing a mounting pile of bills each month, you're not alone. Today, millions of Americans are having difficulty paying their debts. Most of those in financial distress are middle income families with jobs who want to pay off what they owe.

If you are having financial problems, it is important for you to act now before those problems get worse. Doing nothing can lead to much larger problems in the future -- even bigger debts, the loss of assets such as your house, and a bad credit record.

The good news is that there are solutions. There are ways to help improve your relationships with creditors, reduce your debts, and help you manage your money. In brief, these solutions can help give you a new, fresh start. First, let's see how bad your problems are.

Financial Fitness Checklist

To find out just what kind of financial shape you're in, answer the questions in the following Financial Fitness Checklist.1 If you're married, print this out and take it home so that you and your spouse can work together to answer the questions. Make a note of how many questions you answer yes to.

1. Are you using more and more of your income to pay your debts?
2. Do you make only the minimum payments due on your loans and credit cards each month?
3. Are you near, at, or over the credit limit on your credit cards?
4. Are you paying your bills with money intended for other things?
5. Are you borrowing money or using credit cards to pay for things you used to buy with cash?
6. Do you often pay your bills late?
7. Are you dipping into your savings to pay current bills?
8. Do you put off visits to the doctor or dentist because you can't afford them?
9. Has a collection agency called recently about overdue bills?
10. Are you working overtime or holding a second job to make ends meet?
11. If you or your spouse lost your job, would you be in financial trouble right away?
12. Do you worry about money a lot?

If you answered "no" to all questions on the Financial Fitness Checklist, you're the picture of financial health.

One or two "yes" answers, while not necessarily a sign of impending doom, can be a warning sign of potential problems. Before things get any worse, take time now to draw up a realistic budget (including a savings plan) or to revise your spending plan. Cut back on your use of credit cards, and watch closely for other signs of financial trouble.

Three to five "yes" answers could mean that you're heading for financial trouble. It's imperative that you get your spending under control right away. If you don't have a monthly budget, draw one up and follow it. Put away your credit cards and cut out all unnecessary spending until you can answer "no" to all the questions on the Financial Fitness Checklist.

If you answered "yes" to more than five of the questions on the Financial Fitness Checklist, you may already be in serious financial trouble. But don't despair. Financial counseling can start you on the road to financial recovery.

Road to Financial Recovery

If the Financial Fitness Checklist indicates you are heading for financial trouble or already in it, immediate action is in order. Eight different organizations concerned with consumer and credit issues worked together to develop the following guidance for people like you.2 Free or low-cost personalized counseling is available through your Employee Assistance Program or a private non-profit organization in your area.

What You Can Do for Yourself

Review your specific obligations that creditors claim you owe to make certain you really owe them. If you dispute a debt, first contact the creditor directly to resolve your questions. If you still have questions about the validity of the debt or the collection practices, contact your state or local consumer protection office or state Attorney General.

Contact your creditors to let them know you're having difficulty making your payments. Ideally, this should be done before a payment is late or missed. Tell them why you're having trouble -- perhaps it's because you or a spouse recently lost a job or have unexpected medical bills. Try to work out an acceptable payment schedule with your creditors. Most are willing to work with you and will appreciate your honesty and forthrightness. Many have "hardship programs" which provide for adjustment of payments for a period of time.

The Fair Debt Collection Practices Law prohibits a debt collector from showing what you owe to anyone but your attorney, harassing or threatening you, using false statements, giving false information about you to anyone, and misrepresenting the legal status of your debts. Remember that under other federal laws to collect debts, creditors cannot seize most government assistance and can only garnish a portion of wages to collect debts.

Budget your expenses. Create a spending plan that allows you to reduce your debts. Itemize your necessary expenses (such as housing and health care) and optional expenses (such as entertainment and vacation travel). Start a savings plan so that funds are available for unforeseen but essential expenditures. Stick to the plan.

Try to reduce your expenses. Cut out any unnecessary spending such as eating out and purchasing expensive entertainment. Consider taking public transportation rather than owning a car. Clip coupons, purchase generic products at the supermarket, and avoid impulse purchases. Above all, stop incurring new debt. Consider substituting a debit card for your credit cards.

Use your savings and other assets to pay down debts. Withdrawing savings from low-interest accounts to settle high-rate loans usually makes sense. Selling off a second car not only provides cash but also reduces insurance and other maintenance expenses.

Look for additional resources from governmental and private sources for which you may be eligible. Government assistance includes unemployment compensation, Aid to Families with Dependent Children (AFDC), food stamps, low-income energy assistance, Medicaid, and Social Security including disability. Other resources may be available from churches and community groups. Often these sources are listed in the Yellow Pages of your phone book.

"Looking closely at our options helped us realize that we still needed to try self-budgeting before taking more extreme measures. We think that perhaps we were giving up too soon." Alicia A.

What Others Can Do for You

Credit Counseling. If you are unable to make satisfactory arrangements with your creditors, there are organizations that can help. An organization that you can call is a Consumer Credit Counseling Service (CCCS) agency. These local, non-profit organizations affiliated with the National Foundation for Consumer Credit (NFCC) provide education and counseling to families and individuals.

For consumers who want individual help, CCCS counselors with professional backgrounds in money management and counseling can provide support. To promote high standards, the NFCC has developed a certification program for these counselors. A counselor will work with you to develop a budget to maintain your basic living expenses and outline options for addressing your total financial situation. If creditors are pressing you, a CCCS counselor can also negotiate with these creditors to repay your debts through a financial management plan. Under this plan, creditors often agree to reduce payments, lower or drop interest and finance charges, and waive late fees and over-the-limit fees.

According to the NFCC, about 35% of those counseled are able to help themselves after budget counseling sessions; 30% require a debt repayment program, 7% are referred to legal assistance, and 28% are referred to other resources (e.g., programs for treating compulsive behavior such as alcohol, drug or gambling problems) or decide not to participate at that time. About 65% to 70% of the individuals who start the debt repayment plan complete it successfully.3

After starting the debt repayment plan, you will deposit money with CCCS each month to cover these new negotiated payment amounts. Then CCCS will distribute this money to your creditors to repay your debts. With more than 1,100 locations nationwide, CCCS agencies are available to nearly all consumers. Supported mainly by contributions from community organizations, financial institutions, and merchants, CCCS provides services free or at a low cost to individuals seeking help. To contact a CCCS office for confidential help, look in your telephone directory white pages, or call 1 (800) 388-2227, 24 hours a day, for an office near you.

"I cannot tell you how happy I am to finally be able to control my finances now that I have followed a budget. So far, so good. I actually have a balance in my savings account!" Rodney O.

Personal Bankruptcy. Bankruptcy is a legal procedure which can give people who cannot pay their bills a fresh start. A decision to file for bankruptcy is a serious step. You should make it only if it is the best way to deal with financial problems.

There are two types of bankruptcy available to most individuals. Chapter 13 or "reorganization" allows debtors to keep property which they might otherwise lose, such as a mortgaged house or car. Reorganizations may allow debtors to pay off or cure a default over a period of three to five years, rather than surrender property.

Chapter 7 or "straight bankruptcy" involves liquidation of all assets that are not exempt in your state. The exempt property may include items such as work-related tools and basic household furnishings, among others. Some of your property may be sold by a court-appointed official or turned over to your creditors. You can file for Chapter 7 only once every six years.

Both types of bankruptcy may get rid of unsecured debts (those where creditors have no rights to specific property), and stop foreclosures, repossessions, garnishments, utility shutoffs, and debt collection activities. Both types also provide exemptions that permit most individual debtors to keep most of their assets, though these "exemption" amounts vary greatly from state to state.

Bankruptcy cannot clean up a bad credit record and will be part of this record for up to ten years. It can, for example, make it more difficult to get a mortgage to buy a house. It usually does not wipe out child support, alimony, fines, taxes, and some student loan obligations. Also, unless under Chapter 13 you have an acceptable plan to catch up on your debt, bankruptcy usually does not permit you to keep property when the creditor has an unpaid mortgage or lien on it.

Bankruptcy cases must be filed in federal court. The filing fee is $160, which sometimes may be paid in installments. This fee does not include the fees of your bankruptcy lawyer.

Choosing a bankruptcy lawyer may be difficult. Some of the least reputable lawyers make easy money by handling hundreds of bankruptcy cases without adequately considering individual needs. Recommendations from those you know and trust, and from employee assistance programs, are most useful.

Some publicly funded legal services programs handle bankruptcy cases without charging attorney fees. Or these programs may provide referrals to private bankruptcy lawyers. Keep in mind that the fees of these attorneys may vary widely.

"Our bills have been a source of worry to us. After bringing our problem to credit counselors, we have begun to feel there is a way to cope with it. We are feeling more confident now." Nelson M.

Possible Pitfalls

You may encounter credit counselors who aren't helpful. For-profit or non-credentialed counseling organizations often make promises that they cannot or do not keep. Be especially careful when asked for a large sum of money in advance. To check the organization's reputation, contact your state Attorney General, consumer protection agency, or Better Business Bureau.

"Credit repair" clinics and "credit doctors" have been frequently criticized for promising that they can remove negative information from your credit report. Accurate information cannot be changed. If information is old or inaccurate, you can contact a credit bureau yourself and ask that it be removed.

Risky refinancing options. When already in financial trouble, second mortgages greatly increase the risk that you may lose your home. Be wary of any loan consolidations or other refinancing that actually increase interest owed or require payments of points or large fees.

A Final Word: Don't lose hope, even if you despair of ever recovering financially. You can regain financial health if you act. Pursuing the options presented in this pamphlet can put you on the road to financial recovery.

"It feels great to be getting my life (and credit) in order!" Robyn H.

Security Concerns

An individual who is financially overextended is at risk of engaging in illegal acts to generate funds.

Amount of debt determines, in part, how stressed and desperate a person is as a result of financial problems. However, what caused the debts and how one deals with these financial obligations tells more than amount of debt about a person’s reliability, trustworthiness, and judgment.

If a person is not at fault for the financial problems and is dealing with them in a reasonable manner, security concern is substantially alleviated. On the other hand, debts caused by irresponsible or impulsive behavior or by gambling, alcohol abuse or drug abuse are a serious concern. A person who is irresponsible in fulfilling financial obligations may be irresponsible in fulfilling other obligations, such as following the rules for protecting classified information.

Financial stress is common among a large segment of the population. Many immature young persons go through a period of difficulty adjusting to the temptations of easy credit. Most people with financial difficulties do not view crime as an appropriate means of solving their problems, but the few who do are a serious concern. Of recent spies who betrayed their country for money, about half were motivated by some real or perceived urgent financial need, and about half by personal greed.4 Greedy individuals often have a compulsive need for money or goods as a measure of success or as a source of self-esteem, influence, power, or control.