I hope all of you had a Happy Thanksgiving! Over the holiday, I read some interesting articles debating the value of credit counseling requirements that are part of the bankruptcy reform legislation. Some people are happy about these new requirements because they feel credit counseling offers debtors alternatives that they would not have been offered without credit counseling. Others see these requirements as yet another obstacle that must be overcome before debtors can obtain true debt relief.
The US TRustee's office is required to review programs offered by any agency seeking to be approved as a pre-filing credit counseling provider and as a post-filing educational course provider. The US Trustee requires companies, among other things to demonstrate extensive credit counseling experience, be bonded, and offer a bona fide counseling session (though the session could be over the phone or on-line and not necessarily done in person). The US Trustee's office requires any company seeking to be approved to go through an extensive application process highlighting its experience and conducts a detailed review of its programs. This review and approval process is meant to insure that debtors are receiving good information from reputable, independent companies that are focused on providing a service to the public and not profit motives.
At first glance, it appears that the legislation is attempting to insure that debtors are getting helpful information from companies that have the debtor's best interests at heart. However, many other people don't see it that way. The Editor and Publisher of Privacy Times, a Washington newsletter that covers the information world, Evan Hendricks (according to the Lincoln Journal Star) sees something missing. "They say they'll advise (potential filers) of all their options," he said. "But some of those are legal options, and credit counselors are not licensed to practice law." He feels that the motives of some of the credit counseling agencies are in meeting the needs of creditors, particularly large, financial services companies. "It looks like a way to discourage people from filing bankruptcy and places someone between the consumer and their legal representative," he said.
Credit counseling agencies admit that they are partially supported by creditors who benefit when someone arranges a payment plan as opposed to filing for bankruptcy. However, more than half of their budgets typically comes from fees paid by clients. Typical credit counseling fees vary, but are usually around $50 for a single debtor and $60 for a couple for both the pre-filing counseling and the post-filing educational session. The US Trustee requires that agencies who are approved also offer services "without regard to ability to pay" insuring that some debtors can obtain the services without cost, but that is typically handled on a case-by-case basis and is up to the credit counseling service provider to determine on its own.
The question, though, is whether or not the counseling helps to educate debtors, as it was intended? Or, is it simply another barrier to debt relief? Credit counseling advocates say that they don't steer potential bankruptcy filers away from bankruptcy. They insist that they discuss all sorts of financial issues with debtors. Obviously, the initial information a credit counselor asks the debtor is about income and monthly living expenses. But, credit counselors insist they also look at all of the debtor's assets, liabilities and net worth as opposed to just money management issues. Credit counselors insist debtors will benefit because they will better their knowledge of financial matters. Credit counseling advocates don't believe consumers have bettered their knowledge in the past.
From my perspective, I always viewed my job as a counselor exploring bankruptcy options with potential clients to review ALL options. As their attorney, or potential bankruptcy attorney, I have ethical obligations to review all of these things credit counselors say they are exclusively able to review. I also have legal obligations to make sure bankruptcy is in my potential client's best interests. I don't believe a credit counselor is more qualified than I am in analyzing my potential client's financial situation. In fact, I believe attorneys are better qualified, have had more training, and have more obligations to potential clients than credit counseling agencies do. Obviously, Congress feels that credit counseling agencies offer a better exploration of these issues than attorneys. I strongly disagree with this conclusion.
Also, as one staff attorney from the National Consumer Law Center pointed out that the credit counseling and debtor education requirements are not selectively imposed on debtors who are considering bankruptcy because of financial mismanagement. While many people find themselves considering bankruptcy because of bouts of financial irresponsibility and mismanagement, there are a lot of debtors who are considering bankruptcy because of circumstances that had nothing to do with financial mismanagement or irresponsibility. Health issues, divorces, and unexpected layoffs have caused many more people to file for bankruptcy than simple financial mismanagement. As John Rao of the National Consumer Law Center (as quoted in the Lincoln Star Journal points out: people "caught in a divorce or with health problems will have to go through a lot more hoops to get relief, which is not fair." As I see it, people considering bankruptcy because of these issues don't benefit at all from "education" or "counseling" because education and mismanagement was never the problem.
For the people who are considering bankruptcy due to uncontrollable, unforeseen, and unplanned health and marital problems, the credit counseling and debtor education requirements serve only to put up roadblocks to relief don't provide any benefit. There is no individual benefit to the debtor, nor does the requirement in any way benefit society's interest in reducing the need for bankruptcy.
http://www.legalhelpers.com/blog/2005_11_01_archive.html
Wednesday, June 27, 2007
Declining Incomes?
I read an article in this morning's Chicago Tribune that discussed Illinois median incomes. The article was citing a recent study of median income in the United States. The study found that the median income in Illinois is declining. In fact, incomes once adjusted for inflation are at a 1989 level! Illinois had the biggest drop in median income with Michigan second.
Unfortunately, we all have heard plenty of stories about the housing market and the "bubble." Housing prices continue to increase rapidly all over the country. There are differences from place to place, but generally the cost of owning a house has increased exponentionally over the last 10 years.
Things like housing, fuel, vehicles, utilities, groceries continue to increase in price, yet this report points out that incomes are falling! We hear talk about rising inflation and about the Federal Reserve considering policies to reduce inflation. I heard a report on NPR Radio pointing out challenges of the new Federal Reserve Chairman. One of the challenges was trying to set targets for inflation.
Unless my math is wrong, I don't know how it is possible for people to continue to pay higher prices for basic necessities while their incomes fall. Aside from using retirement assets early or being one of the fortunate few who can live off of inheritances or other family support, the only way society can maintain this situation is for banks to lend more money either in mortgages, refinancings, HELOCs, credit cards or other types of credit. The bottom line is that consumers are borrowing more and more with less and less ability to pay the debt back.
The good news is that the bankruptcy law helps consumers who get in over their head. Much has been made about bankruptcy reform and there have been significant changes to the laws, but bankruptcy, either Chapter 7 or Chapter 13, remains an effective way to help someone get out of debt. Give us a call, you might be pleasantly surprised!
http://www.legalhelpers.com/blog/2005_11_01_archive.html
Unfortunately, we all have heard plenty of stories about the housing market and the "bubble." Housing prices continue to increase rapidly all over the country. There are differences from place to place, but generally the cost of owning a house has increased exponentionally over the last 10 years.
Things like housing, fuel, vehicles, utilities, groceries continue to increase in price, yet this report points out that incomes are falling! We hear talk about rising inflation and about the Federal Reserve considering policies to reduce inflation. I heard a report on NPR Radio pointing out challenges of the new Federal Reserve Chairman. One of the challenges was trying to set targets for inflation.
Unless my math is wrong, I don't know how it is possible for people to continue to pay higher prices for basic necessities while their incomes fall. Aside from using retirement assets early or being one of the fortunate few who can live off of inheritances or other family support, the only way society can maintain this situation is for banks to lend more money either in mortgages, refinancings, HELOCs, credit cards or other types of credit. The bottom line is that consumers are borrowing more and more with less and less ability to pay the debt back.
The good news is that the bankruptcy law helps consumers who get in over their head. Much has been made about bankruptcy reform and there have been significant changes to the laws, but bankruptcy, either Chapter 7 or Chapter 13, remains an effective way to help someone get out of debt. Give us a call, you might be pleasantly surprised!
http://www.legalhelpers.com/blog/2005_11_01_archive.html
Bankruptcy Clerk Commits Fraud - Our clients not affected
Wow! What a month. I know it's been a while since my last blog, but I recently ran across a newspaper clipping about a "longtime bankruptcy court clerk who routinely dealt with people facing mounting debt is accused of giving out false information so she could pocket their money" - Chicago Sun-Times, 9/13/05! The good news for our clients is that none of them were taken advantage of by this scheme.
Allegedly, this woman who had worked at the bankruptcy clerk's office in Chicago and was making $69,000 per year on her job was arrested when the FBI sent an undercover witness who approached the woman saying he had just filed for bankruptcy and needed help because he feared losing his house. Instead of telling him that his bankruptcy filing alone would be enough to stop the sale of his home, she took $500 from him to "block the foreclosure." She even staged a fake phone call to Chase Financial pretending to arrange the transaction. The call had to be fake because the name the undercover officer used was fake and there was no such mortgage she said she looked up. This clerk had also taken $5,000 in 2002, allegedly, from another debtor to "stop foreclosure" on her house.
as you consider whether or not to file for bankruptcy. It's not that you will fall victim to fraud if you don't have This situation illustrates why it is important to have quality, responsible bankruptcy attorneysbankruptcy lawyers. The problem is that these people were vulnerable to the court employee because they didn't understand how the process worked and didn't understand their benefits under bankruptcy and how to enforce those benefits. Instead, they asked for help from someone other than an attorney and they were taken.
Remember, your attorney is doing more then typing paperwork. An attorney is offering you knowledge of how the laws work and representation to deal with creditors who you perceive may be "ignoring" the bankruptcy. This is one reason among many why you should hire a lawyer to help you through this process. While you may be very adept at preparing the paperwork, would you know what to do if a creditor "ignored" your bankruptcy paperwork?
Given the bankruptcy law changes and examples like above, the investment in quality legal representation is worth every penny. If you feel overwhelmed by debt with little hope of getting out, please give one of the firm's attorneys a call. We can help you analyze your situation and propose solutions we can deliver for you.
http://www.legalhelpers.com/blog/2005_11_01_archive.html
Allegedly, this woman who had worked at the bankruptcy clerk's office in Chicago and was making $69,000 per year on her job was arrested when the FBI sent an undercover witness who approached the woman saying he had just filed for bankruptcy and needed help because he feared losing his house. Instead of telling him that his bankruptcy filing alone would be enough to stop the sale of his home, she took $500 from him to "block the foreclosure." She even staged a fake phone call to Chase Financial pretending to arrange the transaction. The call had to be fake because the name the undercover officer used was fake and there was no such mortgage she said she looked up. This clerk had also taken $5,000 in 2002, allegedly, from another debtor to "stop foreclosure" on her house.
as you consider whether or not to file for bankruptcy. It's not that you will fall victim to fraud if you don't have This situation illustrates why it is important to have quality, responsible bankruptcy attorneysbankruptcy lawyers. The problem is that these people were vulnerable to the court employee because they didn't understand how the process worked and didn't understand their benefits under bankruptcy and how to enforce those benefits. Instead, they asked for help from someone other than an attorney and they were taken.
Remember, your attorney is doing more then typing paperwork. An attorney is offering you knowledge of how the laws work and representation to deal with creditors who you perceive may be "ignoring" the bankruptcy. This is one reason among many why you should hire a lawyer to help you through this process. While you may be very adept at preparing the paperwork, would you know what to do if a creditor "ignored" your bankruptcy paperwork?
Given the bankruptcy law changes and examples like above, the investment in quality legal representation is worth every penny. If you feel overwhelmed by debt with little hope of getting out, please give one of the firm's attorneys a call. We can help you analyze your situation and propose solutions we can deliver for you.
http://www.legalhelpers.com/blog/2005_11_01_archive.html
Should Increased Costs Lead You To File Without a Lawyer?
I read an article today on Marketwatch.com that inspired me to write this blog. The article was discussing how increased legal fees because of the new reform legislation may drive more people to try to file cases on their own. The article was a lot more neutral in giving advice about whether to use bankruptcy attorneys or not than I'm going to be. It is now more important than ever to spend the money on good bankruptcy lawyers to help you through your bankruptcy.
First of all, despite the increase in attorney fees that the article points out is anywhere from 10% - 75% depending on where you live, the price you pay for good representation is well worth it. Despite the increase in cost, bankruptcy cases are still a bargain in comparison with the cost of continuing to maintain your payments on debts you have no hope of paying off.
Your creditors have a seemingly endless group of high-priced attorneys working on their behalf to try to find ways to overcome your bankruptcy filing. Many tactics creditor's attorneys employ because the tactics work when dealing with an uninformed, inexperienced, and unrepresented debtor simply won't be employed by the creditor if you have legal counsel.
Third, as the article points out, bankruptcy can be much more expensive than an attorney fee if you don't do the paperwork properly. If you fail to file all the required paperwork within certain deadlines your case could be dismissed. While it is possible to file another case, you will have to pay filing fees over again. Not only that, but improper filings may cause you irreversible hardships. You risk losing your car or house that would not have been lost had you hired an attorney to ensure the paperwork gives you the protection you need. Also, if you have to file over again because the paperwork was not proper the first time, the bankruptcy law isn't as friendly with each subsequent filing. The automatic stay in a subsequent case may be limited in duration and there are other steps that need to be completed to insure the stay prevents creditors from taking action against you.
Finally, while some contend that the paperwork is "like filling out a tax form or a social security application" (Steve Elias, founding editor of Nolo, publisher of legal self-help guides), I would argue that completing paperwork is a minor portion of why you are hiring an attorney. Even if you are savvy enough to complete the paperwork properly, you still should have legal representation.
Good legal representation involves: advising you about the best bankruptcy options for your situation (a petition preparer can not give you this advice and you may not know all the specifics about all of your options; advising you how to protect as much of your property as possible, serving as your representative in dealing with your creditors; there are many inquiries creditors can make of debtors that would not violate the automatic stay, so if you represent yourself, you may still get phone calls from creditors asking you for information; serving as your representative in dealing with your trustee, protecting you from potential illegal collection actions by your creditors (your attorney knows what to do and say in dealing with a creditor who may be trying to take advantage of someone who isn't represented); filing the proper motions for relief from all sorts of potential issues; and advising you about the law in the event there is a dispute as to dischargeability or dismissal of the case, among other things.
Even most self-help publications advise debtors to hire attorneys and get good legal advice. Again, the risks of doing the case yourself and the hidden costs that could result from one misstep almost never outweigh the value you will get from obtaining good legal representation in your bankruptcy case. Remember, in most Chapter 7 cases anywhere in the country, your cost will be less than $2,000. If you think about how much money you are paying per month on your minimum payments to your creditors or how much money a creditor could garnish from your paycheck in the event the creditor obtains a judgment, the legal expenses pale in comparison.
http://www.legalhelpers.com/blog/2005_12_01_archive.html
First of all, despite the increase in attorney fees that the article points out is anywhere from 10% - 75% depending on where you live, the price you pay for good representation is well worth it. Despite the increase in cost, bankruptcy cases are still a bargain in comparison with the cost of continuing to maintain your payments on debts you have no hope of paying off.
Your creditors have a seemingly endless group of high-priced attorneys working on their behalf to try to find ways to overcome your bankruptcy filing. Many tactics creditor's attorneys employ because the tactics work when dealing with an uninformed, inexperienced, and unrepresented debtor simply won't be employed by the creditor if you have legal counsel.
Third, as the article points out, bankruptcy can be much more expensive than an attorney fee if you don't do the paperwork properly. If you fail to file all the required paperwork within certain deadlines your case could be dismissed. While it is possible to file another case, you will have to pay filing fees over again. Not only that, but improper filings may cause you irreversible hardships. You risk losing your car or house that would not have been lost had you hired an attorney to ensure the paperwork gives you the protection you need. Also, if you have to file over again because the paperwork was not proper the first time, the bankruptcy law isn't as friendly with each subsequent filing. The automatic stay in a subsequent case may be limited in duration and there are other steps that need to be completed to insure the stay prevents creditors from taking action against you.
Finally, while some contend that the paperwork is "like filling out a tax form or a social security application" (Steve Elias, founding editor of Nolo, publisher of legal self-help guides), I would argue that completing paperwork is a minor portion of why you are hiring an attorney. Even if you are savvy enough to complete the paperwork properly, you still should have legal representation.
Good legal representation involves: advising you about the best bankruptcy options for your situation (a petition preparer can not give you this advice and you may not know all the specifics about all of your options; advising you how to protect as much of your property as possible, serving as your representative in dealing with your creditors; there are many inquiries creditors can make of debtors that would not violate the automatic stay, so if you represent yourself, you may still get phone calls from creditors asking you for information; serving as your representative in dealing with your trustee, protecting you from potential illegal collection actions by your creditors (your attorney knows what to do and say in dealing with a creditor who may be trying to take advantage of someone who isn't represented); filing the proper motions for relief from all sorts of potential issues; and advising you about the law in the event there is a dispute as to dischargeability or dismissal of the case, among other things.
Even most self-help publications advise debtors to hire attorneys and get good legal advice. Again, the risks of doing the case yourself and the hidden costs that could result from one misstep almost never outweigh the value you will get from obtaining good legal representation in your bankruptcy case. Remember, in most Chapter 7 cases anywhere in the country, your cost will be less than $2,000. If you think about how much money you are paying per month on your minimum payments to your creditors or how much money a creditor could garnish from your paycheck in the event the creditor obtains a judgment, the legal expenses pale in comparison.
http://www.legalhelpers.com/blog/2005_12_01_archive.html
Payday Loan For the Holiday Budget Crunch?
Payday lenders offer tempting short-term loans for a fee, usually due on a payday. They can also be called: cash advances, check advances, check advance loans, post-dated check loans or deferred-deposit check loans. The premise is simple; lenders offer cash loans to working individuals who secure their loan with a post-dated check including a fee for the loan. On payday, the borrower can either pay the full loan back or roll it over into another loan for an additional fee.
At first glance, payday loans may seem appealing, especially around this time of year when families often need additional money for the holiday season. While payday loans may seem like the answer to a holiday budget crunch, they usually end up causing even more financial distress, and are often the beginning of a vicious and very expensive cycle that can prove almost impossible to escape. Many borrowers don't foresee how fast interest and fees on these loans add up. Most people considering a payday loan are on a tight budget and are already living paycheck-to-paycheck and cannot afford to pay the entire loan back out of their next check. Payday lenders anticipate this and usually offer the borrower a chance to roll the loan over for another two weeks until the next payday, for a fee of course. The cycle of rollovers can quickly build up, especially if individuals start borrowing from several different payday lenders, and can lead to an endless cycle of debt. When someone is living from paycheck-topaycheck, a payday loan may force them into debt consolidation counseling or even require them to seek good bankruptcy lawyers.
The fees and interest rates on payday loans can be astronomical. It is common to see interest rates between 300% - 1500%. Compare this to typical interest rates on cash advances on a credit card, usually between 20% - 35%. Lenders are required to provide individuals with a full disclosure of the APR on the loan and must also provide a written loan agreement. It is very important to carefully read the loan agreement and understand what the interest rate on the loans will be. If you know you can't pay the full amount back, consider how much you would be paying if you have to roll the loan over several times. Make sure you read that last column on the loan disclosure statement. The last column shows the total amount you will pay before this debt is paid off. You might be surprised and hopefully, it will make you think twice before taking a payday loan.
In my opinion, payday loans should be avoided at all costs. Proper budgeting and establishing an emergency fund are the long-term answers to avoid the need for a short-term loan, but we all know that this is easier said than done, and the only thing that can be expected is unexpected expenses. Alternatives include: borrowing from family members, credit unions, banks, employers, or credit card cash advances. These loans are likely to be at a significantly lower interest rate and contain more favorable terms for the borrower.
Putting off the purchase until you save enough money would help you avoid all interest rates and fees. A payday loan may seem like an easy solution to the holiday cash crunch, but avoiding them and considering other alternatives could keep you out of bankruptcy!
http://www.legalhelpers.com/blog/2005_12_01_archive.html
At first glance, payday loans may seem appealing, especially around this time of year when families often need additional money for the holiday season. While payday loans may seem like the answer to a holiday budget crunch, they usually end up causing even more financial distress, and are often the beginning of a vicious and very expensive cycle that can prove almost impossible to escape. Many borrowers don't foresee how fast interest and fees on these loans add up. Most people considering a payday loan are on a tight budget and are already living paycheck-to-paycheck and cannot afford to pay the entire loan back out of their next check. Payday lenders anticipate this and usually offer the borrower a chance to roll the loan over for another two weeks until the next payday, for a fee of course. The cycle of rollovers can quickly build up, especially if individuals start borrowing from several different payday lenders, and can lead to an endless cycle of debt. When someone is living from paycheck-topaycheck, a payday loan may force them into debt consolidation counseling or even require them to seek good bankruptcy lawyers.
The fees and interest rates on payday loans can be astronomical. It is common to see interest rates between 300% - 1500%. Compare this to typical interest rates on cash advances on a credit card, usually between 20% - 35%. Lenders are required to provide individuals with a full disclosure of the APR on the loan and must also provide a written loan agreement. It is very important to carefully read the loan agreement and understand what the interest rate on the loans will be. If you know you can't pay the full amount back, consider how much you would be paying if you have to roll the loan over several times. Make sure you read that last column on the loan disclosure statement. The last column shows the total amount you will pay before this debt is paid off. You might be surprised and hopefully, it will make you think twice before taking a payday loan.
In my opinion, payday loans should be avoided at all costs. Proper budgeting and establishing an emergency fund are the long-term answers to avoid the need for a short-term loan, but we all know that this is easier said than done, and the only thing that can be expected is unexpected expenses. Alternatives include: borrowing from family members, credit unions, banks, employers, or credit card cash advances. These loans are likely to be at a significantly lower interest rate and contain more favorable terms for the borrower.
Putting off the purchase until you save enough money would help you avoid all interest rates and fees. A payday loan may seem like an easy solution to the holiday cash crunch, but avoiding them and considering other alternatives could keep you out of bankruptcy!
http://www.legalhelpers.com/blog/2005_12_01_archive.html
Retirement planning
Do you sometimes wonder how you are going to make ends meet when the time comes to retire? Have you given up hope of ever retiring? Do you worry whether there will any money available for you upon your retirement from social security, medicare and/or medicaid?
These are very important questions. Unfortunately, there are many people who don't even get to the point of asking these questions until they are on the verge of retiring. Studies show that 61% of all workers haven't even tried to calculate how much savings they will need in order to live comfortably in retirement. The key to financial health is retirement planning. The earlier you begin to plan and take action, the better off you will be and the less you have to set aside to insure healthy finances in retirement.
Let me try to give you some tips. The first step to develop a solid financial plan is to set aside enough money into a savings account to cover 3-6 months' worth of income in case of unexpected emergencies. This "emergency" fund will ensure that you have money to cover unexpected expenses while still allowing you to continue to build your financial future. Once you calculate how much you need to set aside (remember, 3-6 months' worth of take-home income), you should establish a goal for saving toward this emergency fund. Pay your "emergency" fund faithfully just like a utility bill or rent until you have reached your goal. This does not mean you need to save $300-400 per month, but save something every month, even if it is $25 or $50 per month.
The following are some other tips which should help you reach your retirement goals as well as develop healthy spending and saving habits.
1) Utilize any retirement savings plans offered by your employer (even if the employer won't match your contributions). These contributions are "pre-tax." This means that putting away $50 out of your paycheck does not mean your net pay will be $50 less. In fact, it might only be $35-40 less. If your employer does not any type of retirement savings plans (like 401(k), 403(b), or 457 plans), you should still put money away into an IRA. Consider signing up for automatic transfers from your paycheck into an IRA.
As your income increases over time, you should increase the amount or percentage of your income you are putting into your IRA or retirement plans. If you adopt this plan your savings and income have the potential to grow together over the years and outpace inflation.
2) Set spending limits and stick to your limits. It is far too easy to "charge" it when you don't have the money in your pocket to afford a particular purchase. You have to resist that temptation! Take time to calculate a reasonable "spending allowance" for a week. At the beginning of the week, withdraw your "allowance" and limit your spending to your allowance. This will help you set priorities and budget your money.
3) Flexible spending accounts (FSAs). Many employers offer flexible spending accounts into which you can deposit pre-tax earnings for medical and dependent-care expenses. These funds can help parents save tax dollars when paying for childcare or medical expenses. Again, like in the 401(k) scenario, you can put $50 into the account and it doesn't cost you $50 off your paycheck. The only potential pitfall is that you must spend the money by the end of the year or you lose it. You have to keep receipts to show you spent the money on the required childcare or medical expense to get the money. Therefore, make sure you are only saving what you know you spend.
4) Bill yourself. Whenever you pay off a major expense, like a credit card or a car, consider continuing those payments by making deposits into your own savings account. Eliminating your debt increases your net worth and by continuing to build your savings you can increase your assets and eliminate your reliance on credit. For example, if you are paying $400 per month for a car on top of your living expenses. Once your car is paid off, instead of spending the $400, put it into a bank account. This way you can begin saving for your next car and can have a bigger down payment and better financing terms.
5) Utilize piggy banks for all that loose change. Over the course of a year, loose change can add up! Pay your expenses with dollar bills and deposit all your change at the end of the day into a piggy bank. If you are able, consider depositing any $1 or $5 bills you have at the end of the day. If this is done faithfully throughout the year, you will likely have more than a thousand dollars in your piggy bank at the end of the year!
6) Allocate lump sum cash payments into three parts. When you receive your tax refund, inheritance, or bonuses, break up these things into three parts. Set aside 1/3 of the money for long-term savings goals (retirement), set aside another 1/3 for short-term savings goals (your next car purchase, furniture purchase, etc..) and the last 1/3 you can use to reward yourself! This way you can still splurge, but you can also have the satisfaction of continuing to meet your savings goals.
7) Have fun! Make a list of fun and inexpensive things you like to do. When you feel the urge to spend money, do the fun and inexpensive things you've put on your list instead. Go to a museum, take a drive through the countryside, go for a hike, go to the zoo, etc... Think about your list and stick to it whenever you feel like going on a shopping spree for useless items. If you can successfully eliminate spending money on unnecessary items, you will be much closer to attaining your savings goals.
I know what you're thinking. All of this is nice, but I can't afford it. Consider this. The results of the Retirement Confidence Survey indicates that those people who thought about their retirement and made a plan changed their financial habits. Saving a mere $20 per week will amount to $1,040 by the end of the year and with only a 5% annual return will result to well over $50,000 over 25 years!
Saving doesn't have to be difficult, but it does require you to think about these issues, make a plan, and follow-through on the plan. With a little bit of time and effort, your goals will become a reality.
http://www.legalhelpers.com/blog/2005_12_01_archive.html
These are very important questions. Unfortunately, there are many people who don't even get to the point of asking these questions until they are on the verge of retiring. Studies show that 61% of all workers haven't even tried to calculate how much savings they will need in order to live comfortably in retirement. The key to financial health is retirement planning. The earlier you begin to plan and take action, the better off you will be and the less you have to set aside to insure healthy finances in retirement.
Let me try to give you some tips. The first step to develop a solid financial plan is to set aside enough money into a savings account to cover 3-6 months' worth of income in case of unexpected emergencies. This "emergency" fund will ensure that you have money to cover unexpected expenses while still allowing you to continue to build your financial future. Once you calculate how much you need to set aside (remember, 3-6 months' worth of take-home income), you should establish a goal for saving toward this emergency fund. Pay your "emergency" fund faithfully just like a utility bill or rent until you have reached your goal. This does not mean you need to save $300-400 per month, but save something every month, even if it is $25 or $50 per month.
The following are some other tips which should help you reach your retirement goals as well as develop healthy spending and saving habits.
1) Utilize any retirement savings plans offered by your employer (even if the employer won't match your contributions). These contributions are "pre-tax." This means that putting away $50 out of your paycheck does not mean your net pay will be $50 less. In fact, it might only be $35-40 less. If your employer does not any type of retirement savings plans (like 401(k), 403(b), or 457 plans), you should still put money away into an IRA. Consider signing up for automatic transfers from your paycheck into an IRA.
As your income increases over time, you should increase the amount or percentage of your income you are putting into your IRA or retirement plans. If you adopt this plan your savings and income have the potential to grow together over the years and outpace inflation.
2) Set spending limits and stick to your limits. It is far too easy to "charge" it when you don't have the money in your pocket to afford a particular purchase. You have to resist that temptation! Take time to calculate a reasonable "spending allowance" for a week. At the beginning of the week, withdraw your "allowance" and limit your spending to your allowance. This will help you set priorities and budget your money.
3) Flexible spending accounts (FSAs). Many employers offer flexible spending accounts into which you can deposit pre-tax earnings for medical and dependent-care expenses. These funds can help parents save tax dollars when paying for childcare or medical expenses. Again, like in the 401(k) scenario, you can put $50 into the account and it doesn't cost you $50 off your paycheck. The only potential pitfall is that you must spend the money by the end of the year or you lose it. You have to keep receipts to show you spent the money on the required childcare or medical expense to get the money. Therefore, make sure you are only saving what you know you spend.
4) Bill yourself. Whenever you pay off a major expense, like a credit card or a car, consider continuing those payments by making deposits into your own savings account. Eliminating your debt increases your net worth and by continuing to build your savings you can increase your assets and eliminate your reliance on credit. For example, if you are paying $400 per month for a car on top of your living expenses. Once your car is paid off, instead of spending the $400, put it into a bank account. This way you can begin saving for your next car and can have a bigger down payment and better financing terms.
5) Utilize piggy banks for all that loose change. Over the course of a year, loose change can add up! Pay your expenses with dollar bills and deposit all your change at the end of the day into a piggy bank. If you are able, consider depositing any $1 or $5 bills you have at the end of the day. If this is done faithfully throughout the year, you will likely have more than a thousand dollars in your piggy bank at the end of the year!
6) Allocate lump sum cash payments into three parts. When you receive your tax refund, inheritance, or bonuses, break up these things into three parts. Set aside 1/3 of the money for long-term savings goals (retirement), set aside another 1/3 for short-term savings goals (your next car purchase, furniture purchase, etc..) and the last 1/3 you can use to reward yourself! This way you can still splurge, but you can also have the satisfaction of continuing to meet your savings goals.
7) Have fun! Make a list of fun and inexpensive things you like to do. When you feel the urge to spend money, do the fun and inexpensive things you've put on your list instead. Go to a museum, take a drive through the countryside, go for a hike, go to the zoo, etc... Think about your list and stick to it whenever you feel like going on a shopping spree for useless items. If you can successfully eliminate spending money on unnecessary items, you will be much closer to attaining your savings goals.
I know what you're thinking. All of this is nice, but I can't afford it. Consider this. The results of the Retirement Confidence Survey indicates that those people who thought about their retirement and made a plan changed their financial habits. Saving a mere $20 per week will amount to $1,040 by the end of the year and with only a 5% annual return will result to well over $50,000 over 25 years!
Saving doesn't have to be difficult, but it does require you to think about these issues, make a plan, and follow-through on the plan. With a little bit of time and effort, your goals will become a reality.
http://www.legalhelpers.com/blog/2005_12_01_archive.html
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