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Helping Those Who Serve: First Responders and the Military

They keep us physically safe, so let’s keep them financially safe.

In this free webinar, you’ll learn:

• Where to find special discounts on everything from phones to cars
• How to apply for student loan programs just for you
• Ways to save on a new home and a college education

2021 first responders and service members financial Guide

Helping Those Who Serve

Thank you for taking the time to attend our webinar! This guide covers key points from the webinar so you can put what you’ve learned to use. We hope this information helps you find the right programs and relief options for your situation.

Specialized Programs for First Responders

Public Safety Officers’ Benefit Program

The Public Safety Officers’ Benefit Program (PSOB) is a death benefit to survivors of fallen law enforcement officers, firefighters, and first responders. It also offers disability benefits to officers who are catastrophically injured in the line of duty. You can visit Benefits.gov or email ASKPSOB@usdoj.gov to learn more.

HUD Good Neighbor Next Door

This program from the U.S. Department of Housing and Urban Development (HUD) allows first responders to buy a home for half its appraised value. The catch is that these homes must be located in a specified area that is defined as “up-and-coming” by local government leaders. You can find out more about the program by emailing answers@hud.gov.

State Benefit Programs

Benefits vary based on which state a first responder lives in.

Many states offer extended workers’ compensation benefits to first responders. For example, in Florida, first responders are allowed to recoup lost wages through workers comp if they have been diagnosed with post-traumatic stress disorder (PTSD).

Check your state’s workers comp website to see what extra benefits you may be eligible for.

Private Enterprises Help First Responders

Not only do state and federal governments aid first responders, but so do some private businesses:

  • AT&T: 25% off wireless plan
  • Costco: $20 Costco Shop Card
  • Dickies: 10% discount on their total purchase
  • Jockey: 10% discount
  • Nike: 20% discount

Unfortunately, there is no master list of private businesses that offer discounts. So, your best bet is to ask if a company offers discounts if you’re shopping in a store. If you are shopping online remember to search for “first responder.”

Moreover, some carmakers offer incentives for first responders. General Motors, for example, has a program that offers up to $500 on most models and up to $1,000 on Cadillacs. Again, ask your local dealerships while you shop for your next car if they offer first responder discounts.

Specialized Support for Military Service Members

How does the SCRA help military personnel?

The Servicemembers Civil Relief Act (SCRA) is a federal law that temporarily suspends judicial and administrative proceedings so Service Members can focus their energy on defending the country.

·       Reduce interest rates: When you are deployed on active duty, all interest rates on your debts are capped at 6%.

·       Postpone foreclosures: This is seldom used, but can potentially be helpful. The SCRA requires a court order before your house can be sold in foreclosure. This gives you time to work out a deal with your lender directly to avoid going to court.

·       Defer income taxes: If military service “materially affects” your ability to pay income taxes, the IRS is required to defer those taxes without any penalties or fees for deferment.

·       Prevent evictions: If you are renting, regardless of what it says in your lease, your landlord cannot evict you without a court order.

 

 

·       Protect against default judgments: If you are on active duty and a civil action, civil proceeding, or even an administrative proceeding is filed against you, the SCRA protects you. The SCRA prevents plaintiffs from obtaining a default judgment against you because you cannot appear in court.

·       Delay civil court cases: Civil court cases like divorce proceedings, as well as child paternity and support cases, cannot take place while you are on active duty.

  • Court-ordered repossession: Your property can’t be repossessed for non-payment during active-duty deployment without a court order.
  • Active-duty life insurance: Life insurance companies cannot end your coverage or require any additional payments for premiums except for increases based on your age.
  • Small business owner protections: If you are a small business owner, your non-business assets, as well as your military pay, are protected from creditors while you are on active duty.

For more information about SCRA protections, speak with a VA counselor or call 877-827-3702.

To use some of these protections, you may need an SCRA certificate. This is a document used as evidence of active-duty status in the U.S. Military, Reserve, or Guard.

It is formally referred to as the “Status Report Pursuant to Servicemembers Civil Relief Act.” For more information, visit ServicemembersCivilReliefAct.com.

Military Savings Deposit Program (SDP)

The Military Savings Deposit Program (SDP) is a program designed to give Service Members an opportunity to build savings.

The savings rate through SDP is much better than what private citizens can get with standard savings accounts. The average savings rate on savings accounts from private banks and credit unions is less than 1%. SDPs can garner you a whopping 10% interest accrual.

All active-duty Service Members, Guard, and Reserve members are eligible for an SDP during deployments whenever they receive Hostile Fire Pay/Imminent Danger Pay.

Military Lending Act (MLA)

The Military Lending Act (MLA) protects active-duty Service Members, their spouses, and their dependents from certain lending practices.

The MLA will not allow interest rates higher than 36% to be charged on most consumer loans. This applies to payday loans, vehicle title loans, and tax refund anticipation loans. Home loans, auto loans, and credit cards are excluded from the MLA.

Additionally, this law does not apply to Veterans or military retirees.

Other Military Finance Programs

  • Student loan payments can be deferred while you are on active duty.
  • Military Service Members have specialized student loan forgiveness programs.
  • Tax preparation is given for free to Service Members on base.
  • You can put “active duty” fraud alerts on your credit reports so no one can scam you while you are deployed.

Private Enterprises Help Military Personnel

Just as carmakers offer special programs to first responders, carmakers extend similar offers to military Service Members and Veterans. For example, Ford’s “Ford Salutes Those Who Serve” program offers $500 bonus cash on specified car models.

Unfortunately, much like for first responders, there is no master list of private businesses offering discounts. It’s often best to simply ask for the availability of these discounts or search online for military discounts.

 

Thank you!

2021 Holiday $urvival Guide

Save during the holidays without being a Grinch

In this free webinar, you’ll learn how to:

• Find the perfect gifts at the perfect price
• Avoid common — and costly — holiday scams
• Save money on holiday expenses that aren’t just about buying gifts
• Use credit cards to save money instead of spend it

2021 Holiday $urvival Guide

Save during the holidays without being a Grinch

Thank you for taking to time to be a part of our webinar! This guide covers key points from the webinar so you can put what you’ve learned to use. We hope this information helps you find creative ways to save during the holidays.

Revealing statistics about holiday debt

  • The average American ran up $1,325 in holiday credit card debt in December 2019.
  • By January 2020, 78% of Americans with credit card debt were unable to pay them off.
  • Meanwhile, the average credit card interest rate was 17% in 2020.

Create a holiday spending plan

Start by making a list of people you need to shop for, which may include:

  • Parents
  • Extended family
  • Spouse
  • Friends
  • Boss / co-workers

Make sure to think carefully because once you set your list, you don’t want to deviate. From there, move on to budgeting per person. How much are you willing to spend on each individual?

TIP: A good rule of thumb is that you should only spend 1.5% your gross income on the holidays. So, for example, if you earn $40,000 per year then you should have a holiday budget of $600.

5 nifty gift-giving ideas

  • Shop high-tech: Use apps like Camel Camel Camel, Baywatch, or The Mac Index for keeping track of cut prices and deals on Amazon, eBay and Apple products. You can also set price alerts on Amazon.
  • Go low-tech: If you have the skills, use your abilities to craft your own goods for your loved ones. For example, knit a sweater or crochet a blanket.
  • Go old-tech: Go thrift shopping and find vintage tech for the hipsters in your life.
  • Assemble your gifts: Make a gift basket with various food items and tchotchkes. Personalize gift baskets around the tastes and interest of the person receiving it.
  • Don’t buy. Do: Do coupons for massages, car washes, cleaning the house, etc…

4 ways to holiday save

When everything seemingly costs money, find creative ways to cut costs:

  1. Let the kids help with budgeting and crafting.
  2. Create affordable holidays traditions like baking holiday treats, touring neighborhoods for holiday light shows and/or decorations, or seeing a local choir.
  3. Host potlucks instead of parties.
  4. Take a family trip somewhere using helpful money saving apps like Airfarewatchdog, Hopper or Skyscanner. If you prefer to go low-tech, find a travel agent that can help you find deals when traveling at peak times.

Make money while spending money

Even though it seems impossible to make money while spending money, there are ways to successfully do so. Take advantage of credit card reward points. If you are going to be purchasing gifts using cash, go ahead and use your reward raking credit card to make said purchase and then pay it off immediately in full using the cash you have saved.

You’ll earn your rewards without having to split hairs about having to pay off any interest fees.

What if you already have high balances heading into the holidays?

If you find that you are still drowning in debt with these tips—or you already have high balances before you ever start shopping—it may be time for debt analysis from a trained expert. Credit counseling is a free gift available all year long! A certified credit counselor will review your finances and offer concrete suggestions for getting out of debt and saving money.

Charity done right

Consider donating to charities. This is a good way of getting your feel-good karma for the holidays. The bonus here is that your donation could be tax-deductible.

To find a charity that falls in line with your ideals, use CharityNavigator.org.

Thank you!

Marriage and Money: Till Debt Do Us Part

Learn how to say “I do” to saving as a couple

In this free webinar, you’ll learn:

• How to talk about money with your spouse
• The three reasons money is a major source of marital strife
• Why a household budget is household bliss

Learn how to say “I do” to saving as a couple

Thank you for taking to time to be a part of our webinar! This guide covers key points from the webinar so you can put what you’ve learned to use. We hope this information helps you have productive conversations about money with your spouse or fiancé.

Takeaways:

  • Marriage and money don’t always mix naturally—you need to work at it together.
  • Talk about your finances before you talk about the wedding.
  • Communicating openly about money often will make your marriage much happier.

Divorce and debt

Money fights are the second leading cause of divorce, behind infidelity, according to a 2017 report on household finances by the Federal Reserve. A separate poll of divorce attorneys showed that four in ten marriages end because of financial issues, among other things.

Try to be open with your partner about all of your spending habits and debt.

A rocky start to your relationship

That same Federal Reserve study found that nearly two-thirds of all marriages start in debt. Almost two-thirds of all new marriages begin with one or both partners carrying debt into their relationship, meaning they start off less than broke as a couple.

Couples must discuss their debt and create a plan together to achieve their goals.

Some potential indicators of a divorce

A report by Psychology Today says that there are some key questions that may predict a marriage would be headed for divorce:

  • Do you regularly argue about money?
  • Do you cringe when your partner buys new stuff?
  • Can you and your partner solve financial problems together?

If you answer “yes” to these questions, then you and your spouse need to work together to improve the financial state of your relationship.

How NOT to let money split you up

The good news is that you CAN make your money and marriage work together perfectly. But you need to recognize the areas where most couples run into issues. The three biggest relationship landmines are:

  1. Not talking about money BEFORE marriage
  2. Not budgeting DURING marriage
  3. Not talking until AFTER buying things

Talking about money BEFORE Marriage

Couples talk about a lot of things but don’t talk enough about money. You need to talk about how much you owe, how much you spend, and how you THINK about money. That’s really three separate conversations.

So don’t make the mistakes of having one quick conversation about money and thinking you’re done. Instead, follow this plan:

Conversation 1: Gather up the facts

The first conversation is primarily a fact-finding mission for you as a couple. You simply need to write everything down. Make a list with two columns. In the first column, write down both of your debts, including:

  • credit cards
  • student loans
  • car loans
  • personal debt

In the second column write down your incomes and total them up to determine your combined income. If you’re paying more than you’re earning, this is the first financial challenge that you’ll need to fix. We’ll cover how to do that further in this guide. But just getting all of this written down is enough for your first conversation.

Conversation 2: Deciding how you will handle your money

For the second conversation, answer these questions so each partner understands the other’s expectations:

  • Will you merge all your income into one joint bank account or will you each keep some separate money?
  • If one of you earns more than the other, will that partner have more of a say in how the money gets spent?
  • If one of you wants to make a major purchase and the other doesn’t, how will you resolve that?

Get as detailed as possible with this conversation. You may even consider role-playing through some possible scenarios.

Conversation 3: Talking about how you feel about money

Finally, you need to talk through how you really think about your finances.

  • When you get stressed out, do you engage in retail therapy?
  • Do you pinch pennies to such an extreme that you don’t want to make any big purchases, even when it’s a great deal?
  • Would you rather scrimp during the week so you can blow it all on the weekends?

There’s no right or wrong answer to these questions. However, not knowing the answers to these questions could cause problems later. So, this conversation can prevent you and your partner from misreading the other’s intentions and actions.

Make sure to budget DURING your marriage

The next big mistake is not watching your money AFTER you’re married. Don’t fall back on the excuse that budgeting is a hassle. There are safe, online tools that can make budgeting fast, easy, and more accurate.

First, check with your bank or credit union to see if they offer a free budgeting tool built into your bank account.

If not, apps such as Mint, Tiller and You Need a Budget (YNAB) can help you budget with a few keystrokes. They all have different looks and features, so choose one as a couple that suits your needs the best.

Don’t wait until AFTER purchases to talk

Both your money and your marriage need regular maintenance. Set some time aside to preview the upcoming week’s expenses. As a couple, you already talk about a lot of things on a daily and weekly basis. Learn to add a weekly conversation about how you plan to spend your money during the upcoming week. If you actively keep a calendar, schedule time for this.

A story of how marriage and money can go wrong

Penny and Bill did the right thing as a couple and didn’t rush into marriage. They moved into an apartment and carefully planned their wedding. The cost was high, but they decided the big day was worth blowing their budget.

They also never had those three key conversations about money. Instead, they enjoyed their wedding and had a wonderful honeymoon, but they came home to a mountain of credit card debt. As newlyweds, they didn’t have much cash, so they were only making minimum payments and interest charges were eating away at their monthly payments.

What’s more, Bill found out that Penny had a half-dozen credit cards that were all maxed out. She was only making minimum payments on those, too. He was horrified and said they were in trouble, but Penny didn’t think it was a big deal.

Bill looked at Penny’s credit card statements and found she was paying an average of 20% interest. They also had their wedding debt. With minimum payments, they’d still be in debt by the time they retired.

On top of that, they both needed new cars, wanted to buy a house, and start a family. Bill was constantly stressed but Penny kept telling him it was no big deal and things would work out.

They discovered something about themselves they should have learned a long time ago.

Bill is a planner and agonizes over every purchase, never buying anything until hes done hours of research. Penny thinks of money emotionally and jumps on a good deal before it disappears.

If they could take the best qualities of each other, they would have a strong financial life. But now they were arguing and focusing on each others financial weaknesses instead. That’s when the financial infidelity started.

The moral of the story: When couples don’t talk about money, it leads to money fights and leaves the relationship open to financial infidelity, where spouses “cheat” on each other with their finances.

Understanding financial infidelity

Financial infidelity involves lying directly or lying by omission about money to your spouse and it’s not healthy.

One report in US News found:

  • 25% of married people make secret purchases
  • 20% hide debts or accounts
  • 20% lent money without mutual consent
  • 20% drained money from savings
  • 15% lied about their income

Signs of financial infidelity

Certain suspicious activities will often point to financial infidelity by your spouse. Some signs might include:

  • Your spouse doesn’t want you checking the mailbox or rushes home to hide deliveries
  • There are a lot of new possessions that are never explained
  • You’re not allowed to see your spouse’s credit card statements
  • Your spouse deflects or even refuses to talk about finances

Some couples make financial infidelity easy—about 40% of married American’s don’t know what their spouse’s salary is. They simply never talked about it. That ignorance can lead to temptation, which can lead to financial infidelity.

The cure for financial infidelity

Talk early and talk often. Talk about your debt, your spending, and your philosophies about money. Avoiding the same fate as Penny and Bill is as easy as talking.

How to Avoid the 5 Most Common Money Mistakes

You can save big by doing very little — and sometimes nothing.

In this free webinar, you’ll learn:

• Top five money mistakes
• What happens if you bury your head in the sand
• Tips to fix the most common money mistakes
• What to be aware of when dealing with medical bills and credit cards
• How to deal with creditors with regards to late bills
• Learn to budget for contingencies
• How good it feels to be in control of your finances

HOW TO AVOID THE 5 MOST COMMON MONEY MISTAKES

You can save big by doing very little—and sometimes nothing.

This may sound unbelievable or even a little sketchy, but it’s true: You can save money every month by literally doing nothing. The tactics that we’ll discuss in this whitepaper have worked for millions of Americans. We are NOT making this up.

First let’s look one very important number – $83,000,000,000. That’s how much Americans owe on their credit cards. We owe $83 billion to credit card companies. But when a number gets that big, it’s hard to even understand it. So, how much is $83 billion exactly?

It is enough to give everyone living in the two most populous U.S. states $1,000 in cash. That’s everyone living in California and Taxes. Of course, we just keep charging, so soon we’ll be able to add the third most populous state, Florida.

Did you know more than half of all credit cardholders carry a balance each month? With credit card interest rates hovering at around 20 percent, that means many credit users are paying $1 in interest for every $5 they charge.

So, can be very hard to catch up once you get behind. That’s why credit cards can be so dangerous, and it’s why they’re going to come up a lot as we talk about money mistakes.

How to save money on your credit cards in just minutes

Before we talk about how to save money by doing nothing, first let’s talk about how spending a few minutes can help you save money on those hefty credit card interest rates and fees.

Average credit card late fee: $36

If you miss the due date on your credit card by even a day, you get popped with a late fee and it can really add up. But you can easily get rid of it?

How? By asking.

If you’ve had a credit card for many years and you have been a good customer, you can call the number on the back of the card and get some concessions. For example, if you’ve never been late with your payment before, you can often get the first late fee removed as a gesture of goodwill.

You might also be about to shave down your interest rate if you mention that another card has offered you less—and if you spend about five minutes online you can surely find one. Then mention that new card and lower rate to the representative.

You can also move your due date, so it corresponds better with your paychecks and other bills. That way, you never get caught short again.

Money Mistake #1: Not asking!

What we just covered about credit cards is the first money mistake that people make. They simply fail to ask to pay less or save more. But that’s not only with credit cards. It applies to many of the companies and institutions that you might owe money to.

When to ask for a break

  • Credit card late fees and deadlines
  • Medical bills
  • Any debt in collections

Besides calling your credit card companies, you should also call about any debt you’ve incurred for medical procedures. And this isn’t just about hospital bills and doctor’s fees. Even dental work and lab fees can be negotiated. Medical providers are well accustomed to such negotiations. Just contact the billing department and politely inform them that you can’t afford to pay the full bill right now, but you’re a responsible person and want to work something out.

Ask what breaks they offer and remember, always be polite!

Debt collectors can be mean, but you can kill your bills with kindness!

The tactic we describe above also works well with debt collectors. No one likes dealing with debt collectors, but here’s the behind-the-scenes truth that can help you save: Debt collectors often BUY debt from, say, your doctor. THEY pay pennies on the dollar for your debt.

The doctor gets something when he might fear he’d get nothing, and the debt collector then goes after you, making a big profit when you pay in full. But they can still profit even if you don’t pay the full amount. Therefore, many debt collectors will accept less than the full amount—because they’ll still profit on the transaction.

So, if you’re facing a debt collector, ALWAYS negotiate! We can show you how. We have a publication that gives you step-by-step instructions.

Negotiating isn’t just for your debt either!

  • Cable and satellite bills
  • Cell phone bills
  • Newspaper delivery

Before we leave the topic of negotiating, let’s wrap up with this: You can negotiate almost any service.

That goes for your cable or satellite bill. You can often get extra premium channels if your provider is running a special you didn’t know about. You can even negotiate for a lower bill, often saving $5 or more per month. The same tactic works for those complex mobile phone contracts. If you still get a newspaper delivered, you can either get a small price break or an extra day delivered for free.

Why do these businesses cut you these breaks? Because they want to keep your business. And these little savings really add up, especially when you don’t have to do anything.

Money Mistake #2: Ignoring the tech!

Now let’s move to the second biggest money mistake. If not asking is the first mistake, then not embracing technology is a close second.

What does this mean?

There are big advancements that make it easier for you to save money, but not everyone adopts them. Sometimes, it’s out of fear, but mostly, it is just because people don’t know about them. So, let’s allay your fears and fill you in now…

Budgeting is crucial—but boring

Let’s be honest: budgeting isn’t fun.

We all know it’s important. After all, how can you save money if you don’t know how much you’re spending? That’s why a monthly household budget is so important. But it can also be time-consuming to put pen to paper. But what if you didn’t have to?

Budgeting better with tech tools

There are websites, apps, and programs that handle the drudgery of budgeting for you. They do the math for you, and in seconds instead of hours. Many of them cost nothing and the ones that do cost only a few dollars.

Here’s how they work…

Let technology do the dirty work:

  • Mint
  • Personal Capital
  • YNAB
  • Mvelopes

One of the most popular budgeting apps is called Mint and another is called Personal Capital. But a lot of banks and credit unions offer similar programs on their websites for their customers.

Basically, you just type in your income and expenses, and these programs do the math for you. You can even project your savings if you eat one less takeout dinner, or if you refinance your mortgage. The software does the heavy lifting for you.

Tiller, Quicken, and more!

If budgeting apps are a little too techy for you, there’s a middle step. Websites like Tiller let you download customized spreadsheets that stay on your computer, and you easily personalize. Quicken has software that’s been around for decades and most of us are familiar with it.

Each solution has its pros and cons, but they all work. So, it’s really up to what makes you feel the most comfortable.

Money Mistake #3: Forgetting your workplace options!

The last place you might look for easy savings is your workplace. However, believe it or not, your employer can help you effortlessly save money, even as you work hard to make it. There are three major ways to do that.

Direct deposit can help you save indirectly

More than 9 in 10 Americans are paid through direct deposit, and almost all of them have access to a neat feature: You can direct some of that money AWAY from your checking account and send it DIRECTLY to a savings account you don’t normally see.

Imagine if you send even $10 a week to a savings account. At the end of the year, you’ll have more than $500! And you literally spent a few minutes setting it up, then did nothing the rest of the year!

TIP: Raise up your savings when you get a raise

This savings shortcut works very well when you get a raise. Just divert that extra money into a savings account. You won’t be tempted to spend it because you never got used to having it, and you don’t constantly see it in your checking account.

To set up multiple direct deposit streams, simply talk to your Human Resources or payroll department. They can walk you through this easy process.

401(k) is more than OK

Make 43 cents on every dollar!

Where you work might offer valuable services that can save you big. One of the most popular is a 401(k), which helps you save for retirement. What’s so special about a 401(k)? Many employers match a portion of your contribution to this retirement account.

According to government research, the average is 4.3 percent. That means for every dollar you sock away for later, you get 43 cents. That may not sound like much, but when you consider a savings account is paying less than one percent in interest, that suddenly seems like a lot.

Also, the IRS gives you some money, too: By not taxing what you contribute. And since this is for your retirement, which is a long way off, those savings will build up over time.

HSAs are a healthy way to save

Another big workplace benefit is called a Health Savings Account, or HSA. It does the same thing by letting you set aside money for healthcare and having it be invisible to the IRS.

We could spend an entire webinar talking about these lucrative benefits, but we suggest you chat up your HR department. Believe it or not, they WANT you to take their money. Why? Because companies that offer these benefits know their employees will appreciate them. They’re more likely to stick around and work hard. So let your bosses help you save!

Money Mistake 4: Not automating your bills!

We’ve already talked about automating your savings. Now let’s talk about automating your spending. Almost every bank and credit union—and even many municipal utilities—offer automatic bill pay.

You can go online and set the day each month when you want a bill to be paid. On that day, the proper amount is automatically deducted from your bank account right then, and not one day sooner. Or more importantly, not one day LATER. This means never paying a late fee ever again.

An autopay warning: You MUST have a budget first

Of course, a danger of automatic bill pay is that if you blow your budget on some debit card purchases you’ve forgotten, you might not notice how low your bank balance is getting. Then your bank or credit union might hit you with fees, either for not keeping a minimum balance or for overdrawing your account. That’s why it’s so important to keep a household budget.

Another autopay warning: Setting it and forgetting it

Another worry about autopay: You might set a bill to be paid and never look at it again. What if it’s for a subscription you no longer need? Or a music streaming service you no longer use? Of course, if you keep that household budget using the easy tech we talked about earlier, you won’t have any of these downsides. It’ll be all upsides.

Money Mistake 5: Falling for financial scams!

The final big money mistake is caused by our desire for easy money. While we’ve just reviewed some proven ways to save more without having to burn a lot of calories, there are also a lot of scams that prey on our urge to find shortcuts. The difference is, you don’t know these people, yet they want you to trust them.

2 types of scams: Greed and fear

Generally speaking, there are two kinds of scams. One appeals to your greed, the other to your fear. If you find yourself talking to someone you don’t know, and you feel one of these emotions welling up inside you, pause for a moment and consider whether it’s a scam. Let’s run through an example or two.

Greed scams: Getting something for nothing (or so you think)

Let’s talk about easy money. The stereotype for these scams is the Nigerian prince who wants to give you thousands of dollars to help him transport money out of his country. But these also include scammers posing as VA managers and calling military veterans to offer extra benefits. Or an IRS agent trying to give you a tax refund you didn’t know you had coming. Or even a government official saying they’ve located some funds you lost.

In all these cases, what the scammers are after is your personal information. They can either use that to break into your accounts and drain them, or they can sell your personal information to other scammers who will do the same thing.

Fear scams: Scaring you into losing money

Ironically, these scams can be from the same alleged sources. The IRS agent who wants to give you that refund? Well, now he’s calling to threaten you with prison if you don’t pay back taxes right away. Never mind that the IRS never calls you, they only send letters. And never mind that there hasn’t been a debtor’s prison in this country for two centuries.

These scams all insist you must ACT NOW or you’ll suffer severe consequences. Why? Because they know if you take a moment and really think about what they’re threatening you with, it doesn’t make a whole lot of sense. How, for example, can a bill collector order the police to arrest you if you don’t wire the balance you owe? Since when do police officers take orders from debt collectors?

How to avoid all scams – by doing nothing

So how do you avoid both kinds of scams? Simple, by doing exactly what we’ve been talking about so far: Almost nothing.

You need to resist the urge to ACT NOW. Ask for the name and title of the person calling you. Ask for a phone number to call them back. They won’t give you one, but on the off chance they do, look it up and see if it’s even from the place they say they’re calling from. Usually, they’ll just hang up on you.

In addition, NEVER reply to emails from people you don’t know. If you want, Google them and look for the legitimate company’s website and contact them that way. But again, doing nothing is your safest bet.

What to know about debt collectors

Now let’s take a moment to talk about a topic no one likes—debt collectors. Who likes people calling them all the time and asking for them to pay bills they can’t afford to right now? No one would answer yes to this question.

Here’s the thing about debt collectors: They can’t just bother you any time of the day, and they’re not allowed to threaten you at any time. That’s important to know, and it’s important to let them know you know.

Federal Debt Collections Practices Act

There’s a federal law called the Fair Debt Collection Practices Act, or FDCPA. The FDCPA bans debt collectors from being abusive.

For instance, it says they can’t call you before 8 in the morning and after 9 at night. They can’t call you at work if you tell them not to. They’re not even allowed to swear at you.

If you’re getting harassing calls from debt collectors, just Google the letters F-D-C-P-A and you’ll get a list of your rights. Then tell those debt collectors you know about your rights—and you know how to report them to the federal authorities. That usually settles them down very quickly.

The bonus mistake: Not asking for professional help!

Before we finish this off, let’s add one bonus mistake that many people make. This one costs them not only money but a lot of time. It’s not asking for professional financial help.

Now, this might sound self-serving since this guide is written by one of those places, but it also happens to be true. You can save both time and money by calling a nonprofit credit counseling agency like Consolidated Credit. Here’s what happens when you do.

Credit counseling: free, easy, short, and rewarding

When you call a certified credit counselor, you receive a free debt analysis. They’re trained to ask you the right questions and study your financial strengths and weaknesses. Front here, they can recommend ways for you to spend less and save more. They can also offer you a powerful tool that you can’t use on your own. It’s called a debt management program.

Debt management program: pay less, pay off faster, get debt-free

A debt management program, or DMP for short, is basically an agreement between you and your credit card companies. They’ll freeze your penalty fees and lower your interest rates if you agree to make regular payments. Those payments go through the credit counseling agency, and you can make one payment that covers any credit cards you put into the DMP. So, you pay less and save time, too.

So, what’s the catch?

DMP has a fee, and you can’t do it yourself

DMPs aren’t free. It costs money for staff to administer them. But—and this is a huge but—that fee is rolled into your monthly payments, and it’s minuscule next to the savings you’ll reap. That’s probably why DMPs have been around for decades, and they’ve saved Americans millions of dollars. But you can’t just sign up for a DMP on your own. The credit card companies work exclusively with nonprofit credit counseling agencies.

Thank you!

Free Yourself from Student Loans Debt

Don’t let college costs from long ago ruin your future.

In this free webinar, you’ll learn:

• How these terms can save you thousands: forbearance, deferment, and federal repayment programs
• The truth behind student loan forgiveness
• How to find experts who can truly help you lighten your student loan burdens

How to Tackle Your Student Loans

Don’t let college costs from long ago ruin your future.

In some ways, student loans are the cruelest form of personal debt. You took out these loans so you could get a great education and launch a lucrative career. You just wanted to take care of yourself and your family. Ironically, the cost of that education is now keeping you from the financial independence you were looking for.

The sad truth is, even before the pandemic, student loans were already being called a crisis. Why? Because Americans collectively owe more than one trillion dollars on all the student loans out there. It’s one of the largest forms of debt people owe.

In fact, people owe more on our student loans than they do on all the credit cards out there. Next to mortgages, this is the biggest category of personal debt. And if you think back to the Great Recession, you’ll remember that a mortgage crisis caused that.

Of course, when you talk about a trillion dollars, it’s hard to even grasp the number. So how about these numbers? 40 million American adults owe student loans, with 6 million owing more than $50,000. So basically, almost a fifth of the country is making student loan payments, and millions of them are struggling. Add a pandemic on top of that, and you can see how dire the problem is.

These are the reasons why you’ve been hearing President Biden talk about student loan forgiveness. It’s a complicated topic, but know this: What’s being proposed right now, even if it happens, won’t solve the problem. It’ll just ease some of the symptoms. That would only apply to federal student loans. That accounts for the majority of people’s student loan debt – only 8 percent are from private lenders.

THE TRUTH ABOUT STUDENT LOAN FORGIVENESS

Student loan forgiveness means different things to different people. What most people want it to mean is: No more student loan payments! But of course, nothing financial is that simple.

There are two kinds of student loan forgiveness, broadly speaking.

Small, sudden, and one time

The first is the political kind. You might’ve heard about this in the news. President Biden has been talking about this for a while now — ever since he was on the campaign trail, actually. He’s even signed a couple executive orders to forgive certain, specific kinds of student loans.

Big, slow, and permanent

The second kind of student loan forgiveness is more established. It’s been around for a decade. But it requires some work. Still, the payoff can be huge. There’s no telling what the president and Congress will actually do, and when they’ll actually do it.

Public student loan forgiveness

Can you really get your hefty student loan balances forgiven? The answer is, “Yes, but…”

The Public Service Loan Forgiveness program – PSLF, for short – offers federal student loan forgiveness if you work in a qualified profession. What are those professions? You can work in…

  • Public health
  • Military service
  • Public safety
  • Law enforcement
  • Public education
  • 501(c)(3) tax-exempt organizations

What they all have in common is they do some public good. So if you work for a for-profit business, you don’t qualify, even if you’re doing a lot of noble work in your community.

If you work in one of those professions, you’ve cleared the first hurdle. Unfortunately, there are more. The qualification process is long, complicated and (worst of all) not guaranteed. And you need to make 120 regular qualified payments first – that’s 10 years’ worth. But if you do qualify, you could get out of student loan debt for less than you originally borrowed.

Is it really worth the hassle and the long timeline? Well, depending on your specific circumstances, you can save up to $24,000. There is just one more complicating factor: To qualify for student loan forgiveness from the federal government, you need to enroll in one of their existing student loan relief programs. Many people have heard that the federal government offers help to those struggling to make their payments, but they don’t quite grasp all the details. And no wonder, because it can get a little complicated. So let’s break it down for you.

Federal student loan relief programs

One question Consolidated Credit gets asked a lot is, “What’s the catch? Why would the government help me pay off student loans it saddled me with?” Well, remember the $1 trillion in total student loan debt in this country? Well, the federal government knows that if you can’t pay it back, they’re on the hook for those losses. And besides, if you can’t pay back your student loans, you won’t be able to buy a home and pay property taxes and be a productive member of society.

Unfortunately, these relief programs are as easy to understand as your income taxes. Which means, they can get confusing. Like all government programs, these student loan efforts all have acronyms. Here are ICR, IBR, PAYE, and REPAYE explained.

Income-based repayment (IBR)

If you have federal loans and can demonstrate a financial hardship, you qualify. Like the name implies, an IBR matches monthly payments to your income. It’s the government’s way of acknowledging that the salary you earn after you get a degree usually doesn’t exactly match the expense you incurred to get it.

For example, the program adjusts your monthly payments to your income and family size. If you have a lower income and a larger family, it reduces your student loan payment requirement. In general, enrollees spend between 10 percent to 15 percent of their take-home income to repay student loans under an IBR. This reduces the burden of student loan repayment on your budget.

The federal government isn’t forgiving your loan. You still owe what you owe. You’re just paying less each month on that total loan. But here’s the catch: You pay interest on all your loans, and student loans are no different. So your interest is still accruing, because you’re paying less each month. Even the government acknowledges that this can increase total cost over the life of your loans. Still, it helps you greatly in the short term, so for many folks, it’s worth it.

Income-contingent repayment (ICR)

The same thing goes for another program with a very similar-sounding name. Income-contingent repayment is a little different than income-based. While both an IBC and an ICR adjust your monthly payments based on your income, the ICR has a few important differences.

First of all, you don’t need to show any crushing financial problems to qualify. Remember, for an IBR, you need to show some hardship. In other words, you need to prove to the government that you simply don’t make enough or save enough to meet your obligations. ICRs don’t require this, so it saves you on paperwork and hassle.

But there’s a downside to ICRs. Unlike an IBR, an ICR doesn’t stop your monthly payments from increasing indefinitely along with your income. Also, while an IBR typically reduces your payments to 15 percent of your income, ICRs only go to 20 percent.

Pay as you earn (PAYE) & revised pay as you earn (Repaye)

Pay as You Earn is even better than an IBR at reducing monthly payments. It was updated and expanded a few years ago into yet another option called REPAYE – which stands for Revised Pay as You Earn – but the concepts are still the same. Your monthly payments are reduced to 10 percent of your discretionary income, and after 20 or 25 years, whatever balance is left is forgiven – and forgotten. You pay nothing more.

So what’s the difference between the two? They’re subtle but real. For instance, to qualify for PAYE, you must have a partial financial hardship. REPAYE? Anyone with qualifying student loan is eligible. Your spouse’s income doesn’t count in PAYE if you file separately, but it does in REPAYE. So what does all this mean? Generally speaking, PAYE is a better option for married borrowers when both spouses have an income. REPAYE is usually better for single borrowers and people who don’t qualify for PAYE. But in both cases, just like an ICR, if you get a new high-paying job or a big fat raise, your payments jump up along with that extra income.

Other options

Deciding which program is right for you will take some time. You can start with this website: StudentAid.gov. That’s a federal site that’s written in pretty plain English. There are other money-saving options for student loans: forbearance and deferment. Here’s what they are.

Forbearance

What’s forbearance? You’ll be familiar with the concept if you’ve ever called your credit card company and begged to get a late fee removed. In this case, your student loan servicer wants you to keep making payments, so sometimes they’ll give you a forbearance. That means you can temporarily stop paying your student loans. Basically, it’s like a hold button for your loan payments.

The problem is, you need a good reason for such incredible debt relief. Without one of these reasons applying to you, you can’t get a forbearance. These come in two types: discretionary and mandatory.

  • Discretionary: A discretionary forbearance requires your servicer’s permission. It’s totally up to them if you get it. And all of them have specific situations that must apply to you. For instance, if you can’t make your payments due to a change in jobs, a medical expense, or other financial difficulties, your servicer can decide to give you a forbearance.
  • Mandatory: This means your servicer can’t deny you the forbearance if you qualify. What’s it take? If you’re on a medical internship or residency program, or if you’re in the National Guard and got activated by the governor, or if your payment is more than 20 percent of your monthly gross income – then you can get a mandatory forbearance. You’ll have to prove that to your servicer, but a little paperwork can save you thousands of dollars.

Whatever forbearance you qualify for, you can get up 12 months of making NO payments. In total, you can get three rounds of 12-month forbearances before you max out. That gives you plenty of time to get your financial life in order– but remember, you still owe the loan amount.

In fact, under a forbearance, your interest charges continue to accrue. And because you’re not making payments, that means your overall loan debt increases. So you get some relief now, but later on, you’ll pay for it. But there’s another option that avoids some of this: deferment.

Deferment

A forbearance and a deferment are more similar than different. In fact, the only major difference is that with a deferment, you might not owe that accrual of interest we just talked about. Like a forbearance, you must have some pretty serious circumstances that prevent you from making those monthly payments – like, say, cancer treatment or a job layoff.

Now, this is just a rough overview of forbearances and deferments. You want to know how detailed it can get? Here’s a quote from the federal Student Aid website…

You may be eligible for a deferment on your federal student loan if you are a parent who received a Direct PLUS Loan or a FFEL PLUS Loan, while the student for whom you obtained the loan is enrolled at least half-time at an eligible college or career school, and for an additional six months after the student ceases to be enrolled at least half-time.

If it sounds complicated, don’t worry – there are a few more options.

Federal direct consolidation loan

If you’ve ever used a debt consolidation loan to take care of credit card debt problems, you might think you understand how a Federal Direct Consolidation Loan works for student loan debt. But you’d be wrong. You use a Federal Direct Consolidation to consolidate federal student loan debt into one easy payment. But the loan structure, interest rate, and how you qualify varies greatly from other types of consolidation loans.

Consolidating debt is generally done to simplify debt repayment. If you have multiple individual debts to repay, it can get complicated to juggle all those bills within your budget. Consolidation reduces that down to just one bill, so debt is easier to manage. However, that’s not the only advantage of Federal Direct Consolidation Loans. In this case, taking out this type of loan provides an additional benefit that can be significant, depending on your situation. Namely, you can make defaulted federal student loan debt current. It’s an amazing benefit, and one worthy of a few minutes of your research.

It’s actually easy to apply. You do it through StudentLoans.gov.

Refinancing

Finally, there’s refinancing. If you don’t want to deal with forbearances and deferments, and you’re not interested in the federal relief programs we just talked about, you have another option: refinancing your loans on your own.

When you refinance, you actually take out a new loan at a lower interest rate. This works best if you’re not cash-strapped and want to pay off your loans faster. That’s because you need a credit score high enough to qualify. Basically, you’re consolidating your federal student loans into one private loan for a lower interest rate. You can then plow your savings back into paying off the principal.

While not nearly as complex as the other options, it’s not a walk in the park, either. There are the three first steps you need to take.

  1. Determine how much debt you need to refinance.
  2. Note the current balance and APR on each loan you include.
  3. Shop around and get quotes from lenders.

When you find the best deal, apply. But remember, when you apply for any new loan, that results in a “hard inquiry” on your credit report. That can temporarily drop your credit score. It’s not a huge deal, but it’s worth mentioning – because if you apply for too many loans in too short a time, you could end up paying more. So for instance, you don’t want to refinance your student loans at the same time you apply for a new credit card and secure a new auto loan. All those inquiries, not to mention the new credit, could drop your score and raise your rates.

Is the hassle worth it?

Pursuing any of these options will take a lot of time. Is it worth it? Most definitely yes. Anything is better than defaulting on your student loans, which is what happens when you don’t make payments for 270 days or more. That means your wages can be garnished, your credit score is trashed, and any future tax refunds and other federal benefits payments can be withheld. You don’t want to go down that road.

Here’s a depressing statistic: According to the Government Accountability Office, 51 percent of all federal borrowers were eligible for the IBR program we mentioned earlier – yet, only 13 percent are actually participating in it. And the Department of Education even admits that their efforts to increase awareness about these federal relief programs is “incomplete” and “inconsistent.” That’s why you might consider hiring a professional.

Think of it like your taxes. If your income taxes become too complex, you can hire a CPA or tax preparer who not only saves you the time and aggravation, but can also find ways to save you money – hopefully more than enough to cover the cost of hiring them in the first place. That’s been happening more and more in the student loan world.

Thank you!

Student loan debt holds thousands of Americans back from improving their credit score or even owning a home. This paper was just an overview of all your student loan debt relief options. Learn more about each option and find out which may be the best fit for you. Visit our website at ConsolidatedCredit.org to learn more, or visit StudentAid.gov.

Buy or Refi: Which Is Best for You?

This is your biggest financial decision, so listen to the experts

In this free webinar, you’ll learn:

• The benefits of buying and the best time to refinance
• The importance of these four words: debt-to-income ration
• Budgeting basics and why credit is key

BUY OR REFI: WHICH IS BEST FOR YOU?

This is your biggest financial decision, so listen to the experts.

For most people, a home is the most expensive thing they’ll ever buy. Which means it’s also the most complicated thing they’ll ever buy. And of course, that makes it the most stressful thing they’ll ever buy. While no one can make home-buying a fun and relaxing process, this guide can cut your stress in half.

Owning a home can be both fun and lucrative. Buying it is a mess of stress. A Homes.com poll from 2018 found that a third of homebuyers actually shed tears because they were so frustrated at the process. Most had at least four arguments with their families. The reason for this stress isn’t hard to figure out.

Mortgage debt by the numbers

By far, the biggest form of debt in this country comes from mortgages. We collectively owe 16 trillion dollars on our homes. That’s how much we need to pay before we own our home free and clear. Needless to say, that can easily cause anyone to stress.

It’s especially stressful because mortgage debt is almost four times more than all the other forms of debt we struggle with. That includes credit cards, student loans, auto loans, personal loans, etc. Everything else we owe is dwarfed by what we owe on our homes.

So if you’re feeling stressed, you’re not alone. Not by a long shot. There’s no way to dive deep into every aspect of home buying and refinancing in one guide. So these are the highlights that can point you in the right direction for the best expert advice — and almost all of it is free. But before you can consult the experts, you need to know how to ask the right questions.

What to consider before you buy or refi

You should be taking a deep dive into your finances before you make any decision about financing a home. Here are some of the things you should ask yourself to help you prepare:

The income questions

The very first step isn’t looking for a home. It’s looking at your paycheck. You’ll need to pay for your new home with money you earn, so you need to start there. Ask yourself…

  • Do I have a steady source of income?
  • Have I been regularly employed for the last 2-3 years?
  • Is my current income reliable?

Otherwise, you’ll have trouble getting a mortgage — and even more trouble paying it.

The payment questions

It’s hard to even get a lender to give you a mortgage unless you have a good credit score. We’ll talk more about that in a moment, but for now, you need to ask yourself:

  • Do I have a good record of paying my bills?
  • Do I owe a lot on my credit cards?
  • Do I have a car loan or other big loans?

The savings questions

While you can buy a home without a down payment, that’s rare. You’ll likely owe many thousands right off the bat. Besides that, you need to pay the mortgage, so you need to make sure you can set aside that much aside each month. Last but certainly not least are the miscellaneous expenses and bills that come with home ownership. You need to add those up, from property taxes to insurance and more. Ask yourself…

  • Do I have money saved for a down payment?
  • Can I pay a mortgage every month?
  • Can I afford the maintenance and other house-related bills?

Debt-to-income ratio

Whether you’re buying for the first time or refinancing, one number is important: it’s called debt-to-income ratio, or DTI for short. It’s the fancy way of saying, “We’re going to divide all your monthly debt payments by your gross monthly income.”

Why is DTI so important? Because lenders know it’s a reliable formula for figuring out if you’re going to make your monthly mortgage payments on time — or slip into foreclosure, which no one wants. If you divide what you owe by what you earn, you can give it a percentage.

The highest you want this number to be is 43 percent. That’s because it’s the highest number you can have and still get a qualified mortgage from most lenders. DTI as just one of the many complex numbers you’ll need to master before buying a home for the best deal possible.

Why buy or refi at all?

Some people believe, “Maybe it would just be easier to keep renting” and “Maybe it would just be easier to keep paying the mortgage I have.” Buying a home and refinancing one can certainly be daunting. But done right, both decisions will be among the best financial moves you’ll ever make. And you don’t have to go it alone. Here are tips from some experts.

Shop around

Whether you’re buying your first home or refinancing your existing home, every expert will tell you the same thing: Shop till you drop. There are so many lenders with so many different loan programs. As Wells Fargo consultant Barnaby Robles urges you: “Explore your options. Restrictions that one lender may have, other lenders may not have. The only way to find out is to shop around.” Sure, this will take some time, but remember, it’s the biggest purchase of your life.

When is the best time to buy or refi?

One of the most common questions housing experts hear is, “Is now the right time to buy my home or refinance it?” That’s actually a complicated question. It’s really not about timing, it’s about your preparation. As Realtor Bill Gassett explains, “A significant pitfall for buyers is the fact it is very easy to lose out on a home they absolutely love. Besides getting the most they can for their home, sellers are looking for financially sound buyers who have a solid down payment and a trustworthy pre-approval letter from a reputable lender.”

Basically, trying to time the housing market is like trying to time the stock market. It’s risky. Instead, worry first about your paperwork. As Bill Gassett says, you want to save enough for a down payment and meet with a lender before you go house-hunting. That way, you’ll get a pre-approval letter. What’s that? It’s a document that shows sellers you’re serious, because you already did the legwork and got a lender to say you’re a good risk.

What credit score do I need to buy a home?

People need to work on their finances ahead of buying a home, but especially their credit score. Here’s what Maria Gaitan, Consolidated Credit’s housing counselor director, has to say about that: “To get approved for a traditional mortgage, you generally need a FICO credit score of 720 and above to qualify for a good interest rate. However, as a first-time homebuyer you can find financing options that allow you to qualify, even if you have a score in the 620 to 670 range.”

When to talk to a counselor

If you’re overwhelmed, you might want to start by talking to a housing counselor. You want that to be a HUD-certified counselor, like the ones at Consolidated Credit. They’ll present you with all the options, and that includes refinancing.

“An experienced housing counselor can help a potential buyer to determine if they are mortgage-ready — and what type of loan (and amount) they may be able to qualify for,” says Barry Rothman, a Consolidated Credit certified housing counselor.

Refinancing the right way

Refinancing means you get a new home loan to replace your existing one. Why do that? Because you can profit from the exchange. If you can refinance into a loan that has a lower interest rate than the one you currently have, you can save money on both your monthly payment and overall cost of the loan.

Finding a lower interest rate

Obviously, refinancing only works when you can find a lower-interest mortgage than the one you have right now. Those rates are at historic lows right now, but there are other factors to consider. For one thing, you need to qualify for a new mortgage just like you did for your first, so everything we discussed earlier about DTI still matters. And you want enough equity in your home so you can save even more.

Closing costs

Refinancing a home comes with some of the same costs as buying one. Most fees are rolled into the new loan, so they’re sort of hidden. But they’re there. Other fees must be paid before you close on your new mortgage, like an appraisal. Either way, you’re paying thousands of dollars. It’s hard to say exactly how much, since circumstances vary not just by the cost of your home but where you live. The financial website Bankrate estimated in San Francisco County, a $200,000 refi will cost nearly $5,000 in fees.

When does it make sense to refi?

You need to look at several key factors to decide if you can refinance your home. Those include the value of your property, the loan amount, whether you want a 30-year or 15-year loan, what your credit score is, and even where you live. Thankfully, you don’t need to do this all yourself. There are many online calculators that will add it up for you. Try your bank or credit union for starters.

What to do with your savings

If the numbers work out and a refi is in your favor, the next question is: What will you do with all the money you save? While you might be tempted to spend it, you can save even more. How? By paying off your credit card balances. You could save an extra dollar for every $5 you saved on the refi. Here’s how.

Did you know more than half of all credit card holders carry a balance each month? And did you know that credit card interest rates are hovering around 20 percent? That means many people are paying $1 in interest for every $5 they charge. But they don’t have the money to pay off that stubborn debt. After you refinance, you can get rid of credit card debt and pocket even more savings. That can go into an emergency fund, college fund, car fund, vacation fund or anything else. As long as it’s going into your pocket and not your credit card company’s pocket, that’s good!

How to save for a new home or refi

Saving doesn’t sound like something that’s particularly complicated, does it? But there are ways to do it faster and easier.

Budgeting tech

Sure, you can create a household budget with pen to paper, but there are online programs that will do the mundane work for you. Online budgeting tools are safe and easy. Most are free, too.

One of the most popular programs is called Mint, although many banks and credit unions offer similar programs on their websites for their customers. Basically, you just type in your income and expenses, and these programs do the math for you.

Direct deposit

One you create a budget to save for a new home or a refi, you can start socking away cash. Here’s an easy way to do it: If your employer pays you via direct deposit – and 82 percent of Americans get paid that way – you can ask your company to split your direct deposit. Most employers will let you send some money to one bank account, and some money to another – at no charge to you.

So you can shunt some of your paycheck directly into a separate savings account. You won’t even miss the money, because you’ll never see it in your checking account. This works especially well when you get a raise. Just send the extra cash directly to your savings account.

Thank you!

The Weather and Your Wallet

Don’t let natural disasters destroy your life or your finances

In this free webinar, you’ll learn how to:

• Prepare for any natural disaster without breaking the bank
• Take advantage of technology to give you piece of mind
• Get free help recovering from a natural disaster

The Weather and Your Wallet

Don’t let natural disasters destroy your life or finances.

COVID-19 has been the biggest natural disaster in a century, but this paper will discuss the natural disasters that come like clockwork every year. We’re not trying to depress you, but actually raise your spirits. Preparing for natural disasters isn’t hard, and it’s not expensive, either. Once you do it, you have peace of mind. When you have a disaster plan, you worry less and enjoy life a little more – even now, during a pandemic.

2020 natural disasters

Of course, natural disasters aren’t polite. They don’t stand in line and wait their turn. COVID-19 won’t deter wildfires, hurricanes, tornados, earthquakes or floods this year. And if 2021 is anything like 2020, most of the country is in the path of something bad. No matter what the year, no part of the United States is immune from natural disasters. Wherever you are right now, you’re vulnerable to a natural disaster.

According to the federal government, there were 22 “major weather disasters” last year, up from 14 in 2019. They killed 262 people, compared with 44 people the year before. The total cost of those disasters was $322 billion. You might think with that much money on the line, Americans would be on top of their disaster planning. Think again.

Disaster planning

When was the last time 70 percent of people in this country agreed on anything? Well, in a July 2020 Allstate survey, they agreed that they worry about natural disasters. Yet three-quarters of them aren’t doing anything about it. We have enough to worry about these days, so here’s how to ease our fear of natural disasters. How can you do that? By taking just a little time and even less money to prepare in advance.

Plan now

Let’s start by learning about disaster preparation that costs nothing. There are three key things you can do right now: gather all your key documents, organize everything you’ll need to get compensated for any destruction, and design evacuation routes and when you’ll use them. Let’s take a quick look at each.

Documentation

First, gather up all the paperwork you’ll need in case the worst happens. Most importantly, that means insurance policies. Check your policies to make sure you’re properly covered. If not, time to talk to your insurance agent. If so, write down the name, address and claims-reporting telephone number of your insurance company – and remember, this might be different from your agent’s contact information. Also take pictures of everything of value in your house. That’s much easier these days with cameras in almost everyone’s phones. Don’t forget to shoot not only that nice couch but also all your jewelry and other collectibles. If you have documents attesting to their value, gather those, too.

Organization

Having excellent documentation won’t matter if you don’t have it safely in one place. And it needs to be portable, too. If you need to evacuate, you want to grab everything you’ll need and not worry you’ve left something behind. That’s why the worst time to gather up your documentation is right before you need to leave. While some people buy a portable and waterproof metal lockbox for hundreds of dollars, just as many people keep these documents safely stored in cheap Tupperware. Do whatever works for you, as long as it’s protected and at your fingertips.

Evacuation

When people hear the word “evacuation” they think it means, “Get out now!” They don’t often consider, “Where am I going?” An evacuation plan actually answers two questions. First, what’s the safest and quickest route away from the danger? Second, where is the safest and cheapest place to land? That could be the home of a friend or relative, or a government or private shelter. But you want to figure that out now. Otherwise, you’ll get the first part right and get out of danger. But you won’t have a destination to wait out the worst of it.

Disaster tech

Technology doesn’t just make it easier to order stuff online and make our TV sets bigger and brighter. Technology has made it safer to survive natural disasters. And it’s not expensive, either. For instance, you can buy a thermal emergency blanket for around $15. A good solar charger for your smartphone is around $20. Same for a personal water filter. Best of all, these items last a long time, so you don’t have to buy them again. Even the emergency food, while not exactly gourmet, is relatively cheap and lasts for up to a decade.

Disaster prep

Each kind of natural disaster requires different supplies, although some are universal. Here’s the problem: Most disaster supplies are purchased at exactly the wrong time. During hurricane season, for example, most bottled water is sold 48 hours before the storm is scheduled to hit – leading not only to shortages but also price gouging. Shopping for disaster supplies is just like shopping for holiday gifts. It’s best to do it off-season. You’ll save more. Look for deals year-round, not just on the eve of, say, tornado season. Shop for blizzard supplies in the summer. Shop for hurricane supplies in the winter.

Disaster advice

There’s no shortage of excellent advice on exactly what to do to prep for each kind of disaster – from the best masks for a wildfire to how much bottled water you’ll need after a hurricane. If you don’t know where to go first, start with us. We’ve compiled a simple booklet on natural disasters that isn’t the end of the information you’ll need, but it’s a really good beginning.

Hurricanes

Let’s focus on one key fact about each kind of natural disaster that often gets overlooked. For instance, even if you’ve gone through a hurricane before, and even if you prepared for it very well, you might now know this: Flooding kills more people and costs more in property damage than the high winds do. It’s the “storm surge” from the ocean that’s more deadly than the gale-force winds.

Wildfires

In some ways, calling wildfires a “natural disaster” isn’t accurate, since almost all of them are caused by human beings either acting clumsily or maliciously. Thus, more wildfires start in areas where camping is allowed than in remote wilderness areas. Check to see where camping is allowed near you.

Tornadoes

Although tornado season is traditionally March through May in the south, they peak in the summer up north. And they can happen in any state in the country. Only Alaska is spared, although it last had one documented in 2005. So, unless you live in Alaska, don’t ever say it can’t happen here.

Earthquakes

Earthquakes are the most common natural occurrence on this list, except no one feels most of them. Of the half a million that happen each year, human beings feel only 100,000 of them – and only 100 cause any damage to property or claim lives. But earthquakes are among the most damaging natural disasters. In this country, they cause more than $4 billion a year, according to FEMA.

Flooding

Flooding is the one natural disaster that follows other natural disasters. As previously mentioned, hurricanes can cause flooding, but so can tornadoes and earthquakes. So-called “no-name storms” cause flooding, too. Did you know 90 percent of all U.S. natural disasters declared by the President involve some sort of flooding? It’s also the one natural disaster that can happen anywhere – even Alaska.

Disaster recovery

No matter what natural disaster hits you, the recovery process is almost always the same. First, don’t venture outside until you get the all-clear from officials. Second, assess your family’s needs and any property damage. Third, use your disaster supplies for eating, drinking, cleaning, and washing. That’s all basic stuff, but what about financially recovering from a natural disaster?

If you suffer any damage from a natural disaster, and you and your family are safe, the next step is to ensure your finances are safe. Remember when we mentioned putting all your valuable documents in one safe place? Well, now it’s time to consult them. Break out those insurance policies. Call the agents representing you right away. Don’t expect them to get right back to you, since they’re surely slammed with other claims. But the sooner you call, the sooner you’ll hear. Also contact your lenders and ask for grace periods and extensions. That’s everything from your mortgage to your credit cards. If your home is damaged and you can’t stay there, don’t forget to tell your utility companies. They can suspend your service and save you some money.

You’re not alone.

After a natural disaster, you might feel like your world has been turned upside down, and you’re all alone. You might not have cellphone service, only heightening your sense of loneliness. But the fact is, you’re not alone. You have help available to you, and much of it is free. Some of it actually gives you money.

Finding financial aid

Once you can get back online, your first step is to visit consumerfinance.gov/recover. That website offers step-by-step instructions for recovering from every kind of natural disaster. If you’re in a presidentially-declared disaster area, go to disasterassistance.gov to learn how to claim some aid. Go to the homepage of your state’s website to see if you qualify for state aid, even if you’re not in an official disaster area. You can also call the Red Cross at 800-RED-CROSS to see about financial aid, shelter, free meals, free clothing, and even some personal hygiene supplies.

Call a credit counselor

One service Consolidated Credit has long provided is free priority counseling for those affected by natural disasters. For nearly three decades, we’ve offered a free debt analysis from a certified credit counselor. After a natural disaster, we’ve offered even more help.

Here’s who not to call. After a natural disaster, scammers descend upon the area. Some are shady contractors who offer to fix up your property for cheap – but only if you pay in cash, up front, and right away. Never pay up front. Pay as the work gets done. Always get estimates from more than one contractor, and make sure they’re licensed and bonded. You might also get phone calls from official-sounding people demanding you give them your Social Security number and other personal details. Ask for their number so you can call them back, and if they’re reluctant, hang up. In fact, if you’re not sure what to do, the best advice is to do nothing. Like we just said, there’s plenty of free help out there, so you don’t need to fall for any scams to get the assistance you need.

Thank You!

Natural disasters are only fun in the movies. In real life, they’re scary and costly. But with a little planning and just a little money, you can weather the storm. This paper was just an overview, just a starting point. But as you can see, it’s not as daunting as you might think.

Code Red Rx

How to recover from a financial panic attack – and how to avoid the next one

In this free webinar, you’ll learn:

• How poor financial health can make you physically sicker
• How to stay CALM (and what that stands for)
• Proven tactics to shed credit card and student loan debt

Code Red Rx:

How to recover from a financial panic attack – and how to avoid the next one

In many ways, a financial illness is easier to solve than a physical illness. Do you sometimes feel like you’re suffering a financial heart attack? If so, you’re sadly in good company. Turns out 3 in 4 Americans feel like that, according to a CNBC report from February 2021. They rank “financial stress” as the worst kind they face – even more than stress at work or in their own families.

This paper covers simple, proven ways to restore your financial health – no matter how long you’ve been living with your painful financial condition.

1 Financial Stress

If you’re wondering why this paper is called Code Red Rx, it’s not a gimmick – and it’s not melodramatic. Study after study has shown that financial problems cause physical problems. And Consolidated Credit’s certified counselors have repeatedly seen and heard these same reports over the past couple of decades.

The life insurance company John Hancock has a profitable reason to know exactly what kills its customers, so it researches the causes. When the company asked if financial stress affected physical health, the answer came back like as a resounding yes: “It lowers our immune function and ability to fight illness, which can make us less effective at home and work.”

Taking care of your financial health is an important part of taking care of your physical health.

1.1 Debt Stories

Consolidated Credit hears from real people who are suffering from financial stress. It has a huge impact on their lives, and even their physical wellbeing. Here are a few of their stories; maybe they sound like yours.

1.1.1 Maria

There was Maria, who had nearly $8,000 in credit card bills and a credit score in the 400s – she couldn’t even move into a new apartment because her score was so low. She had maxed out her credit cards and was paying a whopping 29.99 percent in interest charges. Like many people, Maria said, “I was embarrassed about my situation and felt unsure where to begin.” But when she finally dug herself out of debt, she told us she’d never felt happier.

1.1.2 Sonya

Then there was Sonya, who ran up $3,000 on a department store credit card at 18 years old. She told us, “I was scared. I hated answering my phone at home because I knew it would be someone asking, ‘When can you send that payment?’ I remember having my hands against the wall, I didn’t know what to do. I was desperate.” When she finally paid off that debt and the other debt she had racked up, she told us, “I felt like someone had taken the shackles off my feet.”

1.1.3 Paula

Finally, Paula, who’s a mental health counselor who ran up big bills caring for her ailing father. When he recovered, her finances didn’t – and then she became sick from the financial stress. She told us: “As a mental health counselor I know what it looks like when people suffer emotionally. And when I became consumed with debt, I was there. I was stressed all the time.”

If you want to know more about these women’s struggles – and how they eventually conquered their debts – you can read all about them on the Consolidated website under Debt Stories.

1.2 Financial Crisis

Maybe you’re thinking, “Thank God I’m not suffering from a financial crisis! This doesn’t apply to me!” If so, know this: Many money woes are caused by small spending problems that just don’t seem like a big deal. Then catastrophe strikes. There are five major ones, and they cause your little money problems to blow up into big ones: accident, divorce, illness, layoff, and natural disaster.

So even if you think your finances are healthy, the real question is: Have you built up your money immunity? During the government shutdown of 2018, one of the big storylines was just how many federal workers didn’t have enough money in the bank to miss even one or two paychecks without having to take out a loan to cover their bills.

2 The Impact of COVID-19

Maybe you’re thinking, “This doesn’t apply to me, I’m not suffering from a financial crisis, and I weathered the COVID-19 shutdown.” In that case, Consolidated Credit is thankful you weren’t affected. But our own polling shows more than half the nation was – and COVID-19 isn’t the only threat out there. Your finances are vulnerable to the Big 5 Catastrophes.

Most Americans make ends meet every month, but there’s little margin for error. One serious car accident that keeps you from going to work, a bitter divorce that splits your income while paying attorneys, a chronic illness that costs money to treat and affects your income, or a natural disaster that requires replacing so much of your belongings – all of these can wipe you out. And of course, layoffs were a huge problem during the shutdown, as were furloughs and pay cuts.

So even if you think your finances are healthy, the real question is: Have you built up your money immunity?

3 Emergency Fund

Four in 10 Americans don’t have enough money saved to cover an emergency costing $1,000, according to a depressing Bankrate report January 2020. That makes it hard to stay financially healthy, because just like flu season, money problems are sure to come your way eventually, affecting you or your family.

3.1 Preventative Medicine

This leads us preventative medicine. How can you bolster your money immune system? Well, an emergency fund is the easiest way, but it can be a bitter pill to swallow. Why? Because you need to contribute to it in small ways all the time. When you’re facing debt stress, it’s because you don’t have enough money to go around. So how are you supposed to save? Well, the best place to start is with your pocket change. Seriously, set aside small amounts all the time. Have one less coffee from the drive-through of your favorite coffee shop. Brown-bag it one more day a week.

Once you get into a rhythm of small contributions, you can start building up your emergency fund to cover 3 to 6 months of living expenses. That’s the gold standard of emergency funds. How do you do that? Well, the best way is automatically. For instance, if your employer pays you via direct deposit – like 82 percent of Americans get paid – then you can ask your company to split your direct deposit. That’s right, most employers will let you send some money to one bank account, and some money to another. So you can shunt some of your paycheck directly into a separate emergency savings account. You won’t even miss the money, because you’ll never see in your primary account. This works especially well when you get a raise. Just send the extra cash directly to your emergency fund until you build it up to cover 3 to 6 months of expenses!

3.2 Time for a checkup!

What if you’re feeling a pain in your head or chest from all the debt you’re carrying? Then you need more than preventative medicine. You need a thorough checkup. But be calm. Literally, be CALM. CALM stands for create a plan, automate bill payment, lower spending, and make progress.

3.2.1 Create a Plan

No one likes to hear the words, “make a budget.” But it’s so easy to do it these days. If you don’t relish the idea of putting pen to paper, there are scads of online programs that will do the mundane work for you. Online budgeting tools are safe and they’re easy. You simply type in the amounts you spend in different categories, and these powerful tools do the math for you. They also let you see how much you can save per year by shaving off just a few dollars per week. For instance, if you type in the cost of one less work lunch per week that you buy, you can see how much that will save you per year.

3.2.2 Automate Bill Payment

Here again, embracing technology can help you save more in less time than ever. This technology was mentioned earlier when going over an emergency savings account. But instead of just automating your savings, you can automate your payments. Almost every bank and credit card – and even many municipal utilities – offer automatic bill pay. You set the day when you want a bill to be paid, and that amount is automatically deducted from your bank account right then, and not a day sooner. What’s the advantage, besides the worry of paying bills? You’ll never pay a late fee again.

3.2.3 Lower Spending

Of course, a danger of automatic bill pay is that if you blow your budget on some debit card purchases you’ve forgotten, you might not notice how low your bank balance is getting. That’s why it’s so important to cut your spending.

Sure, you can go on a crash diet and shed a lot of pounds. But that’s also called a yo-yo diet, because you just can’t maintain that forever. Same thing happens with money. If you cut spending so drastically that you suffer through the day, eventually you’ll crack and go on a spending binge.

Instead, just like dieting, make lifestyle changes. Do you clip coupons? Do you search out BOGO deals? Have you looked at all the subscription services you’ve signed up for to make sure you really use them? There’s no shortage of ways to save, and they’re as easy to find as an Internet search.

3.2.4 Make Progress

If you take this advice, you won’t notice a big change right away. Again, this is like dieting and eating right. You don’t wake up a day later weighing less and feeling better. It takes time, and the progress is gradual. But one day, you suddenly notice things: “Hey, my body is lighter and my wallet is heavier!” So the last part of CALM is maybe the most important. Be patient and you’ll see progress.

4 Why Budgeting is so Important

Now, another component that you should keep in mind, which is just as important as having a savings cushion, is the plan of how you are going to get there. Planning your budget should be top of mind. Before you can be save, you need to get your financial house in order and that is why you need is a budget.

It only takes four simple steps.

You also need to make money, not just save it. A budget needs money coming in before it can track money going out. So add up all your income – which is more than just your paycheck. It includes money from any part-time or freelance work, child support you receive, rent you charge, and Social Security and other income from benefits. Once you add all that up, you have your net income.

Even more than hidden income, many people suffer from hidden expenses. To keep track, think of your expenses in three buckets:

Fixed expenses are those you can’t easily change. If you pay rent or a mortgage, those amounts are the very definition of “fixed.” But so are car payments and insurance.

Flexible expenses are those you need but can do something about. So for instance, you need to go grocery shopping, but you can look for BOGOs, clip coupons, and use strategies for getting more food for less money. Same thing with gasoline for your car and your utility bills.

Discretionary expenses are those you can live without if you really had to, like a movie matinee, a nice dinner out, or that fancy hair salon you like.

The total of these categories is your net expenses.

If you have $2,000 a month in expenses and $2,500 a month in income, then you’re “in the black” by $500. If those numbers are reversed, then you “in the red” by $500.

If your income is greater than your expenses, congratulations! You now have the pleasant task of deciding how to best use your savings. But if your expenses outstrip your income, time to set some priorities.

You need to decide what steps you can take to either reduce your monthly expenses or increase your monthly income – or both, if you can.

5 How to Manage Your Budget

Before getting into the nitty gritty of saving secrets, here’s how you’ll track your progress. You just learned how to start your budget, now here’s how to maintain it. It may help to keep a spending diary for a month or two. This means saving your receipts and writing down the items and amounts for everything you spend.

If that sounds like a chore, there are free, secure online tools to help you monitor your spending. One of the most popular is called Mint, but there are many others, sometimes offered through your bank. Check them out.

5.1.1 What is “saving,” anyway?

Sure, you could stuff some cash under your mattress every so often. But that’s not the smartest saving tactic. First you need to be clear about what you want to save for, like buying a house, sending your children to college or just simply going on a vacation. Then, you should establish savings goals with a plan on to hit those goals.

5.1.2 Examples of Saving Goals

Your goals can be serious and major – like saving three months of living expenses for an emergency fund. Anyone who’s followed the recent government shutdown knows how stressful life can be if you miss just a couple of paychecks. So that emergency fund isn’t just a financial goal – it’s also a mental health goal.

But some goals are actually fun. Saving for a vacation can make saving easier because you can think ahead to sun-kissed beaches or powdery ski slopes. And while saving for a down payment on a new home seems daunting, it can be exciting to take those first steps to such a life-changing event.

5.1.3 How to be SMART about Saving

So how do you set your savings goals without consulting an encyclopedia? Just remember the acronym SMART. Here’s what it stands for…

Specific

Measurable

Achievable

Realistic

Timely

Specific is the easiest to do. Think of it like this: Instead of saying, “I want to lose weight,” you’d say, “I want to walk 10,000 steps during breaks at work and after dinner at night.” That specific goal is easier to meet than a vague one.

Measurable means setting targets you can easily track. So take a look back at the goal of losing weight. If you promise to walk 10,000 steps a day, there are apps on your phone that can easily measure that. There are now apps that can help you manage the money coming in and what you are spending on. You’d know every day if you’re living up to your own promises.

Achievable means figuring out how to get where you want to go. You need to develop the attitudes, abilities, skills, and financial capacity to reach them. For example, even a modest goal isn’t achievable if you set too tight a deadline. Losing 20 pounds in a year is achievable – but in one week, it’s dangerous. You can also say, I will stop buying fancy coffee and a pastry every morning in my way to work and save about $7 a day which amounts to over $1,800 at the end of the year.

Realistic means not setting impossibly high goals. If you tell yourself, “I plan to eat only salads every day for a year and never even look at a dessert,” then that’s a specific and measurable goal – but it’s also never going to happen. Using the example of buying your morning coffee, you shouldn’t cut out coffee entirely, just the expensive one in the morning. You can have the coffee at work and then make it a special treat in the weekend… you’ll be saving a lot.

To be realistic, a goal must represent an objective toward which you are both willing and able to work.

Timely means setting a deadline that’s as soon as you can comfortably hit it. Too many goals come with the vague deadline of “soon.” Even a big New Year’s resolution that takes the entire year isn’t as good as smaller goals each month.

5.1.4 How to Save on a Tight Budget

The next time you’re tempted to buy something, ask yourself…

Do I really need this item?

And before you say YES, answer these follow-up questions:

Is this item worth all the time I spent making the money to pay for it? Can I use my money in a better way right now? And of course, the hardest question of all: Do I really need this or do I just want it?

While waiting for sales and using coupons are effective and time-honored techniques, those savings don’t matter if you actually didn’t need the item.

6 8 More Ways to Save Money

Of course, there are more than eight ways to save money. But these eight are the least time-consuming and the easiest to stick with. They work because the small savings add up over time. That’s more lucrative than trying to save big every so often. It’s kind of like dieting: You want to make small lifestyle changes instead of enduring crash diets. Here are your financial lifestyle changes:

6.1.1 Treat yourself, then save yourself.

It’s called “nonessential indulgence-matching.” But that’s a mouthful. It just means every time you treat yourself, you treat your savings account, too. For example, if you splurge on a gourmet coffee during a lunch break, you put the same amount of money into your savings account. Sound weird? Think of it this way: If you can’t afford to save the matching amount, you can’t afford that treat, either.

6.1.2 Think about hours, not dollars.

Time really is money. Calculate a purchase by the hours you worked to get it, instead of the money it cost you. Just divide the price tag by your hourly wage. If it’s a $50 pair of shoes and you make $10 an hour, ask yourself: Were those shoes really worth five long hours at work?

6.1.3 Sleep on it.

Time is money even when you’re not doing anything. It’s called the 24-hour rule. It’s the antidote to impulse buying, and it’s so easy. When you find that non-essential must-have, wait until the next day before buying it. This works especially well online, because shopping websites specialize in luring you into immediate decisions that can cost you.

6.1.4 Don’t think about it.

Hands down, the best way to save is without even worrying about it. That means setting up automatic savings. Most employers will let you deduct a certain amount from your paycheck and transfer it into a retirement or a savings account. Best of all, it costs you nothing in either money or time. You never even notice the money is gone. This is a great way to “spend” any raises you get. Ask your HR representative for more details about setting this up.

6.1.5 Go low-tech

Earlier, high-tech online budgeting tools like Mint were mentioned. But some people do better going old-school. They budget with cash and envelopes. It’s simple: Label an envelope with each monthly expense, and put cold, hard cash into each envelope. Draw from the envelope when you pay those expenses – and once the money is gone, hey, it’s gone. That’s one dramatic way to curb your impulse shopping.

6.1.6 Decide between paper or plastic

You’ve probably heard about credit cards that offer cash back and other rewards. It’s true, you can save big with these rewards. But you can also spend big. These cards compel you to overspend to chase those points, which means you run up balances that charge high interest. You might actually save more money cutting up the plastic and go all-cash. In fact, there’s solid research showing we spend less money when we have to part with paper than swipe plastic.

6.1.7 Be bad at math.

Sounds weird, right? You’re always encouraged to budget better. But you can actually save by being vague. Here’s how: Some financial institutions will round up your debit card purchases. For example, Bank of America will round up to the next dollar amount – and put the change into your savings account!

6.1.8 Loosen up

To bring this back to the beginning, save those pennies. Loose change adds up. Keep it in a jar or piggy bank, and you’ll be amazed by how much it adds up. Get started by checking your car and those seat cushions and kitchen junk drawers. You’ll be surprised how much money you have in the house – and you never knew it!

7 The Storm After the CALM – Coaching!

If you embrace CALM and started to act SMART, but still feel stressed out by your finances, there’s another C to consider. It’s called coaching. Once again, compare this to your health. If you eat right and exercise, you’ll probably be physically fit. But every so often, you’ll get sick, and sometimes, home remedies don’t work. You need to see a medical professional.

Well, sometimes your finances get sick, even when you do everything right. Sometimes, a small bad habit grows into a big money ailment. When that happens, you need to consult a financial expert.

Luckily, you can talk to a financial expert easier than you can consult a doctor. First, you don’t need an appointment. You can call a certified credit counselor at a nonprofit credit counseling agency at almost any time. Second, it’s free – no co-pay. You can receive a free debt analysis that will help you figure out how to get financially healthy.

7.1.1 Coaching Questions

Of course, just like doctors, some financial counselors are better than others. Experts say to look for these things: The agency should be around for many years – decades, hopefully. It should have certified counselors, which means they take a standardized test to ensure they know what they’re talking about – and they have to retake it every two years. They should have the highest rating for the Better Business Bureau. And finally, they should have many excellent reviews from reputable review websites.

Find experts who can help you get out of credit card debt.

Income Tax Advice from the Experts

There are legitimate – and easy – ways to spend less on your taxes

In this free webinar, you’ll learn:

• Why Americans get into so much trouble with the IRS
• How to get out of trouble – and stay out of trouble – with the IRS
• Where to find an accredited tax expert who can help you

Tax advice from the experts

How to worry less about your taxes

Tax season is upon us—which leaves thousands of Americans stressed and overwhelmed. That’s why Consolidated Credit is breaking down everything you need to know, starting with how the IRS works.

Understanding the IRS

The IRS isn’t staffed by heartless government employees. The IRS doesn’t get any joy from upsetting you. In fact, the IRS wants to help you. That may sound contradictory to everything you’ve ever heard, but the truth is, the IRS is just confusing, and that leads to misconceptions.

You’ve also probably heard of IRS forms with names like W2 and 1040. But do you know just how many forms the IRS has? There’s 800 of them. The IRS is one of the most complex government agencies, and it has one of its toughest jobs. Accurately collecting taxes from individuals and businesses isn’t easy. So when you deal with the IRS as just one person, it can be both depressing and daunting. But it doesn’t have to be.

The IRS loves all numbers. And it adores the letter W. But what’s it all mean? Once you know what the forms are for, you can get a better sense of how the entire income tax process works. It’s a lot less intimidating when you understand the reasons behind the numbers and letters.

W2

No one likes paperwork, but this is the best IRS form. Why? Because its sole purpose is to show you how much you earned in the previous calendar year. It also shows how much tax was withheld, which lowers your tax bill or nabs you a refund.

W4

What’s a W4? It’s the form you fill out so you can get a W2 the next year. Basically, a W4 is what you need when you start a full-time job. It lets your employer know how much you want withheld from your paycheck. You can also use it to adjust your withholdings throughout the year.

W9

A W9 is kind of the opposite of a W4. While a W4 is what you fill out for full-time work, a W9 is what you fill out for freelance assignments or a side gig. It tells the IRS how much you’re making as an independent contractor. If you make more than $600 a year from one employer, you need to fill out a W9. Less than that? You don’t need to declare that income at all. It’s too small an amount for the IRS to worry about.

1099

A 1099 is the form you get back from the employer who paid you as an independent contractor. It notes exactly how much you earned on that side gig. So when you file your taxes, you might be sending a W2 with your full-time income and a 1099 with your freelance income. Depending on your withholding, you might have to pay something. Or you might be getting a refund.

Withholding

Whenever you get paid, your employer removes—or withholds—a certain amount of money from your paycheck. This withholding covers some or all of your taxes. Why do that? Well, otherwise you’d owe thousands of dollars on April 15, and not many of us are organized enough to save those thousands all year long and pay them all at once. Therefore, the law says employers in every state must withhold money for federal income taxes. Some states and even cities also require tax withholding.

How withholding works

Here’s the tricky part of withholding: It’s not user-friendly. Sure, it uses simple numbers, from one through four. But it can get really confusing really fast when you try to figure out just what you should declare. Your income and some other factors might give you the opportunity to add additional allowances. You might want to consult a tax pro for this, because they can help you achieve the sweet spot: no refund, no tax bill.

Everyone loves getting tax refund checks, even though that’s not ideal. Steve Rhode, a longtime personal finance expert, laments that many Americans use tax refunds for what he calls “forced savings accounts.” In other words, since we have trouble saving money, we let the IRS do it for us. Problem is, the IRS doesn’t pay us interest. It keeps it. So all tax experts say the best thing to do is keep your refund small and then save your own money through the year, maybe earning a few bucks in interest in a savings account or even investing it in a retirement account where it can make real money. But why let the government hold onto your money for you? It doesn’t make dollars or sense.

Common mistakes

What happens when you can’t pay your taxes or you’ve already fallen behind? Even if you’re current on your taxes right now, it’s helpful to know this. That way, should you or anyone you know get in trouble with the IRS, you’ll realize there are legal ways out of that bind. In fact, here’s a news nugget that surprises most Americans: The IRS wants to help you get out of tax trouble. It’s true. The IRS doesn’t want you to stress out over your taxes. But here’s how Americans often mess that up.

Ignoring the IRS

You might think the major way to anger the IRS would be to not pay your taxes. Actually, that’s not the case. After all, the tax code is complicated, and the IRS knows that. They actually want to work with you to make sure everything is proper and legal. But if you ignore their letters, well, then they get upset. And no one likes being ignored.

Listen to Tom Vastardis, a CPA and tax preparer with three decades of experience. Tom says, “You should never ignore a letter from the IRS. An unopened IRS letter could eventually lead to bank account levies, garnishments on paychecks, loss of appeal rights in tax court, even a tax lien on property.” Always open those letters, and always read them carefully and follow the instructions. It will save you money and huge headaches later on.

Not all IRS letters are bad. In fact, the IRS will even send you a letter if you’re owed a refund, or if the IRS just needs more information about you. Of course, the scariest IRS letters are the ones that say you owe money. While you don’t want to ignore any IRS letter, these are the worst to ignore. As Tom Vastardis says, that can result in the IRS eventually seizing your assets. The sad part is that’s totally avoidable.

How to get out of trouble with the IRS

As Tom Vastardis says, the IRS isn’t trying to scare you or even intimidate you. They just want what they think they’re owed. If you get a letter saying you owe back taxes, Tom recommends, “After opening the letter, you should immediately call an accountant.” Why? Because this is one time that do-it-yourself doesn’t really work.

Respond right away

Regardless of whether you call an expert or go it on your own, the crucial first step is simply taking that first step. Jacob Dayan says, “The IRS will work with you, but not if you ignore them.” Dayan has been a tax attorney for more than a decade, and his firm has helped more than 60,000 clients. He says nothing is more costly than waiting to reply to an IRS letter that’s sent to you. If it’s a simple matter, you might want to handle it yourself. But Jacob agrees with Tom Vastardis and says for more complicated matters, you’ll actually save money hiring a professional.

Don’t be afraid of the IRS

The number-one reason people wait too long to reply to the IRS? They want to figure out all the angles first. But that’s impossible even for the pros. As Jacob Dayan says, the IRS is very secretive about its process. So, the real goal isn’t figuring out why the IRS does what it does. The goal is figuring out what you can do when they’re looking at you.

Understand tax debt

Whenever you owe the IRS, it’s because you have tax debt. You either paid too little or too late. Now the IRS wants you to settle up. First thing to know, though: The IRS can’t send you to jail. Debtor’s prisons haven’t existed in this country since the mid-1800s. As long as you’re not engaged in tax evasion, you’re OK. What’s tax evasion? It’s intentionally not paying or underpaying your taxes. That’s different than making a few honest mistakes or not having enough cash to immediately settle up.

That said, lots of bad things can happen if you don’t work with the IRS to pay back what you owe. The IRS starts a clock on your back taxes, and the longer it takes you to settle up, the more penalties you owe. If you refuse to work with the IRS, the IRS will work you over. The agency can garnish your wages and seize money from your bank account. That’s never pleasant.

Figuring out “compliance”

The IRS cares most about compliance. What’s that? It’s the fancy way of saying you’re talking to the IRS and working out a plan to pay everything off. Of course, the IRS doesn’t take your word for that, so it reviews your records. Basically, as Jacob Dayan says, “the IRS wants to be confident that you will not owe in the future before they agree to a resolution program.”

How long do you have to pay everything back?

This is really where it starts to get tricky. You usually have 72 months to straighten everything out. But the IRS isn’t the cold, heartless agency you’ve heard so much about. If you can prove financial hardship, the IRS will often cut you some slack in various ways. The problem is figuring out how to communicate all that to a large bureaucracy.

IRS terminology

When you owe back taxes, you also get hit with some complex terminology. Here are some definitions:

  • Currently Not Collectible (CNC) status: What you get if paying anything toward your tax debt would throw you into a financial crisis.
  • Streamlined installment agreement: Installment agreements that don’t require verification of your assets, expenses, debt or income.
  • Offer in Compromise (OIC): Where qualified people with tax debt negotiate a settled amount that’s less than what they owed to clear the debt.
  • Final Notice of Intent to Levy and Notice of Your Right to Hearing: The IRS may levy your bank account or garnish your wages if you don’t take action soon.

Why you need a tax pro

If you’re financially struggling, CNC status is what you want. But here’s the rub: The IRS just doesn’t tell you, “Hey, here’s something that could help you.” That’s why you need to work with a tax professional who knows all the ways the IRS will give you a break—legally. But there’s a difference between what’s legal and what’s widely known.

Avoiding tax scams

Another benefit to consulting a tax pro is avoiding tax scams. Sadly, there are bad people out there who look for people in tax problems and then try to rip them off. These poor folks don’t know that the IRS would never call your personal residence and threaten to send police to your home. These scammers are preying upon your fear so you give them money or information they can use. The truth is the IRS will send out several notices before anything negative happens.

How to find a reliable tax pro

The best tax pros have a few things in common: they’ve been doing this for years, they have great online reviews, and they’re highly rated by the Better Business Bureau. They’re also quite measured in their promises. As the FTC says, if someone is promising to solve your problems without even reviewing your information, watch out. Better yet, seek out an attorney who works at a firm specializing in tax relief.

Ethical tax pros won’t charge you their entire fee up front. Run from anyone who demands that. Also be leery of anyone who says you qualify for a program without diving into your details. That’s impossible. Also avoid any ads you see online or hear on the radio that purport to give you “secrets the IRS doesn’t want you to know.” If you’ve learned anything today, it’s that the IRS wants you to know everything. The agency might not explain it very well, but the IRS wants its money, and it won’t get that money if it keeps secrets.

Thank you!

That’s all for this paper. If you owe back taxes or fear you’re about to, all is not lost. In fact, you can get professional help and get your life back on track. The IRS might not be your best friend, but it’s not your worst enemy, either. You just need a knowing ally on your side. Speak to a certified credit counselor to see which option may be best for you. Contact us below if you have any questions.

Finding the Best Debt Solution

You have several powerful options

In this free webinar, you’ll learn:
• How a debt management program works, and why millions have done it
• Why debt settlement is both powerful and dangerous
• What bankruptcy really means, and why it’s so misunderstood

Finding the Best Debt Solution

You have several powerful options

There’s only one way to get into debt: You spent more than you could pay back. Now you’re paying interest and maybe even worse: steep penalties and painful fees. Luckily, there are several ways to get OUT of debt, and while each of them has its own pros and cons, there’s a good chance one is a perfect fit for you.

There are four proven ways to get out of debt safely and reliably. They are:

  • • Balance transfer cards
  • • Debt consolidation loans
  • • Debt management
  • • Debt settlement
  • • Bankruptcy

The first one is the hardest. Then there are the three easiest and most popular solutions. Why are they so popular? Because you have experts helping you, instead of going it alone.

Do it yourself (diy)

If you’re buried under heavy credit card balances that you can never seem to pay off, part of the problem is the steep interest rates most credit cards charge. The national average is almost 20 percent, which means for every $5 you pay to get rid of that big balance, a dollar is being siphoned off and going to your credit card issuer as their profit. That makes it tough to ever catch up. But what if you could get a credit card that would help you pay off your credit cards?

Balance transfer cards

These cards offer you a low interest rate, and in many cases, no interest rate at all. With one of these cards, more of your money goes to paying down your balances instead of lining the pockets of your credit card issuer. Sound too good to be true? They’re not, but there are some drawbacks you need to watch out for.

Specifically, there are three things to watch out for. First, most balance transfer cards charge a fee to move your balances from your other, higher-interest cards. This can total up to 5 percent of every dollar you transfer. While some charge less and a few don’t charge anything, you need to keep your eyes peeled for this annoying fee.

People often ask, “Why would any credit card company give me a card for no interest? Aren’t they giving up a lot of money?” The answer is yes, they ARE giving up a lot of money you’d otherwise pay them. But they’ll make a lot of that back. How? Well, all balance transfer cards have an expiration date, usually at the end of 18 months – but sometimes for only six months. If you use that time to pay off your balance, you come out way ahead.

Unfortunately, research has shown that most Americans who get a balance transfer card don’t pay off their entire balance. Guess what happens then? The interest rate jumps – sometimes to a higher rate than you had on your original cards! So, to really take advantage of balance transfer cards, you need to be disciplined and stick to a deadline.

Finally, balance transfer cards aren’t for everyone. Some folks can’t get them, because the credit card issuers won’t give them one. If your credit score is under 670, you’ll generally struggle to get approved. Why? Because you’ve already proven to be a credit risk, and even though credit card issuers want to make money off you, they also want to get paid. So if your credit score is suffering, this isn’t the option for you.

Debt consolidation loans

This is simply a personal loan you secure and then use to pay off all your credit card bills with steep interest rates. The concept is the same as a balance transfer card: You’re paying off the high interest rates with a lower one. In this case, you might be able to get a personal loan of between 36 and 60 months from your bank or credit union at 6 percent, then use the money to pay off your credit cards that are charging you 20 percent. Then you simply make one monthly payment on the personal loan. Usually, you get out of debt faster AND make a smaller monthly payment, which is the definition of a win-win.

If you get a debt consolidation loan, you’re looking at 3 to 5 years to pay it all off. In the meantime, you need to be careful not to run up more debt. That timeline is pretty close to a debt management program, which we’ll cover later, but in that case, you work with a credit counseling agency that can help keep you on the straight and narrow. With a debt consolidation loan, you’re on your own – if you can even get a loan. If you have too much debt, it’s a classic Catch-22. You need the loan to pay off debts, but you have so much debt, no bank or credit union will give you the loan.

Getting expert help

Not everyone renovates their own bathrooms or overhauls the transmission in their cars. Most of us rely on experts to help us do everything from our taxes to our oil changes. Well, it’s no different with debt.

Just like there are terrible CPAs and auto mechanics out there, so too are there terrible debt experts. Here’s what to look for: First, go to the website for the Better Business Bureau and search the name of the company. If it doesn’t have an A-plus rating, forget about it. Second, go to the agency’s “about” page and see how long it’s been around. The longer the better, because that means they know their stuff backward and forward. Third, check out review sites that have excellent customer reviews for the agency, like Trustpilot.com and ConsumerAffairs.com.

You should consider these options in this order: debt management, debt settlement, then bankruptcy.

Debt management programs

One of the most powerful debt-busting solutions is only available through a credit counseling agency like Consolidated Credit. It’s called a Debt Management Program (DMP). It might be able to cut your monthly payments by up to 30 or even 50 percent. A DMP also freezes late fees. Even better, you only make one payment a month for all the credit cards that are in the program. And unlike the other debt solutions we’ll talk about later, your credit score isn’t irreparably damaged. It might dip temporarily, but it actually improves over time. Unfortunately, credit card companies won’t let you sign up for a DMP yourself.

To qualify for a DMP, you have to work through a credit counseling agency, because the credit card companies trust those nonprofits to follow all the rules they establish. After all, the credit card companies are willing to forgo some of what you owe them to get back the rest. They don’t surrender profits that easily. Luckily, when you work with a reputable credit counseling agency, they take care of the paperwork for you.

DMPs aren’t for impatient people. It often takes years to graduate into financial freedom. One reason for the long timeline is that DMPs are supposed to be relatively painless. Imagine a crash diet compared to gradual lifestyle changes that help you lose weight. That’s how a DMP helps you shed debt. And your credit counselor is there for you the entire way. But if you’re looking for a quick fix, this isn’t it.

Debt settlement

Debt settlement seems like the best option of them all. In a nutshell, you negotiate with your creditors and pay them only a fraction of what you owe. Why would your creditors agree to this? Because they don’t want you going broke and paying nothing. The national average over the past few years is 48 percent – which means most folks in debt settlement don’t pay back 52 percent of their debts. Sounds like a great deal, right? Sadly, it’s not.

Debt settlement starts out with a free debt analysis to see if it’s the right solution for you. If it is, the debt settlement company will set up an escrow account for you. This is a secure account where your funds will be kept until your settlements are reached. That can take a while, and in the meantime, you’re making monthly contributions to the escrow account. The more creditors you have, the longer this process can take. And some creditors might outright refuse to settle. After all that, the debt settlement company will take its fee out of what you’ve paid into escrow.

Debt settlement also ruins your credit score. And why not? You’re telling your creditors you can’t pay them back what you owe. New lenders will be wary of giving you money, because they fear you’ll do the same thing to them. Now, if you’re buried in debt, this might seem like a small price to pay for getting rid of those steep balances. But that negative mark on your credit can stay there for seven years. That means if you want to buy a home or a car, you’ll pay a lot more in interest – if you can even get the loan at all.

The most dangerous part of debt settlement has nothing to do with actual debt settlement. It’s the scammers who try to steal your money. Some try to charge steep fees up front, which is actually illegal. By law, debt settlement companies can’t charge any fees until a settlement is successfully achieved. And those fees should be a small percentage of the original amount you owe. Whether you go for debt settlement or debt management, you’ll pay a fee to the folks who are handling the work for you, but it should be much, much less than what you’re saving. Unscrupulous debt settlement companies don’t care about that, though. Some will even take your money and then not actually help you settle your debts. You should seek out a reputable debt settlement firm using the same techniques we described earlier for credit counseling agencies.

Bankruptcy

Most people know bankruptcy is serious, but they don’t always know why. Bankruptcy can accomplish things no other debt solution can. Bankruptcy can help save your home from foreclosure and get you out of crushing credit card or medical debt. Because bankruptcy is a law, it has powerful advantages over debt settlement. For example, just filing for bankruptcy means you get an “automatic stay.” That prevents creditors from pursuing payment or taking any action against you until your bankruptcy is discharged or a repayment plan has been approved. Also, bankruptcy works for back taxes, something no other debt solution does. In a nutshell, bankruptcy is a debt solution where the power of the legal system is behind you.

Bankruptcy is even more complicated than debt settlement. You’ve probably heard of Chapter 7 and Chapter 13 bankruptcies, but do you know the difference? Chapter 7 is called “liquidation bankruptcy” because it involves selling your assets, although some are protected, like your home and car. Chapter 7 bankruptcy only takes 4-6 months. Chapter 13 is similar to a debt settlement program because it sets up a monthly plan to pay back a percentage of your debts. The biggest difference is that the terms of Chapter 13 bankruptcy are decided by the courts, not negotiated between you and your lender or creditor. Depending on this payment plan, it could take up to 5 years to complete the court-ordered repayment plan. This is commonly called “wage-earner bankruptcy,” and it can be a good option if your creditors don’t want to work with you on debt settlement.

Regardless of which option is best for you, you’re required to go through something called “pre-bankruptcy credit counseling.” It’s up to you to find an agency approved by the Department of Justice, and a typical session can take up to 90 minutes. Bottom line, it takes time and effort.

Just like debt settlement, there’s a black mark on your credit for years to come. For Chapter 7, that bankruptcy will stay on your credit report for a decade. For Chapter 13, it’s less – seven years. That’s because you’re actually paying back some of your debts. Still, that’s a long time to have a low credit score.

If you have student loans – and the national average is around $37,000 – you probably won’t be able to get rid of them in bankruptcy. Bankruptcy law puts the burden of proof on you. You must show that continuing to owe those loans “will impose an undue hardship on you and your dependents.” Proving that is tough. One study shows that only one-tenth of one percent of all bankruptcy filers have enough evidence to even try to meet this threshold – and only 40 percent of them succeed. The bottom line is, while you CAN get student loans discharged, you shouldn’t count on it.

What should you do?

There’s no downside to calling for a free debt analysis. There’s no obligation, and a certified credit counselor can walk you through all your options, which means you have more information to make your debt-busting decision. This webinar is just an overview, not a deep dive into your personal situation. But you can get that with one free phone to a nonprofit agency.

Thank you!

That’s all for this paper. Everyone’s financial situation is different, and your experience with debt settlement or DMPs may be very different from someone else you know who did the exact same thing. Speak to a certified credit counselor to see which option may be best for you. Contact us below if you have any questions.

Rebuilding Your Finances in 2021

How to have a new year with no debt

In this free webinar, you’ll learn how to:
• Get free expert help to overcome the debts you just racked up
• Save for the holidays all year long – and emerge debt-free!
• Create a painless, high-tech budget that will keep you out of debt forever
• Enjoy the rest of the year without a holiday debt hangover

Rebuilding your finances in 2021

How to have a new year with no debt

Most Americans are entering 2021 with debt. Even in the best of new years, more than half of us don’t pay off our holiday purchases when January’s credit card bills come due. We carry a balance. In fact, many Americans don’t pay off their holiday bills until the summertime. While we don’t have statistics yet for 2020, we do know the average American racked up $1,325 in holiday debt in 2019, according to Magnify Money. That means even before the pandemic, we overspent on gifts, travel, food, and drink.

Ever since the Great Recession, our holiday debt has been creeping up. Only five years ago, we were averaging $986 in holiday debt coming into the new year, according to Magnify Money. As that number grows, it becomes harder and harder to pay it all back.

Last year, according to CNBC, when 28 percent of Americans started their holiday shopping, they still hadn’t paid off their holiday debts from 2019! They had so much holiday debt, they couldn’t get rid of it before the next holiday season! During a pandemic, you can imagine how much more dangerous that would be. While we see light at the end of the tunnel, there’s no telling what will happen to our incomes between now and then. That could still mean furloughs, pay cuts, and layoffs.

How to set smart financial goals

Most Americans don’t get into holiday debt because they’re irresponsible or frivolous. It’s for a far simpler and easily fixable reason: They just didn’t make a plan. The truth is, most of us don’t want to overspend during the holidays. We feel peer pressure to do it. A poll by Lending Tree not only found that more than 6 in 10 Americans dread holiday spending, but almost the same amount report being “stressed about their holiday debt” after the fact. If that describes you, then you’re already motivated to spend less in 2021. You just need a plan.

Learn from the pandemic

While it’s still too early to know for sure, preliminary research shows we spent much less for the 2020 holidays than we did in 2019. Some of those savings are obvious. For instance, we all traveled less. But we also bought fewer, simpler, and cheaper gifts. Why? Because we weren’t gathered to open them, so we had to buy them online and ship them to loved ones. And guess what? The sky didn’t fall and disaster didn’t ensue.

Your first 2021 smart finance goal should be: Resist the peer pressure and buy reasonable gifts once again this year. If this pandemic taught us anything over the holidays, it’s that our relationships are priceless, not our gifts.

Buy sooner

Not only should we keep buying reasonable, personal gifts this year, we should do it even earlier than we just did. So many retailers pre-empted Black Friday by offering deals well before that unofficial holiday. Keep that going.

Everyone knows that the best time to score deals on holiday decorations is in January, when stores are selling off their leftover inventory for cheap. Every month is off-season for something, and that’s the time to snag a discount and hide it in a closet for Holiday Season 2020. You can easily scour the Internet to learn which months are historically buyers’ markets. Believe it or not, many of these individual deals will save you more money than buying those same items during the usual Black Friday sales.

How to pay off 2020 holiday debt

If you want a financially stronger 2021, the first thing you should focus on is getting rid of your holiday debt. Then, you can set yourself up for a debt-free holiday season at the end of this year. Your options include both do-it-yourself tactics and getting free expert advice. It really depends on your financial situation and your own personality.

Credit counseling

If you have steep and stubborn holiday bills, the first thing you need is a debt diagnosis. You don’t go to a doctor, though. Instead, you call a certified credit counselor. These experts work at nonprofit credit counseling agencies. While they’re on the phone with you, a counselor will give you a free debt analysis. They’ll review every dollar you spend and every dollar you earn. From there, they can give you a menu of debt-busting options.

Debt management program

One of the most powerful weapons in a credit counselor’s arsenal is called a Debt Management Program, or DMP for short. It might be able to cut your monthly payments by up to 30 or even 50 percent. How can it do that? Simple. Your credit counselor works directly with your credit card companies. A DMP has several wonderful advantages over trying to get out of debt yourself.

Not only do you save money on interest rates, a DMP also freezes late fees. Even better, you only make one payment a month for all the credit cards that are in the program. You make that payment directly to the credit counseling agency, who pays your creditors on time. No more forgetting to write that check for that one credit card, then getting hit with late fees.

Learn more about DMPs on your own time and at your own speed. Check out ConsolidatedCredit.org for the simplest plain-English explanation of the pros or cons. Or you can call a nonprofit credit counseling agency and not only receive that free debt analysis, but also ask any questions you have about DMPs or anything else financial.

How to budget in 2021

You might think budgets are boring. Who wants to waste time adding up your income and expenses and then figuring out how to best spend it every month? Where’s the fun in that? But budgeting in general has been proven to be the best way to save both money and stress, and an emergency budget is hands down the best way to avoid big problems when the unexpected happens.

Here’s the first rule of personal finance: You can’t save money unless you know how much you’re spending. If you’ve survived 2020 and want to thrive in 2021, you’ll create a monthly budget. And it’s not as difficult, or even as boring, as you think it is. Why? Because technology can do a lot of the work for you.

While you can certainly go old-school and create a budget by putting pen to paper, it’s so much easier if you use secure online tools that require just a few keystrokes. There are websites, apps, and programs that handle the drudgery of budgeting for you. Many are free, and the ones that charge are only a few bucks.

Budgeting tools

Here are the apps and websites we trust and recommend:

  • • Mint
  • • Tiller
  • • YNAB
  • • mvelopes

Mint is one of the most popular ones, although many banks and credit unions offer similar programs on their websites for their customers. Basically, you just type in your income and expenses, and these programs do the math for you. You can even project your savings if you eat one less takeout dinner, or if you refinance your mortgage. The software does the heavy lifting for you.

If that’s a little too techy for you, there’s a middle step. Websites like Tiller let you download customized spreadsheets that stay on your computer, and you easily personalize. Each program has its pros and cons, but they all work. It’s really up to what makes you feel the most comfortable.

Why emergency budgets are important

What’s an emergency budget? It’s a stripped-down monthly budget, cutting out every expense that isn’t needed for your basic survival. If this pandemic results in you getting laid off or losing your income for more than a little while, you need to know – in advance – how much it will cost you just to survive these difficult times. Without an emergency budget, you’re flying blind.

Survival expenses

In an emergency budget, you focus only on the expenses that matter most. First, there are your basic needs: food, water, and shelter. Second, there are bills you’ve just got to pay. Mortgage or rent, other loans, utilities, water.

Then there are support functions that you can’t live without. For example, if your car breaks down, you need to fix it – or you can’t get to work and make enough money to survive. Same thing for childcare.

Finally, there are medical expenses. This includes prescriptions and any medical care you’re under – because nothing else matters if you’re so sick you can’t work. Or enjoy your life.

Cut out all luxuries

Once you prioritize the three broad categories (basic needs, bills, and medical expenses), it’s time to cut back to the barest of bones. Since you’re keeping only the necessities, get rid of everything else. That includes pausing or even canceling monthly subscriptions like cable or satellite TV. That’s right – no Netflix. And you’ll scale back your phone plans to the cheapest level available. Ditto with your Wi-Fi. If you can get a cheaper rate for a slower connection, you’ll build that into your emergency budget. Every penny counts here.

While emergency budgets aren’t fun, they don’t have to be miserable, either. Just because you’ve cut out your costliest entertainment options doesn’t mean you can’t enjoy yourself. You and your family can enjoy board games and even go outside and hike, bike, or walk. Your local library has both online and socially distant in-person options to keep you both entertained and educated. Bottom line here: Helping your bottom line doesn’t mean living like a monk.

Defer your debts

During the worst of the pandemic, the federal government offered a slew of debt-delaying plans to ease the economic strain on us all. These included rent freezes and deferrals on paying taxes, student loans, and mortgages. Many private industries did the same, and while the federal CARES Act expired on New Year’s Eve, those private lenders are still offering some help.

If you need to commence your emergency budget, we have some weird advice for you: Don’t pay your debts. At least not before you ask permission to defer or reduce your payments. It sounds odd, but if you call your lenders, they might cut you some big breaks. Why? Because if you go bankrupt, they lose a profitable customer. So they’ll often work with you, temporarily cutting the amount of your payments, deferring them for a short time, or slicing off some of the interest you owe. But you won’t know for sure until you ask.

Emergency funds

During a normal economy, experts recommend you save 3-6 months of bills and other budgeted expenses. This allows you to weather a period of unemployment or cut hours at work without relying on credit cards.

Of course, a pandemic is exactly when you’d dip into an emergency fund. But what if you don’t have one? Well, now is the time to start. That’s right, during a pandemic might be the best time for you to start saving for the next emergency.

If you’re one of the fortunate Americans to not suffer a furlough, pay cut, or layoff, then you still have money coming in. And if you’re practicing safe health practices, you aren’t going out and about as much as you once did. With everyone else cutting back right now, this is the perfect time for you to start socking away a few bucks a week so you can build up an emergency fund.

One easy way to do that: If your employer pays you via direct deposit – and 82 percent of Americans get paid that way – then you can ask your company to split your direct deposit. That’s right, most employers will let you send some money to one bank account, and some money to another. So you can shunt some of your paycheck directly into a separate emergency savings account. You won’t even miss the money, because you’ll never see it in your primary account.

Thank you!

10 Smarter Ways to Save Without Breaking a Sweat

Saving money doesn’t have to be hard. In fact, it can be automatic.

In this free webinar, you’ll learn:
• How to save money without even knowing you’re saving money
• Which online tools can help you save money painlessly
• The latest high-tech ways to save for everything
• How to save without changing your current lifestyle

10 Smarter Ways to Save Without Breaking a Sweat

Saving money doesn’t have to be hard. In fact, it can be automatic.

Can you save money during a pandemic? Can you save money when you’re not sure if you’re going to be furloughed or even have a job? Can you save money during a recession? Not only is the answer “yes” to all these questions, but it’s actually more important to save money when times are bad. And interestingly enough, it doesn’t have to be a chore.

Before we start talking about saving, let’s talk first about overspending. The total amount of money every American owes for everything is 14.3 trillion dollars, from mortgages to credit cards to student loans to auto loans to personal loans and more. It’s a huge number, but interestingly, it’s actually been shrinking during the pandemic.

The total debt all of us owe fell by 34 billion dollars earlier this year. That sounds like a lot of money, but compared to 14.3 trillion, it represents only a drop of only .02 percent. Still, it was the largest decrease since early in 2013. What caused that drop? Experts say two things. First, we’re all nervous about the future right now, so we’ve reduced our frivolous spending just in the case the worst happens. Second, lenders are equally nervous, so they’ve tightened their standards. For example, it’s not as easy to get a new credit card these days.

Save money without even knowing you’re saving money!

We know how hard it is to save money even in the best of times. Saving now seems like it’ll be difficult. There are many techniques that require some sacrifice, but let’s start with some small ways that really add up – and they don’t hurt at all.

Automatically pay your bills

Let’s start with an easy one. Almost every bank and credit card – and even many municipal utilities – offer automatic bill pay. You set the day when you want a bill to be paid, and that amount is automatically deducted from your bank account right then, and not a day sooner. What’s the advantage, besides not worrying about paying bills? You’ll never pay a late fee again. That’s a big deal when you consider 1 in 4 Americans regularly owes late fees because they forget one of the many bills they’re juggling. That’s money they’re giving away instead of saving.

Direct – and indirect – deposit

You can also automate your savings just like you automate your bill-paying. More than 9 in 10 Americans are paid through direct deposit according to a 2019 survey from the American Payroll Association. Almost all of them have access to a neat feature: You can direct some of that money AWAY from your checking account. You can send it to a savings account you don’t normally see.

This works very well when you get a raise, because you can divert that extra money into a savings account, and you won’t be tempted to spend it because you constantly see it in your checking account. Of course, these days, more Americans are getting furloughed or laid off than getting raises, but this tactic still works, even if you set aside just a few dollars per paycheck. Soon you’ll have built up an emergency fund that will give you peace of mind as these uncertain times continue.

To set up multiple direct deposit streams, simply talk to your Human Resources or payroll department. They can walk you through this easy process.

Online tools can help you save money painlessly

During this pandemic, we’ve all spent way too much time staring at computer screens. But in this case, using a computer isn’t a waste of time but a great way to save. We’re going to start at the beginning with a topic no one enjoys talking about: budgeting.

How to budget without getting bored

You can’t really save money if you don’t know where it’s going. But let’s be brutally honest: budgeting isn’t fun. So how can you draw up a household budget and keep it without cramping your lifestyle?

While you can certainly go old-school and create a budget by putting pen to paper, it’s so much easier if you use secure online tools that require just a few keystrokes. There are websites, apps and programs that handle the drudgery of budgeting for you. Many are free, and the ones that charge are only a few bucks. Here’s how they work.

A cutting-edge way to cut expenses

One of the most popular is called Mint, although many banks and credit unions offer similar programs on their websites for their customers. Basically, you just type in your income and expenses, and these programs do the math for you. You can even project your savings if you eat one less takeout dinner, or if you refinance your mortgage. The software does the heavy lifting for you.

If that’s a little too techy for you, there’s a middle step. Websites like Tiller let you download customized spreadsheets that stay on your computer, and you easily personalize. Each program has its pros and cons, but they all work. It’s really up to what makes you feel the most comfortable.

High-tech ways to save for everything

Thankfully, computer technology can be used for more than just budgeting. You can save when you buy things. Before we share those tips, just a word of warning: Use these shopping tools to buy only what you need, not to splurge. It makes no sense saving a few bucks on every purchase just to turn around and buy something frivolous.

Don’t just shop online. Compare…

Everyone knows you can score great deals online rather than in the store. But not everyone knows about these comparison-shopping tech tools. These websites and apps – and many others just like them – let you make a list of your desired items, then tell you when the best deal is being offered. Most of them pegged to Amazon, but BayWatch monitors deals on eBay while The Mac Index does the same for the sale of Apple products.

You can find these price-monitoring programs everywhere, and you don’t need to be tech savvy to take advantage of them. Try one or more and see if you save big.

How to save without changing your current lifestyle

Now let’s talk about saving while changing the way you do things, not what you actually do. For us here at Consolidated Credit, that means credit cards. Why? Because according to CreditCards.com, more than 75 percent of all Americans adults own at least one credit card, and the average American owns three. So, if you can easily save on your credit cards, then you can make a real dent in your debt. And that means savings.

All told, those of us with credit cards are carrying balances of over one trillion dollars. And we’re paying for that privilege. While credit card interest rates fluctuate wildly depending on the card and your circumstances, right now it’s hovering around 20 percent. That means you pay $1 in interest for every $5 you charge. If you could cut or even eliminate those interest payments, you’d have a lot more money in your pocket, and you wouldn’t have to change a thing about how you live.

Balance transfer cards

Let’s start with one of the easy ways to do that. It’s a certain kind of credit card. It’s called a balance transfer card. These cards offer you a low interest rate, and in many cases, no interest rate at all. With one of these cards, more of your money goes to paying down your balances instead of lining the pockets of your credit card issuer. With credit card interest rates hovering around 20 percent right now, that’s big savings for doing nothing different during your day. Sound too good to be true? There are some drawbacks you need to watch out for.

Specifically, there are three things to watch out for. First, most balance transfer cards charge a fee to move your balances from your other, higher-interest cards. This can total up to 5 percent of every dollar you transfer. While some charge less and a few don’t charge anything, you need to keep your eyes peeled for this annoying fee.

Second, all balance transfer cards have an expiration date, usually at the end of 18 months but sometimes for only six months. If you use that time to pay off your balance, you come out way ahead. If you don’t, the interest rate jumps – sometimes to a higher rate than you had on your original cards!

Finally, if your credit score is under 670, you’ll generally struggle to get approved. That might be even more true these days as lenders tighten up.

Debt consolidation loan

Next up on the scale of difficulty is a debt consolidation loan. This is simply a personal loan you secure and then use to pay off all your credit card bills with steep interest rates. The concept is the same as a balance transfer card: You’re paying off the high interest rates with a lower one. In this case, you might be able to get a personal loan of between 36 and 60 months from your bank or credit union at 6 percent, then use the money to pay off your credit cards that are charging you 20 percent. Then you simply make one monthly payment on the personal loan. Usually, you get out of debt faster and make a smaller monthly payment, which is the definition of a win-win. You save money by literally doing nothing different, except who you write a smaller check to.

If you get a debt consolidation loan, you’re looking at 3 to 5 years to pay it all off. In the meantime, you need to be careful not to run up more debt. If you have too much debt, it’s a classic Catch 22. You need the loan to pay off debts, but you have so much debt, no bank or credit union will give you the loan.

Credit counseling

We will admit our bias here. Consolidated Credit is one of the nation’s largest and oldest credit counseling agencies, so we naturally think they’re awesome. The best of these nonprofit agencies will offer you a free debt analysis from a certified credit counselor. With one phone call, a counselor will review every dollar you spend and every dollar you earn. They’ll point you to plain-English educational resources that can help you save big bucks. Even better, they can give you a menu of debt-busting options.

But before we do that, let’s review the only drawback we know of for nonprofit credit counseling agencies. And that is this: Like everything in the world, from doctors to diners, there are good ones and not-so-good ones. How do you find the best? There are three easy ways to figure that out in just a few minutes of Internet searching.

Credit counseling: What to look for

First, go to the website for the Better Business Bureau and search the name of the credit counseling agency. If it doesn’t have an A-plus rating, forget about it. Second, read the agency’s “about” page and see how long it’s been around. The longer the better, because that means they know their stuff backward and forward. Third, check out review sites that have excellent customer reviews for the agency, like Trustpilot.com and ConsumerAffairs.com.

Debt Management Program (DMP)

One of the most powerful debt-busting solutions is only available through a credit counseling agency. It’s called a Debt Management Program, or a DMP for short. It might be able to cut your total payments by up to 30 or even 50 percent. A DMP also freezes late fees. Even better, you only make one payment a month for all the credit cards that are in the program. Unfortunately, credit card companies won’t let you sign up for a DMP yourself.

To qualify for a DMP, you have to work through a credit counseling agency, because the credit card companies trust those nonprofits to follow all the rules they establish. After all, the credit card companies are willing to forgo some of what you owe them to get back the rest. They don’t surrender profits that easily. Luckily, when you work with a reputable credit counseling agency, they take care of the paperwork for you. So, in a way, this con becomes a pro.

Two easy moves…

Let’s end with two niche tactics that require some of your time, but just once. First, did you know you can negotiate lower bills? It’s true. For example, if you’ve had a credit card for many years and you’ve been a good customer, you can often call the number on the back of the card and get some concessions just for asking. For example, you might be able to shave down your interest rate if you mention another card has offered you less. And you can also move your due date to correspond better with your paychecks, so you never get caught short and need to float that balance a little longer.

Same thing goes for your cable bill. You can often get extra premium channels if your provider is running a special you didn’t know about. You can even negotiate for a lower bill, often saving $5 or more per month. The same tactic works for those complex mobile phone contracts. These little savings really add up, especially when you don’t have to do anything.

Finally, let’s end with the last place you might look for easy savings: your work. Earlier, we mentioned direct deposit, but that’s simply diverting your own money to where you won’t easily see it. Now we’re talking about your workplace giving you valuable services that can save you big.

One of the most popular is a 401(k), which helps you save for retirement. What’s so special about a 401(k)? Many employers match a portion of your contribution to this retirement account. According to government research, the average is 4.3 percent. That means for every dollar you sock away for later, you get 43 cents. Doesn’t sound like much, but when you consider a savings account is paying less than 1 percent in interest, that’s suddenly a lot. Also, the IRS gives you some money, too, by not taxing what you contribute.

Another big workplace benefit is called a Health Savings Account, or HSA. It does the same thing by letting you set aside money for healthcare and having it be invisible to the IRS.

We could spend hours discussing these lucrative benefits, but we suggest you chat up you HR department. Believe it or not, they want you to take their money. Why? Because companies that offer these benefits know their employees will appreciate them. They’re more likely to stick around and work hard. Let your bosses help you save!

Thank You!

Making the Most of the Gig Economy

How to set up a second income stream without cramping your lifestyle.

In this free webinar, you’ll learn:
• The best way to discover what can make you the most money
• How to avoid the traps and scams of a second gig
• The best tips and tricks for balancing your budget and your life

Making the Most of the Gig Economy

How to set up a second income stream without cramping your lifestyle.

The Gig Economy>
Thank you for taking the time to attend our webinar! This guide covers key points from the webinar so you can put what you’ve learned to use. We hope this information helps you make the best financial choices for your situation.

What is the Gig Economy?

In layman’s terms, the Gig Economy refers to every job that isn’t full-time.
Part-Timers
Part-timers can work for as little as a handful of hours a week to 34 hours by law. Part-time workers work for one place on a regular schedule while receiving limited benefits.

Independent Contractors/Freelancers

“Independent contractor” and “freelancer” are terms often used interchangeably. But one major difference is that contractors have contracts. Regardless of whether it’s for a weeklong project or sporadic work over a year, contractors are guaranteed payment from a single employer.
Freelancers also work by project. However, the agreement is much less formal, and they can work for a multitude of clients at any given time.

Entrepreneurs

This term covers everything from a mom starting a babysitting service to a tech guru launching the next Amazon or Google.

The massive growth of the gig economy

In 2005, the federal government did a study that concluded the Gig Economy “accounts for roughly 2-4% of all workers.” Today, well over one-third of all workers have side gigs. A total of 35% of all workers make money by not working traditional full-time jobs. That is 57 million people who contribute almost $1 trillion to the economy every year.

The Side Gig Economy

About 4 in 10 workers use the Gig Economy as their primary source of income, either by choice or because they were laid off. Meanwhile, 6 in 10 use the Gig Economy for “side gigs.”

Fastest Side Gigs: Retail & Fast Food Chains

Some of the easiest extra work anyone can pick up is working a few shifts at a nearby retail outlet or working at a fast-food chain. Whether you are flipping burgers, folding sweaters, or bagging groceries, you can ease into the Gig Economy. Best of all, the shifts you are likely to seek — nights and weekends — are the shifts managers usually have the most trouble filling.

Getting Side Gigs Online

If you have skills like writing, designing, or coding, you might be able to find work online. The downside is that the work listed online can often be quite competitive. Still, it may be a good idea to weigh your options. Otherwise, you can always pursue similar work locally.
Here are some of the websites we recommend:

  • Upwork.com
  • Freelance.com
  • Guru.com
  • PeoplePerHour.com

Turning Hobbies into Money

If you are wondering how or what you can do to make a few extra bucks, look no further than yourself. Do you know a second language? Are you proficient with any musical instruments? You might want to consider using your own hobbies and skills to teach and make a little extra money.
Any skill from yoga to bookkeeping and public relations can be monetized. If you possess skills others would be willing to pay for, post them to your social media, at church, or log onto Nextdoor.com. This website is perfect for listing local opportunities.

Teach Others for a Fee

While the pandemic has affected many school districts’ rules, most schools still need capable substitute teachers. According to ZipRecruiter, hourly pay for substitute teachers ranges from $10.65 to nearly $16 across the United States. Generally, you are required to have a high school diploma. However, some states will require special testing for teaching licenses. Check your state’s requirements for more information.
Otherwise, it may be a good idea to consider tutoring. You can advertise for free on social media and locally or use a website like Nextdoor.com.
Alternatively, you can make use of tutor-specific websites like:

  • Wyzant.com
  • TutormatchingService.com
  • KnowledgeRoundtable.com

Side Gigs without Special Skills

So, what if you don’t know a second language or have any unique talents? And what if teaching just isn’t for you? Well, you can still find work that doesn’t require special skills.
Think, for example, dog walking, janitorial services, or childcare help. You can advertise locally, or online.
We recommend trying websites like:

  • Care.com<./li>
  • DogWalker.com
  • TaskRabbit.com.

Not only can you list your services, but these websites also offer helpful advice on how to make the most of your time while making the most money.

Side Gigs to Watch Out for

Certain side gigs may seem easy, such as Uber or Lyft, but they have minimum requirements and a screening process that make them a little more complicated. So, it’s not as easy as signing up to chauffeur people. You’ll need to read up on their requirements and figure out if the wear and tear on your car are worth the hassle.
The same thing goes for medical billing or coding from home. These are legitimate jobs that require training and testing.
And when it comes to multi-level marketing, you may want to study up and do the math before signing up to be a Sally cosmetics door-to-door salesperson. Otherwise, you could be staring at a closet full of unused and unsold products.

Avoid Side Gig Scams

Since people are looking for ways to make easy money, scammers have realized this and want to take advantage of people’s given situations. So, make sure to thoroughly research that driving service before you sign up for it. And avoid multi-level marketing firms that rely on your signing up other sellers, a.k.a pyramid schemes. If you have to spend money to get involved, or if you make so little it’s not worth the time, it’s best to avoid that gig altogether.
And whatever you do, make sure you are not falling for these scams:

  • Taking online surveys
  • Mystery shopping
  • Envelope stuffing

How to Identify Side Gig Scams

It can be stressful trying to figure out which side gig is legitimate and which is a scam. Luckily, there are websites that help. For starters, try the Better Business Bureau website and see if the company is listed. Additionally, you can search for online reviews from sites like TrustPilot.com or ConsumerAffairs.com.
But more importantly, start at the source. If the company’s website does not have an “about” page, or if it doesn’t list a complete corporate history and the names of its leaders, it might be best to look elsewhere.

Side Gigs and Taxes

If you make more than $600 from one employer, then don’t forget to notify the IRS. An employer should send you a 1099 form under those circumstances. Make sure you don’t ignore it because the last thing you want to do is irk the IRS!

3 Best Ways to Spend Your Side Gig Money

Pay Off Credit Cards

The average credit card interest rate fluctuates, but recently credit card interest rates have been hovering around the 20% mark. That means for every $5 you spend you are paying $1 to your credit card company for the privilege of carrying a balance. Now, imagine how much you could save by paying off your balances. So, shift your focus to paying off debts first and foremost.

Start an Emergency Fund

If the pandemic has taught us anything, it’s to expect the unexpected. Leading up to the pandemic, polls showed that less than half of Americans had $1,000 saved up for emergencies. To cover their bills, many turned to their credit cards. For this reason, we recommend funneling your side-gig earnings into savings for future emergencies.

Invest in Yourself

According to several polls, Americans in their 30s have about $40,000 saved for retirement. How much do they actually need? Almost a million dollars by the time they are in their 60s. Hence, why saving now for retirement is imperative. Upping 401(k)s and IRA balances as soon as possible can help you by giving you more time to earn interest.

The Secret to Saving through Side Gigs

While others are spending, you’re busy earning

According to Jill Gonzalez, an analyst at WalletHub (a personal finance firm), the pandemic is created a spending problem for people. Her analysis shows that 58 million Americans are spending more than normal due to stress or simply boredom. This is concerning because of the dire state the economy is currently in.
So, to combat this we recommend totaling up what your side gig has made you and what is has SAVED you. Because when you’re working more, you’re spending less. Since your time is occupied, you are left with little time and room for retail therapy. Spend time making money instead of spending money wasting time.
Thank you!