Leap Day Giveaway!

Posted February 28th, 2012 in Giveaways by Jeremy Waller

In the spirit of the all-important holiday that only comes once every 4 years I’ve decided to launch my first giveaway on Personal Finance Whiz!

Up for grabs is a $25 gift card to Amazon. (If Amazon isn’t your thing I’m also happy to send the winner cash via PayPal.) Continue Reading »

How to Negotiate With Creditors and Debt Collection Agencies

Posted February 26th, 2012 in Debt by Jeremy Waller

Debt sucks. And it really sucks if you can’t make your your payments each month. If your monthly payments are getting harder and harder to make, then here’s some real simple debt advice for you. Stop making the payments.

Seriously. Continue Reading »

Top Personal Finance Posts Of The Week – Dubstep Cat Edition

Posted February 25th, 2012 in Blog Carnival by Jeremy Waller

http://www.youtube.com/watch?v=DgGfOb101V0

Err what? I don’t even know what to say to that.

Top Posts of the Week Continue Reading »

How to Deal With Creditors When You Can’t Pay

Posted February 23rd, 2012 in Debt by Jeremy Waller
Boy Scouts

Be Prepared: Like a Debt Boy Scout

Despite the harsh lessons that were taught to us by the Great Recession, it seems that we haven’t quite gotten the message about the dangers of overleveraging – spending beyond one’s means.  U.S. consumers began 2011 by paying down nearly $33 billion in credit card debt during the first quarter of the year, according to a Card Hub credit card debt study, yet completely erased this pay down by the end of the third quarter.  While the final numbers are not yet in, we are expected to have ended the year with a net debt gain of roughly $64 billion.  Not only does this indicate a need for a priority shift when it comes to spending, but it also gives reason to wonder how one should handle serious credit card debt if overburdened by it.

Whether you are currently indebted or not, you should be aware of the possible ramifications of serious debt – expensive interest, credit score damage, and most importantly, the potential for a lawsuit – in order to either manage your debt strategically or give yourself a valuable incentive to avoid letting things spiral out of control.

The first thing you must understand is debt’s statute of limitations, as everything – from your strategy to the steps creditors can take – revolves around it.  Each state has a statute of limitations for written contracts, which dictates the length of time during which creditors can sue you for outstanding payments.  These statues last 3 -15 years, depending on the state, but here’s where things get tricky:  The clock only begins to run at the time of your last payment, which means it resets every time you pay.

Now, I don’t mention this to promote a sort of payment boycott, but rather to encourage reaching a payment plan with your creditor that will remove the threat of lawsuit and therefore make paying a less risky proposition.

Debt Management

One of the most common and effective amended payment agreements you can reach with your creditor is called debt management.  It entails the creditor waiving some fees and interest in order to lower your monthly payments to a manageable level.  Creditors do this because having some money coming in on a regular basis is usually preferable to chasing customers around and getting litigious.

The plan you arrive at must obviously be mutually beneficial; your creditor’s not going to reduce your principal, and you shouldn’t agree to anything you cannot afford.  That’s why you need to be patient, polite and willing to get creative in order to reach an agreement.  Oh, and don’t break a debt management plan because not only will you be back to square one, but you will have also reset the statute of limitations.

Debt Settlement

If you’ve got a rainy day fund or can scrape together some cash from friends and family, now’s the time to do so.  Sometimes, if you are able to pay 30% – 60% of your principal in one swoop, your creditor will waive the rest.  This is obviously tough to manage for most people with significant debt, but it will get you out of debt immediately and change the status of your accounts from “not paid” to “partially paid,” which could marginally improve your damaged credit standing.

Unfortunately, these are only first steps because they do not always work.  Your situation might be too complicated or your debt too significant for your creditor to give you a break.  At this point, you may want to visit an attorney.  No, not because a lawsuit is necessarily imminent, but rather because the option of bankruptcy should not yet be taken off the table, especially since many bankruptcy attorneys offer free consultations.

The following are your basic options when it comes to bankruptcy:

Chapter 7: Involves liquidating your assets in order to pay off what you owe.  Chapter 7 bankruptcies remain on your credit report for 10 years from the date of filing.

Chapter 13: Involves the implementation of a payment plan based on expected future earnings.  Completed, or discharged, Chapter 13 bankruptcies remain on your credit report for 7 years from the date of filing, while non-discharged payment plans stay for 10 years.

Depending on what you hear from an attorney as well as where you live, waiting out the statute of limitations could be your last, best option.  After the statue expires, your debt becomes time-barred, which is a defense that will get a suit thrown out of court.  This is more likely to be an option for people living in the Carolinas, Maryland, Mississippi, New Hampshire, Alaska and D.C. because their statues of limitations are only three years long.

If you do decide to wait, make sure not to make any payments, sign anything promising to pay in the future, or even acknowledge in writing that you owe anything to begin with because in some states this can reset the statute of limitations clock.

Ultimately, I hope you never find yourself in serious credit card debt, but it’s always good to be prepared.

Sometimes It’s The Simple Things in Life

Posted February 21st, 2012 in Financial Freedom, Frugal Living by Jeremy Waller

There’s the saying that the best things in life are free.

Recently we’ve cut out budget way back to help meet some of our financial goals this year. That means our fun budget is pretty thin right now. But that didn’t stop us from having a great weekend. Continue Reading »

Top Personal Finance Posts Of The Week – Recovering Markets Edition

Posted February 19th, 2012 in Blog Carnival by Jeremy Waller

This week two of the major U.S. stock market indices made a run towards their highest levels in years. The Dow closed last week at 12,949.87, just 46 points short of 13,000 which we haven’t seen since May 2008. Meanwhile, the S&P 500 closed at 1,361.23 just a hair short of it’s 4 -year high.

Much of this is fueled by positive news regarding the Greek bailout. Consumer spending is rising, the financial services industry is picking up again and unemployment is falling. 2012 is off to a good start! Continue Reading »

The True Risk of Investing: Understanding the Types of Investment Risk

Posted February 17th, 2012 in Investing by Jeremy Waller

understanding the types of investment risk

In my last post I talked about the fact that there is no such thing as a risk free investment. Specifically I talked about how some of the investments that are traditionally considered “safe” are some of the riskiest. Many people don’t really understand risk which skews their perception of risk.

So many people are weary of investing right now because of everything that has happened with the economy recently. I think a lot of the trepidation has been driven by the sensationalist media coverage. The Dow dropping 500 points in one day becomes a front page headline and people who have no clue what they’re talking about ramble on about double dip recessions and the decline of America. The next day the Dow rises back to where is was the day before and all is well again. Continue Reading »

How to Play the Banking Game

Posted February 14th, 2012 in Saving by Jeremy Waller

play the banking game

The following is a guest post

The banking industry is getting more and more competitive. If you look around, you’ll notice that most are offering some type of incentive to get you to bring your current accounts over. As a savvy consumer, you can play the banking game and move your accounts around to get the maximum benefit. It is easy to find and compare current accounts online. Continue Reading »

Risk Free Investments Do Not Exist

Posted February 14th, 2012 in Investing by Jeremy Waller

Money Back Guarantee

With the turmoil in the markets we’ve seen over the past few years it makes sense that people are more interested than ever in low-risk investments. I’ve even heard people talking about putting their money in “risk free” investments until the economy recovers.

The problem is there’s no such thing as a risk free investment.

Risk free implies that there is absolutely no chance that the value of your investment could decline. To state it another way, in order for an investment to be risk free you would need a guaranty that the purchasing power of your money in the future will be greater than or equal to the purchasing power of your money today.

That simply doesn’t exist in the real world. Continue Reading »

A Financed Lifestyle is No Lifestyle At All

Posted February 9th, 2012 in Financial Freedom by Jeremy Waller

The following is a guest post by American Debt Project.

I was looking at my credit card today (the one with the nearly $18,000 balance) when it hit me. I finally saw my credit card as something other than just a method of payment. My credit card has been my chief enabler, lifestyle financier and traveling companion for way too long. This 85.60 x 53.98 mm plastic card has been the one thing I have carried around with me without fail, from college, to out of college, to out of country and across state lines.

Sure, I guess other things in my life have been constant for that long, but nothing has had the consistency with which I have spent money using this credit card. I have the same cell phone number but I have switched providers. I’ve had different cars. I’ve held several different jobs. And in all that time, I’ve carried around the same credit card, knowing its steadfast availability would carry me through any new or unexpected situation that might come up.

My credit card kept me in denial. I hid from my problems. I denied that I didn’t know what I was doing with my life. I pretended like I was figuring life out and moving along in a positive direction, when the truth is I spent quite a few years simply idling.

I’m saying my goodbyes to my crutch and I’ve been walking a lot taller (and harder) knowing that I only have my own resources to rely on. I don’t have the false sense of security that my credit card provides, I have a true sense of where I stand because I know exactly how much I can spend on my bills and expenses each month without incurring new debt.

Breaking the Credit Card Crutch

I no longer bring my credit card if I am going out to dinner or drinks or shopping. I’ve cut all of those activities down, but when I do go out, I bring cash or know my spending limit on my debit card. If my spending limit for that day is $40, I only spend $40. If I tried to set that limit for myself with my credit card, I would blow right past it. “$46.81 is really good! I only went $6.81 over budget!”

But the problem is if you go $6.81 over budget for every meal, every grocery trip or every new T-shirt, then you really don’t have a budget. It’s not a budget if you silently tell yourself a number and then proceed to completely ignore it as you plunk down your credit card for whatever you feel like you absolutely must have at that moment.

It’s a never-ending cycle.

You really want to spend less, you’re really trying to spend less and yet you find yourself still using your credit card to fund your lifestyle.

So how do you move on?

A New Kind of Lifestyle: Conscious Behavior

It’s not easy to change a lifestyle when it’s the only lifestyle you’ve known. It might seem like cutting out travel, meals, and consumer items will lead you to a life of austerity. But a financed lifestyle is no lifestyle at all: you’re living beyond your means with little to show for it.

I know it’s fun at the time, but paying back debt is a lot less fun. I spent the first eight years of adulthood financing my lifestyle. Call me a slow learner, but I’m finally changing the patterns that took me so long to identify.

I was interested to see that Ramit Sethi (of “I Will Teach You To Be Rich”) doesn’t allow people with credit card debt into his Dream Job course or any other paid course. That kind of makes me feel like a leper, but he makes a very good point. Here’s a conversation from Twitter:

As Ramit says, there are behavioral reasons for being in credit card debt. Figure out what behaviors are keeping you in credit card debt and cut all of them out. Getting out of debt is the first priority of anyone who wants to get their finances and future potential in order. There are many, many actions to follow, but let’s get this first one figured out before anything else.

American Debt Project is a blog about paying off debt and understanding the patterns and behaviors that get Americans into debt in the first place. I also blog about income inequality, investing and the fascinating dynamics of living in Los Angeles and Southern California. If you’re changing your lifestyle, check out 25 Activities Better than Shopping.