Money Wise

Being money wise begins with knowing when to ask for help and being wise enough to implement what you have been taught.  If you take the time and pay the money to go through money management or any money training, it makes no sense to not follow through.  I understand it takes commitment to change behavior, that is any behavior.  The cost is just too great for you not to make the changes.  I have often wondered why lottery millionaires are typically broke within five years of receiving the money.  Between everybody having their hand out, including family, strangers, and organizations, you have to deal with your desires.  It has to be a shock to your senses to receive that amount of money and there is nobody available to ask what you need to do first.  

You have investment bankers available at your financial institution,  but if you never had money  before you may not know how to find one or trust them.  Or maybe they just start off purchasing all the wants and desires without counseling.  It really doesn't take much to spend 1 million dollars if you consider the debt and tax penalties of most people.  Most people typically have a 200K or more house note and if you have that house note or larger there is usually a student loan following it with a car note and two children.  If people experience financial trouble with a little, then having a lot more adds stress and fuel to the fire.  If you are having difficulty managing a little you can be assured you will have a tough time with managing more.  

The reasoning behind that is because most people add to their existing debt even when they get a raise and wonder why there is less money when they are making more.  Some people tend to buy more expensive items or just more of everything, without thinking of the consequences.   When you make more money that is what you should be saving or using to rid yourself of your current debt and Do Not build current debt with future money.  I will get into that more in a later topic.  I say that because the sooner financial training is put into place the better.  It would be wonderful to offer it in a classroom setting, due to all parents do not know where to start themselves.  There is more to say than don't make the same financial mistake I did, without offering the road map to financial success and avoidance.

One of the best things we can do for our children as parents is to teach them early about how to handle money.  As parents we want to tell them what to do, I would offer this as an alternative; give them the all the potential outcomes to the options available and let them make the decision from there.  They have to learn to trust themselves, even if they make the wrong decision, that is a learning opportunity.  The same goes for you as the adult, you must weigh the options when making financial decisions.  Remember, I already told you emotions have no place in financial matters.  You have to determine the cost of the effect and the short or long term benefits of the decision.  

It is a good idea to determine why you spend money the way you do or make the financial decisions that you make.   Asking for help when you know there is a big financial decision to be made and you are out of your element is always a great idea.  Consequently if you believe you need the okay to go ahead with the financial move you may not need to complete the task.  Knowing why you make financial decisions will be a good predictor of why you should ask for assistance.  Agree, I stress to you when you have been given the opinion of a professional you must weigh it seriously and not let your want get in front of you needs.  Money decisions can not be undone once the money has been spent or lost.  You can consider it a sunk cost and it would be best to consider that in the beginning, but asking yourself, once this money is gone, will I be covered in the case of a financial incident.  A sunk cost, is money spent on a project or item that you know you will not be able to recover.

Be money wise and seek counsel, but when you seek the counsel and get the answers you must put it into action.  Having the knowledge and not putting it to use will leave you feeling very disappointed in yourself and if marred could cause marital issues dealing with whose to plan.

Marriage Debt and Accounts

There is so much to know and so many lies to be reveled concerning how debt will be reviewed once married.  The first myth I want blow is that your debt becomes his/her debt.  That must be put into context, yours spouses debt is only yours when you pay them together monthly from your joint budget.  If your spouse had credit card debt, tax debt, real estate debt, car debt, and so on prior to marring you then legally that debt is not your financial responsibility.  That is good news if your spouse passes prior to the debt being cleared, you are not responsible unless your name is listed as co-owner.  The draw back is they can come after the estate, if there is one and the spouse is listed. 

The second myth is your credit takes on the same effects as your spouses.  The truth is your credit doesn't become his/her credit unless you are purchasing a large dollar item together.   They need to view both your reports to make a decision, but it still is not the same information.  It doesn't mean that prior debt has now been absorbed by you, it just means they are looking at your numbers together to see who is the weaker link and who should be named first, which is the person with the higher FICO score.If you and your spouse do not share credit than your scores will be different and will require different attention.  Sharing credit means you made credit application requests together.  If a purchased items is only in one persons name than the other will not benefit from the on time payment, nor will they suffer for the late payments.  This is why it's important to know before purchasing large dollar items who should apply or both.  

Another myth is having a joint account requires both signatures to pull out all the money, it may to close the account, but not to move the money. You will need to verify that with the bank prior to adding a person or opening the account.If one spouse owes creditors and a bank levie is approved then a joint account can be seized.  In the event that happens there are steps you can take to clear it up, but be prepared to wait.  So, didn't think that just because your name is on it as well they can not accomplish this.  You would have to go through legal means to get it resolved as far as what belongs to the other spouse.  Also, all names on an account at the same financial institution allows for right of off set for the bank.  Meaning, if one account holder over draws an account and their name is listed on another they can clear the negative balance with the position account; as long as the funds are available.  If there is the possibility of this issue arising you may want to consider having separate accounts until it is resolved.  You will always have the option of adding your spouse to your account as a beneficiary.  Meaning, they will have access to the money in the event something happens to you.

The same applies to tax liability that was already existing prior to the marriage and that which occurred during the marriage.  You are only financial responsible for tax debt when you file joint, otherwise you are only responsible for your own debt.  Filing a joint return says that you accept responsibility for that tax year only, but there is a way to avoid this by filing separate or you will have to seek advice from a tax attorney to prove the tax debt was not personally yours.   I will get more in dept with this topic in a later post.

I hope you get the jest of what I am saying when it comes to making financial decisions.  You must know your rights as well as know how to utilize credit.  I have a blog coming soon to explain why it is important to establish credit.

Why do I need credit?

I have been asked this question so many times I have lost count.  Many people are so afraid of debt that now they are questioning if they should establish credit.  Well, the answer is yes, you need credit because all major purchases requires it, jobs consider it, and insurance companies utilizes it.  At some point you are going to want a car, house, or another big ticket item.  You must have credit established to be considered worthy of making major purchases, unless you have saved all the cash you will need for the purchase.  Even if you don't use the credit for purchases they now look at your credit report for jobs and insurance to determine if you are responsible.  What you must understand is that just because you have a credit card doesn't mean you have to use it.  You really only need major credit cards, due to department store cards only have the one purpose and usually the interest rates are awful.  If you must have a department store card I would say Wal-Mart due to you can get food, clothes, home and office supplies, and fix your vehicle. 

When selecting a credit card check to see if there is an annual fee as well as if the provider will close the account if there is no activity on the card.  Some providers will close your line of credit if you do not utilize the card, which forces you to make purchases during the year.  There are other providers which will only close your card upon your request or due to non payment.  Establishing credit is not to be taken lightly, it is a major step and you must do your homework as a consumer.  Do not just apply for credit due to the merchant is offering a discount from the bill, due to you will most lightly not pay it off at the end of the month or you will keep using the card.  These cards usually carry a high interest rate and you don't know what limit you were approved for or the interest rate.  If you don't pay off the card you may very well offset the discount you received with the interest you will accrue.  Credit can be your friend or your enemy, depending on how you treat it.

Relationships and Money

There are some many directions to go with this topic, but I will try to stay the course.  I believe this to be a very important topic especially in these financial times.  I'll begin with a question as to how you handle your finances in your home?  Do you know how much money your spouse makes?  Do you know how many credit cards your spouse has and what is the outstanding balance?  How much of a  payment does he/she make toward debt monthly?  Do you know how much it takes to run your  home financially?  I ask those questions, due to some many people do not know the answer to any of them or they may know the answer to one of two of them.

Lets break it down by each individual question.  How do you handle the finances in your home, is important to address; is it individually or a group session in your home?  In an effort to limit the amount of stress on one partner, how money is spent should be decided together. They have a saying, which says, "whoever controls the money has all the power."  That doesn't seem like a even scaled marriage.  Who wants to feel underpowered in a relationship that is to last a life time?  To keep everybody in the know and the level of power equal handle your home finance together.  That does not mean you have to have a joint account, but you should both know how to work the budget.

Next, Do you know how much money your spouse makes?  This is a strange question for me to ask personally.  During my career I have come across men and women who had no idea of how much money was actually coming into their home.  I do not understand how you could live with someone and not know how they handle money or how much money they make.  You must know the answer to this question in order to credit a budget and to create the best financial future possible for your family.  How can you build an emergency or savings account when you don't know how much is really left over at the end of the month.  You are unable to plan for college or much of anything else.  This should not be a secret among partners, because partners share. 


This is a big one, How many credit cards and what is the outstanding balance for your spouse?  It is shocking to me that many couples have no clue to this question either.  You can see how this would go hand in hand to knowing how much money is actually coming into your home.  If you knew the answer to the the prior question, you should be able to answer this one.  There are couples where one spouse has two cards and another has 20, but the other spouse has no knowledge.  During a financial counseling session is not a good way to find out this information.     Unknown debt can cause undue stress in an other wise good marriage.  This includes student loans and tax obligations. 

What if you knew how much money your spouse made, but when you got married you didn't see it.  You should have asked this questions: How much of a payment does he/she make toward debt monthly?  It makes no difference it you know the answers to the other questions if you don't know this one.  If you or your spouse are struggling by yourself more often than not you will struggle together, especially if there is no budget made.  The only area of the budget that will be freed up when two becomes one is the loss of one paying rent and utilities, but then other bills may increase when bringing a family together.  You may need more space, which means a higher payment, which takes some of the money you just saved in moving in together.Be aware of how much the monthly payments are prior to marriage or at least as soon as somebody becomes frustrated.  You can not have two homes operating as one financially under the same roof, there will be confusion and separation.

The last question is, Do you know how much it takes to run your household?  If only one person is handling the money then your answer will be no.  You must think ahead, what if something were to happen to the one handling all the financial issues, how will the other spouse handle the new position.  Are all the the bills handled online and if so where and what are the passwords.  Does it take both incomes to keep all the necessities operating?  You must sit down as a couple and pay your bills in order to keep the harmony and stress spread out evenly.  Doing so will also help you to answer the other questions I have asked within this post.  Be realistic when creating your family budget and be willing to sacrifice for the bigger picture, based on necessity not wants.

There is no more coming together than to do it with the family finance.  Doing it together keeps the pressure off only one spouse and it could keep many money arguments down.  If you both are in agreement and aware of what is happening then there should not be a lot to argue about in that area.   During this economy many marriages have suffered and I would hate to see a marriage fall apart due to money and the stress it can bring.  You must discuss, prioritize, and budget together, while sticking to your decisions and if there are changes to be made do them together.  Preferably you discussed all this before you got married and if not please start now, but if your already married it is never too late.  Don't wait for the tide to come before you buy the boat or life vest.

Bankruptcy

First, let me say this is for informational purposes only and you should seek legal advice.  Okay, with that out of the way, there are different types of bankruptcies an individual could file.  Understand once you start the process and it is sent to the courts you no longer have any control of the process, meaning you will not be able to stop it.  The decision will be up to the court at that point.  You give the courts and your creditors the right to make you sell off your possessions in order to pay your debt obligations and potentially seize your income tax, if you file after the bankruptcy and receive a return.  That is a reason for some of the estate sales you see. A lawyer can give you the specifics, but this is the basic of what can transpire during a bankruptcy.  The courts will say what is allowed or disallowed.  Due to the new rules there are financial requirements for either filing and how often you can file, so you only want to use this when necessary.  

Filing Chapter 7 has the power to relieve you of all the debt you have listed.  You may be allowed to keep your car, home, and other items as long as they are not more than what you are exempt for.  A Chapter 7 will usually last about four to six months prior to being discharged.  A Chapter 13 is the reorganization of debt, meaning you will be responsible to make payments toward the debt and it can be up to three to five years to be discharged.  Generally unsecured creditors will receive a lesser amount than what is actually owed.

If you keep your home or car you will have to continue to pay the note or the creditor can request a relief of stay and have it included in the bankruptcy.  Bankruptcy will only protect your home if you continue to pay the mortgage, due to it only places the arrears under the payment arrangement.  If you are not paying the front end of your mortgage then you will continue to fall behind.  So, understand a chapter 13 will only help you keep your home if you can pay your current mortgage.  It will only buy you time to get things figured out or replace your income, if you are not able to pay them both simultaneously.  Lenders will not be able to negotiate with you concerning a debt until you have been discharged.  That is the reason the bank will not speak with you during a bankruptcy or review your file until you have been discharged or dismissed.  The same rules apply for your vehicle as well.  The trustee will be responsible for setting the amount for repayment in the Chapter 13 plan and the length of time for the repayment period.  

It doesn't matter which one you file, they are reflected the same way on your credit report.  It will remain on your credit report for 10 years.  It will be up to the lenders if they will consider you made arrangements to pay your debtors, but you will still have the scar.  You want to only file bankruptcy when there is nothing more you can do and speak with a bankruptcy attorney for your best option.  Remember to do your homework as well, so you have some thoughts about the process so it doesn't seem so foreign to you.  The good news is once your case has been discharged your creditors listed can no longer contact you concerning the debt.  But if your file is dismissed then there is an issue which needs to be addressed or you didn't make the scheduled payments to the trustee.  Either reason puts you bank on their radar.  I hope this provided a snap shot for this process and helps your toward the best financial decision for you and your family. 

College Graduate

So, you are about to graduate or you have recently graduated and now you need to understand what you agreed to when you signed for your student loans.  The first thing you must understand is that you must pay back your student loans at some given point in time, so I hope you only borrowed what you needed.  Outside of that, there are several loans for which you can borrower against and you must know which ones you have in order to know how the interest in incurred and when you will need to start repayment.  Review your outstanding loans and the current interest rate and if it is fixed or variable.  You could either have a government loan or a private loan.

The government loans can be either subsidized or unsubsidized with a fixed rate depending on when the loan was awarded with a six month grace period after graduation.  The subsidized loan is needs based and will not accrue inter while you are in college or during the six month grace period after you graduate.  The unsubsidized loan is not based on financial needs and you will be responsible for the interest that accrues on the loan while you are in school and during the grace period after graduation.  You can qualify for either loan when you complete your FAFSA paperwork.  The subsidized loan amount will be determined by the college you will be attending.  The Perkins loan is also a governments needs based loan, but it is for students with extreme financial needs.  The interest rates are lower and have a nine month grace period instead of the six month, there are also no fees involved.  If you were not able to qualify for a government loan you may have received a private loan.

A private loan would have been granted by a financial institution or by Sallie Mae.  Many loans are released through Sallie Mae.  If you received a private loan your rate is typically variable and you may or may not have a grace period after graduation.  You must read the terms of your agreement to repay your loan.  There are several repayment options to your loan whether you have a government or private loan, you will need to go directly to their website to see what they are. 

You will usually have at least six months after you graduate before you will have to restart paying back your student loan.  If you are unable to pay your loan by the six month or the last month you will need to contact the lender to see if you qualify for a deferment or forbearance.  If you are working, but not able to pay the requested payment you can request a forbearance.  A deferment is allowed for a period of specified time allowed by the lender, based on the reason for the request.  During this time you will not have to make a scheduled payment.  If you receive a forbearance you can either pay nothing during the time period or you can pay an adjusted amount for a specified period of time.  The main point is to not default on your student loan.  You may receive a forbearance while in default, but most lenders want you to enter a default program in order to be considered for any other special programs.  If you are delinquent, but not in default you can use the forbearance program to delay going into default.  You do not want to go into default due to they can request a judgement against you and garnish your wages, especially if it is a government loan. 

If you return to school your loans will go back into deferment until you graduate and the payments will resume.  Please do not be afraid to discuss your options with your lender by reviewing their site or speaking with a representative.  If you are late on your payment it will reflect negativity on your credit report, so be proactive.  The good news is there are ways to have the debt canceled.

You can request a cancellation of debt through bankruptcy, which is the most difficult way to do it, death, disability, or there is an issue with the school you attended and incurred the debt.  You can also request a cancellation of debt because of the profession you have selected.  There are several government jobs that will cancel a portion or all of your student loan debt, but requires your service for a specific period of time. You can learn more at http://www.studentloanborrowerassistance.org/loan-cancellation/.  If your debt is canceled and the amount is over $600 you will have to claim it as income on your tax return, but you will need to speak with a tax professional to advise you of how it will affect you individually.  The reason you will have to claim it as income is because you did receive the money for its intended purpose, but didn't have to lose money in paying it back.  So, in doing so you actually got to keep that money you would have spent and the government says that is income for you.  You will receive a 1099C informing you of the amount and tax period you will have to claim.

Following Gods Financial Plan

I believe there is a spiritual aspect to everything we do, especially in the way we handle our finances.  Not only in the paying of tithes and offerings, but in the way we handle our debts.  The bible is full of instruction on how to treat your creditor, but also how the creditor is to treat you.  You always hear advertisement directed toward the debtor to make you feel bad about yourself if you are not following the plan God has for you.  They never mention that God also has a plan for the creditor.  The prayer says. "Forgive us our debts as we forgive our debtors."  What I want you to understand is yes, as children of God we are suppose to be lenders and not borrowers, but lenders are not suppose to expect more than what they gave, You can find this in Leviticus 25:37.  We all know that is not the nature of how it works now, due to we have to pay interest on top of what we borrowed, unless you can pay during an interest free period.  The bible actually says they should forgive debt if you  are unable to pay back what you borrowed, as found in Matthew 18:27 . 

You must understand that God has given us all instructions to better ourselves and help our sister and brother grow.  As a person that owes another it is okay to ask for forgiveness of your debt, it doesn't make you a bad person or Christian.  It is simple using the prevision God has set for you.  It is however very important that you listen to counsel and stay in your financial field, as found in Proverbs 19:20.    If you are having financial difficulty it is your duty to seek assistance. We must get over the embarrassment of not being in the financial position we hoped we were in and deal with where we are.  I truly believe embarrassment is just a form of pride and we all know pride is one of the deadly sins.  When it comes to finance being prideful, it will must definitely leave you depleted.    I say that because you will not seek help when you are full of pride, even when you know you need the help.  It doesn't matter your level of education or status, if finance is not your area of expertise you just might need help in that area.  

This is one of my favorite verses says: Proverbs 13:7- There is one who pretends to be rich, but has nothing; Another pretends to be poor, but has great wealth.  I selected this one because it is the basis around the saying of trying to live like the Jones', when you really are a Smith. It is okay to be a Smith, live within your financial field or below it.  I am not trying to preach to you I just want you to understand you have the power and the means to change your financial status and get back on track.  I believe it is my duty to share with you what I have learned in order to help you prosper and grow and in return I will learn and grow with you.  Let us know what you think or what you are concerned about.