The Key to Financial Planning - Your Financial Objective

The key to any investment planning is starting with a financial objective. What exactly is the financial goal?



All to often people care more about return or safety when considering investment options. What should be considered first and foremost is the needs of the investor. What is this money being saved for? How long will it be before the money is needed?

Potential returns and risks of individual investments are irrelevant until the investors objectives and goals have been clearly defined. For instance a S&P 500 index fund that will most likely avg 12% over the next 15 years sounds much better than a money market fund that will average 3% over that same period. This will hold true for many investors but not the high school student saving for college who will need the money in 18 months. That student may very well be disappointed when they withdrawal the entire account that has lost money because they bought in on a market down cycle. The student is better off with something safe because they can't risk a loss. On the other hand the recent college graduate who just found a job and wants to start saving for retirement will be better off in the stock market.

Determine Your Financial Objective

Understanding investor objectives can be tricky. Here are some great questions to answer when coming up with the objective of financial planning.

1. How much money is needed?
2. When is the money needed?
3. What is the likeliness that an emergency or other need will come up and the money will be needed early?

Debt Snowball - 2 Schools of Thought

The debt snowball is a debt reduction method and strategy used to pay off debt. It is widely preached by debt counselors all over the world and many consumer finance and debt help gurus such as Dave Ramsey absolutely swear by it.


How the Debt Snowball Works

It is really a rather simple concept. The one employing this method simply lists all their debt and budgets out the minimum payment owed monthly to each creditor. Then one creditor is selected and any remaining funds available after all minimum payments have been made is allotted the remaining balance. After that creditor is paid off that minimum payment as well as the remaining excess funds is targeted towards the next selected creditor. Thus the snowball grows. You pay of the next creditor at a faster rate then the previous. As creditors are eliminated the snowball grows bigger and bigger. Rinse and repeat.

There is an internal conflict in this method. Conflict arises in determining which creditor should be targeted first, second, and so on.

There are two schools of thought on this matter. The "motivational finance method" and the "logical finance method".

1. Motivational Finance Method - Here the creditor owed the least amount of money is always targeted first. In this way the one paying off debt is thought to be more motivated because they are awarded the satisfaction of seeing the fruits of their labour sooner. However this method pays no attention to interest rates. Thus in theory the consumer will most likely pay more then the one who utilizes the logical method.
2. Logical Finance Method - Here the highest interest bearing creditor is paid off first. In this way the consumer is paying off their debt the fastest and the cheapest. However experts tend to agree that the consumer will be more likely to quit than the same consumer who employs the motivational finance method.

So Which Debt Snowball Method is Best?

Technically it is kinda impossible to argue against the logical method. However, if the consumer in financial hardship is not motivated then perhaps the motivational method would work better. I would contend that if the consumer can't stay self motivated enough to see it through the logic method then neither would work anyway. But that is just my opinion. Personally I would rather get out of debt faster and cheaper.

Home Loan Approval - Your Best Financial Footing

This article describes some basic steps one can take to improve the chances of approval for a mortgage loan.




Have Stable Monthly Budgeting Habits

It is a good practice whether awaiting for a loan approval decision or not to always maintain a stable monthly budget that utilizes wise spending, saving,  and income earning habits.

Maintain Healthy Credit Scores

Your credit scores and your credit reports will have a big impact on the lenders decision to approve or deny you the funds you need to buy a home. You want to ensure that your credit score is as high as you possibly can get it. This means checking your reports and ensuring that all info and activity is accurate and that their are no mistakes that are hurting the appearance of your credit history.

Make sure you understand credit score basics so that you are able to do what you need to do if something is out of place. If you don't understand what your looking at than how will you know if it is OK?

Pay Off Unsecured Consumer and High Interest Debt

If you have credit card debt, owe money on store credit accounts, personal bank loans, or any sort of high interest debt than you really should pay it off.

Lenders are not going to want to lend money to folks that owe on a lot of rip off high interest credit cards or other sorts of unsecured debt.

At the very least you need to consider a debt consolidation loan with more favorable terms.


Be Upfront with The Bank or Lender - Tackle Obvious Approval Issues First

If there are some obvious weaknesses on your loan application it is a good idea to bring them up first. This allows you to offer an explanation instead of coming up with an excuse for when they find out about it anyways. Plus you will be able to avoid applying for the loan if the weakness is a automatic disapproval trigger for the lender.

If nothing else this will make you appear and feel more responsible as a borrower.


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Debt Settlement Risk Factors

Debt Settlement Risk - Three Key Fundamental Risks

Debt Settlement has some fundamental risks that come with the decision to pursue efforts of settling debt for a discounted price with your creditors.

This article provides an outline of three existing debt settlement risk.



3 Financial Risks

No Guarantee

• There is never a guarantee that you will be able to settle debt with a lender. Just because you want to settle and make an offer does not mean that they will take it.

Taxes

• You will most likely have to pay taxes on any debt forgiven by your lender.
• The government and the IRS count those funds as income. So you will get a 1099 for the discounted amount of debt in most cases.

Credit

• Your credit score is not going to be in good shape. there is no doubt that you will have to become delinquent in order to have any real chance of settling any debt with your lenders. Those missed payments and default statuses go on your credit history and payment history records.
• Also just because you settle a debt successfully does not mean that other potential creditors are going to view that as a good thing. Think about it. You borrowed money and did not pay the full amount back.

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California Hardest Hit Fund Foreclosure Assistance - Strategic Focus

The California State Housing Authority has taken targeted measures to provide assistance to homeowners in financial hardship through the Hardest Hit Fund.

Like all states receiving help from HHF they have worked hard at developing innovative mortgage assistance programs targeted to the specific needs of their homeowners foreclosure assistance needs.

In addition to developing new programs they have adopted the approach of improving and expanding existing efforts and foreclosure prevention programs already in place.

California has decided to hyper focus borrower assistance resources towards aiding low to moderate income homeowners.

A core theme in the development and design of their approach is to ensure that their programs and the operations of their assistance efforts remain flexible and agile. This is in response to the success that the Obama home affordable mortgage assistance programs have had with the same approach.

To get the most bang out of their buck California foreclosure assistance efforts has put significant measures in place to have lenders, loan servicers, and PMI insurers to match their efforts dollar to dollar.


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Understanding Loans That are Unsecured

Understanding unsecured loans and debt is a key part of healthy personal finance.

Loans that are not secured do not have a guarantee backed by an asset of comparable value like secured loan does. This means that debt which is unsecured carry more risk for creditors than a comparable secured loan. Thus a unsecured loan carries less of a risk for the borrower. Following this logic, unsecured loans are more costly for consumers.

Creditors that lend via unsecured loans set higher interest rates and sizable fees that the borrower will have to pay. The lender asks for more to hedge the increased risk involved in investing in unsecured debt. If the borrower does not repay the loan as agreed creditors will not be able to seize or collect any type of collateral if the loan is no secured by an asset.

The comparably higher risk associated with unsecured debt derives from two fundamental notions.

1. The borrower will elect to pay secured debt before unsecured debt.
2. There is no collateral guarantee to hedge the risk of default.

Types of Unsecured Loans

Below you can find a list of typical unsecured  lending products

• Personal Loan 
• Credit Card Accounts
• Peer to Peer Lending
• Debt Consolidation Loan
• Store Financing Loans
• Some Small Business Loans
• Some Corporate Loan Debt

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Ivy League College Level Education with out Leveling Your Personal Finances

There are many reason we don't all graduate from those prestigious Ivy League Schools such as Harvard, Stanford, or MIT. These great educational institutions are very expensive. They are insanely competitive.


The admission offices only have room for so many, and they want the very best.

So for the vast majority of Americans it is simply not possible to get into these schools. Most US students won't be able to hear and be a part of these wonderful lectures and academic experiences.

Most of us will never have the opportunity to see what goes on behind those institutional walls of academic excellence.

Right?

Wrong.

Everyone is able to be a part of these institutions and classes. You can take whatever class you want. You can take these classes when ever you want. All the high caliber schools around the world are available free. They are free to all via the Internet and a special website called AcademicEarth.Org

If you would like to get a free Ivy League Eduction that will not break your finances via Academic Earth simply follow the step by step instructions I detail in that article titled...

How to Get a Ivy League Education Free

How to Get a Ivy League Education Free

This article describes how to get a free ivy league caliber education.


What if someone told you that you were able attend the same lectures held by the same professors that only the academic elite and or extremely rich were able to attend through top notch universities such as Harvard?

Would you believe that person?

Believe it.

How is this possible? 

The Internet.

More specifically a wonderful website known as Academic Earth.

This is a how to article describing the step by step process one can follow to attend a vast and impressive library of current and ongoing lectures from the top rated Universities and elite professors that the planet earth has to offer.

1. First thing one needs to do is to hop on the computer and get online.
2. Once you have made your way on to the Internet. Go to your browser and point it towards the following URL... 
3. - http://www.academicearth.org
4. Next step is to take a look around and decide which degree you would like to unofficially obtain. You will find that the website is nicely put together and organized. It looks a bit like Hulu.com and other like sites.
5. After you have decided on a topic and had a chance to look around the site pick your first class and hit play.
6. Make sure you have a note book and even a spare laptop or iPad may be of use.
7. Finally start watching and taking notes or just relax while you get a free 3,000 dollar lecture. 

With Academic Earth you can get all the benefit with out ruining your personal finances.


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How to Refinance and Lower Your Monthly Payment

This article is a step by step guide on how to refinance and lower your mortgage payment. It is intended for homeowners who need to lower their monthly payments in order to stay current on their home loan.


I have another post in which I describe what borrowers are the best match for this particular mortgage payment solution. I suggest you make sure you are a good fit for refinance help to lower your payment before you move forward.

Below I have created a list of nine steps to take in order to refinance and lower your monthly mortgage payment.


Steps to Refinance and Lower Your Mortgage Payment

1. Create monthly budget.
2. Write hardship letter.
3. Income and tax documents.
4. Call your lender.
5. Ask about refinancing options for distressed borrowers.
6. Complete financial package that they request.
7. Submit financial package.
8. Follow up to make sure they received it and ask when to expect a reply.
9. Wait for approval.

Refinance Help - Lower Mortgage Payment

Many homeowners, who are still current on their mortgage, are worried about making their next monthly mortgage payment on time. Some will be able to make the next payment, but they know that something has to be done in the near future, or they will default.


These homeowners need help making home affordable for the long term.

If you are a homeowner who has found yourself amidst a financial hardship during these slow economic times than you know of the stress and worry it brings to your life.

If you are dealing with this stress, if you are a homeowner who knows you have to do something or you will eventually default on your mortgage, than be sure to read the rest of this post.

You can refinance your mortgage to a loan with more favorable terms. You can lower your monthly payment.

Characteristics of Homeowners who May Be Able to Lower Their Mortgage Payment by Refinancing

• They have at least 9 - 12 percent of home equity that has accumulated.
• They are still current on their mortgage payments.

Those are only generic qualifications. If you are interested in a specific program than you need to reference the applicable qualifications for that refinance program of interest.

If you are a homeowner who meets this basic borrower profile than you may be able to refinance and lower your mortgage payment.

Where to Go From Here

If you want to explore this opportunity or move forward towards refinancing your mortgage loan than I suggest taking a look at another recent article of mine that lists all the steps involved in refinancing your loan to lower your mortgage payment. The post is titled and linked below...

How to Refinance and Lower Your Monthly Payment

Credit Websites for US Consumers

There are three official websites that a US consumer can visit and access their free annual credit report. These three sites belong to (one each) the three major credit bureaus. I have listed the 3 credit bureaus below.


Three Credit Bureaus 

1. Equifax
2. Experian
3. Transunion

The three applicable websites that allow consumers to obtain their free annual credit report (and more) are listed below.

• www.Equifax.com
• www.Experian.com
• www.Transunion.com

Consumer Credit Reminder

I just wanted to let folks know, or at least remind them, that they will be able to get their credit reports just fine, however, they will not be able to obtain their actual credit score.

the credit score is something you generally have to pay for unless you make use of some sort of promotion or service in which you are generally going to have to give someone some sort of business somewhere.

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Creditors are Willing to Eliminate Debt - Find Out Why

It often comes as a shocking surprise to people when they learn just how much folks typically save through debt settlement.

People often do not expect lenders to be willing to eliminating tens of thousands in credit card debt for people who are in financial hardship. None the less it is true.


Lenders routinely agree to forgive 30% - 70% of outstanding credit card debt through debt settlement offers for credit card consumers who are unable to pay the full amount.

Why are Lenders Willing to Settle Credit Card Debt?

Lenders are will to do reduce the outstanding debt on credit card accounts for several reasons.

• Unlikely to obtain full amount anyways.
• Large cash payment.
• The tax write off they will get for doing so.

Want to Learn More About Debt Settlement

If this post has sparked some interest then I suggest that you check out another article I posted not to long ago. It is a guide outlining a DIY Credit Card Debt Settlement Plan.

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Budget Bucket Saving

As the economy continues to struggle consumers and homeowners a like are starting to see the importance of increasing their savings and their savings rate.

I have taken the time to post some simple steps you can take to save more through a strategy known as budget bucket saving. This is a great personal finance tip.


Bucket Budgeting and Saving - Six Easy Steps


Determine Budget Categories

First you are going to want to categorize your spending. this is simple all you need to do is to set down with pen and paper and write down a list of spending categories whether its home expenses, clothes, entertainment, etc., etc.

Plan Tracking Method

Step two is to make sure you keep some sort of record of everything you spend. this can be done automatically through credit and debit cards.

Assign Budget Figures for Each Spending Category

The third step is to set a max amount for each spending category. Tell yourself that you may spend up to this amount but no more.

Start Living and Spending According to Budget

You may have to make some initial adjustments to your category budget amounts.

Once all budget figures are workable really focus on coming out ahead.

Monthly Bucket Audit

At the end of every month see how you did. If you have money left over in a category then scoop it up and dump it into your savings account. Do this with every "bucket".

Savings Bucket Management

You have to protect the savings from you and all that is around you. There are plenty of good reasons to spend that money but you need to get in the habit of making hard decisions.

You need to hoard that cash and focus on making sound financial decisions.


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Amidst the Ash of Subprime

A New Borrowing Era - Post Subprime

Following the subprime mortgage crisis, and the political and economic changes that it has caused, will you be able to rely on your mortgage broker?



This is an important question for potential home buyers to ask themselves because mortgage brokers and lending agents were a cause of the mortgage and foreclosure crisis.


Irregularities in subprime lending have played a large role in the current economic crisis.

Many mortgage brokers that forced borrowers to forge documents and escalate income levels to enable borrowers to qualify for a mortgage that they weren't eligible for. Theses borrowers took a home loan that they could not afford.

As a result these homeowners were the first to fall behind and lose their home to foreclosure.

If you are planning to take out a mortgage and you are not a financial expert, you can and should seek financial advice from a professional.

Just the same you want to make sure that you have some basic knowledge

It is important for you to be aware of the terms and conditions you are agreeing to at closing. Borrowers that have fallen prey to misleading mortgage brokers could have easily avoided such mistakes by taking the time to understand the mortgage terms on their own.

Be careful and don't allow yourself to be taken for a ride that results in you losing your home through a mortgage foreclosure sale.

Home Buyer Considerations

Mortgage lending has been the catalyst and factor allowing most of today's homeowners to own their home. Depending on your personal finances you also may one day take out a mortgage. In which case there are several factors that home buyers should consider before buying a home and taking out a mortgage. This article contains essential mortgage questions home buyers should consider when obtaining a mortgage.



Financial Questions Home Buyers and Mortgage Borrowers Should Seriously Consider 

Are you comfortable with the Mortgage loan term (15 yr - 30 yr)?

You have to decide whether you will opt for a 15-year or a 30-year loan term.

If you are opting for the 15-year loan term you have to make higher monthly payments but the rate of interest will be lower.

When you opt for 30-year loan term, you pay lower monthly payments but the rate of interest will be high. You get more time to pay off your mortgage.

Adjustable Rate or Fixed Rate?

If you opt for an adjustable-rate mortgage, your monthly mortgage payments will be less in the first few years. The rates will change as per the prevailing rates in the market. Thus your monthly mortgage payments will also differ.

If you opt for fixed-rate mortgage, your monthly mortgage rates will be fixed and predictable. This may make it easier for you to keep up with your financial obligations and stick to your monthly budget.

Does your income support the size of the mortgage?

Your income is undoubtedly an important factor that determines what size and type of a mortgage you can afford. It is important that you live within your means.

What is your debt to income ratio?

Your DTI or debt to income ratio is another factor that can help you to decide how much mortgage you should take out. The more debt you have the less you should consider borrowing.

What is Your Credit Score?

Your credit score has a big impact on the cost of borrowing. The better your credit report and credit score the better and more favorable your financing options will be.

If you think you will be able to improve your credit score in the short term then it may be worth the wait.

How big of a down payment can you afford?

The down payment that a home buyer is both willing and able to make is one of the most important factors considered by lenders.

The bigger the down payment is the cheaper the financing costs will be.


Is buying a home the best use of those funds?

There is no question that owning a home is one of the most beneficial purchases that people make. However before you purchase a home you still need to weigh the pro's and con's of the purchase as well as the opportunity cost.

Debt Settlement Basics

Debt Settlement

Debt settlement can be defined as resolving distressed loans and debt through a pay off agreement between both creditor and borrower. Typically the debt to be payed is drastically reduced and the new reduced amount is paid immediately in one large payment.


Settling debt and financial obligations is a great way to get rid of unsecured debt that has accumulated from credit cards and or other high interest unsecured debt that one may have.

Who Performs or Negotiates a Debt Settlement Agreement?

A debt settlement agreement must be approved by both the lender and the borrower. As this would imply all that is needed for a person overwhelmed with credit card debt is a means to contact the lender as well as a lender willing to settle.

However many consumers have been known to hire debt settlement firms and or debt settlement lawyers or debt settlement counseling agencies or even a friend better suited to to do so. Having said this there is no reason what so ever that you should not partake on this task on your own if you feel you are able to so adequately enough.

You can successfully obtain a debt settlement arrangement all by yourself if you are willing to put in the time and effort. Prior to this post I posted a DIY article outlining how to settle credit card debt. If you are interested in getting rid of credit card debt than that may be a helpful resource and worth taking a look at.

I also wanted to make sure that everyone realizes that negotiating with credit card lenders is no easy task and should be given considerable consideration and effort.

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DIY Credit Card Debt Settlement

Borrowers who are amidst a financial hardship and can not make timely monthly payments on their credit card debt can benefit from debt settlement. Distressed borrowers are able to avoid bankruptcy as well as reduce the total amount owed by successfully negotiating a settlement with their creditors.

This post discuses how consumers of credit card debt can obtain debt help and a debt settlement offer on their own.



How to Obtain a Debt Settlement Agreement with Your Creditors


1. Raise the Cash

Before you can seriously entertain the idea of settling your debt you need to have some serious cash.

This may mean saving for a while. Many people are only able to do this by defaulting on their credit card payments.

The lender already has a monthly payment arrangement with you that you have most likely defaulted on sense you are in the current predicament that you are in.

The lender is not going to be quick to jump to another monthly payment plan and is certainly going to want more then you would have to pay in a lump sum agreement.

2. Determine Your Settlement Target

Typically a debt settlement agreement is anywhere from 20 - 70 percent of the outstanding balance that is owed to the lender.

Figure out what percentage you are able to pay. Is this amount realistic?

Rationalize how you are going to lay these cards out on the table once you get on the phone.

For instance if your dealing with a 8,000 dollar acct and you have 5,500 dollars that you can some how muster then in terms of debt settlement you are doing pretty well. Here I would suggest offering 3000 and no higher the 3500 to 4000 dollars in this initial round of negotiations.


3. Make the Initial Contact


When you do get on the phone and you get that first rep on the phone you can probably expect to hear "NO". This does not really mean "NO" this will almost always be the case because you are most likely talking to somebody not able to say yes.

Try to go around them if you can, this comes surprisingly natural to some but it can also be like moving a mountain depending on your personality and how long of a lunch break your rep on the other end took if any.

What you can do is to collect as much information as possible. Important information would be the time the reps id info and the questions and responses that accumulate between you and the rep. It does not hurt to let it be known that you are in fact recording information and responses.


4. Find a Decision Maker

Remember that it is not easy finding a decision maker who can approve a settlement offer. The longer you have been in default the easier it is going to be to get a settlement offer. However it is never going to be easy to find a decision maker which is what you really want.

Once you do get a decision maker on the phone you should be able to get a settlement offer at some point.

Sometimes you will have to correspond by mail. This is especially true with bigger banks.

If you get a offer through the mail continue correspondence and lender communication via that outlet of communication.


5. Getting the Agreement

Generally they will send it in the mail.

You need to look it over of course and sign it and send it back with the payment but only after you know that the representative has signed it as well.

Then you can count on that credit card account and card to be useless.

Cash For keys

Foreclosure sales are at all time highs.

Homeowners are losing their homes everywhere. Many people who lose their home to foreclosure have to move, and thus incur significant expenses and moving costs. This is a financial hardship in itself but is often endured while the former residents are already amidst a current financial hardship which has caused them to default on their mortgage payments and fall victim to foreclosure in the first place.

A program called Cash for Keys was developed to address this homeowner difficulty.


Cash for keys offers homeowners and renters who must move due to foreclosure financial aid and foreclosure relocation assistance.

How Cash for Keys Works

The lender or mortgage servicer offers the occupant who must move due to a foreclosure financial assistance through a conditional agreement.

The occupant must agree to move out by a certain date.

The occupant must agree to leave the property in acceptable condition.

If the occupant follows all requirements of the agreement they are given thousands of dollars in foreclosure relocation assistance and financial aid.


Typical Cash for Keys Amount

The exact amount received through a cash for keys like program is variable.

The typical amount will range from 1,000 - 5,000 dollars.

Chapter 13 Bankruptcy

Borrowers with overwhelming financial obligations can obtain debt help through a chapter 13 bankruptcy given the borrower has income and is able to make good on their financial obligations through a feasible and fair compromise with the existing creditors.


What is Chapter 13 Bankruptcy?

This bankruptcy chapter is the legal process of restructuring the debt under the supervision of a trustee.

This is not a liquidation like chapter 7 bankruptcy. Instead this chapter of bankruptcy restructures the existing debt of the borrower by developing a feasible and fair payment plan. Creditors are paid according to the plan developed in the chapter 13 bankruptcy process.

Key Points of Chapter 13 Bankruptcy

The repayment plan will be for a term of about 3-5 years.

Chapter 13 will stop foreclosure.

The mortgage payments will be due as usual after you file and the back owed portion will be part of the chapter 13 repayment plan.

Designed for individuals or unincorporated businesses.


Other Important aspects of Chapter 13 Bankruptcy


Bankruptcy is not a pleasant or relieving experience. Nor is it cheap. There are many consequences which carry a long shelf life and the consideration of Bankruptcy should be done so with extreme care, time, responsibility, and the proper resources and guidance such as a qualified attorney.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a legal process which exists, and was created, as a debt solution for those who are overwhelmed with debt, and further, this chapter of bankruptcy is intended to help borrowers who have no feasible way of complying with the terms of the debt in it's current form. 

This chapter is able to provide consumers help with debt and financial hardship.


How Does Chapter 7 Bankruptcy Work?



Chapter 7 Bankruptcy is a legal process of liquidation of the borrowers assets in which the proceeds are used to repay all or a portion of the debt owed to the creditors.

Liquidation bankruptcy is available to both businesses and individuals.


The Process of Chapter 7 Bankruptcy

The first step of the process of Chapter 7 Bankruptcy is the petition submitted by the borrower. The petition includes a detailed financial package that outlines the assets, liabilities, and expected earnings of the borrower.

Once the court has the filed petition a trustee is appointed to the bankruptcy by the court.

The trustee will then organize and carry out several meetings with the creditors to determine the allocation of the future proceeds from the liquidation of the debtors assets.

The liquidation of assets is executed and the proceeds are distributed as planned.

Other Important aspects of Chapter 7 Bankruptcy

Remember that bankruptcy is a last resort and is not a pleasant or relieving experience. Nor is it cheap. There are many consequences which carry a long shelf life and the consideration of bankruptcy should be done so with extreme care, time, responsibility, financial consideration, and the proper resources and guidance such as a qualified attorney.