Budgeting Solutions w Credit Coaching

 7 Steps for getting out of debt – FOREVER!

1. Start an emergency fund.
2. Prioritize debt and attack it.
3. Save 3 to 6 months wages in case of emergency.
4. Start retirement planning.
5. Start college fund.
6. Pay off home early.
7. Build wealth! Give!

12/03/06: Glenn Kelso - "About Money"  recorded at The Meeting Place. Large file, please be patient.

Read about how Hurricane Katrina changed bankruptcy laws...

Read about Interest Only Mortgages cost vs. benefits...

Money and the Marlboro Man...

Interest Aftermath...

Live Within Your Means...

Check out this interesting commercial. If this is not the banks discouraging you to use your cash then....? This is the stuff that makes me crazy!

Values vs. Spending Habits are yours in alignment...?

Some advise on getting started from Certified Financial Planner Glen Foster...

Here are some tips to keep in mind to help you prepare a home budget:

1. Make sure you list all of your expenses for the month, and don't forget to include categories for unexpected medical and dental expenses that may occur.
   

2. Be sure to include all sources of income when determining your cash flow. Many people forget to include tax refunds, bonuses, and gifts when creating their household budget.
   

3. Make sure that you pay yourself first, your savings second, and then everything else.
   

4. If you don't have experience creating and following a budget, consider attending our workshop or having us create a budget that will help you keep track of spending and plan for the future.
   

5. Set budget goals. Whether your goal is to save to buy a new car or a home, having some type of financial goal will give you something to work towards.
   

6. Be flexible. There may be times that you have to change your budget due to some unexpected circumstances. But remember to get back on track as soon as you can.
   

7. Review your budget often. Make adjustments when they are needed. For example, if you pay off a credit card bill, instead of taking the money that you had used for that payment and spending it, try applying it towards another bill, or put it into some type of savings plan.

You NEED to KNOW...

~ "People who learn early in life how to budget will fare much better in their financial life than people who are still struggling with the basics of budgeting. For some people, budgeting is a dirty word, like dieting, because it means that things will have to change, and most people don't like changes in their lives.

~ Learning how to prepare and follow a household budget is a positive change that can be done. It takes discipline and a sense of wanting to improve the quality of your life. Without a budget, people spend their money on whatever they want, and then try to pay their bills with whatever is left over; and sometimes, they discover too late that they don't have enough money to pay their bills. With a budget, people pay their bills, have some money to put into savings, and still have money to buy things." Quoted from, That Money Show, www.pbs.org

Hurricane Katrina Affects Bankruptcy Laws

PLANO, Texas (AP) -- Jerry and Deborah Alciatore fled New Orleans with nothing but a couple of overnight bags, an ice chest and their credit cards. The bags emptied quickly, but two weeks after Hurricane Katrina hit, the balance on the credit cards is mounting fast.

Their first week on the road, they charged $1,600 in food and hotel bills in Houston, about $400 worth of clothing, mostly from discount stores, and a couple hundred more on gasoline.

Jerry Alciatore splurged $1,200 on a laptop to keep in touch with employees of his small architectural firm, pushing the credit card bill to about $5,000. They'll soon have to make another mortgage payment on their house in Metarie, which was damaged but not destroyed by 3 feet of floodwater.

"I'm worried. We have about a one-month gap where my income will be cut off and so will my wife's," he said. "I have to see if my business is still going to be OK. We're going to be out of our house for maybe three months, but I have a mortgage payment every month, and now we have to rent an apartment."

The Alciatores are quick to say they are lucky compared to others who suffered so much more. They consider themselves middle class, maybe upper middle class.

Still, financial experts say the couple is right to be worried. The Alciatores and other Katrina victims who thought they were financially secure must keep their debt in check while facing huge relocation costs and uncertainty about their income. It's not easy.

"People in a crisis are not thinking clearly. Their emotions take over, and that's not a good place to be when it comes to your finances," said Deb Outlaw, a CPA and financial planner in Dallas. "Sometimes they feel like they have to get back to what they had before the disaster, but they need to be patient."

Like much else surrounding Katrina, the financial aftermath is a story of haves and have-nots.

Helen Salazar-Realini, a financial planner in Miami, said most of those who left the Gulf Coast early will be fine. Insurance, after a deductible that can run several thousand dollars, will cover their homes and cars and living expenses while they are uprooted.

Renters will be in far worse shape, she said. They may have lacked insurance to cover their belongings and have difficulty recovering security deposits.

Salazar-Realini said people in such a dilemma should seek consumer credit counseling offered by familiar agencies such as United Way.

"They will expect that you'll cut up all your credit cards. They'll put you on a budget," she said. Most helpfully, those agencies can negotiate a repayment plan with creditors that ideally should waive additional interest, the planner said.

Critics say credit card issuers are making it harder for people to dig out of debt by increasing penalty rates for late payments. Nearly half raise interest rates for customers who are late paying other bills.

Credit card companies now say they will waive penalties for Katrina victims who are unable to pay on time. Credit card giant MBNA Corp. will give hurricane victims a two-month payment holiday and a break from cash advance and late fees.

Jim Donahue, an MBNA spokesman, acknowledged that some people will take on more debt than they can repay. He said it was too early to tell what the credit card company would do then.

Rhonda Bentz, a spokeswoman for Visa USA Inc., said most banks that issue Visa cards are expected to offer more lenient terms to hurricane victims.

"There are some who are going to be staying in hotels, putting that on their credit cards," she said. "The displacement is going to be much longer and cover many more people" than other recent hurricanes or the September 11 terror attacks. "It's hard to tell what the impact might be."

Katrina has renewed the debate over changes to the bankruptcy code set to take effect next month.

The Consumer Federation of America and other groups are lobbying Congress to delay the new bankruptcy law, which they opposed all along. A delay would help Katrina victims file for Chapter 7 bankruptcy protection under the old law, making it easier for them to wipe out most kinds of debt rather than set up a 3- or 5-year repayment plan.

"They turned the bankruptcy courts into collection agencies for credit card companies. That means there's less protection for victims of Katrina," said Elizabeth Warren, a bankruptcy law professor at Harvard and a critic of the new law.

The American Bankers Association is opposed to delaying the new law. Floyd Stoner, the group's executive director for congressional relations, said creditors and bankruptcy judges will treat hurricane victims sympathetically.

"If you lost all your assets, you're not going to have to repay part of your debt ... that will be even more true in a natural disaster like Hurricane Katrina," Stoner said.

At a job fair near Dallas, Shannon Miller and her fiance, Darin O'Connor, said they charged $200 for gasoline, $300 for four nights in a Dallas hotel, and are still using credit cards for frequent trips to Wal-Mart and Target to buy everything from an iron to the clothes they wore when they lined up for interviews at the job fair.

"We have to get jobs to support ourselves," Miller said. "We can't sit around for six months like it's vacation."

Kimberly Rogers, 26, and Julian Ford, 23, who lost their rental apartment in New Orleans, said they were spending cautiously to avoid financial trouble.

They have received money, food, clothes and shelter from friends and relatives. They have avoided using credit cars, with help from Rogers' family.

"They don't want us to spend any money right now, and I don't want to create any debt," Ford said. He paid off the balance on two credit cards just before Katrina and is confident about finding a job and paying off the $400 on the remaining card.

The Alciatores and about 40 other Katrina victims are staying in a suites hotel in Plano, a Dallas suburb. The Red Cross is paying for up to 28 days of lodging. Many have applied for $2,000 in aid from the Federal Emergency Management Agency.

"I'm not going to line up for food stamps," Alciatore said, "But when you're cut off from your income and your bank account, you look around and say: 'I'm not too proud to take a couple grand to help get back on my feet."'

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Cost versus benefits of interest only mortgages

Mortgage Matters with Joe Tomkins

As seen in the Nanaimo News Bulletin www.nanaimobulletin.com

There is no doubt that the newest trend in real estate financing in Canada is the interest-only mortgage. There are a number of different variations and uses that may be right for some; however, a better understanding of the cost is necessary prior to jumping into this high cost solution.

An interest only mortgage is interest-only for some or all of the loan term, but it's also likely to be a form of "balloon" financing - a loan with huge payments in the final years, hundreds more than the original interest only payment. To avoid the interest only trap, let's compare a sample interest-only mortgage loan and a basic fixed-rate mortgage.

Imagine that we borrow $200,000 at 5.55% for a ten year term amortized over 25 years. In the case of this mortgage, the initial rate is fixed for 10 years and the loan is an interest-only product during its first decade. Following the interest, only period, principal and interest payments will begin and must be sufficient to ensure the balance is paid in full within the remaining 15 years of amortization.

In terms of monthly payments, the interest-only product costs $925 a month during the first decade, while the fixed-rate loan with a 10-year term has a monthly cost of $1,227. A $302 savings seems attractive. At the end of 10 years, the interest-only borrower has paid out $111,000 while the fixed-rate loan has cost the borrower $147,240 - a difference of $36,240.

At the end of 10 years, the interest-only borrower still owes $200,000 while the fixed-rate loan balance is $150,186. That means $49,814 has been knocked off the fixed loan amount versus nothing from the interest-only loan. If we compare the monthly cash saved in the first 10 years by the interest-only borrower ($36,240) with the principal reduction earned by the fixed-rate borrower ($49,814), we can see that the interest-only approach is actually more costly by $13,574.

Now the interest only borrower must repay their $200,000 mortgage in 15 years. For comparison sake, let’s say that the interest rate is the same. Now the payments balloon to $1,633 per month. That is an increase of $708 over the original interest only payment. This is also assuming rates will not rise in 10 years making these numbers even more unmanageable.

While the interest only option is not right for the average homeowner, this and other interest only options can be of advantage to those who are buying/selling rental properties or looking to save money over a very short term. So before you choose to use this high cost option consult with a mortgage professional to ensure you are fully aware of the total costs and available strategies.

Joe Tomkins

Mortgage Consultant                                                    

Invis Mortgages Office 250 754 7775 email: joetomkins@invis.ca www.nanaimomortgagematters.com

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Values and Spending Habits - Are yours in alignment?

 Do you ever try to convince yourself after a shopping trip that you deserve it, your worth it, or do you simply enjoy the purchase with out the emotional battle.  This is a simple question to find out if your spending habits are in alignment with your values.

 Arguments between couples over financial matters are one of the root causes of divorce. It is amazing how many couples are unable to discuss their financial situation.  They have children together and many years in a loving marriage but are cautiously avoiding any mention of finances.  Why is this?

 In essence it comes down to differing value systems around money. Value systems are developed by the age of thirteen, at that young age we have been taught how we will treat many things, including money, for the rest of our lives.

 Each person is entering a marriage with different beliefs around money.  For example take a couple where one person was raised in a household where everything you desired was provided even your entire college tuition.  The other partner may have grown up with limited resources where money was scarce.  Are they going to save for items or purchase on credit.  Do they fall into the spender’s category or the savers?  One person maybe completely at ease with their spending habits, while the other’s stress level is rising to the boiling point.  Then there is the unavoidable argument. 

 We work with couples (and individuals!) to realize their values and begin bringing their spending habits into alignment.  Having a budget and following it will create new money habits and each person will be focused on one united goal.  The result is a couple working together encouraging and supporting each other.

 “Stress is the bill you pay when you live on credit.”  This quote explains our goal, to have our clients become debt free, saving and paying cash for purchases and no longer buying on credit and then carrying the stress of that decision for months after.

 Good Cents provides a one year budget plan, credit reviews, goal setting, and most importantly helps to create new money habits. Relieve yourself from the burden of interest and finance charges. Save more money, pay cash, enjoy your purchase because it is in your budget.  Simply put, following your budget is in alignment with your value system. No guilt attached.

 If you don’t already have a thorough budget, give us a try. Call us or visit our website for more information on how we can help.  Our goal is to help clear the fog of confusion and guide our clients to the ultimate goal of become debt free.  It takes time to create new financial habits and without support it becomes daunting.  We look forward to working with you to achieve a balanced stress free future.

 David & Laurie Lee - March 07 

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Millstone Creek Special Assessment

After receiving information of our special assessment at over $106,000 on Wednesday July 11th we were left with a feeling of shock and disbelief. We had a short term plan to pay off our mortgage and now were looking at the whole idea of being mortgage free dumped in the garbage along with the exteriors of our homes. 

Well believe it or not, within an hour or so of reviewing our personal budget, and making a couple of phone calls to our lender and the HPO office we had a plan that would get us back on track, and really did relieve much of the stress that we were sharing only moments earlier. 

The fact is that there is only one way to deal with this bill. It has to be paid off, in full, no matter what the cost, and there is no magic bullet that is going to make it defer longer or go away. It is going to take hard work, disicpline and a plan to follow to see it through. 

What we have learned so far:

By calling the HPO office: Because the size of the repair assessment and our first mortgage is more than the most recent assessed value of the home we will automatically qualify us for the interest free loan. Our lender does not need to decline us first, just fill out some forms. The form can be found here.

Normally these loans will renew in sync with your mortgage. In our case that could have been 28 months, at which time the loan would have been combined with our first mortgage (if we qualify). But, in the case of this assessment, the HPO office tells us we will get the 5 full years of interest free, and it will be re-assessed after that. If after this term is up, we still do not qualify for a regular mortgage, the interest free loan may be renewed.

The monthly payment on all mortgages including the no interest repair loan is usually 25% of your gross household income. To figure this out, take your monthly mortgage payment and divide it by your income before taxes. Normally, lenders will allow a 40% debt service ratio, so you should still be able to afford other payments such as a car payment if needed. Our initial concern when we were first faced with this was if the HPO loan maxes out our debt service ratio, what would happen if we wanted to get a new (or new to us) vehicle? 

There is quite a bit of info on the HPO web page, in their frequently asked questions section. They are very helpful by phone as well. 

Hopefully you have a plan on how you can work towards tackling this nasty bill we have just been given. If you don't, we can help with that. We are going through this at the same time you are, and I can tell you from personal experience that it makes a huge difference emotionally just knowing how, even if the when is a ways away. The contact info is on the top of this page.