Myth [mith] – noun – an unproved or false collective belief that is used to justify something; any invented story, idea, or concept. In the world of credit, innumerable myths abound. Let’s explore a few …
MYTH. When delinquent accounts, judgments, missed payments and other “negatives” are paid, they will be removed from my report. TRUTH – the information will remain. Your credit file is a credit HISTORY, it will simply reflect that it has been paid [which is obviously better than unpaid].
MYTH. Credit reporting agencies make credit decisions. TRUTH – credit reporting agencies provide information [nothing more] to lenders who make the decisions.
MYTH. Personally viewing my credit report will lower my credit score. HUGE MYTH. TRUTH – viewing my credit report will have no negative bearing on my credit score.
MYTH. In the case of divorce, the divorce decree will always carry more weight than the credit obligations. TRUTH – the credit obligation will override a divorce decree.
MYTH. I need to keep a balance on my credit cards and other debts to build a credit history. TRUTH – credit use and on-time payment are what build a credit history. I can do this and still pay the balance in full each month.
MYTH. Shopping for the best rate for an auto loan or home mortgage is not a good idea because the multiple inquiries will be a negative. TRUTH – while many inquiries can hurt one’s credit, inquiries for auto loans and mortgages will be lumped and treated as one inquiry. Shop for the best deals!
MYTH. While poor credit has obvious financial consequences, it doesn’t really affect anything beyond that. TRUTH – an estimated 70% of employers will review your report prior to a hire. Money problems have been linked to less productivity at work, more missed work days, problems at home, and other “baggage” many employers don’t want.
MYTH. I must give permission for a company to see my credit report. TRUTH – with the exception of an employer, permission is not needed. Just look at the inquiry section of your report and you’ll see a lot of people that “pre-approved” you for a credit offer that you never gave consent to.
MYTH. If I’m responsible with credit, I have no need to review my reports. TRUTH – depending on which study you read, it is estimated that as much as 80% of consumer reports contain errors; about 1/3 of those errors are big enough to result in the denial of credit! Ensuring the information in your report is accurate is ultimately YOUR responsibility.
MYTH. Credit reports are the same from company to company. TRUTH – although most companies will report to all three bureaus (Experian, Equifax, and TransUnion), this was not always the case. Also, the speed at which they update information is not the same. I’ve never seen a scenario where the reports were identical with all three …
MYTH. Credit repair companies can fix my credit problems. TRUTH – most are scams. Most are attempting to either (1) work illegally; or (2) try to fix errors that I can fix myself for no cost. Be careful.
MYTH. Credit is too difficult to understand. TRUTH – everyone can AND SHOULD understand their credit. Schedule an appointment if you need help.
HELPFUL CREDIT RESOURCES.
- Ordering your free credit report(s)
- Credit Scoring - MYFICO
- Improving credit, Disputing errors - OFS Resources
- Register for 1 credit Financial Survival (PFP 1183)
- Register for 1 credit Financial Success (PFP 4318)
The Financial Tip of the Week is a service of:
University of Missouri-Columbia
College of Human Environmental Sciences
Department of Personal Financial Planning
Office for Financial Success
Dr. Mark Oleson - OFS Director
Kamis, 26 Oktober 2006
Kamis, 19 Oktober 2006
Credit Card Trap Widens
Credit card companies are notorious for many of their “business” tactics. Many consumers [often students] fall prey to various credit card traps. Many of the more common ‘traps’ are well documented – others, not so much … I want to take the opportunity this week to talk about the more common [as well as new] traps. This is not intended to be an exhaustive list. My initial intent was to write about the most recent trap I’ve read about (Trap #10) – as I started, however, I thought it might be also beneficial to remind you about some of the other more common traps as well.
1. FEES. Fees continue to become an ever-so-important part of a credit card companies revenue. The most common fees include: over-the-limit, late payment, convenience check and balance transfer fees. According to Carddata.com, over-the-limit and late fees have risen 138% and 160% respectively over the past 10 years.
2. PENALTY RATES. More and more companies are becoming less forgiving of late payments. Bank of America, Citibank, and other notable card companies currently raise rates to 30%+ for a single missed payment! OUCH.
3. INTRO OFFERS. Most people are aware of the tactic used by companies to lure in customers with a low rate offer for a short period of time – most people aren’t aware of the cards terms once the intro period expires.
4. USING A CARD WHERE YOU’VE TRANSFERRED A BALANCE. If taking advantage of a intro rate or balance transfer “special” be certain not to use the card for other purchases – your payments don’t go to your higher rate purchases, the payment will go to the ‘special rate’ portion of the balance.
5. CONVENIENCE CHECKS. These are awfully enticing – the checks often come made out to you and advertise that you can use them for anything. The catch? Most charge cash advance rates (~20%), most charge an average transaction fee of 3% of your check amount, and you normally will lose your grace period [even if you pay in full at the end of the month]. Not a great deal in most instances.
6. UNIVERSAL DEFAULT CLAUSE. A tactic initiated in recent years that creates penalty rates not only in the instance where you miss a payment with that particular card. In this agreement, the card is entitled to raise your rates even if you miss a payment elsewhere!
7. “YOU’RE PRE-APPROVED”. This ‘announcement’ makes many feel warm and fuzzy. The reality? All this means is that the company has reviewed your credit report and won’t reject your application based on that information. If you apply for the card, you can still be turned down because of insufficient income or other reasons that won’t be reflected within your credit report.
8. BAIT AND SWITCH. I’ve got a credit card that I use to obtain benefits – cash back on gas and other purchases, etc. If someone else were to apply for that card [or any other credit card requiring someone to have excellent or well established credit], instead of being turned down, on the application, there will be a statement where you are essentially giving permission to the CC company to give you their ‘base’ card if you are turned down for the card in which you are applying.
9. DECREASING MINIMUM PAYMENTS. One of the most financially rewarding tactics (for the CC company) is to decrease your required minimum payment as your balance decreases, essentially keeping you in debt longer. This is a smart tactic on their part because many people that can’t afford to pay the balance in full will simply pay the minimum payment. This required payment will decrease over time, extending the repayment period and interest paid over time.
10. NO MISSED PAYMENT PENALTY RATE. I’m sure this heading is perplexing. The idea of an interest rate going up because of missed payments is rational. But is it legal for a rate to go up for someone that doesn’t miss any payments? That’s what I’ve been reading recently. More and more “savvy” consumers in past years have taken advantage of 0% balance transfers, intro offers, and other “deals.” What many consumers saw as a loophole is now beginning to be closed by CC companies. Smart Money magazine wrote of an individual with what most would consider near perfect credit (790 credit score) – never missed a payment, never over the limit … He carried $8,000 on a credit card because he was taking advantage of the 0% rate for life offer. It was obviously quite a shock to open his statement and see a rate of 29.99%! Apparently, his card company viewed him as a higher credit risk because of his debt and thus, according to the card agreement, had the right to bump him to the ‘default rate’ … Normally, default rates are triggered by missed payments, but apparently, high balances can also trigger a default rate [due to higher risk on the part of the company]. A 2005 study by Consumer Action found that 90% of card issuers would use a universal default rate hike if a customer's credit score decreases, 86% would do so if they paid a mortgage or any other loan late. Nearly half (43%) would hit you with universal default if they decide you have too much debt, while 33% would do it for the exact opposite reason: too much credit available. You can see a rate hike even if all you do is get a new credit card (33%) or shop around for a car loan or mortgage (24%). BE CAREFUL – THE CREDIT CARD TRAP IS WIDENING!
*Schedule a financial counseling/planning session at the OFS
*Walk-ins (M/W from 3-5pm) at the Student Success Center
The Financial Tip of the Week is a service of:
University of Missouri-Columbia
College of Human Environmental Sciences
Department of Personal Financial Planning
Office for Financial Success
Dr. Mark Oleson - OFS Director
1. FEES. Fees continue to become an ever-so-important part of a credit card companies revenue. The most common fees include: over-the-limit, late payment, convenience check and balance transfer fees. According to Carddata.com, over-the-limit and late fees have risen 138% and 160% respectively over the past 10 years.
2. PENALTY RATES. More and more companies are becoming less forgiving of late payments. Bank of America, Citibank, and other notable card companies currently raise rates to 30%+ for a single missed payment! OUCH.
3. INTRO OFFERS. Most people are aware of the tactic used by companies to lure in customers with a low rate offer for a short period of time – most people aren’t aware of the cards terms once the intro period expires.
4. USING A CARD WHERE YOU’VE TRANSFERRED A BALANCE. If taking advantage of a intro rate or balance transfer “special” be certain not to use the card for other purchases – your payments don’t go to your higher rate purchases, the payment will go to the ‘special rate’ portion of the balance.
5. CONVENIENCE CHECKS. These are awfully enticing – the checks often come made out to you and advertise that you can use them for anything. The catch? Most charge cash advance rates (~20%), most charge an average transaction fee of 3% of your check amount, and you normally will lose your grace period [even if you pay in full at the end of the month]. Not a great deal in most instances.
6. UNIVERSAL DEFAULT CLAUSE. A tactic initiated in recent years that creates penalty rates not only in the instance where you miss a payment with that particular card. In this agreement, the card is entitled to raise your rates even if you miss a payment elsewhere!
7. “YOU’RE PRE-APPROVED”. This ‘announcement’ makes many feel warm and fuzzy. The reality? All this means is that the company has reviewed your credit report and won’t reject your application based on that information. If you apply for the card, you can still be turned down because of insufficient income or other reasons that won’t be reflected within your credit report.
8. BAIT AND SWITCH. I’ve got a credit card that I use to obtain benefits – cash back on gas and other purchases, etc. If someone else were to apply for that card [or any other credit card requiring someone to have excellent or well established credit], instead of being turned down, on the application, there will be a statement where you are essentially giving permission to the CC company to give you their ‘base’ card if you are turned down for the card in which you are applying.
9. DECREASING MINIMUM PAYMENTS. One of the most financially rewarding tactics (for the CC company) is to decrease your required minimum payment as your balance decreases, essentially keeping you in debt longer. This is a smart tactic on their part because many people that can’t afford to pay the balance in full will simply pay the minimum payment. This required payment will decrease over time, extending the repayment period and interest paid over time.
10. NO MISSED PAYMENT PENALTY RATE. I’m sure this heading is perplexing. The idea of an interest rate going up because of missed payments is rational. But is it legal for a rate to go up for someone that doesn’t miss any payments? That’s what I’ve been reading recently. More and more “savvy” consumers in past years have taken advantage of 0% balance transfers, intro offers, and other “deals.” What many consumers saw as a loophole is now beginning to be closed by CC companies. Smart Money magazine wrote of an individual with what most would consider near perfect credit (790 credit score) – never missed a payment, never over the limit … He carried $8,000 on a credit card because he was taking advantage of the 0% rate for life offer. It was obviously quite a shock to open his statement and see a rate of 29.99%! Apparently, his card company viewed him as a higher credit risk because of his debt and thus, according to the card agreement, had the right to bump him to the ‘default rate’ … Normally, default rates are triggered by missed payments, but apparently, high balances can also trigger a default rate [due to higher risk on the part of the company]. A 2005 study by Consumer Action found that 90% of card issuers would use a universal default rate hike if a customer's credit score decreases, 86% would do so if they paid a mortgage or any other loan late. Nearly half (43%) would hit you with universal default if they decide you have too much debt, while 33% would do it for the exact opposite reason: too much credit available. You can see a rate hike even if all you do is get a new credit card (33%) or shop around for a car loan or mortgage (24%). BE CAREFUL – THE CREDIT CARD TRAP IS WIDENING!
*Schedule a financial counseling/planning session at the OFS
*Walk-ins (M/W from 3-5pm) at the Student Success Center
The Financial Tip of the Week is a service of:
University of Missouri-Columbia
College of Human Environmental Sciences
Department of Personal Financial Planning
Office for Financial Success
Dr. Mark Oleson - OFS Director
Kamis, 12 Oktober 2006
Pension Protection Act of 2006
Last August, The Pension Protection Act of 2006 was passed, providing many benefits to savers. It was created with an eye on helping to “Protect pension and retirement plan participants and promote individual savings.” In a nutshell [don't worry, we won’t dive into the entire 1,304-page Act today], we’ll focus on five of the prominent areas in the plan …
1. Permanency to retirement plan and savings incentives. Contribution limits to IRAs, 401(k)s, and other workplace savings plans were increased in 2001 but were due to expire in 2010. This legislation makes these increases permanent. It also makes permanent the relatively new Roth 401(k) option which was slow to catch on for fear it would also disappear in 2010.
2. Automatic 401(k) enrollment. The new plan makes it easier for corporations to set up automatic enrollment in 401(k) plans. They can also set the plans to increase contributions automatically over time. I think this is great. If you don’t, you can ‘opt out’ – the issue now is that you may need to opt out of your company plan rather than opting in. In a study of four large companies that made 401(k) enrollment automatic, researchers found that 96% of employees were saving in a 401(k) plan six months after being hired [compared with 43% that were saving after six months prior to the switch to automatic enrollment]. According to the Employee Benefit Research Institute, it is expected that automatic enrollment would increase 401(k) participation from about 66% (currently) of eligible workers to more than 90%. Employers will be able to start contributions at 3% of salary and increase it over time to 6%. “Lifecycle” or “Target Retirement” funds are likely to be the default fund.
3. Deposit your tax refund automatically into an IRA. Starting in 2007, you can directly deposit all or a portion of your federal tax refund into an IRA. Consider this – the average tax refund of $2,400 is more money than the average person now saves for retirement annually!
4. Other IRA Enhancements. Beginning in 2010, it will be possible for anyone to convert eligible workplace savings plans or traditional IRA assets into a Roth IRA [regardless of income]. There are many other enhancements [primarily estate planning-related] which you can read more about below.
5. 529 College Savings Plan benefits are now permanent. The benefits of this college savings tool, established in 1996, were set to expire in 2010. This uncertainty kept many potential parents on the sidelines or in other vehicles because of their uncertain future.
ADDITIONAL RESOURCES.
- White House Pension Act Fact Sheet
- Fidelity Investments
- TIAA-CREF – Pension Protection Act of 2006 Guide
*Schedule a financial counseling/planning session at the OFS
*Walk-ins (M/W from 3-5pm) at the Student Success Center
The Financial Tip of the Week is a service of:
University of Missouri-Columbia
College of Human Environmental Sciences
Department of Personal Financial Planning
Office for Financial Success
Dr. Mark Oleson - OFS Director
1. Permanency to retirement plan and savings incentives. Contribution limits to IRAs, 401(k)s, and other workplace savings plans were increased in 2001 but were due to expire in 2010. This legislation makes these increases permanent. It also makes permanent the relatively new Roth 401(k) option which was slow to catch on for fear it would also disappear in 2010.
2. Automatic 401(k) enrollment. The new plan makes it easier for corporations to set up automatic enrollment in 401(k) plans. They can also set the plans to increase contributions automatically over time. I think this is great. If you don’t, you can ‘opt out’ – the issue now is that you may need to opt out of your company plan rather than opting in. In a study of four large companies that made 401(k) enrollment automatic, researchers found that 96% of employees were saving in a 401(k) plan six months after being hired [compared with 43% that were saving after six months prior to the switch to automatic enrollment]. According to the Employee Benefit Research Institute, it is expected that automatic enrollment would increase 401(k) participation from about 66% (currently) of eligible workers to more than 90%. Employers will be able to start contributions at 3% of salary and increase it over time to 6%. “Lifecycle” or “Target Retirement” funds are likely to be the default fund.
3. Deposit your tax refund automatically into an IRA. Starting in 2007, you can directly deposit all or a portion of your federal tax refund into an IRA. Consider this – the average tax refund of $2,400 is more money than the average person now saves for retirement annually!
4. Other IRA Enhancements. Beginning in 2010, it will be possible for anyone to convert eligible workplace savings plans or traditional IRA assets into a Roth IRA [regardless of income]. There are many other enhancements [primarily estate planning-related] which you can read more about below.
5. 529 College Savings Plan benefits are now permanent. The benefits of this college savings tool, established in 1996, were set to expire in 2010. This uncertainty kept many potential parents on the sidelines or in other vehicles because of their uncertain future.
ADDITIONAL RESOURCES.
- White House Pension Act Fact Sheet
- Fidelity Investments
- TIAA-CREF – Pension Protection Act of 2006 Guide
*Schedule a financial counseling/planning session at the OFS
*Walk-ins (M/W from 3-5pm) at the Student Success Center
The Financial Tip of the Week is a service of:
University of Missouri-Columbia
College of Human Environmental Sciences
Department of Personal Financial Planning
Office for Financial Success
Dr. Mark Oleson - OFS Director
Kamis, 05 Oktober 2006
8% Rule ...
In an interview earlier this week, I was asked the question of what financial pitfalls most befall college students. I’ve come to the conclusion that I am much more concerned about pride (why students don't come to seek financial assistance than why they do come). Aside from pride, the biggest financial problem I’ve witnessed is student loans. There are a lot of potential factors here: overspending, no budget, borrowing more than can afford to be repaid, having a ‘head in the sand’ approach and not really having a clue about what they owe or anything else about their financial situation, and increasing educational costs, just to name a few.
I want to share a couple of free resources designed to help people evaluate their student loan situation. One uses a needs-based approach, and one uses a rule of thumb to gauge your financial situation.
Financial Path to Graduation.
The Path, developed at Brigham Young University nearly ten years ago, takes a needs-based approach to asking questions to evaluate your situation. Where will my current course of action take me? Will I be able to afford this situation? This process requires a student to evaluate their individual path to determine if it will lead them to firm footing at graduation, as opposed to an all-too-common scenario of owing more than can be afforded. After witnessing the benefits of the program for students, BYU began requiring that students complete The Path prior to being given new loans – the results have been impressive: lower default rate, fewer borrowers, lesser loan amounts … not bad in the current environment of more borrowers and more borrowing. Read more about early results of their Path program.
SLOPE Calculator (8% Rule).
I think when reviewing ones student loan situation that a rule of thumb can also offer insight into the “path” that one is on. A generally accepted rule of thumb in the student loan arena is that one can afford a payment that is 8% or less of your gross income (if you don’t have an idea of what starting salaries are in your field of study, The Path can help). Obviously 8% is a guideline only, 8% for one person may create a hardship (picture someone with a large car payment, credit card debts, etc.) vs. someone with similar student loan debt but no other debts. That is the exact reason I prefer a needs-based approach. The advantage of the 8% rule is it allows me at any stage of my education to take stock in where I am. A really nice tool to help in this process was developed by the Colorado Student Loan Program. The Illinois “Mentor” program uses this tool and provides detailed information about what it is and how it works. It is well worth the few minutes it would require to examine your current student loan borrowing.
- Schedule a financial counseling/planning session
- Walk-in sessions available Mondays/Wednesdays (3-5pm) at the Student Success Center
The Financial Tip of the Week is a service of:
University of Missouri-Columbia
College of Human Environmental Sciences
Department of Personal Financial Planning
Office for Financial Success
Dr. Mark Oleson - OFS Director
I want to share a couple of free resources designed to help people evaluate their student loan situation. One uses a needs-based approach, and one uses a rule of thumb to gauge your financial situation.
Financial Path to Graduation.
The Path, developed at Brigham Young University nearly ten years ago, takes a needs-based approach to asking questions to evaluate your situation. Where will my current course of action take me? Will I be able to afford this situation? This process requires a student to evaluate their individual path to determine if it will lead them to firm footing at graduation, as opposed to an all-too-common scenario of owing more than can be afforded. After witnessing the benefits of the program for students, BYU began requiring that students complete The Path prior to being given new loans – the results have been impressive: lower default rate, fewer borrowers, lesser loan amounts … not bad in the current environment of more borrowers and more borrowing. Read more about early results of their Path program.
SLOPE Calculator (8% Rule).
I think when reviewing ones student loan situation that a rule of thumb can also offer insight into the “path” that one is on. A generally accepted rule of thumb in the student loan arena is that one can afford a payment that is 8% or less of your gross income (if you don’t have an idea of what starting salaries are in your field of study, The Path can help). Obviously 8% is a guideline only, 8% for one person may create a hardship (picture someone with a large car payment, credit card debts, etc.) vs. someone with similar student loan debt but no other debts. That is the exact reason I prefer a needs-based approach. The advantage of the 8% rule is it allows me at any stage of my education to take stock in where I am. A really nice tool to help in this process was developed by the Colorado Student Loan Program. The Illinois “Mentor” program uses this tool and provides detailed information about what it is and how it works. It is well worth the few minutes it would require to examine your current student loan borrowing.
- Schedule a financial counseling/planning session
- Walk-in sessions available Mondays/Wednesdays (3-5pm) at the Student Success Center
The Financial Tip of the Week is a service of:
University of Missouri-Columbia
College of Human Environmental Sciences
Department of Personal Financial Planning
Office for Financial Success
Dr. Mark Oleson - OFS Director
Kamis, 28 September 2006
Opting Out of Unwanted Credit Card Solicitations
Last week I got an e-mail from a frustrated student. She was ruining her paper shredder destroying all of the credit offers she was inundated with on a daily basis and she was fed up. Probably a familiar cry -- over 6 billion offers entered U.S. households last year alone. Her query – how do I stop them? She referenced the helpful tip on opting out of solicitations, which provided information on stopping unwanted phone solicitations (via state and national ‘do not call’ registries).
Stopping the MADNESS!
Under the Fair Credit Reporting Act (FCRA), credit reporting agencies are permitted to include your name on lists used by creditors or insurers to make firm offers of credit or insurance. What you may not have known is that the FCRA also enables you to “Opt-Out,” which prevents the credit reporting agencies from providing the information contained in your credit file to others [unsolicited offers]. NOTE. This does not keep you from obtaining additional credit, it merely keeps you from receiving pre-approved, unsolicited, and otherwise unwanted offers. If you’re wondering what the benefit(s) of receiving unsolicited offers, you can view the credit reporting agencies report to Congress (pp. 32-40).
How to do it.
There are two good ways to stop the offers [or at least slow them down]:
(1) Go to www.OptOutPrescreen.com (or call 888-5-optout). These are the credit reporting agencies opt in/opt out resources which will stop the agencies from selling your information to direct marketers. You can opt out for a five-year period of permanently. You can always opt back in if you miss the mail. If you use the website provided, you can fill out a brief, simple form to opt out. It will provide a screen with the information you provided that you will need to print, sign, and mail to the address provided in order to permanently opt out. If you don’t do that last step (print, sign, and mail), it will opt you out for the 5 year period instead.
(2) Add your name to the Direct Marketing Associations (DMA) Do Not Mail file. You can access this online – this process costs $1. You can also send a letter or postcard with your name, address and signature to: Mail Preference Service; Direct Marketing Association; PO Box 643; Carmel, NY 10512. The ‘mail method’ also costs $1 [+ postage]. Your name stays on the list for 5 years, and you can re-register at the end of that period.
Credit card companies get consumer information from other sources in addition to those mentioned above, so, while these two methods will considerably slow down credit card offers, the offers won't necessarily stop completely. SORRY.
ADDITIONAL RESOURCES.
Direct Marketing Association FAQ
FCRA Summary
Opt Out/Opt in Online Form
Opt Out FAQ
Schedule a Financial Session with the OFS
The Financial Tip of the Week is a service of:
University of Missouri-Columbia
College of Human Environmental Sciences
Department of Personal Financial Planning
Office for Financial Success
Dr. Mark Oleson - OFS Director
Stopping the MADNESS!
Under the Fair Credit Reporting Act (FCRA), credit reporting agencies are permitted to include your name on lists used by creditors or insurers to make firm offers of credit or insurance. What you may not have known is that the FCRA also enables you to “Opt-Out,” which prevents the credit reporting agencies from providing the information contained in your credit file to others [unsolicited offers]. NOTE. This does not keep you from obtaining additional credit, it merely keeps you from receiving pre-approved, unsolicited, and otherwise unwanted offers. If you’re wondering what the benefit(s) of receiving unsolicited offers, you can view the credit reporting agencies report to Congress (pp. 32-40).
How to do it.
There are two good ways to stop the offers [or at least slow them down]:
(1) Go to www.OptOutPrescreen.com (or call 888-5-optout). These are the credit reporting agencies opt in/opt out resources which will stop the agencies from selling your information to direct marketers. You can opt out for a five-year period of permanently. You can always opt back in if you miss the mail. If you use the website provided, you can fill out a brief, simple form to opt out. It will provide a screen with the information you provided that you will need to print, sign, and mail to the address provided in order to permanently opt out. If you don’t do that last step (print, sign, and mail), it will opt you out for the 5 year period instead.
(2) Add your name to the Direct Marketing Associations (DMA) Do Not Mail file. You can access this online – this process costs $1. You can also send a letter or postcard with your name, address and signature to: Mail Preference Service; Direct Marketing Association; PO Box 643; Carmel, NY 10512. The ‘mail method’ also costs $1 [+ postage]. Your name stays on the list for 5 years, and you can re-register at the end of that period.
Credit card companies get consumer information from other sources in addition to those mentioned above, so, while these two methods will considerably slow down credit card offers, the offers won't necessarily stop completely. SORRY.
ADDITIONAL RESOURCES.
Direct Marketing Association FAQ
FCRA Summary
Opt Out/Opt in Online Form
Opt Out FAQ
Schedule a Financial Session with the OFS
The Financial Tip of the Week is a service of:
University of Missouri-Columbia
College of Human Environmental Sciences
Department of Personal Financial Planning
Office for Financial Success
Dr. Mark Oleson - OFS Director
Kamis, 21 September 2006
Emergency Funds
“Pay off your debt.” “Max out a Roth IRA.” “Buy a house.” Personal finance professionals bombard us with a litany of things we ought to do in order to achieve financial independence. All of the things that need to be done can become extremely overwhelming. Where’s a person to start? Most tend to agree that the first thing you should do — after meeting basic needs, and while reducing spending — is to start an emergency fund.
What is an emergency fund?
An emergency fund is an easily accessible source of money for use only in case of emergency. Emergencies do not include a new car, a PlayStation, a vacation … [I think you get the idea]. It is for use only in the case of an emergency.
Why do you need an emergency fund?
- A golf ball smashed your windshield.
- Mole problems.
- Job layoff.
- Health problems.
- Because “life” happens.
Insurance is purchased protection to assist with many of life’s emergencies. It won’t, however, cover everything – in addition, there will normally be a required deductible or co-pay as part of the insurance coverage.
People with an emergency fund tend to be in better shape than those without one. Studies show that those without emergency savings are more likely to accumulate debt. It may feel like you can’t afford to have one, but the truth is you can’t afford not to have one. Emergency funds are essential, even for college students. Why? There is a tendency for people that don’t have an emergency fund to turn to credit cards, payday loans [and other forms of debt] to cover the emergency if they don’t have the savings otherwise.
How much is enough?
Though personal finance experts agree emergency funds are necessary, there’s no consensus on how much is enough. Some say you need to save a year’s salary. Others believe $1000 is sufficient. Most advice tends to fall someplace in the middle. My recommendation is to do what will suit you. There is not one right answer. Examine your situation — your income and your needs — to decide how much you should save. I would look at an emergency fund in a vastly different way if I were a tenured professor than if I were self-employed.
What do the “experts” say?
The Wall Street Journal’s Complete Personal Finance Guidebook says: “How much is enough? The answer is different for different people in different situations. For those in careers with a large, ongoing demand or who have relatively strong job security, three months’ worth of expenses is probably enough of a cushion. Those with bigger career demands, such as higher-paid managers and executives or couples who work in the same industry or at the same company, might want nine months to a year’s worth of expenses in the bank.
In You Don’t Have to Be Rich, Jean Chatzky recommends three to six months of living expenses. Your Money or Your Life recommends six months of living expenses, but only once you’ve achieved financial independence.
In Dave Ramsey’s The Total Money Makeover, Ramsey’s very first step is to save $1000 in an emergency fund. Then he advocates eliminating debt; then he recommends building a three- to six-month cushion.
How do you get started?
Starting an emergency fund can be as simple as depositing a little money into a savings account. I think it’s wise to keep your emergency money someplace that’s not too easy to access. In other words, I wouldn’t advise that your funds be kept in your checking account or a savings account that you use regularly. Put it somewhere where the money is easily accessible, but not a regularly used expense account. Many experts suggest money market accounts as the best place to park emergency fund money. I’m a big fan of the high-yield online savings accounts – ones that are FDIC insured with no fees and no minimums. HSBC (hsbcdirect.com), ING (ingdirect.com), and Emigrant Direct (emigrantdirect.com) are all good examples that are currently paying above 5% in some instances. (SOURCE – Get Rich Quick Slowly).
Last Weeks Tip: Vesting
Schedule a Financial Counseling/Planning Session
The Financial Tip of the Week is a service of:
University of Missouri-Columbia
College of Human Environmental Sciences
Department of Personal Financial Planning
Office for Financial Success
Dr. Mark Oleson - OFS Director
What is an emergency fund?
An emergency fund is an easily accessible source of money for use only in case of emergency. Emergencies do not include a new car, a PlayStation, a vacation … [I think you get the idea]. It is for use only in the case of an emergency.
Why do you need an emergency fund?
- A golf ball smashed your windshield.
- Mole problems.
- Job layoff.
- Health problems.
- Because “life” happens.
Insurance is purchased protection to assist with many of life’s emergencies. It won’t, however, cover everything – in addition, there will normally be a required deductible or co-pay as part of the insurance coverage.
People with an emergency fund tend to be in better shape than those without one. Studies show that those without emergency savings are more likely to accumulate debt. It may feel like you can’t afford to have one, but the truth is you can’t afford not to have one. Emergency funds are essential, even for college students. Why? There is a tendency for people that don’t have an emergency fund to turn to credit cards, payday loans [and other forms of debt] to cover the emergency if they don’t have the savings otherwise.
How much is enough?
Though personal finance experts agree emergency funds are necessary, there’s no consensus on how much is enough. Some say you need to save a year’s salary. Others believe $1000 is sufficient. Most advice tends to fall someplace in the middle. My recommendation is to do what will suit you. There is not one right answer. Examine your situation — your income and your needs — to decide how much you should save. I would look at an emergency fund in a vastly different way if I were a tenured professor than if I were self-employed.
What do the “experts” say?
The Wall Street Journal’s Complete Personal Finance Guidebook says: “How much is enough? The answer is different for different people in different situations. For those in careers with a large, ongoing demand or who have relatively strong job security, three months’ worth of expenses is probably enough of a cushion. Those with bigger career demands, such as higher-paid managers and executives or couples who work in the same industry or at the same company, might want nine months to a year’s worth of expenses in the bank.
In You Don’t Have to Be Rich, Jean Chatzky recommends three to six months of living expenses. Your Money or Your Life recommends six months of living expenses, but only once you’ve achieved financial independence.
In Dave Ramsey’s The Total Money Makeover, Ramsey’s very first step is to save $1000 in an emergency fund. Then he advocates eliminating debt; then he recommends building a three- to six-month cushion.
How do you get started?
Starting an emergency fund can be as simple as depositing a little money into a savings account. I think it’s wise to keep your emergency money someplace that’s not too easy to access. In other words, I wouldn’t advise that your funds be kept in your checking account or a savings account that you use regularly. Put it somewhere where the money is easily accessible, but not a regularly used expense account. Many experts suggest money market accounts as the best place to park emergency fund money. I’m a big fan of the high-yield online savings accounts – ones that are FDIC insured with no fees and no minimums. HSBC (hsbcdirect.com), ING (ingdirect.com), and Emigrant Direct (emigrantdirect.com) are all good examples that are currently paying above 5% in some instances. (SOURCE – Get Rich Quick Slowly).
Last Weeks Tip: Vesting
Schedule a Financial Counseling/Planning Session
The Financial Tip of the Week is a service of:
University of Missouri-Columbia
College of Human Environmental Sciences
Department of Personal Financial Planning
Office for Financial Success
Dr. Mark Oleson - OFS Director
Kamis, 14 September 2006
Vesting ...
When beginning a job, there are many nuances and intricacies related to the benefits offered through your new employer (elements that should be part of your analysis when evaluating job offers). Among these is the vesting schedule of your retirement plan. What is vesting? Good question …
VESTING is your right of ownership to retirement plan benefits. Your employer determines the vesting schedule for the basic retirement plan, which can be either immediate or delayed. Vesting schedules apply only to employer contributions and earnings on employer contributions. Your contributions (as well as any earnings attributable to your contributions) are always immediately vested, meaning that if you were to leave the company tomorrow, those funds could leave with you.
Immediate Vesting. After you begin your retirement plan, all contributions and earnings vest automatically if it is an immediate vesting plan. The maximum participation requirements for eligibility for a plan with immediate vesting are two years of service and the attainment of age 21, or, for educational institutions, one year of service and the attainment of age 26.
Delayed Vesting. Individuals in delayed vesting plans don't have ownership rights to the contributions (and any earnings on those contributions) made by the employer on their behalf until they meet the vesting requirements. There are two objectives to Delayed Vesting: (1) Reward employees with longer service; and (2) Reduce the cost of providing benefits to employees who leave after only a few years of service.
There are two types of delayed vesting. (1) Cliff Vesting - you work several years and then the employer contribution vests fully at a threshold date. In three-year cliff vesting, for example, none of the client's accumulation would vest during the first two years of participation. But at the end of the third year, the employee's entire accumulation would be 100 percent vested. Under (2) Graded Vesting, in contrast, ownership of retirement benefits accrues in stages -- for example, 20 percent after two years, 40 percent after three years, and so on, until the entire accumulation is completely vested. For employer matching plans, contributions must vest by the end of the third year. To find out more about your vesting schedule, contact your employers benefits department.
(SOURCE – TIAA-CREF)
Schedule a Financial Counseling/Planning Session
The Financial Tip of the Week is a service of:
University of Missouri-Columbia
College of Human Environmental Sciences
Department of Personal Financial Planning
Office for Financial Success
Dr. Mark Oleson - OFS Director
VESTING is your right of ownership to retirement plan benefits. Your employer determines the vesting schedule for the basic retirement plan, which can be either immediate or delayed. Vesting schedules apply only to employer contributions and earnings on employer contributions. Your contributions (as well as any earnings attributable to your contributions) are always immediately vested, meaning that if you were to leave the company tomorrow, those funds could leave with you.
Immediate Vesting. After you begin your retirement plan, all contributions and earnings vest automatically if it is an immediate vesting plan. The maximum participation requirements for eligibility for a plan with immediate vesting are two years of service and the attainment of age 21, or, for educational institutions, one year of service and the attainment of age 26.
Delayed Vesting. Individuals in delayed vesting plans don't have ownership rights to the contributions (and any earnings on those contributions) made by the employer on their behalf until they meet the vesting requirements. There are two objectives to Delayed Vesting: (1) Reward employees with longer service; and (2) Reduce the cost of providing benefits to employees who leave after only a few years of service.
There are two types of delayed vesting. (1) Cliff Vesting - you work several years and then the employer contribution vests fully at a threshold date. In three-year cliff vesting, for example, none of the client's accumulation would vest during the first two years of participation. But at the end of the third year, the employee's entire accumulation would be 100 percent vested. Under (2) Graded Vesting, in contrast, ownership of retirement benefits accrues in stages -- for example, 20 percent after two years, 40 percent after three years, and so on, until the entire accumulation is completely vested. For employer matching plans, contributions must vest by the end of the third year. To find out more about your vesting schedule, contact your employers benefits department.
(SOURCE – TIAA-CREF)
Schedule a Financial Counseling/Planning Session
The Financial Tip of the Week is a service of:
University of Missouri-Columbia
College of Human Environmental Sciences
Department of Personal Financial Planning
Office for Financial Success
Dr. Mark Oleson - OFS Director
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