Foreclosure Confession: Why I had to tell my bank to Kiss My ...

...Have you (or someone you know) ever thought about letting or have let the bank foreclose on your house?  I have.

 

Seriously, in 2008 the economy was so bad that I reluctantly had to tell my bank to kiss my a**. Even though I knew it was going to kill my credit score, hurt my great long-term financial relationship with my bank and inhibit me from getting a mortgage soon after; I allowed the bank to foreclose on my home.  Here are 3 of the reasons why.

  

MY HOUSE COULDN'T SWIM!

Here is how I learned that houses can't swim ... The house that I purchased in 2005, with over $30,000 in equity, all of sudden became worth $50,000 LESS than what I owed the bank in 2008. In three years the value of my home was "under water" by a little over $80,000!  How could this be?

I drove through my neighborhood and saw an unusual amount of houses with foreclosure notices. But, I was in denial. I was so excited about the new job that I accepted and about relocating to another state where I always wanted to live, that I ignored the signs.

I quickly learned that it didn't matter what I believed my home was worth. Rather, it was all about how much buyers were willing to pay for the properties around my home that determined it's value. I was also frequently reminded that a property will not sell for more than it is valued, regardless of how much more is owed on the mortgage in a buyer's market with significant amount of homes for sale.

I even thought I would save money by doing a FSBO (For Sale By Owner) instead of turning the property over to a professional immediately. By the time I handed it over to a real estate professional, the market was sinking fast and it was too late. Not working with a real estate professional early ended up costing me more money.

I was so mad at myself because I knew better!

I JUST DIDN'T QUALIFY

Say what? A single mother, getting next to nothing in child support and the "sole bread winner" paying ALL of the bills alone, didn't qualify for a modification or short sale.  How could this be? I felt hurt and confused. That's when the fear started to settle in. "Now, what am I going to do?" "How will I explain this to my son, my family, my boss?" "OMG ... foreclosures are public record," I remembered, "What if people see that my home was being foreclosed?"  "How could I help other's with their financial situations while dealing with my own financial mess?"

Unfortunately, there was no Olivia Pope back then for me and Foreclosure Prevention organizations and programs didn't really exist until after the Foreclosure Prevention Act of 2008.

  
I felt so embarrassed that my financial dirty laundry was going to be exposed. And, as much as I wanted to be upset with the bank, I was more upset and disappointed with ME. 

  

I WAS JUST 'SICK AND TIRED'!

Dealing with this situation made me physically, mentally, emotionally and financially SICK and TIRED!  My blood sugar and blood pressure was always elevated because of the stress of worrying, which was definitely not good for a diabetic with hypertension. I worried all of time about the fact that my house would not sell AT ALL. It stressed me out more because I was honestly trying to figure out how to minimize the loss to the bank. The stress was literally killing me. It wasn't that I was emotionally attached to the property. It was that I was emotionally attached to my FINANCIAL INTEGRITY! I had to fulfill my promise to pay back the money I had borrowed.  And the fact that I had a willingness to pay but lacked the ability to pay the mortgage, ate me alive.

I had sleepless nights filled with crying. I prayed to God for guidance and consulted with my money mentor for advice. I had a great long-term financial relationship with my bank and it really felt like I was going through a heart wrenching, heart breaking, and bitter break up with them. I even started ignoring my bank's calls, letters and notices. It was that whole "blood from a turnip  philosophy and somehow, I convinced myself that if I ignored them, I wouldn't be as stressed out. Of course, that financial fairy tale didn't (and still doesn't) work! The more I ignored them, the more intense they tried to reach out to me. As they should have!

I finally realized that if I continued to ignore and prolong the situation any further, I was going to suffer more mentally, emotionally, physically and financially. So, despite the negative social and financial consequences, I had let it go and walked away. 

   

Yes, it killed my credit and my credit score. And, YES, I was not able to apply for a mortgage for several years after. BUT... there was LIFE AFTER FORECLOSURE.

I am clear now as to why I had to go through this. I had to experience the negative consequences of my financial ignorance, bad financial decisions and bad timing. I had to experience and feel the pain. This experience helped me to become more compassionate to better help others going through this and similar financial issues. This test turned into my Testimony to share the lessons learned about some consequences and benefits of certain financial decisions, actions and non-actions.

I don't blame my bank for my foreclosure! I wasn't in an exotic mortgage and I was fully aware of the terms and agreements of the mortgage contract. Not all banks or credit unions were involved in the mortgage C-O-N-spiracy. Most financial institutions helped consumers obtain the American Dream to own their own home.  I completely accept responsibility for my bad financial decisions and especially my financial ignorance.  

  

The GREAT NEWS is that today there are now hundreds of reputable resources to help homeowners who are facing foreclosure today. 

• Click here for a summary of the Foreclosure Prevention Act of 2008. Know your rights!
• Operation HOPE also has a wonderful Foreclosure Prevention Program. Contact an office in your city or state.
• The Neighborhood Assistance Corporation of America (NACA) has a Home Save Program. Go to their website at www.NACA.com to locate an event in your city or state.

Also, most financial institutions have their own Financial Prevention programs or departments that may be able to assist you.

Whatever its worth, you are not alone and there is help. So please ask if you feel or think you might need help before it's too late. If you are on the verge or are now going through a foreclosure, make sure you have a Financial Resurrection Plan. Look out for my blog about the benefits of a Financial Resurrection Plan.

Financially True,

  

Tarra Jackson ... Making Money Sexy




If you need more information about creating a Financial Resurrection Plan, feel free to contact me.

Financial Spring Cleaning Tips

... have you (or someone you know) ever thought about doing some Spring Cleaning with your Finances? I have.
  

It's SPRING!!! Yes! It's that time again.  Out with the old to make room for the new!  Spring is the season of newness!  Time to put away all of the winter clothes and blankets and bring out or make room for the Spring and Summer stuff. If you are planning to do some spring cleaning this year, are you planning to do some Financial Spring Cleaning?


Financial Spring Cleaning is just as, if not more, important as Spring Cleaning in your home and closet. Here are a few tips on Financial Spring Cleaning with your Paperwork, Wallet, Credit Report and Budget.


PAPERWORK - SPRING CLEANING

• FILE ESSENTIAL DOCUMENTS / SHRED NON ESSENTIAL DOCUMENTS. If you have a desk, filing cabinet, drawer or box full of old bank statements, checks, bills, or other financial documents, sort through them carefully and keep only the important documents that you know you will need to reference at a later date. Do NOT just throw the documents away in the trash. If you do, you are begging to be a victim of Identity Theft.  If you do not own a shredding machine at your home or do not have access to one at your job, take your shred box to a local Shredding Company.  They are awesome!  Just dump, watch it get shredded and drive away! Search for a local Shredding Company or ask your local financial institution if they do Shred Events.

• GO GREEN / PAPERLESS.  Most financial institutions encourage their customers to sign up for electronic statements. This is more cost effective for them because they save money on paper, ink, postage and mail service. This is beneficial to you because you don't have to worry about more paper coming in the mail.  Don't fret! If you need to have a hard copy of your statement to audit or review, you can simply print you statements via online banking.

WALLET - SPRING CLEANING

• REDUCE THE PLASTIC.  If you have more than one debit or credit card in your wallet, you may be setting yourself up for over spending. Or worse, you may give that thief who stole your wallet access to all of your money and credit. Save the planet and just PICK ONE already! Only having one debit or credit card in your wallet to use for a purpose is the best way to control spending.  

• USE CASH! A wallet is for cash!  Keep cash in your wallet to see exactly how much you are spending.  The may help you with a new financial reality check.

CREDIT REPORT - SPRING CLEANING

• GET IT FREE! Before you decide to apply for credit anywhere, you should know your credit status. Lenders should NOT know your financial reputation before or better than you! Being afraid of what is reporting is no excuse for not getting a copy of your credit report.  You should know what creditors are saying about you. You never know, the stuff they are saying and reporting about your could be false "rumors."  You will want to nip that in the bud sooner than later. You can get a FREE copy of your credit report at least once a year at www.AnnualCreditReport.com or by calling (877) 322-8228.

• SET THE RECORD STRAIGHT! If there is false information reporting on your credit report, it is your obligation to set the record straight and get it corrected.  Creditors are going to notify you that they are reporting information incorrectly!  This is YOUR financial reputation we're talking about.  It will suck when you are declined for credit because of information that is incorrect. Each credit reporting company (Equifax, Experian and TransUnion) has an online process to dispute incorrect information. They also provide detailed instructions on how to dispute information via mail as well.  Get started at www.AnnualCreditReport.com.

  
BUDGET - SPRING CLEANING

• GET ONE! If you do not have a written budget, this is the time to get it together.  Once you see where your money is going money, it will help you make better financial decisions. If you need help creating a budget or spending plan, click here for my FREE eBook on 5 Steps to Building a Budget that Works. 

 

• UPDATE IT! A budget or spending plan is a living and breathing document. There are some things that may have changed within a year, which may require changes to your budget. So, if you do have a budget established, now is the time to review it and update it as necessary. Who knows, you may have a few extra bucks to save or to pay off another debt. Better yet, treat yourself if you were able to stay on target with your budget! You deserve it.

  

Click here for more tips or to schedule your FREE Financial Consultation.

3 Ways to Sabotage Your Credit Score

...Have you (or someone you know) ever wondered why when you think you are doing everything right regarding your credit, your credit score still takes a dive? I have.

  

Don't worry.  You are not alone.  I have been asked about this by numerous consumers and almost all of my clients.  The Credit Score is a calculation of credit performance behaviors that tell how risky you are to lend or provide a certain service to.

The quick way to remember the Anatomy of the Credit Score is S.P.A.D.E.  SPADE stands for 

• Spending (30%) - how much  of your credit cards or revolving debt do you use? 
• Payment History (35%) - how are you paying on all of your credit accounts? 
• Age of credit (15%) - how long have you had experience with credit? 
• Diversity (10%) - what experience do you have with different types of credit? 
• Exposure (10%) - how many times do you allow your credit report to be viewed?

What makes the credit score calculation so complicated is that there are some things that we do, that seem to be good common sense actions, that actually reduce our credit scores.

Here are the Top 3 Ways to Sabotage Your Credit Score.

#1:  CLOSING PAID OFF CREDIT CARDS

This seems like a wise and financially responsible thing to do right? RIGHT!!!  But, this action will actually have a negative impact on your credit score.  This affects the Spending category of the credit score, which is 30% of the score.  Credit scores rely heavily on utilization of revolving debt, like credit cards or lines of credit. So, if you close your credit cards, your utilization will be Zero. Not Good!  This is why you may see a dip in your credit score.

HELPFUL HINT:  Keep your credit card or line of credit balances at or less than 30% or the credit limit.

#2: OPENING DEPARTMENT STORE CARDS FOR 10% DISCOUNT
OK, Reality check ... You will not get a 10% on your purchase if you revolve a balance at 18% APR or higher.  The purchase will actually end up costing you more than the 10% you thought you saved.  Besides this misnomer, this action will have a negative impact on your credit score because it affects up to 3 categories of your credit score: Age (15%), Exposure (10%), and possibly Spending (30%)!  That's potentially 55% of the credit score negatively affected.

Here's quickly how this works: 1) You now have a new account reporting on your credit report, which affects the Age category; 2) That inquiry when they pulled your credit report to see if you qualified for the card affects the Exposure category; and 3) if the credit limit given is right above the amount you charged, this will affect the Spending category.

HELPFUL HINT: Don't believe the hype! Use a card you already have or better yet ... use budgeted CASH!

#3: THOSE PESKY SMALL COLLECTION ACCOUNTS
You know ... that small balance you didn't know you owed your doctor because your insurance didn't pay for it. Or that ticket you got in Atlanta. (Sorry ... venting).  Yeah, those.  Here's the thing, the amount doesn't matter when it comes to collection accounts.  So, whether the amount is $50 or $5,000, the negative hit is the same.

HELPFUL HINT: Check your credit report regularly or at least once a year. You can get a copy of your credit report for free at least once a year at www.annualcreditreport.com.


Financially True,

Tarra Jackson, Making Money Sexy!

"It's what they DON'T report that HURTS!"

... Have you (or someone you know) noticed that there may be some accounts or positive information that is not reporting on your credit report that could help your credit score? Well, I have!

   

We may all be familiar with the fact that there might be incorrect information reporting on our credit reports that are hurting our credit scores with Equifax, Experian and TransUnion.  However, were you aware that there may be positive information that is not reporting on your credit reports that may help your score?

    

Here are TWO (2) things to consider if positive information is not reporting on your credit report.

   

#1: SOME LENDERS DON'T REPORT! 

   

That's Right!  The credit reporting system is voluntary!  Therefore, it is NOT required for financial institutions, buy here pay here organizations, or apartment rental organizations to report to credit reporting companies. Therefore, you may find that your positive payment histories may not be reporting to help increase your credit score.  Some organizations only report negative information; or they may only report to one or two of the credit reporting companies but not all three.

   

HELPFUL HINT:  Before you sign a credit agreement for a loan, ask the organization or financial institution if they report to all three credit reporting companies. 

   

#2: MIX UPS!

   

If you share the same name and may have shared the same address with someone, like a family member (parent/child), trades may be mixed up and reported on the wrong credit file.  Credit Reporting Companies use the Name and Address as the primary matching triggers.  The secondary triggers are date of birth and social security number.  Therefore, this is a common mix up with parents and children who share the same names.

   

HELPFUL HINT:  Include any name suffixes like Jr., Sr., III, etc., on all financial documents and credit applications and agreements. Also, check your credit reports regularly to make sure all information is correct for you.  If there is incorrect information reporting, dispute the information immediately with each credit reporting company, if necessary.

   

Click Here to schedule your FREE Consultation!

Personal Finance Symposium V Sustainable Family Finance

It is that time of year, again.  Time for our annual Personal Finance Symposium.  This year’s line-up of speakers continues the tradition of outstanding leaders in the profession.  Please see the list of speakers below, as well as how to register for the program.  I have also attached reply cards, invitations, and a poster if you have others you’d like to invite to participate in the Symposium.  We look forward to seeing you on 17 April!  - Rob Weagley   Personal Finance Symposium V Sustainable Family Finance April 17, 2013 Reynolds Alumni Center University of Missouri - Columbia, MO Program 9:30 a.m. Welcome and Introduction Robert O. Weagley, Ph.D., CFP®, Chair, Personal Financial Planning Betsy Rodriguez, Vice President for Human Resources University of Missouri   10:00 a.m. “Money Sanity Solutions: Build Healthy Money Habits for a Successful Future” Nathan Dungan, President and Founder; Share Save Spend, Minneapolis, MN   11:00 a.m. “Choosing the ‘Best’ Insurance Product: Matching Needs with Solutions” John Olsen, President; Olsen Financial Group, Kirkwood, MO   12:00 Lunch   1:30 p.m. “What Recovery? The Muddle-Through Economy” Juli Niemann, Executive Vice President, Research and Portfolio Management; Smith, Moore & Co., Clayton, MO   2:30 p.m. “Financial Literacy 101 from a Past U.S. Treasurer” Anna E. Cabral, Unit Chief of Strategic Communications in the External Relations Division of Inter-American Development Bank and former Treasurer of the United States of America, Arlington, VA   Registration: Program: $30/person (includes lunch) $60/per person for 4 Hours CFP® Continuing Education Credit (includes lunch) $10/student (includes lunch) For more information or to make your reservation, please contact Amy Sanders at (573) 884-5958 or sandersal@missouri.edu or mail check (payable to University of Missouri) to 365 McReynolds Hall, Columbia, MO 65211   Open to the Public ~ RSVP Required Sponsored by the Personal Financial Planning Department - University of Missouri Office for Financial Success, Center for Economic Education and the College of Human Environmental Sciences

 

 

Robert O. Weagley, Ph.D., CFP^(r)

Chair, Personal Financial Planning

241 Stanley Hall

University of Missouri

Columbia, MO  65211

573-882-9651 - o

573-884-8389 - f

The 3 C's of life

 

Choices, chances, changes.

You must make a choice, to take a chance or your life will never change.

 

 

"Karen thought she needed to get second job. I told her NO!" - Here's why ...

... Have you (or someone you know) thought a second job would help solve your (or their) Cash Flow problems? Well, I have!

Karen, a single mother and successful corporate executive, made good money (over $80,000 a year). When Karen started her coaching sessions with me, she told me that she was thinking about getting a second part-time job to be able to pay all of her bills and build her savings.  I told her NO! I gave her several strategies that helped her save about $5,000 in a year.
  

Here are TWO (2) of the strategies that I coached her through.
  

CASH FLOW STRATEGY #1: EAT IN!!! 

  

Karen admitted that she hated to cook, so she and her son ate out frequently. She also bought her lunch everyday during the week. She spent an average of at least $30 per day. Instead of telling her to stop eating out cold turkey, I suggested that she eliminated eating out for one meal.  She would at least save $10 per day.  She decided that she was going to take her lunch to work.  

  

Karen saved $10 per day, $50 per week, which totaled $2,600 for the year.
   

CASH FLOW STRATEGY #2: STOP NAME DROPPING!!! 

  

Karen admitted that she was fixated on buying "Name Brands" when she went grocery shopping. So, Karen and I went grocery shopping as a Field Trip. When she picked out something that was "Name Brand," I picked a "Generic Brand" to compare ingredients and PRICE!  She realized that most of the Generic Brands had the same ingredients with LOWER PRICES. During this Field Trip, Karen saved almost $100 on her grocery bill and got more food (to make her lunches). Karen went grocery shopping twice a month. 

   

That's $200 savings per month, which totaled $2400 for the year.

  
   

In one year, Karen saved about $5,000 without getting a second job. Her part-time job became making her lunches and implementing the strategies she learned during our coaching sessions. 

   

This allowed her to spend more time with her son!

  

Lesson:  It's the little changes that make a BIG difference!
   
   

Click Here to schedule your FREE Consultation!

Tax Planning

Tax Planning

 

University of Missouri Extension and the Department of Personal Financial Planning operate a Volunteer Income Tax Assistance site on the MU campus (times and locations). In this tip, I want to share with you some ideas I have gleaned from my interactions with clients over the years. Some of these may run against conventional wisdom, but before you call me crazy, consider what I am proposing. If you still think I am crazy, let us know by sending an email or commenting on our blog.

 

Never rely on your refund to save you

The vast majority of returns process correctly. However, that means that a sliver of returns do not process correctly. Over the years, client’s refunds have been delayed for several reasons. The IRS may decide to look closer at a return, the return may have been prepared incorrectly, or other unique problems may arise. I remember one taxpayer who came in and was counting on the refund to make a payment on a vehicle loan. The money didn’t come through in time, and he lost his vehicle.

 

There are avenues to explore if your refund is taking longer than expected. The Taxpayer Advocate is your voice at the IRS, and this agency within the IRS can sometimes accelerate or investigate refunds that have become ‘stuck’. However, the Advocate has tightened what cases it will accept, so you shouldn’t automatically expect the Advocate to step in and help you either.

 

Receiving a refund by direct deposit or check may be inferior to the third choice

Checks can be stolen from mailboxes. Direct deposit routing and account numbers can be entered incorrectly. Both of these problems can eventually be fixed, but the process can take several weeks. The third option is to use your refund to pay next year’s taxes. I first really considered this option when I looked at the tax returns for the leaders of our country:

 

President Obama’s 2011 tax return: http://goo.gl/zx9BQ

 

President Obama’s 2008 tax return: http://goo.gl/65ymQ

 

President Bush’s 2005 tax return: http://goo.gl/TvJo7

 

There is an option on the 1040 page 2 for your refund to be applied to next year’s tax bill as an estimated payment. You are letting the government keep your money (which is not optimal), but you can offset this by changing your withholding so that you have less taken from your paycheck.

 

W4s can be confusing, so you might try an online calculator to help you plan:

IRS calculator: http://www.irs.gov/Individuals/IRS-Withholding-Calculator

ADP calculator: http://goo.gl/JFHGG 

 

Or get no refund at all

Vice President Biden’s return demonstrates this point:

Vice President Biden’s 2011 tax return: http://goo.gl/jVp5q

With an adjusted gross income of $379,035, he paid taxes of $237 with the filing of his tax return. The rest of his tax bill was paid through withholding. Good tax software (including those at the free tax assistance sites) can often calculate what your tax picture looks like next year. Owing a small amount lets you keep your money all year instead of letting the government hold onto it interest free.

 

Bring four years of returns with you when you prepare your taxes

You don’t have to bring everything, but bring at least the tax forms you filed. Several items on your current tax return will reference your past returns.

Examples:

The Non Business Energy Credit includes lookbacks to prior tax years. The credit’s lifetime limitation for 2012 is $500. If you claimed over $500 in those prior years, then you get no credit this year.

The American Opportunity Credit for higher education can only be claimed in four tax years, and the IRS has revised form 8863 to ask taxpayers explicitly if they have claimed the credit in four prior years.

First time homeowners that claimed the First Time Homebuyer’s credit  in 2008 and 2009 (but not 2010!) must repay the credit over 15 years. The max amount of the credit was $7,500; over 15 years, that ends up being $500 a year.

If you sold capital assets in a prior year at a loss, but you were not able to use the entire loss to offset income, then you may be able to carry the loss forward to decrease income in future years.

 

Never destroy your tax returns

Tax returns tell stories. We often don’t consider them as family scrapbooks, but they actually are. They hold clues to who we worked for, when we were married, the birth of children, buying or selling a home, the organizations we donated or belonged to, and other small details.

I picture myself sitting with my grandchildren on a rainy day going through old tax returns and telling stories: here is when your grandmother and I were married; this is when we bought our first house and paid the interest; here is when we made some energy improvements; here is when we sold the house and moved; we made our first deductible contribution to the symphony society; here is when we first claimed your parents; etc…

 

In addition, old tax documents can help correct errors that could crop up in the future. For example, if your Social Security and Medicare wages are reported incorrectly in one year or several, it would be useful to have the documents to correct the error instead of scrambling to find replacements. The IRS can also audit you within six years of the due date of that year’s tax return.

 

Bonus tip: When you call the IRS at their main hotline, 1-800-829-1040, be patient and do not press any buttons on your phone

The automated phone tree at the IRS relies on touch tone phones. Almost all phones are touch tone, but some individuals still have their rotary phones. To allow people with rotary phones to talk to someone at the IRS, the IRS has left a secret way to get in touch with the operator who can connect your call. If you call the main number, 1-800-829-1040, and do not press any buttons, then the IRS assumes that you are calling from a rotary phone and will connect you to the operator. You will have to listen to many lists of options, but it is still easier than navigating the tree to speak to a human.