Tuesday, February 22, 2011

401K Debt Reduction

Many people started experiencing financial trouble during the recession, and nothing can be more damaging than high interest unsecured credit card debt that isn't getting paid off. Unfortunately, the current trend of using your 401k as a way to get a secured debt consolidation loan can lead to trouble down the road that is best avoided if at all possible. Read on for a few reasons why using your retirement money for consolidating credit card debt is a mistake.

Your 401k Should Stay Tax Free And Interest Building

Using part of your 401k balance to secure a debt consolidation loan means the money that you borrow stops saving you tax money and building interest. While your retirement fund is left alone, it compounds interest on tax free cash constantly. If you use that money as collateral for a secured debt, it just sits there doing nothing until your debt is paid off. For many people this down time can end up pushing back a comfortable retirement due to the financial burden it will cause in later years.

Never Risk Your Retirement Savings

While your 401k may seem like a safe source of money, that could change if you are ever fired or laid off. With economic troubles surprising many people with unexpected job loss, using your retirement money on debt consolidation instead of enrolling in a debt counseling service can be a huge risk. Your loan may need to be paid in full immediately, and there is no guarantee you'll be able to transfer your 401k to a new employer fast enough to avoid the problem.

Instead of using your 401k for debt consolidation, consider looking into a plan that will help you get your debt handled without touching money you need. There is no reason to put your potential future retirement at risk to pay off debt right now.

Sandra White is a writer for FranklinDebtRelief.com.

Friday, February 04, 2011

Guest Post: Reading Your Credit Report

Experts often stress the importance of maintaining a good credit record, but few of us really understand what goes into the reports. Most people just know that banks use it to evaluate potential borrowers. Everything’s summed up in a single score, but how does it get there? Can you do anything to influence your credit report, as with a credit repair company? This guide shows you a detailed look at credit reports and what they can mean for you.

Credit History
This is the most important part of a credit report, and the part that credit repair companies are most concerned with. Your credit history shows all your past and current obligations, including credit card debt, mortgages, and personal loans. It will also show the date the loan was opened, the payment history (including any late or missed payments), and the amount still owed on the loan. Generally, the lower your total debt compared to your income, the better your credit score will be. Child support and overdrawn accounts may also be listed.

Public Records
This section shows any collection accounts and data from local courts. Foreclosures, Short Sale, bankruptcies, wage attachments, and court judgments all show up in this part of your credit report. Each entry stays on your credit report for a given number of years determined by the state, and cannot be removed by any credit repair techniques. In most states, foreclosures and bankruptcies last seven to ten years, while short sales last five to seven.

Credit Inquiries
Your score may also be affected when a third party pulls up your credit report. Banks usually make inquiries when you approach them for new credit, so inquiries from too many banks in a short time can be suspicious. Your score doesn’t suffer, however, when you pull up the report yourself or when an unauthorized company requests access for informational or promotional purposes. Avoid suspicious inquiries by giving your personal information only to banks or institutions you seriously plan to do business with.

Credit Score
Credit scores range from 350 to 800, with higher scores meaning better creditworthiness. People with higher credit scores are more likely to get approved for loans and get the best rates. Each of the three credit bureaus—TransUnion, Experian, and Equifax—uses a different formula, so it’s normal for credit scores to vary from one credit report to another. A credit repair company can help you correct discrepancies between the three, but only if there are erroneous entries.

About the Author
Author is a professional short sale/ real estate agent who completely have a handle on the Short Sale process and helps people who need short sales, or who want to sell for any reason. He also helps people who are having difficulty but want to keep their home. Visit his website to get more
information about Short Sale.

Wednesday, February 02, 2011

Give Yourself a Raise

My sister has two young children. She recently made the comment that there were two milestones with each of her children that made her feel like she got a raise. First was when they switched from drinking formula to milk; second was when they became potty trained. She no longer had to purchase expensive formula or diapers (she did not use cloth diapers). I realized that I, too have given myself a raise by eliminating some expenses over the past couple of years in my quest to simplify my life. I made the following changes, resulting in significant savings:

  • I quit having my hair highlighted. Annual cost savings: $1,120. I was a natural blonde in my youth. As my hair naturally darkened, I started highlighting my hair in salons when I was 19 (I lived in Texas at the time - it was pretty much a requirement). It became a vicious cycle to break because I always had to keep up with my 'roots.' Last year at 36 I decided to end the madness. I got a good colorist to match my natural color, and I got a couple of high-quality haircuts to eliminate those fried ends. I love the freedom!
  • I quit getting manicures and pedicures. Annual cost savings: $480. For a brief time (again, while living in Texas) I got sculptured nails. But I won't even address that expense. That fad ended for me after a couple of years. After that madness, I would frequent the inexpensive nail salons in those strip shopping centers for a monthly mani/pedi. Anytime my toenail polish would start to chip, I felt the need to head back into the salon. I loved the feeling of being pampered in such a girly way. But I realized two things: first, there's no reason my nails can't look nice and presentable without nailpolish and second, there's no reason I can't do it myself. I invested in a good manicure set, and now I do my own nails each week while watching my favorite show, Nova, on PBS. I actually enjoy doing my nails, I do a better job than the salons, and I get immediate gratification.
  • I quit buying department store cosmetics. Estimated annual cost savings: $200. I don't wear much makeup - just blush, eyeliner, mascara and lipstick. I use to be a victim of those cosmetics gift sets that are offered in the department store if you spend a certain amount of money. I would purchase things I didn't need just to get the gift set. Talk about consumerism at its finest. As a result, I had a drawer full of ugly lipsticks. I ended that madness by switching to drug store brands and naturally, I can't tell the difference in my cosmetics at all. I no longer purchase unnecessary items, and I can affordably replace my mascara every three months without taking out a second mortgage. .
  • I quit buying cheap clothes. Estimated annual cost savings: $800. I use to purchase several clothing items each season from stores like Old Navy and Target. I thought I was being thrifty by shopping there. They have cute styles, but of course the clothes don't last more than a year or two. As I entered my mid-30s, I realized that being trendy wasn't as important to me anymore. Now I favor classic styles and I only purchase very high quality items from stores like Brooks Brothers and Harold Powell. I shop much less often and merely maintain the clothing that I own. My winter work wardrobe consists of a few turtlenecks, a couple of cashmere sweaters, and three pairs of pants. Everything mixes and matches and I always feel great in my clothes. After the initial investment in clothing, I find I only need to buy underwear and socks on an ongoing basis.

The total estimated annual cost savings is $2,600. That's almost enough to fully-fund my IRA. I love raises!