# Financial planning



## Rich Parsons (Jan 26, 2008)

Kacey said:


> Not from me... but if I get enough back, I'm going to replace the rest of my windows.




Home improvement is something that will help you with energy costs and also with resale. This is a good long term investment.


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## Rich Parsons (Jan 26, 2008)

crushing said:


> I'll do the anti-patriotic thing and put the whole thing towards my auto loan and get that damn thing paid off rather than buy shtuff.    I sent my last VISA payment in today.  My relationship that started with VISA in 1989 is over!  When the car note is paid it's on to baby step 3!



Crushing this is not directed at you just your comments have triggered this reply  


The standard sources for paying off debt state one should start monitoring your spending habits. Create a chart or spreadsheet. Then you identify areas where you can trim back. You take this money that is trimmed back and then you apply it to the highest interest rate with the lowest balance. There are arguments about interest levels versus paying off loans. I prefer the paying off loans myself. It give positive feedback to you and one sees progress. After you pay off the first loan, you then take the money from that loan payment and apply it to the next one. (* I usually recommend to treat yourself to something with the first extra payment. Take half and apply it to the next bill in line. Take half and go out and get a pizza or buy yourself something. *) This way one cascades towards decreasing the bills and over all debt. 

The other areas for getting ahead is to take half your raise (* In the years when you get one *) and put that amount of money into a 401k or IRA. This allows you to move forward with some increase in your take home that can be applied to bills if you like and some goes towards the future and retirement.


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## Rich Parsons (Jan 26, 2008)

Kacey said:


> Congratulations!  My Visa is nearly paid off (again) - so it's pay that off first, and then see if I have enough for new windows.  The amount I'm likely to get isn't enough to pay anything off - but it could be enough to replace the rest of my old aluminum frame windows, and reduce my utility bills... which will help with the student loans and then the mortgage.




Decreasing debt ratio is not a bad thing. 
Pay off the Visa and look into a Home Equity loan. These can be a partial benefit as loans go as part of it is a deductible on your tax forms. So having the Home Equity of the same value and usually at a lower interest rate then a credit card is better then just the credit card.


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## Kacey (Jan 26, 2008)

Rich Parsons said:


> Decreasing debt ratio is not a bad thing.
> Pay off the Visa and look into a Home Equity loan. These can be a partial benefit as loans go as part of it is a deductible on your tax forms. So having the Home Equity of the same value and usually at a lower interest rate then a credit card is better then just the credit card.



I appreciate the advice.  I had one - but it was adjustable, and adjusted up to the point where I converted it back to a fixed rate loan.  Now that interest rates have come down again, I may look into changing that - especially if my house has appreciated enough for me to pay off my student loans as well; the consolidation would be cheaper, and for reasons having to do with misinformation I was given about the teacher loan forgiveness program, I didn't consolidate them a couple of years ago when the rates were lower - not that 7% is horrible, but if I can refinance my 2nd to include them, they would stay deductible for the life of the loan (student loan interest is only deductible for the first 5 years), and reduce the minimum at the same time, allowing me to overpay at a faster rate than I am now.  But first I have to find a 2nd (HELOC or otherwise) that is sufficiently below my current rate to be worth getting.


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## crushing (Jan 26, 2008)

Rich Parsons said:


> Crushing this is not directed at you just your comments have triggered this reply
> 
> [...]After you pay off the first loan, you then take the money from that loan payment and apply it to the next one..


 
Great ideas Rich!  That's what Dave Ramsey calls the debt snowball and I'm board with that.

In December I set up an alert with my credit card account and got the following email this morning.  Just wanted to share because my better half and I are excited about it.

From: noreply@ezcardinfo.com 
To: xxxxx@xxxxx.com 
Subject: xxxxxxxxxx Alert - Balance drops below 1 
Date:  Sat, 26 Jan 2008 10:26:53 

Dear crushing        :
As you requested, this alert is being sent to advise you that your xxxxxxxxxxxxx credit card account balance has dropped below $1.
To view your account detail or to add or delete an Alert, visit your account management website.
Thanks for being a xxxxxxxxxxxxx cardholder.
xxxxxxxxxxxxx Customer Service​


Rich Parsons said:


> The other areas for getting ahead is to take half your raise (* In the years when you get one *) and put that amount of money into a 401k or IRA. This allows you to move forward with some increase in your take home that can be applied to bills if you like and some goes towards the future and retirement.


 
Speaking of 401ks, maybe I shouldn't have looked at my 401k yesterday.  It's no fun realizing I'm five digits in the red YTD!!!!


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## CoryKS (Jan 26, 2008)

An interesting little factoid:  the terms that credit card companies use to describe people who pay their balance off every month is 'deadbeat' or 'freeloader'.

/the more you know


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## Rich Parsons (Jan 26, 2008)

crushing said:


> Great ideas Rich!  That's what Dave Ramsey calls the debt snowball and I'm board with that.
> 
> In December I set up an alert with my credit card account and got the following email this morning.  Just wanted to share because my better half and I are excited about it.
> From: noreply@ezcardinfo.com
> ...




Great News on the credit card. 

The way to look at it right now for 401K is that most are invested in Mutual funds of index funds of one name or another. They have a general trend over time. Look at the good news if you are retiring more than 5 years from now. You are buying into the market while it is down.  Not the best knowledge but it is a way to think about it and not get upset and stop contributing.


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## Rich Parsons (Jan 26, 2008)

CoryKS said:


> An interesting little factoid:  the terms that credit card companies use to describe people who pay their balance off every month is 'deadbeat' or 'freeloader'.
> 
> /the more you know




Yes, I am lucky enough to be in a place to be able to pay mine off every month without interest. They really do not like that. In particular if you get some form of reward for the money going through your account and not the interest paid on the account. One of the companies just started a new plan where you get the 6 months' interest back if you pay the first five on time. This is intended to keep people to have interest to take advantage of this.


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## Empty Hands (Jan 26, 2008)

CoryKS said:


> An interesting little factoid:  the terms that credit card companies use to describe people who pay their balance off every month is 'deadbeat' or 'freeloader'.
> 
> /the more you know



That's why they keep increasing my credit line...they hope I'll take the bait and stop being a freeloader!

As it is, the greedy bastards are already getting 2.5% or so from the vendors off of every transaction, as well as interest from those not paying off their balances.  Given that, you'd think they could ease off the evil tactics for a while.


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## Makalakumu (Jan 26, 2008)

Spend as much as you want until the revolution.  Then make sure your creditors are guillotined.


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## Empty Hands (Jan 26, 2008)

upnorthkyosa said:


> Then make sure your creditors are guillotined.



Oh, are we guillotining now?  I thought we were supposed to put 'em up against the wall for the firing squad?  *sigh* It's _so _hard to keep up with the latest fashions these days.


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## MA-Caver (Jan 26, 2008)

Empty Hands said:


> Oh, are we guillotining now?  I thought we were supposed to put 'em up against the wall for the firing squad?  *sigh* It's _so _hard to keep up with the latest fashions these days.


I thought it was kick them into a deep pit like the Spartans?


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## Empty Hands (Jan 26, 2008)

MA-Caver said:


> I thought it was kick them into a deep pit like the Spartans?



That is madness!


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## MA-Caver (Jan 26, 2008)

Empty Hands said:


> > Originally Posted by *MA-Caver*
> > I thought it was kick them into a deep pit like the Spartans?
> 
> 
> That is madness!


 :idunno: works for me.


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## CoryKS (Jan 27, 2008)

Rich Parsons said:


> Great News on the credit card.
> 
> The way to look at it right now for 401K is that most are invested in Mutual funds of index funds of one name or another. They have a general trend over time. Look at the good news if you are retiring more than 5 years from now. You are buying into the market while it is down.  Not the best knowledge but it is a way to think about it and not get upset and stop contributing.


 
Exactly.  I've got coworkers who are looking to retire soon, so they're freaking out about the plunge last week.  Me, I'm going, "Woo-hoo!  They're having a sale!"


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## Live True (Jan 27, 2008)

Rich Parsons said:


> The standard sources for paying off debt state one should start monitoring your spending habits. Create a chart or spreadsheet. Then you identify areas where you can trim back. You take this money that is trimmed back and then you apply it to the highest interest rate with the lowest balance. There are arguments about interest levels versus paying off loans. I prefer the paying off loans myself. It give positive feedback to you and one sees progress. After you pay off the first loan, you then take the money from that loan payment and apply it to the next one. (* I usually recommend to treat yourself to something with the first extra payment. Take half and apply it to the next bill in line. Take half and go out and get a pizza or buy yourself something. *) This way one cascades towards decreasing the bills and over all debt.


 
This is the exact premise for when I worked as a Credit Counselor.  First, stop the bleeding by taking a hard look at your spending habits.  I used to recommend that my clients take a notebook and record EVERYTHING they spent in a week's time (form the 1.25 soda at the vending machine to the mortgage).  It's better to do it for a month, but few people have the patience to do this, and a week will give you some interesting insights.  I had one client who save aprox. $10/week (sounds small...but adds up to aprx. $40/month or $480/year) by bringing cases of soda to work instead of buying them through the vending machine.  He never realized he was spending so much in machines each week.  In the cases of many of my clients we had to teach basic budgeting and prioritizing skills.

After you've stopped the bleeding, or at least made a plan to do so, then you work on fixing the underlying cause, which is two-fold. First, you do the cascading payments plan, similar to what Rich has explained above.  Many folks can work with the credit companies to reduce rates/payments, but do be advised that doing so with the credit company or with a credit counseling company can have a temporarily negative affect on your credit report.  In any case, always try to pay a bit more than minimum and focus on the high balance accounts.  Get an idea of how much you are spending total and move that over to paying the lower rate cards/loans, as you pay them off.  It does have a snowballing affect.  While it's a slow progression at first, that last year or two are exciting as your debts drop like flies.

Congrats on all who are payinf off student loans, credit cards, and other debts.  We can all continue to push for hte government to become fiscally responsible and pay off the debt instead of deluding itself, but first we have to do the same for ourselves!


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## Live True (Jan 27, 2008)

hmmm...realized that I hadn't mentioned the second part of fixing the underlying problem...and wanted to mention some stuff about credit reports for those paying off debt....

moderators:  if this is too off topic, my apologies and please feel free to move appropriately

The second part of fixing the underlying problem is a bit touchy feely....it's finding out why you are in debt in the first place.  This can be everything from needing a better paying job (yeah, don't most of us!:uhyeah to having an addictive personality.  Solutions can run from looking for a better job, to getting more education, to reducing your living expenses (through eliminating debts, getting on budget utility plans, etc), to seeking counseling.  In most cases, small baby steps are the best way to make this happen so it's not so overwhelming.

On credit reports.  First, I encourage everyone to go to www.annualcreditreport.com to get free copies of your credit report.  This was part of an act passed a few years ago, where all American taxpayers (sorry to those not in US) can get free copies of their credit reports from the three major credit bureaus.  I recommend using it to it's fullest potention by getting one every 4 months (you don't have to get all three at one time), as that will give you better overview of your finances and help limit fraud.  Other sites may offer "free" reports, but have  alot more tricky advertising and sometimes hidden charges; this still has some, so be careful...credit scores are not included on the free report.

Something else to consider, and then I'll end this long post...your credit report score is used as an indicator of your likelihood to pay or default on future debts. They consider several things, but one of the main factors in this statistical figure is your ratio of available credit to credit in use.  A general rule of thumb is to not have more than 70-80% of this ratio in use at any one time or on any one card.  If you can keep it lower, that is better.  This said, there is controversy over whether it is better to keep paid off credit cards open or to close them.  If you keep them open, they add to your available credit side of the ratio, but if they aren't used it's a mixed blessing. Also, for some, open accounts are just too much temptation.  If you close them, you will have a temporary impact on your credit score, particularly if this is an old account, as your available credit and the length of credit history will be reduced. IMHO, it's best to have 1-2 cards for emergency use, but pay off and get rid of the rest, and make sure the ones you keep have low interest rates, and that you use them sparingly and pay them off quickly.

Last note:  Information typically stays on your credit report for 7 years (good and bad, see last link, below for specifics)  Here are some links about the stuff mentioned above:
http://financialplan.about.com/od/creditreportsandscores/a/ImproveFICO.htm
http://www.consumersunion.org/creditmatters/creditmattersfactsheets/001633.html
http://credit.about.com/od/creditreportfaq/f/negativecrinfo.htm


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## Rich Parsons (Jan 27, 2008)

Live True said:


> hmmm...realized that I hadn't mentioned the second part of fixing the underlying problem...and wanted to mention some stuff about credit reports for those paying off debt....
> 
> moderators:  if this is too off topic, my apologies and please feel free to move appropriately
> 
> ...




This is true. 

I have recommended and posted the link to the free credit reports before. 

My plan calls for getting one each 4 months this way I check them each annually and also get to see if there is something out there in a four month period. 

As to checking why one is in debt, this is the real root cause, but many do not wish to look at it. For our culture is not about what I can afford it is about what Johnny down the street has and how do I get one. aka Keeping up with the Jones. It is about getting the kids what everyone else has. It is about buying or leasing that new car when a used one would do for college. (* I understand some used cars cost as much to maintain as a lease payment, but the 4 to 9 year old car on average is the place to be. And Yes, this is counter to helping the company I work for which wants you to buy or lease that new car every year. *) 

If it is ok for you to take in your pop, next you will take in your lunch. Not only is it cheaper but it also is many times healthier as you eat a more balanced meal and can eat healthier food and not a the Two Coney Special with Chili on the fires no matter how good it might taste.   Now, I go out for lunch, but I use this for my mental health to get out of the office and try not to take phone calls and get refreshed for the afternoon. So we all have to make decisions on what is best for us. And that is the point. To look at the whole picture of system and see what is best for us today and tomorrow. 

Thanks Live True, as I do not have any official training nor have I been in any real problems except near the end of my marriage and my divorce. I did what was obvious to me. I created an excel spreadsheet to record and plan for future months what I would need to pay. Just because you have a couple of hundred this month does not mean you might not need it next month for a car insurance payment.  After I did this and my friends and co-workers saw that I was able to budget and work or plan on getting things paid off, they asked me how I did it. I told them and this is when they told me about the professionals they had worked with who tried to help them do the same thing. Only in the end they kept spending. 

This leads to another issue. My ex I honestly believe could not understand the difference between gross and net. She could not understand that sometimes there are emergencies so it is not a good thing to have all the cards max'd out and no money in the bank. She could not understand that some bills come twice a year and this seemed to surprise her all the time. 

If one person in the house hold cannot or will not work as a team it leads to lots of problems. There is a reason that they say Money is a major cause for relationship issues.


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## Live True (Jan 27, 2008)

Rich, my sympathies with the situation related to your divorce, and I'm glad I could provide some validation for your system.  It's mostly common sense, but some folks need that..."coach" to make it work.  Unfortunately, divorce was a major reason for many people to come to me when I was working as a credit counselor.  Either it was the sudden drop in income, or the sudden realization that they had been spending beyond thier income.  You are correct that if one part of a couple is having major financial woes, it will impact the other half.

FWIW, I encourage couples to have three accounts. One is yours, one is hers (or his), and one is joint.  Each person puts thier share towards the joint bills into the joint account each paycheck, and all joint bills are paid from this account.  Personally, my husband and I split the joint bills percentage-wise, based on the % or total household income we bring in.  I think this is fair and helps when there is a proportionate difference between who makes what.

The rest?  Is YOUR money in YOUR account to do as YOU wish (and hopefully pay your personal bills as well as have fun).  It prevents a lot of aguements that are serious, but ultimately silly and unecessary.

Last two points (and sorry if we are temporarily hijacking this thread)

credit report statement, 100 words or less
You have the right to put a statement on your credit report of this length.  This can be used to state "your side" in a credit dispute that might not have ended the way you want.  It can also state why there was a temporary drop in your credit score/situation during a traumatic situation (ie., divorce, sudden job loss, etc.)
Keep in mind that this statement will stay on your credit report for a while (can't remember how long, but I believe the various credit bureaus note in on their websites), so be careful what you say...and stick to the K.I.S.S. method (keep it short and simple)

pay yourself first
Always said, rarely followed for many of the reasons Rich has stated...but ALWAYS pay yourself before you pay the bills.
This means two things...retirement and savings
Rule of thumb (and one I work toward and don't always manage, myself ) is to have at least three months worth of salary in your savings account
Realistic goal, particularly in this age of rising debt....even if it's only $10-25/paycheck, DO IT!  Put it in your savings account and/or retirement account, and then forget about it.  Small things do add up!

That said, if the $600 comes through (I'm still hoping some rational fiscal responsible politician...ouch...oxymoron anyone?.....says "how are we going to pay for this?)....I'm applying 1/3 to savings, 1/3 to debt (hey, no one's perfect!:boing2 and 1/3 to something fun (some immediate and some towards my beach vacation..wooo hoo!)

Life should be about balance, after all!


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## Rich Parsons (Jan 27, 2008)

Live True said:


> Rich, my sympathies with the situation related to your divorce, and I'm glad I could provide some validation for your system.  It's mostly common sense, but some folks need that..."coach" to make it work.  Unfortunately, divorce was a major reason for many people to come to me when I was working as a credit counselor.  Either it was the sudden drop in income, or the sudden realization that they had been spending beyond thier income.  You are correct that if one part of a couple is having major financial woes, it will impact the other half.
> 
> FWIW, I encourage couples to have three accounts. One is yours, one is hers (or his), and one is joint.  Each person puts thier share towards the joint bills into the joint account each paycheck, and all joint bills are paid from this account.  Personally, my husband and I split the joint bills percentage-wise, based on the % or total household income we bring in.  I think this is fair and helps when there is a proportionate difference between who makes what.
> 
> ...




Shana,

Thanks for your kind words. The Divorce was years ago, and it was just a point of reference.  I am much better now. ** twitch ** Honest.  


I actually have lost a serious GF or two with the comment about two accounts or three. 

I argue for two accounts. I will pay for the things that are in my name or our names. (* I do not expect women to be in the same career and to make as much as me. If they do then that is a bonus not an expectation. *) The reason for two accounts I say is that I do not want to know how much she spends on shoes. And I am sure she does not care how much I spend on Lead be it miniatures or bullets or aluminum knives or what have you.   

I would not expect to get any money back. If I do then I would use in some trip I take this year. Be it to Florida to see my parents or on my bike later in the summer.


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## Live True (Jan 28, 2008)

Rich Parsons said:


> Shana,
> 
> Thanks for your kind words. The Divorce was years ago, and it was just a point of reference.  I am much better now. ** twitch ** Honest.
> 
> ...


 
heh...I compleeeetly *twitch* understand!:wink:

As for the two versus three..it's really what works best for each couple.  I like the three accounts because each person has thier own seperate accounts, etc.  But I'm happy for you that you can afford to shoulder all the financial burden.  Personally, I don't think that's fair to you (the sole burden bearer)....but again...it's really a matter of coming to an arrangement all parties can agree to.

In any case...let's see what congress decides to do on these refunds, and hope they make a good decision...or at least a less horrible one....:shrug:


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## MA-Caver (Jan 29, 2008)

If you want a MILLION dollars by the time you're 65 here's an article that shows one way of doing it... (no the building plans for your local banks aren't in it). http://finance.yahoo.com/retirement/article/104258/How-to-Make-a-Millionom

Either that or keep scratching those lotto cards.


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## Big Don (Jan 29, 2008)

The old adage couldn't be more true: If you fail to plan you plan to fail.
I read an article a while back, the writer had saved tens of thousands by doing one small thing, never spending 1 dollar bills. Save them in a separate spot, put them in a separate savings account and see, I tried it last year for about 4 months and was up about $4K when I had a problem and had to wipe that savings out...


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