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Personal Finance

Here’s Why I’m Paying off a 2% Car Loan…

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...right now, without waiting.

And that is without taking into account any assessment of the clowns who have taken over the White House.

It’s easy enough to see that what goes up must come down. Capitalist economies have always been cyclical. That’s normal. But I think we’re looking at stupidity and foolhardiness that exceed normal, compounded by seditious collaboration with foreign parties who are not our friends, outright corruption, and the takeover of a national political party by ideologues who are so passionate they have taken leave of what little common sense and ethics they might once have had. Compounded, too, by a natural disaster from which this country will not soon recover.

The next economic crash is going to make the Great Recession look like…heh! A tea party. It may make the Great Depression look like a walk in the proverbial park, too. Many, many more of us are going to lose our jobs, and quite a few will never replace them — just as quite a few of us never replaced decently paying jobs and decent benefits after the Fall of the Bush Economy. You think we have a gig economy now? Wait’ll you see what’s coming up the road.

Most of what brought us the Great Recession is already back in place: and then some.

I believe we will see another major economic crash within the next three and a half years, if Trump stays in the White House through his first term. If he is impeached or if he resigns and is replaced with Mike Pence, that may slow things down a bit: then we can expect a major economic crash within the next seven and a half years.

This time, we can see it coming.

Anyone who lived through the Bush Recession would be a fool not to line things up and get prepared ASAP.

What to do to line things up?

• Number 1: Pay off debt, as fast as you can and to the extent that you can. Pay off the car loan, pay off the credit cards, pay off the mortgage if you can.

• Number 2: Do not assume any new debt! Do not buy a new car. Do not buy a new house. Certainly do not buy real estate at the present price point, which in many parts of the country is back in the “bubble” range. Do not charge anything on a credit card. If you can’t afford to pay for it in cash, don’t buy it.

• Number 3: Build a cash emergency fund. Build it as fast as you can. Pay yourself first by putting a set amount aside out of every paycheck. You should have enough in savings to cover at least six months’ worth of living expenses; preferably a year. Even better: two years’ worth.

• Number 4: Take care of routine health and dental care now, while you can afford it. If you are laid off your job, you’ll have about a snowball’s chance of getting health coverage that you can pay for.

• Number 5: Stock up on nonperishable food items. And while you’re at it…

• Number 6: Plant a vegetable garden.

• Number 7: Enhance your networking strategies. Join business groups and make yourself known to potential employers in your field. And while you’re at it, update your resume and keep it updated.

• Number 8: Start a side gig. Ideally, it should be one that could morph into a business that, combined with unemployment and a spouse’s income, can support you. Use the income from a side job to pay off debt and build cash savings.

Be prepared. If you’re not already prepared, better get that way soon…

Banner Image of the Day: Unemployed men outside a soup kitchen opened by Al Capone in Depression-era Chicago, Illinois, 1931. Public domain

How Can You Improve Your Credit Score?

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When your credit score isn’t where you want it to be, there are a couple of things that you can do about it. It is possible to repair bad credit, but it takes time. While there is no quick fix to repairing a damaged credit score, it is entirely possible to set up a credit management plan. Fly-by-night promises of repairing a credit score should be avoided. The best way to manage your credit is by behaving in a responsible fashion. Even before you can improve your score, it’s important to know what your credit score is.

This is your point of departure: check your credit reports at each of the three credit reporting agencies.

In the US, Federal law states that you are entitled to one free credit report from each agency per year. The three credit agencies include Equifax, TransUnion, and Experian. Once you know what your credit score is, you can take the necessary steps to correct it. When you have your credit report in hand, you should go through it with a fine-tooth comb to pick up on any anomalies, or inaccuracies. If you spot anything that is incorrect, report it immediately.

Making payments in a timely fashion is the first step toward repairing credit. Credit scores are calculated by adding up a number of factors. These include the percentage of available credit used (the lower the better), your payment history (consistent payments are best), the amount of new accounts you have opened up (the fewer the better), different types of credit available to you, and the length of your credit history (the longer the better).

Of all the factors that determine a credit score, your payment history is the most important. If you have a history of delinquency, start to make regular payments to avoid collections agencies from reporting you. Your FICO score will increase over time when you make regular payments. Many folks are unaware that they can contact creditors to work out more favourable repayment terms if it becomes difficult pay off a credit card. Credit counseling services will not adversely affect your credit score.

Should you open more accounts to improve your credit score or close unused accounts? When calculating credit scores, everything is done with ratios. Some people think that if you open additional lines of credit, you can increase your credit score by having a lower credit usage ratio. This could work against you. Much the same is true of closing unused lines of credit. FICO scores are carefully calculated, and intentional manipulation of ratios by opening/closing accounts will not always have the desired result.

The best way to manage debt is to pay it off. It is unwise to open multiple accounts at the same time, in the hopes of increasing your available lines of credit and boosting your credit score. Remember that the average age of your accounts will drop if you open multiple new accounts. This will cause your credit score to drop too.

Summary: Repairing Your Credit Score

Good credit scores allow you to enjoy favorable credit terms. Lenders often only consider one number when they are deciding about advancing a loan to you, and that’s your credit score. There are many advantages to a strong credit score, including lower interest rates, a high credit limit, being considered for top-paying positions, and being granted credit facilities for a mortgage or an automobile.

Since your credit score is comprised of five unique elements, it’s imperative to take the time to optimize each aspect of your credit score. You can check your credit score at any time, and it’s not much different to the credit scores that lenders will see when they run a search on you. Many banks and credit card companies offer complimentary credit reports to clients.

Banner image of the day: DepositPhotos, © ivelin

Can You Cope with Hard Times?

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So it looks like the economy is chugging right along just now. That’s nice. The skeptics among us, as we know, expect the current administration to bring the whole house of cards down on our heads — any minute now! But even cooler heads understand that what goes up must go down: the economy never stays “up” forever. Eventually it will sag, and we poor little sheeples will lose jobs, see pensions shrink, wonder how we’re going to pay for gas and food…

Well, take heart! Our friend Donna Freedman has come out with a second volume of her excellent frugalist’s survival guide, Your Playbook for Tough Times. She sent me a copy, and I have to tell you: it’s an amazing little book. In just 196 pages (counting the table of contents and lengthy thank-you’s), she covers the bases, even telling you how to find free and low-cost food.

In a sense, Donna argues that all times are tough times, or (if you have a brain in your head) you should at least treat them as though they were. Says she:

The feedback for the first book was interesting. Here’s a comment that really got my attention: “I realized that ‘tough times’ are no longer an isolated event. They’re pretty much like a fifth season, like hurricane season, and (something) one really has to prepare for.”

Some of us have always lived this way, in that we don’t take money for granted. Rather than spend every dime we earn, we put some aside in case something unexpected happens: job loss, say, or illness. And since these days a lot of workers have to fund their own retirements, that means making careful plans for their money.

Yup.

It has a such an array of ideas, strategies, and advice — all of it informed by Donna’s philosophy of “stealth savings” — that it’s almost encyclopedic. It addresses about every personal-finance challenge most of us are likely to face, and does so with common sense.

Check it out!

Time to Batten Down the Hatches?

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Cassandra before the burning city of Troy. Evelyn de Morgan, 1898

It may be time to batten down the financial hatches…even if you’re not a paranoid crazy like this blogger. Congress has appointed a special prosecutor to look into the question of Trump’s suspected collusion with Russia in subvening the US election process — if indeed any such collusion occurred. And the guy is not our honored leader’s friend: he’s a former FBI director.

Nothing good is going to come of this, no matter which side of the bob-wire fence you happen to be on. To say financial markets are unstable is to put it mildly: the Dow is in a tailspin and the dollar is dropping. Meanwhile, household debts hit a record high this quarter.

If you haven’t already done so, now is the time to review your investments and move to the most conservative position possible. If it’s not too late, shift some assets toward cash. Avoid buying large-ticket items, such as real estate, that may be overvalued at this time. If the markets sink further as this turmoil continues — as they most certainly could — this is not the time to make any major purchases or to be unduly exposed in the market.

Prioritize pay-down of debt. The less debt you have at this time, the better. Pay for day-to-day purchases in cash, and do not borrow for high-cost items unless absolutely necessary. If you can’t afford to pay for it in cash, don’t buy it.

And…you remember what I told you about stocking in propane, water, and nonperishable foods? Do it.

Obscured in the current flap over Trump is the speculation — discovery? — that the recent global ransomware hack came out of North Korea. If that is true, in normal times it would be regarded as an act of war. More to the point, if it proves to be true, it shows that we are in the crosshairs of an unfriendly power led by a demented dictator who is certifiably insane and who has stated his hostility to the US. A better designed, more targeted attack could — and one day probably will — take down the entire financial and power infrastructure.

This will cause more chaos than any of us can even begin to imagine. And what better time to launch such an attack than in the middle of our present self-inflicted chaos?

Be prepared: not just financially but in terms of daily living:

• Have food and water stocked in.
• Keep your car filled with gas.
• If you have a long commute, plan an alternate route to get home if traffic lights and other infrastructure are down.
• Keep battery-run devices fully charged.
• Back up computer data to media that can be disconnected from your network — now, not later.
• Have some cash on hand (if there’s no power or no computer connections, your credit & debit cards won’t work).
• Stock in barterable goods, such as cigarettes, alcohol, weed, and the like.
• Stock in prescription drugs, any OTC drugs you use regularly, and first-aid supplies.
• If you’re a Second Amendment type, stock in ammunition, if you have not already done so.

Sure. I may be crazy. But that’s what they said about Cassandra…

 

The Importance of Financial Planning Should Not Be Underestimated

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It is not a matter of intelligence; financial management can often be a matter of temperament rather than training or education. If you cannot resist the temptation to buy, even if you cannot afford the purchase at present, your desire may still overcome your brain telling you that you should wait. Unfortunately, there are many people operating in the financial sector, often with fancy titles, “consultant,’’ “advisor’’ or ‘’wealth managers’’ who sound impressive but may not be able to provide you with the best advice for your circumstances. It is a concern, because those who accept their lack of expertise may not be getting the quality of advice that they are seeking.

What Is Financial Planning?

Well first of all, it is not a lesson in investment. It is more about making best use of your money and if you are in debt, that means reducing the money you are wasting; typically, that is paying high interest on a credit card by carrying forward a balance. It is far better to pay off such debt with a much cheaper personal loan while someone is unemployed and disciplining yourself to use your card properly. That means paying your full statement amount when it falls due.

Plans have a timescale; you should have a plan to get to a point in a year, five years or at retirement when you have reached a stage where you are progressing and at retirement where your assets can fund the later years of your life. You are the only person who can decide where you want to be, but there is certainly nothing wrong in getting some help with where you should be. That is especially the case with retirement where the earlier you start to save regularly, the better chance you have to use compound interest to help you grow your savings.

Start with thinking about what you want and where you want to be. You need to access the money to enable you to achieve your goals. It is not a one-off exercise just as a budget needs constant revision if circumstances change.

Elements of Financial Planning

  • Cash Flow. You need to grasp how much are spending, and what you are earning, by the month in both cases. If you don’t have an emergency fund, you are potentially vulnerable.
  • If you have monthly debt, you need to prioritize that; perhaps a cheaper source of money?
  • Real Estate. Do you own or rent and what are your future plans if you own? Cash your property in to fund retirement?
  • This is becoming increasingly expensive; are your children going to go to college?
  • Can you see a clear career path?
  • Have you a surplus you can invest and will you go for risky investments for higher growth?
  • Is your insurance cover adequate?
  • Have you started to save and do you appreciate how much you might need to funs a comfortable lifestyle?
  • Ensure you have completed all the necessary documents?

 The Importance

Make no mistake; planning is the only way for ordinary people to manage their finances. There are poor advisors and before you rely on someone to help you secure your financial future, make some checks on the person involved to ensure you are dealing with someone with real expertise.

You need to grasp every element of your financial circumstances so that when you are faced with a decision, you make that decision with all the accurate information available. You must know your cash flow, the dates when all your bills are due because there are implications to your credit score if you make late payments, particularly on a regular basis.

It is positive to be positive and self-disciplined. Debt is certainly stressful and the only way to reduce your stress levels is to get into a situation where you are in control and making good progress. A recent survey suggested that a majority of people who currently have a financial plan feel that it is certainly helping them towards the future. That contrasts with only around 30% of those without a plan feeling positive.

Clearly a good financial plan helps you achieve your goals.

How to Deal with Elder Exploitation

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Recently a friend who’s down on her luck proposed that she should move in with me as a roommate. I was tempted: an extra plug of money — even though it would be far less than what it would cost her to rent an apartment here in lovely (increasingly expensive) uptown Phoenix — plus some help with the utility bills would be nice. And at times one would enjoy the company and another pair of hands to help with the upkeep.

And at about the same time, a reader wrote to discuss a new development in his aged mother’s welfare: a “friend” from the past has resurfaced, essentially broke and homeless, and has talked her into renting a room for about a third the going rate.

For us Aged, a rental arrangement along these lines presents some advantages. If you own the property, a little rent amounts to some spending money. If instead you’re paying a mortgage on it, the effect is the same because the rent defrays the cost of the mortgage payment, leaving something in your checking account to pay for food and glad rags. Less obvious: if you carry what the person pays you on your books as “rent,” it turns your home into a rental property and everything you do to improve or repair it is tax-deductible as a business expense.

It works. When SDXB lived with me, he paid half the mortgage and half the utilities. For the IRS’s purposes, I described the income as “rent,” and that substantially defrayed the cost of the new carpeting, the paint, the new kitchen counters, the new toilet, the new swamp cooler, and various bits and pieces of maintenance. It worked out quite well. And since the mortgage alone consumed half of my entire take-home pay, that “rent” made it possible for me to live in the house at all.

Though my friend is neither male nor a love interest, the possibility of having her share space seemed, in passing, interesting enough. I enjoy this person quite a lot. And it has, after all, been long enough since SDXB’s exit for me to forget why roommates make me crazy…

Presented with this proposal, my son put his foot down. He was having exactly none of it, and he announced in no uncertain terms that no roommate was moving in.

Now…you could observe that I’m a grown woman and can decide for myself who I will and will not live with. And there’s something to that. But I wouldn’t have asked him about this if I hadn’t had some misgivings.

And as a  practical matter, my son being at the height of his vigor still has all has marbles. As I skateboard toward senility, there’s some question as to whether every one of mine really is intact. He has shown himself to be eminently responsible with money and all-around smart about life, the universe and all that.

So, I tend to take his advice, he clearly having a better grip on his marbles than I have on mine.

Really, once you’re in your 70s, you find that you’re more easily persuaded – “railroaded” may be le mot juste – than you were just a few years earlier. You’re less skeptical of other people’s motives and less inclined to believe the worst of others. So it’s easy to take advantage of you. And people know it. People who don’t necessarily mean you well know it.

This isn’t the first time someone has proposed to move in with me. About two days before I was scheduled for the first of the six surgeries that occupied a full year, my neighbor across the street sold her house. By the time the deal closed, she still had noplace to go: she hadn’t bothered (or couldn’t afford) to find an apartment or arrange lodging with family members.

So she shows up at my door and suggests that she should room with me temporarily, until such time as she can find a permanent place.

At this point, I’m pretty bat-brained with stress. I say…uhmmm…okayyy, I guess that would be OK. And before I know it, she’s marching around my house saying “my chair will go here and my TV will go there and my refrigerator will go in the garage”! And I’m thinking…holeeee shee-ut!

When my son got wind of this, he mounted his white charger and galloped across the road. He showed up at her door and said, “You are not moving in with my mother.”

Thank you, God…and son. He thereby extricated me from what was obviously about to become a very messy situation.

Financial exploitation of the elderly is a serious problem in America, partly because families splinter and scatter all over the country. An older person really needs someone who sincerely wants to watch over his or her interests to keep an eye on all aspects of the person’s life, including finances. But when families disperse, there often isn’t any such person left.

Victimization of this nature has become so common that physician’s assistants are trained to recognize it and lawyers are advised that cases of elder financial exploitation can form a part of a successful practice.

The state of Florida (home of the world’s most spectacular con artists) has inscribed financial elder abuse into its statutes:

(1)  “Exploitation of an elderly person or disabled adult” means:

(a) Knowingly obtaining or using, or endeavoring to obtain or use, an elderly person’s or disabled adult’s funds, assets, or property with the intent to temporarily or permanently deprive the elderly person or disabled adult of the use, benefit, or possession of the funds, assets, or property, or to benefit someone other than the elderly person or disabled adult, by a person who:

1. Stands in a position of trust and confidence with the elderly person or disabled adult; or

2. Has a business relationship with the elderly person or disabled adult;

(b) Obtaining or using, endeavoring to obtain or use, or conspiring with another to obtain or use an elderly person’s or disabled adult’s funds, assets, or property with the intent to temporarily or permanently deprive the elderly person or disabled adult of the use, benefit, or possession of the funds, assets, or property, or to benefit someone other than the elderly person or disabled adult, by a person who knows or reasonably should know that the elderly person or disabled adult lacks the capacity to consent;

(c) Breach of a fiduciary duty to an elderly person or disabled adult by the person’s guardian, trustee who is an individual, or agent under a power of attorney which results in an unauthorized appropriation, sale, or transfer of property. An unauthorized appropriation under this paragraph occurs when the elderly person or disabled adult does not receive the reasonably equivalent financial value in goods or services, or when the fiduciary violates any of these duties:

1. For agents appointed under chapter 709:

a. Committing fraud in obtaining their appointments;

b. Abusing their powers;

c. Wasting, embezzling, or intentionally mismanaging the assets of the principal or beneficiary; or

d. Acting contrary to the principal’s sole benefit or best interest; or

2. For guardians and trustees who are individuals and who are appointed under chapter 736 or chapter 744:

a. Committing fraud in obtaining their appointments;

b. Abusing their powers; or

c. Wasting, embezzling, or intentionally mismanaging the assets of the ward or beneficiary of the trust;

(d) Misappropriating, misusing, or transferring without authorization money belonging to an elderly person or disabled adult from an account in which the elderly person or disabled adult placed the funds, owned the funds, and was the sole contributor or payee of the funds before the misappropriation, misuse, or unauthorized transfer. This paragraph only applies to the following types of accounts:

1. Personal accounts;

2. Joint accounts created with the intent that only the elderly person or disabled adult enjoys all rights, interests, and claims to moneys deposited into such account; or

3. Convenience accounts created in accordance with s. 655.80; or

(e) Intentionally or negligently failing to effectively use an elderly person’s or disabled adult’s income and assets for the necessities required for that person’s support and maintenance, by a caregiver or a person who stands in a position of trust and confidence with the elderly person or disabled adult.

(2) Any inter vivos [gift from a living person, as opposed to a legacy] transfer of money or property valued in excess of $10,000 at the time of the transfer, whether in a single transaction or multiple transactions, by a person age 65 or older to a nonrelative whom the transferor knew for fewer than 2 years before the first transfer and for which the transferor did not receive the reasonably equivalent financial value in goods or services creates a permissive presumption that the transfer was the result of exploitation.

As you can see, this is a pretty broad definition. Just about anyone who has any kind of access to an elder person, whether officially as a cosigner on an account or whether as a matter of trust or family relationship, is in a position to wangle any of these abuses.

What can be done?

If you’re already older but still have full possession of your marbles:

  • Designate someone that you trust to keep an eye on your finances and on your personal activities and relationships.
  • Designate someone else that you can trust to “second” or oversee that person’s activities where your finances and lifestyle are concerned.
  • Provide a power of attorney for that person.
  • Put your wishes – especially should you become incapacitated – in writing, give copies to more than one person, and file a copy with your lawyer or accountant.
  • Make it possible for the trusted person to view your bank, brokerage, and credit-card statements; arrange to have statements sent to this trustee, or give him or her the password to view statements online.
  • Arrange for a financial manager to oversee major investment accounts, with responsibility to you, not to your relatives or supposed friends.

It’s important to be aware that just because someone is your child does not make that person trustworthy. The sister of a dear friend assumed the care of their mother, who was at the time sliding into Alzheimer’s. As soon as she got her talons into the woman, she cut off all communication with her siblings. The woman’s estate was worth about $6 million. By the time my friend and her brother realized what was going on, the sister had drained the estate of at least $3 million, diddling away the money on houses for herself and her adult child, on cars, and on luxury items. The lawsuit is under way as we speak – but no one will ever be able to recover the money that was stolen from the mother’s estate.

If you have a parent or loved one who needs help or who may need help:

  • Keep an eye on his or her living conditions and note any abrupt changes. If the person is suddenly living high off the hog or suddenly living like an anchorite, consider that a warning sign and look more deeply into the situation.
  • Watch for the absence of valuables, such as electronic devices, jewelry, or furniture. Any unexplained disappearance of such possessions is a loud and clear warning sign.
  • Regard any new roommates, caregivers, or “best friends” with skepticism. Be sure they do not have access to funds or property. This is a case in which silence is golden: watch, don’t talk.
  • Observe whether such a person accompanies him or her to the bank, knows their Social Security number, or knows PIN numbers for debit cards.
  • Watch for signs that bills aren’t being paid, such as past-due notices, bill collection harassment, eviction notices, cancellation of utilities, or the like.
  • Review bank statements regularly. If statements stop coming in the mail, find out why and where they’re going.
  • Question any unexplained financial transfers or disbursals.
  • Examine cleared checks to confirm that the signatures have not been forged.

If, as in my friend’s case, the victimized elder is mentally in no state to recognize exploitation or to ask for help, you may find yourself with a difficult problem. It’s not easy to challenge a caretaker’s authority, especially if the perp has been smart enough to engineer withdrawals and property exchanges in such a way as to make it appear they’re somehow in the victim’s interest.

Here’s what you can do:

  • Hire a lawyer. Some lawyers specialize in elder abuse cases.
  • Contact the person’s doctor or other health-care providers.
  • Notify other family members who are not exploiting the person.
  • Notify law enforcement officials.
  • Contact your state’s Adult Protective Services.

If you have evidence that someone you care for is being financially exploited — even if the apparent exploiter is a family member — take action. Do not delay. My friend and her brother are out $3 million of the money their father left to them — that’s $1.5 million apiece — because they hesitated to rock the boat. Even if the sister is convicted of a crime, they will never get that money back. And the mother will have that much less to support her safely and comfortably until she dies of Alzheimer’s.

Image: DepositPhotos, © Photography33