Tag Archives: Consumer Credit Counseling Service

Seven Debt Warning Signs

7 Debt Warning SignsCNNMoney reports “Americans have a debt problem.”

Yeah, well, we could have told you that.

Every third person in America  owes so much in payments, that their account is considered “in collections.”

The good news is the debt might only be $25. The bad news is the average amount owed is just over $5,000, with some debts as high as $125,000. The super duper bad news is delinquent debt can put your credit score in the toilet…for years…even if you’ve paid off the debt. And a wrecked credit score can hurt many things from employment opportunities to securing loans.

While it may seem that your debt crept up on you, there are warning signs…here are just seven of them:

  1. You hide bills from others.
  2. You use a credit card for most purchases, and only pay the minimal balance.
  3. You have little or no savings.
  4. You believe that checking account overdrafts are a normal part of everyone’s financial life.
  5. You don’t know what your living expenses are because you have never tracked your spending.
  6. The loss of a job in the household would cause an immediate financial crisis.
  7. You borrow money from payday loan offices, pawnshops, or title loan companies.

More debt warning signs included in the Money Possible workbook. (pdf, page 13)

Need help getting your debt under control? Consider a credit union, where some offer financial education programs and have financial counselors on staff, or contact your local non-profit credit counseling agency like Kansas Consumer Credit Counseling Service.

Money Possible Produces Debt Destroyers

Debt Destroyers photo all participants-no logoRaquel, Fredica and Lisa and Bryan made it. Sixteen weeks of rigorous budgeting and saving and heavy financial lifting.

OK, maybe not that intense…but our three families did make a commitment, met with a financial counselor and made major changes in their financial life. And lived to tell about it.

Here’s what they learned:

“Say no to frivolous spending.”
“Live within your means.”
“Don’t overwhelm yourself with credit.”

Each participant started out with a different financial issue. Lisa and Bryan wanted to bulk up their retirement savings. Fredica needed to control her spending. Raquel’s payday loans were spiraling out of control.

But the outcome for the three was the same: a lighter debt load, and more importantly, less stress in their lives.

The takeaway is that financial stress can cause problems in your daily life…which is in line with this recent survey that says employee financial problems or stress can reduce worker productivity.

What did our participants accomplish in 16 weeks? Here’s the skinny:

Financial Literacy is a family affairLisa and Bryan

  • paid off four of their credit cards
  • learned the difference between needs and wants
  • involved their children and developed a family budget

credit cardsFredica

  • stopped using credit cards
  • is paying down her existing credit card debt
  • learned to live within her means, and work with what money she does have

emergency money jar - compressedRaquel

  • paid down 30 percent of her debt
  • is current on all her bills and has stopped using payday loans
  • started an emergency fund

If you only remember one thing from this post, remember this: Your household budgets and finances are up to you. It’s a life-long process, not just something you can do once and be done.

But don’t feel like you need to do it alone. Get help from the Consumer Credit Counseling Service or a credit union. Financial education is a primary focus of Kansas credit unions, and credit unions nationwide. Credit unions promote financial fitness, and their goal is to make your financial life easier. Get started on your own by downloading the Money Possible Workbook.

Thank you to Lisa and Bryan, Fredica and Raquel for sharing their stories for the world to hear. Using a public venue to air your dirty laundry can be intimidating. These three credit union members took it in stride to promote the importance of financial literacy, and learned a little something along the way.

Turn $100 Into $1000

100 hundred dollar bills rolledDaily Finance has a nice little series about saving a Grand by cutting $100 per month. It’s called the $1000 Savings Challenge and you can see all the posts here.

Cutting $1000 is about as easy as losing those last five pounds. It’s going to take time, effort and sacrifice, something we Americans seem to lack. And there’s no one size fits all solution either.

According to the article,  “Go after your biggest categories to find the most spending, and concentrate on monthly bills so that you’ll be saving money each and every month. Go over every bill, methodically, one at a time, category by category. Cut out what you don’t use, don’t really need, and then look for less expensive alternatives to what’s less….all you have to do is start now, start small and don’t try to be perfect.”

We have been saying all along that to become financially fit you must DO SOMETHING. Start somewhere. Make a change. No one else is going to do it for you. It is up to YOU.

Here is the list of posts. Read them all, or just read the ones that will benefit you the most.

  • Part 10: When the Refi Fails, Rethink Repairs
  • Part 9: Nibbling Away at the Family Food Bills
  • Part 8: Life Insurance You Can Live With
  • Part 7: Spending Smarter on Entertainment
  • Part 6: Find Big Savings in Small Purchases
  • Part, 5: Cutting the Hidden Costs of Work
  • Part 4: Cutting the Cost of Kids
  • A $1,000 Challenge Bonus: How to Buy a Car and Save a Bundle
  • Part 3: Shrinking Your Car-Related Costs
  • Part 2: Turning Down Your Utility Bills
  • Part 1: Cleaning Your Financial ‘Junk Drawer’

Tips include looking through your bills with a fine tooth comb for “fees” or other things you didn’t sign up for. Research your credit card bill for those recurring items, and if you don’t use the service (gym membership?) get rid of it.

To save at work, consider talking to your employer and see if you can re-arrange your schedule to save on child care costs. Buy things like diapers in bulk at wholesale warehouses, but don’t get distracted by those “shiny non-essential items” like barbecue grills.

To put a stop to unnecessary spending, trim your bank ATM fees by switching to a credit union (with a network of surcharge free or low fee ATMs nationwide) or simply reduce the number of times you use the ATM by taking out more than you need. Of course, that only works if you can limit your spending, and don’t suffer from “Have Cash, Must Spend” syndrome.

There’s some advice about flexible spending accounts, reducing entertainment spending, buying a car and a bunch of other stuff, too. Some of it may not be for you. Some of it may be right up your alley.

Still don’t know where to start? Get help at a credit union or non-profit agency like Consumer Credit Counseling Service. And there’s always the Money Possible Workbook, which doesn’t take any time, effort or sacrifice. Just click the link. If that’s not an easy way to start, we don’t know what is.

The Freshman $30,000

We took an informal poll last month regarding your grade in financial literacy. The majority of US adults give themselves a C or lower in money smarts. Either smart people took our poll or you think you manage your money better than you do, because the majority of the respondents gave themselves a B. See the poll results.

Education SavingsIn light of this being the graduation season, and the fact that we ran across a survey that said students wished they learned more financial management in school, this post will be about how kids (or their parents) can become be money smart at school.

Forget the “Freshman 15.” We need to worry about the “Freshman $30,000.” The average student graduates with close to $30,000 in debt. That’s a lot of financial weight.

Students are screaming for education in how to manage their money. Some states require a class in financial education to graduate, but many do not. And just ONE class? We all know it takes more than that to get through to a teenager!

This is where parents need to step up and teach their kids. Or find somewhere that can…like a credit union or consumer credit counseling service.

Here’s why: First-year college students required to take a financial literacy course in high school are more financially responsible than those students who didn’t take the class, a recent study found. This means they were more likely to pay credit card bills on time and less likely to go over their credit limit. Both of those add up to less debt. But just 17 states require a course. And ongoing education is critical.

Our friends at A Smarter Choice have some good tips to get students started on the right foot. Here is a scaled down version of their blog post Get Started on the Right Financial Footing.

Stay frugal. Be mindful of what you’re spending. Check with your gym, and cellphone and cable providers, to make sure you’re getting the best rates. Pack lunches from home. Have friends over for dinner and movies instead of going out.

Negotiate your pay. Starting out with a higher salary will mean higher earnings over the course of your career.

Build an emergency fund. Prepare for the unexpected by setting up an emergency savings account and have your paycheck directly deposited into that account. You should have three to six months of living expenses saved. For real.

Start saving for retirement now. If your job offers a 401(k) or similar retirement savings accounts, put money into it! Even better is if your employer offers to match a percentage of your contributions. Your 50 year-old-self will think you were super smart for doing that.

Pay down student loan debt. Know what you owe and contact your lender immediately–before the due date–if you’re going to miss a payment. Pay extra if you can.

Use credit appropriately. A strong credit history will pay off when you want to buy a house or purchase other big-ticket items (the new iPhone 6 doesn’t count). Here’s the biggest piece of advice that you don’t really want to hear: Don’t charge more than you can afford to pay off monthly! And please, pay your bill on time. Spending too much and having late payments can get you in a heap of trouble…and fast.

College students are smarter, but have more on their plate than in years past. Make financial education a requirement for them, and maybe as an adult, they’ll be shedding that $30,000 before swimsuit season.

Money Brain

money brainThere’s “mommy brain,” “senior moments” and “blonde moments.”

Well…now there’s “money brain.”

Experts say being a spender or saver depends on your brain. What you’ve been taught at home has something to do with it too, but in this post, we’re talking about that gray matter between your ears.

Recent research shows that while parents do have an effect on your financial habits, your brain’s chemistry plays a role too.

We won’t bore you with case studies, focus groups and medical gobbledygook, but here’s the deal: some of you get a thrill from instant gratification (buying that super cute pair of shoes NOW) and some of you get excited by “the deal” (think shopping sales or seeing your savings grow).

Think about it: When you get a free meal, doesn’t it taste better? Or if you find those super cute pair of shoes HALF OFF, aren’t they all that much cuter?

If you want to read the research, read The Psychology of Money-How Spending and Saving Habits are Programmed in Your Brain or The New Science Behind Your Spending Addiction.

Now that you know “you can’t help spending” … well, actually, you can…but if you feel you are one of those people like our friend Fredica (who had a spending problem, but now realizes she can control it) here’s some tips:

  • Use cash. The simple act of seeing the dollars can help. A credit card is just a plastic card, right? You can’t see the money being spent until it’s too late (and $300 later).
  • Use an ATM or branch office to withdraw your money, and make sure you get a balance inquiry. This helps you see your dwindling account.
  • Never “put it on my tab.” Pay as you go so you keep track of how much you are spending. Wait…the only place we know of where you say “put it on my tab” is a bar, and you shouldn’t be wasting money there anyway.
  • Don’t be swayed by “the big sale” or sales people! Remember that Friends episode when Joey bought all that stuff for his new apartment and racked up a major credit card bill?

Ross: What… what’s that?
Joey: It’s my VISA bill. “Envelope one of two.” That can’t be good.

No Mr. Tribbiani, it’s not good.

Don’t buy things because they’re on sale. Buy them because they are a need.

  • Know the difference between needs and wants. Read this “Needs vs Wants” from a recent post.
  • We’ve said it before. Tell someone you are trying to control your spending. A good friend will stop you from buying too much. A great friend will buy it for you. JUST KIDDING. Don’t think we want you to be a charity case. A great friend will help you and may even suggest a financial counselor at a credit union or non-profit agency.

No matter if you are a spender or a saver, you brain has a lot to do with your money smarts, as well as the habits you learned early on in your fiscal career. The bottom line is all about control, and we know you can control your brain. Well, most of us can.

The Payday Loan Trap

The Payday loan trapDid you know there are more payday loan establishments in the United States than McDonald’s and Burger King fast food restaurants COMBINED? Welcome to America, where we swipe our cards, spend our money and stuff our faces.

12 million Americans take out payday loans each year. That’s a lot, but it’s less than half of the 27 million Americans who eat McDonalds EVERY DAY! That’s a lot of burgers.

Raquel, our young mother, admits she stepped into the payday loan trap.

Payday loans are meant to be a quick fix, but consumers are finding these loans (or cash advances) are causing debt to become the next four-letter word. These loans are typically $500 or less and carry hefty fees. The problem is, most consumers, 80 percent of you, can’t pay off the first loan, so its rolled over or renewed within two weeks, turning that initial $500 into $1,500 before you can even say “super size it!”

Don’t despair. Try these alternatives to get you by in a pinch.

Credit unions.
Credit unions put people before profit, and as not-for-profit financial cooperatives (read: not-for-profit bank) they can offer low or no fees on some of their services. The credit union philosophy is “people helping people” so you can be sure that they won’t pull a fast one on you. Credit unions promote financial literacy too, and many have a financial counselor on staff that can help you re-evaluate your finances and put you on a path to smart money management skills. Many also conduct money management workshops for their members, free of charge.

You have to become a member first, which is easier than understanding what is said through a drive-thru speaker. Find a credit union near you at asmarterchoice.org.

Credit counseling help.
A financial counselor can’t help you if you need cash NOW, (kinda like an apple won’t satisfy that craving for chocolate), but if you are using payday loans, it’s probably a good idea to seek help with your financial situation, and eliminate the need for future payday loans. So join the crowd of roughly two million people who sought the help of a financial counselor last year.

A non-profit agency like Consumer Credit Counseling Service usually offers free money management help such as budget counseling, debt management planning, and mortgage default or rent delinquency counseling. In fact, our Money Possible participants are all meeting with a counselor from the Consumer Credit Counseling Service of Wichita.

Reduce spending in other areas.
If you stop hitting the McDonald’s drive-thru, wait until that epic movie is on pay-per-view and hold off buying that new iPhone, you might be able to take that quick cash place off speed dial. Don’t be fooled…it’s hard work, just like eating a salad instead of a Big Mac. But you’ll soon find that some of your “needs” are actually “wants” and you can go without them.

Negotiating your bills.
Talk to your credit card companies. Beg your utility company. Negotiate a payment plan. Most would rather keep you as a customer than lose you, and are willing to work with you. At least it’s worth a try.

Cash advance from a credit card.
We usually don’t condone using your credit card for cash, but the 25 to 30 percent interest rate you’ll be charged is far less than the fees and 300 percent to 500 percent interest on a payday loan. Yup…pay day loan places charge 300 to 500 percent interest plus fees!

Think on that for a minute. It’s not uncommon for a consumer to be charged $10 or $20 on every $100 borrowed. So, if you borrow $300, and the fee is $20 per $100, you’ll actually owe $360. Then, if you can’t pay that loan in two weeks, you’ll roll it over and pay another $60. So now you’ve paid $120 in fees to borrow $300. That equals 520 percent interest rate!

Behind the Scenes of Money Possible

It’s always fun to go “behind the scenes” … kinda makes you feel like you have a backstage pass at a Justin Timberlake concert.

We begged asked our Money Possible participants to meet for a quick (and by quick we mean three hours) video and photo shoot/financial literacy class/get to know you session on an icy Saturday. They were all kind enough to show up, and what’s even better, they were early!

What a fantastic group of participants. They did everything we asked…even with lights and a camera in their face.

The interview.
Lights, camera....Money Possible interview

We thought this was cool. It’s a jar of cut up credit cards.
Destroy debt: cut up credit card jar

Group session.
Group session

Needs vs. wants.
Consumer Credit Counseling Service session: needs vs wants

Scary Statistic: “We have more payday loan locations than McDonald’s Wendy’s and Burger King combined.”
Scary Statistic: We have more payday loan locations than McDonald's Wendy's and Burger King combined.

Stay tuned, we’ll reveal a little bit more about our participants next time.