With the Election Over, Now Really Ask Yourself If You Are Better Off Than You Were Four Years Ago

November 26, 2012

Are you better off than you were four years ago?  Now that the election is over, it is not a question loaded with political implications so you can actually take some time to think about your answer. It is actually a very important question and here is another one, where are you headed four years from now?  Most people, unless they work in politics, don’t anchor their life on four year increments but you could — it may actually be very useful financially to do so. Continue reading “With the Election Over, Now Really Ask Yourself If You Are Better Off Than You Were Four Years Ago”

How Can You Avoid Being a Slave to Your Mortgage?

November 16, 2012

Lately I have talked to a lot of people who are interested in buying their first home and with a combination of today’s low interest rates and a housing market that does not have prices appreciating rapidly, this might just be a great time to be in the market to buy a house.  They understand that part of it but then don’t know how much house they can afford.  They are getting different opinions from different people in their lives.  So, are there any objective measures by which we can figure out how much house someone might want to consider buying?  Sure… Continue reading “How Can You Avoid Being a Slave to Your Mortgage?”

5 More Ways to Boost Your Retirement Savings and Retire Early

November 12, 2012

It’s not so much how much you make; it’s what you do with what you make that can help you create wealth. Case in point, a friend of mine just retired at age 53.  In today’s economy, retiring early is tough to do – virtually impossible—yet she did it and her husband has never had a “regular job.”  She worked as an administrative assistant at the University of California in Davis, California.  Without a college degree, she never earned six figures but what she did earn, she and her husband saved.  They were very frugal and what they saved they invested in rental property, which he managed, as well as in her 401(k).  I love reading her recent Facebook posts sharing things like “It’s a rainy day and I don’t have to go into work!”  She and her husband achieved financial freedom and so can you. Continue reading “5 More Ways to Boost Your Retirement Savings and Retire Early”

What We Can Learn From the Top 25% of Credit Scorers

November 02, 2012

One of the things that I believe is that one of the best ways to learn how to do something well is to learn from someone who is already doing that thing very well.  It’s a long established tradition.  When we want to improve our golf game, we get lessons from a pro.  When we want to make progress in our fitness levels, we can work with a personal trainer.  When we want to create a new dinner, we can turn on the Food Network and, after salivating because of the absolutely amazing way that some of the dishes are prepared, find a new dish to put on your dinner table.  This concept can be translated directly into the financial world and recently it has.  This article from FICO talks about the habits of those with credit scores over 785, which places them in the top 25% of all credit scores.  Continue reading “What We Can Learn From the Top 25% of Credit Scorers”

What to Do With a Windfall of $10,000

October 22, 2012

Ten thousand dollars is a lot of money but certainly not enough to make you independently wealthy. I remember watching the California lottery television show when I lived in Sacramento. The lottery ticket scratcher winners were chosen randomly to be on the show.  Then a few lucky people were pulled from the audience and got a chance to spin a wheel so a ping pong ball would determine whether they won  a million dollars all the way down to a minimum $10,000.  Most people actually won $10,000 but every single one of them had high hopes of winning the million. Continue reading “What to Do With a Windfall of $10,000”

What to Do with $100

October 15, 2012

People often ask me what to do with $10,000 or $100,000 because they have saved those assets in their 401(k) and want to make sure they are invested appropriately for their retirement.  I can’t recall anyone ever asking me what to do with $100, but that question may actually be the key to financial security and building wealth. Continue reading “What to Do with $100”

What To Know If You’re Considering Bankruptcy

August 16, 2012

In his blog post last week, Michael Smith wrote about a woman who was able to overcome tens of thousands of dollars in medical debt by giving up a variety of comforts, working a second job, and even having her friends host a local fund raiser on her behalf. When Michael last spoke to her, she was only 3 months away from paying off all the debt. This is a truly inspiring story about what can be achieved through sheer willpower and determination. Continue reading “What To Know If You’re Considering Bankruptcy”

Financial Lessons From a Six Year Old

August 15, 2012

Today’s blog post is the last in a series of posts sharing the results of interviews I’ve conducted with my four children on the topic of money.  As you may recall, my oldest, Rachel (14), is a saver, and looks at money as something to be used for necessities.  David (12) is my value hunter, and prefers to buy things that have a lasting quality.  Ethan (9) is more of a spender, willing to use any money he has to buy things he wants right now.  Bringing up the rear is Jacob. Continue reading “Financial Lessons From a Six Year Old”

A “Financial Meterorite” Doesn’t Necessarily Mean the End of the World

August 10, 2012

My friends have told me for a long time that I just might be one of the nerdiest, geekiest people they know.  I’m starting to believe that they might just have a point.  I was absolutely fascinated earlier this week (who says fascinated anymore?) when I read a story about a massive meteorite crater that was found in the Canadian Arctic.  Somewhere between 130 million and 350 million years ago (when I was a young man according to my children) a meteorite crashed into Earth and left a crater that is 15 miles wide.  15 MILES!!!!  That thing came falling out of the sky at a ridiculous rate of speed and created a huge dent in the Earth’s surface.  There was also one found earlier this summer that was 62 miles wide and 3 billion years old.  The photos of these craters are absolutely amazing.  When you think about how something falling out of the sky, completely unexpected, can have significant disruption to the Earth’s surface, it reminds me of some of the stories I’ve heard from people about how they’ve rebounded from severe “financial meteorites”. Continue reading “A “Financial Meterorite” Doesn’t Necessarily Mean the End of the World”

Why I Don’t (Always) Hate Debt

July 26, 2012

In his blog post last week titled “Why I Hate Credit Scores,” my colleague Michael Smith wrote about his aversion to debt and why he wants to get to a point where he doesn’t care about his credit score. I generally agree. Debt can really get people (as well as businesses and governments) into a lot of trouble. We see that all the time in the people we help. That being said, I don’t think all debt is bad debt. Instead, I would argue that there are circumstances where debt can be a good thing. Continue reading “Why I Don’t (Always) Hate Debt”

What Our Children Can Teach Us About Ourselves

July 25, 2012

As the father of four, I’m often asked about how to teach children about money.  I’m sure there are a lot of books and blogs about the subject, but for me, I look at children as just people – only smaller and with less life experience.  I guess what I’m trying to say is that each child, like each of us, is unique, and therefore the way we teach them about money should be just as unique as they are.  Continue reading “What Our Children Can Teach Us About Ourselves”

Why I Hate Credit Scores

July 20, 2012

Some of the most frequently asked questions that I hear in my individual financial coaching sessions deal with credit scores.  How can I improve my score?  If I mess up, how badly is my score hurt?  How long does it take for my score to improve once I get my act together and start having great financial habits?  These are all very good and very relevant questions for many people.  But one of my longer term goals in life is to have no use for a credit score and to not care one little bit what my credit score is.  Continue reading “Why I Hate Credit Scores”

Show Me the Money — to Pay Down Debt

July 09, 2012

One of the common complaints I hear from people who are trying to get out of debt is they are financially strapped.  “How can I pay down debt when I can barely make ends meet?”  Since the economic downturn in 2008, overtime pay has gone away, salaries were cut and haven’t come back up, and those who lost jobs and found new ones are unfortunately getting paid less.  It’s tough to find extra money to pay off credit cards and other loans but it can be done. Continue reading “Show Me the Money — to Pay Down Debt”

Do Employees Have A False Sense of Security About Their Finances?

June 19, 2012

As we move farther away from the height of the Great Recession, many employees appear to have put it behind them, since we are seeing stress levels due to financial concerns steadily decreasing over the past few years.  This drop in financial stress levels is based on recent trend analysis research that I wrote about last month for our 2012 Special Report on Financial Stress. Continue reading “Do Employees Have A False Sense of Security About Their Finances?”

I Don’t Want My Kids to be Crushed by Student Loans. Do You?

June 08, 2012

I read this article titled “This Bright-Eyed Young Man Was Utterly Demolished by Student Loans” about (can you guess?) a guy who has experienced significant financial, personal and emotional hardship because of the financial responsibility that he took on with significant student loan debt.  I wish this were an isolated incident, but based on some meetings I’ve had with young people recently, I’d be lying if I said this isn’t becoming increasingly more common.  Maybe not to the extreme that Nick is experiencing, but there is a growing number of young people who may not be finished with paying off student loans until they are closer to Social Security than college. Continue reading “I Don’t Want My Kids to be Crushed by Student Loans. Do You?”

The Right Ingredients for Overcoming Debt

June 06, 2012

Although there are some that say the recession is behind us, there are still others that are continuing to deal with its effects. I recently had an opportunity to speak with a gentleman who finds himself behind the 8 ball when it comes to debt. This is not the first time I’ve received a call like this, nor will it be the last, but what makes this particular call stand out is the way this person has decided to approach the situation. His attitude and determination should be a lesson to us all. Here is his story: Continue reading “The Right Ingredients for Overcoming Debt”

Married With Debt? How to Manage Your Money When the Honeymoon is Over

March 09, 2012

We just received the following question on our website:

“I’ve recently gotten married and both of us have entered into this marriage with our own debts. We are having a hard time, even with combined incomes, making ends meet. I would like to learn more about money management and what needs to be done to pay bills and still have enough money left for savings and cash reserves.” Continue reading “Married With Debt? How to Manage Your Money When the Honeymoon is Over”

Using Your 401(k) in Retirement

February 09, 2012

We recently received this  question on the Ask a Question to a Financial Planner section of our blog:

“I have $35k in bank card debt+$30k in retail credit debt. Bank interest range 13/23%, retail 18/29%. I’m 63, and have $40k in a 401acct where I work. I want to retire this year with two company pensions ($1750/month) and early SS($2400/month, both wife and me). I need to get rid of some monthly payments of debt, where should I use my 401 money toward this goal. All my debt is unsecured, my home is paid off, health is good. I’m ready to go fishing.” Continue reading “Using Your 401(k) in Retirement”

How to Handle Old Debt and Debt Collection Agencies

January 25, 2012

With identity theft and fraud being such common threats, it’s important to exercise caution in every facet of your financial life. You likely know not to give out your social security number to anyone you don’t trust, nor should you ever invest in any get-rich-quick work or investment schemes. The list goes on.

If you have debt issues, you may be further at risk of having your identity or financial information stolen. You may also be pressed for payment for a debt for which you are, in fact, not liable, despite what a debt collection agency may say. If you have any old debt or are faced with the hassle of dealing with a debt collection agency, there are a number of ways you can deal with the situation.

Monitor Your Credit

Monitoring your credit is very important to not only avoid accruing debt, but to check and see if you have any old outstanding debt that is weighing you down. Be sure to review your credit report and continue to check it on a regular basis.

Forget about the companies that want to charge you a fee for this service – you can request a free copy of your report once per year from all three credit reporting agencies via AnnualCreditReport.com. If you have any debt from the past seven years, this is where you will find it. Any debt older than seven years should not appear on your credit report.

Know the Law

It is important to realize that there is a statute of limitations on old debt, which varies by state. Usually, it ranges from three to six years.

Next, understand that if you do have old debt, the collection agency must send you a written notice explaining the amount of money you owe and to whom. If you respond to them within 30 days to dispute the debt, they cannot contact you again until they verify the debt. Send your response via certified mail and keep copies of all correspondence.

Know What Debt Collection Agencies Cannot Do

Here is a list of tactics that debt collectors are not allowed to employ:

  • Call before 8am or after 9pm
  • Use obscene language
  • Call you at your place of employment after you ask them to stop
  • Falsely claim to be someone else (such as a lawyer or someone associated with law enforcement)
  • Threaten to have you arrested
  • Continue to harass you after you’ve asked them to stop
  • Talk with friends, family, or professional references concerning the debt – they can only talk to you or your lawyer
  • Threaten you with wage garnishments unless they have the authority to do so (check with your state guidelines)
  • Threaten to sue, unless it is allowed in your state – in some states, suing is not an option

Hypothetical Situations

Here are four hypothetical debt situations and how to handle them:

  • Debt that is older than seven years and outside the statute of limitations: There is no liability here whatsoever. Due to the statute of limitations, no collection agency can come after you for payment, and it should no longer be included on your credit report. If it is, dispute it and get it removed.
  • Debt that occurred within the last seven years but is outside the statue of limitations: You may want to consider settling this debt to have it removed from your credit report. However, before you pay the entire amount, consider negotiating a settlement with the collection agency by offering to pay back a percentage of the total owed. However, realize that if you opt for a settlement (rather than paying the debt in full) this will more significantly hurt your credit score.
  • Debt that is older than seven years but is not outside the state of limitations: This is a very rare occurrence. Such a debt will no longer have an affect on your credit rating, but you still are exposed regarding collection agencies. Use your best judgment here as to whether you should pay off the debt in full or via a settlement.
  • Debt that occurred within the last seven years and is not outside the statute of limitations: Pay this debt in its entirety if you have the ability to do so. It is damaging your credit score, and collection agencies are legally authorized to come after you for it.

Additional Tips

If you are ever contacted by a collection agency, say as little as possible over the phone, and just hang up if anything makes you uncomfortable. Never agree to pay back the debt (even verbally), and do not acknowledge the validity of the debt over the phone. If you do either one of these, it could actually reactivate the debt and put you on the hook for the amount owed.

If you do get taken to court over an old debt, you must show up in court, regardless of the validity of the debt. Not showing up could result in a claim against you.

Finally, keep in mind that older unpaid debt cannot hurt you nearly as much as new or recent debt. If you have debt issues, focus on the more recent ones.

Final Thoughts

No matter the age of your debt, there is always the moral obligation to pay it back. You can address this issue as you wish; however, I would not suggest that you avoid paying back any valid debts in your life just because there is a loophole. But remember that there are many predatory collection agencies out there that may come after you for “zombie debt” that you do not technically owe.

Do yourself a favor: If faced with the issue of old debt, educate yourself. Know the ins and outs of the entire scenario before making any final decision, and do what’s best for you.

Do you have any old debt horror stories? What are your tips for dealing with collection agencies?

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