Archive for the ‘Money, Finance & Budgeting’ Category

Need A Loan? Lending Club Offers $50 To New Borrower Members

February 27, 2009

As a Lending Club borrower member, the company has extended a generous offer to my friends who may be interested in applying for a loan through the company.

The company will pay $25 to a non-profit of my choice for every friend who successfully joins LC as a borrower member.  And, each friend I refer who successfully joins will be given $50.

$50 is a nice incentive, but money aside, I have really been happy with LC’s services and I think it’s a great option for those of you who might be interested in consolidating debt, funding a project, buying a car or securing a loan for other reasons.

The company is not offering a web-link for signing up, but if you would like to receive an invitation, please e-mail me.

General Lending Club Requirements

Lending Club is open to US residents. To qualify to list a loan request, you will need a FICO score of at least 660 with a debt-to-income ratio (excluding mortgage) below 25%. In addition, your credit history must show that you are a responsible borrower.

  • At least 1 year of credit history, showing no current delinquencies, recent bankruptcies (7 years), open tax liens, charge-offs or collections account in the past 12 months.
  • No more than 10 inquiries on your credit report in the last 6 months.
  • A revolving credit utilization of less than 100%.
  • More than 3 accounts in your credit report, of which more than 2 are currently open.

Debt Rally & Money Talk

February 25, 2009

It’s been awhile since I’ve talked about money. This is probably because I somehow spent $400 of my hard-earned eBay money on God-knows-what.

For shame.

The next 4 months are going to SUCK because I am aggressively paying back a 401K loan and I’ve received a pay cut, so my paychecks have shrunk considerably.

Following is a status of my debt:

Lending Club – $16,324.27

Citibank – $1,515.00

AMEX – $3,391.50

Total = $21,230.77

Note, the Lending Club total includes all future accrued interest and fees.

I’m going to be left with just $185 every two weeks for the next 8 paychecks.  I have $200 in my ING savings account, which is the seed of my emergency savings account.  During the next 4 months I will only be able to pay $400 toward my AMEX card and $120 toward my Citibank card.

As I’ve said, this is when things really start to get challenging.  No big windfalls, no large payments on cards, just trudging along, paying what I can.

I hope I do okay.

How Much Does Unemployment Pay?

February 23, 2009

I was thrilled to see this article on MSN Money, as I have been wondering about this recently.  Here’s what you need to know.

  • Unemployment varies by state; the lowest weekly maximum being $230 (Mississippi), the highest being $628 (Massachusetts).
  • Some states increase payments for families with children.
  • Unemployment benefits are TAXABLE, although not withheld automatically.
  • The new stimulus law exempts the first $2,400 of unemployment benefits from federal taxes.
  • Benefits may be paid a maximum of 26 weeks in most states.  The new stimulus law is extending coverage an additional 20 weeks.

Source: MSN Money via State Labor Department Websites

The maximum benefit I could receive living in California is $1,800 per month.  I currently take home around $2,200 per month after taxes/health care/401k contributions.

The Unspoken Impact Of Unemployment

February 17, 2009

Last Friday, NPR featured a piece on the emotional/psychological toll some are experiencing as a result of the rampant unemployment we’re seeing in these grim economic times.

We’ve all heard the numbers, but listening to one individual emotionally talk about losing his or her job and searching for work brings the reality into stark focus.

How much a job factors into a person’s sense of self and identity varies greatly, of course.  And, losing one’s job is not always a negative experience.  I’ve had friends whose job eliminations have proven to be a blessing in disguise, as they’ve moved into better positions elsewhere.  Some people take the opportunity to go back to school, or enter into a new career.  For some a lay off can mean a much-needed kick in the ass or a wake up call to readjust expectations and/or goals.

However, in a recession, this silver lining is less likely to be found.  The number of available jobs is greatly disproportionate to the number of unemployed.  Credit markets have come to a grinding halt, meaning companies are struggling to find lines of credit and make payroll, much less add jobs.  In addition, when unemployment runs out, people cannot turn to credit as easily.  Which, in theory, should be positive; but how are they meant to live?  The number of qualified, multi-skilled workers looking for jobs is staggering.  And even more staggering is the number of skill-focused workers who have lost their jobs, most notably in manufacturing/labor sectors.

Silvia Martinez, who was profiled by NPR’s All Things Considered, aggressively looked for work after her human resources administrator position was eliminated,

“I apply for jobs and apply for jobs and no one calls. Nobody. I’ve even gone as far as applying at fast-food places; I’ve applied at Wal-Mart, at Kmart, at Target,” she says.

The anxiety, sense of panic and complete hopelessness people like Martinez feel has become more and more prevalent among the unemployed.  Calls to suicide prevention hotlines have nearly doubled.  There have also been reports of an increase in domestic violence and child abuse.  The extreme stress is taking its toll.

I can’t begin to imagine a solution, aside from time.  I have no clue how the new administration’s stimulus package will play out in the next few years.  I do know that there seems to be some fundamental ideological shifts happening, most notably around spending within one’s means.  How this will impact certain sectors remains to be seen, although we’ve certainly seen an immediate impact on retailers/manufacturing.

Positions were eliminated at my office this morning; for me these considerations are weighing heavily.  My position will be impacted in a way that I am not happy about, but I have my job.  It’s a strange thing, trying to navigate between the sadness, the disappointment and the relief.

Because, I don’t know how I would feel if I were laid off.  Nor do I know what would happen.  Would I easily find another job in my field?  Would I be forced to take a lower-paying administrative job?  Would I need to supplement my income with a retail or restaurant job?  Would I perhaps find a better job?  Would I enjoy not commuting 2 hours a day?  How would I feel?

In the end, I am not worried about myself.  Because there are thousands upon thousands of others in far worse situations.  Jobless, single, with children, without prospects.  What are they doing to do?  And how are we going to help them?

Keep An Eye On Your Credit, Kids

February 16, 2009

As I’ve talked about before, your credit score is important for more than securing lines of credit.  Over at Consumerist, they run down four additional situations where your credit may come into play.

  • Prospective Employers
  • Landlords
  • Insurers
  • Cell Phone Carriers

Remember, you can check your credit report one time a year for free at Annual Credit Report.

I Would, But The Recession…..

February 13, 2009

Have you busted out with the recession/economy excuse yet?  The New York Times reports on the apparent upside of a shitty economy:

“Lavish anniversary dinners, the destination weddings of second-tier friends, costly gifts for children, and, yes, obligations to nannies — so often we go along, even when, deep down, we would do anything to get out of them. Now, even if we can still afford such occasional obligations, the recession has provided something of a get-out-of-jail-free card: it’s an excuse with which few would argue.”

– NYT

Personally, each time I’ve recently used lack of money as an excuse, it actually WAS a lack of money, not a “get-out-of-jail-free card.”  Not that I begrudge rich Manhattanites their right to passive-aggressively fire their nannies.

Bank Of America, Trying Very Hard To Lose Business

February 12, 2009

Carly over at The Lit Department posted this little tid-bit last week about B of A partying it up, Super Bowl Style.

I hate them.

The Broken Economy & Your Retirement – When & How To Switch Gears

February 8, 2009

This post was originally meant to focus on how the fledgling economy is impacting our philosophies around saving for retirement.  It still will, but with the added layer of job insecurity and prioritizing certain types of savings/investments.

Image: Veer

It’s always seemed so easy and logical for my 20-something (alright, almost 30) self. Sure, retirement is but a wee spot in the distant future, but saving is the prudent and responsible choice. And my 401K was the magic bullet; the ideal savings solution!

I began contributing to my 401K the moment I became eligible at my first full-time job after college. In five years time I had amassed a small sum of money, which has now diminished by half. The same, sad story is echoed across the country,

“My 401K lost 5/20/50/100 thousand dollars! Half of its value!”

While it’s understandably upsetting to see such a large drop in retirement savings, it’s important to weed out some perspective from the current situation. Pulling money from retirement savings, decreasing 401K contributions or drastically changing investment portfolios are options that must be considered carefully and without emotion. Consider this before thinking about touching your 401K; this is a tax-deferred savings account, so depending on your tax bracket, there’s a 25-35% return on the money invested (now) from the get-go. This is before any market returns (or, as we’ve seen, losses) or employer matching.

Income does not decrease that much proportionately when you stop 401K contributions.  I will use myself as an example, as the first thing that entered my mind when I heard about a pay cut was whether I should stop putting money into this account.

Prior to the pay cut I was making $3,560.48 monthly and contributing 3% (not much, I know) toward my 401K, $106.82 per month.  I will now earning $3,382.46 monthly and my 401K contributions would be $101.48.

With Contribution:

($3,382.46 x 0.97) = $3,280.99 Taxable Income

Taxable Income ($3,280.99) x Taxes (27%, 0.73) = $2,395.12

Without Contribution

Taxable Income ($3,382.46) x Taxes (27%, 0.73) = $2,469.20

Please note, I have left medical expenses out of this equation.

If I stop contributing the 3% to my 401K, I will take home an additional $74 per month.  $27.48 will go toward taxes rather than my 401K.

NOTE

Normally, I would NOT recommend that anyone stop contributions.  However, I took out a 410K loan earlier in the year (something I also do not recommend, but….I’ve never claimed to be a financial genius, right?) and I am considering halting contributions for the period in which I will be paying off the loan (6 months).

To be perfectly frank, my total desperation to pay down that high interest B of A card was clouding my judgment when I decided on the 401K loan.  It was a small loan ($1,400) and I have very little in my account anyhow, and I scheduled to pay it down quickly, so I easily justified it.  As I said, it’s bad news to make a habit out of this, so I don’t recommend it.  I just figured I should be totally honest and fess up.

Modifying 401K Investments

We’ve discovered that 401K accounts are not the “magic bullet,” but they are still valuable. The trick is to realize that all accounts are not created equal. I know it can be intimidating and time-consuming, but do some research into your 401K investment options.  The general rule of thumb when investing for retirement is that you should take on less risk as you get older (or, the closer you get to retirement).  This means an investment portfolio heavy in stocks when you’re younger, transitioning into a more conservative portfolio as you get older.

At 29, I’m not all that worried that my 401K has dwindled by 50%, because I have 35+ to ride the market. This is an ideal time to educate yourself and take control of your investment portfolio. Depending on the 401K, owners often have a great deal of flexibility in choosing and diversifying their portfolios. Now is the time to focus on bear market funds and invest more aggressively, if appropriate given your retirement timeline.

Paying Down Debt V. 401K Investments

You can punch the numbers all you want, but I feel that this is a totally personal decision.  One that should be based on the amount of your debt, what you’re 401K account looks like, your age, and how the debt is impacting your psyche.  If paying off your debt more aggressively will push you to remain motivated and make you feel more sane, by all means, prioritize it.  As lines of credit are SO hard to get these days, it might be prudent to halt (or reduce) contributions for a short period of time to focus on debt repayment.

Emergency Savings

I’ve always scoffed at this advice, not because it’s bad advice, but because it’s entirely unrealistic for the greater portion of the population.  How is a person living paycheck to paycheck going to amass a respectable amount of money in an “emergency” savings account?

My opinions around this have changed with the job market being what it is.  Respectable amount notwithstanding, a liquid savings account – even a modest one – is incredibly important to have in this climate.  It could mean the difference between paying rent with cash or withdrawing money from a credit card at 30%.  It could mean groceries for a month.  I could mean having the money for your kid’s dental work instead of begging a family member for a loan.

For me, this means shifting some of the money meant for debt repayment and a vacation into an emergency savings account.

And yes, I am not happy about it.

Update

February 6, 2009

I will likely be quiet again today.  I just had a meeting and found out that my company is pushing through 5% pay cuts, effective immediately.  I will be spending the bulk of the day buckled down working (and reevaluating my budget).

Your Credit – Common Misconceptions & How To Improve

January 31, 2009

The business of credit can be complicated. It’s taken me a long time to sort out how credit reporting works and, for the most part, I’ve been able to use the rules and guidelines to my advantage. Following are some common misconceptions, and how you might raise (or lower) your credit score.

MISCONCEPTIONS

Closing Credit Accounts Will Improve Your Credit

It seems logical. You pay off a card, and close it so you will no longer be tempted to use it. And, having less open credit cards could only make lenders look at you as more responsible, right?

Wrong. Lenders don’t care how much credit you have available, they care how much you’re using. Your debt-to-credit ratio is one of the common measures used by the credit reporting agencies, and closing accounts will increase this ratio – this is not a good thing.

For example, say you have 10 open cards with a total credit line of $50K, $10K of which you’ve utilized. Your DTC ratio in this case is 1:5. If you were to close 2 of those accounts, reducing your total credit line to $30, your DTC ratio would then be 1:3, meaning you’re using one-third (33%) of your available credit, instead of one-fifth (20%).

If you feel you must close some accounts, focus on those with lower credit limits, such as store cards. However, I would not recommend it in this current credit climate because lenders are closing unused accounts left and right. In fact, some experts have recommended that people start using their cards once or twice a month (and paying them off monthly, obviously) to ensure those lines of credit remain open.

All Credit Reporting Agencies Are The Same

Again, seems logical. However, the three credit reporting agencies (Experian, Equifax and Transunion) are private/public (read: non-government) companies and competitors. They use different models for calculating credit scores. If you would like to check your credit through all three reporting agencies, you may do so for free once a year through Annual Credit Report Dot Com.

Credit Scores Aren’t That Big Of A Deal

Sorry, but they are. Everyone should take their credit scores seriously, as they are not only used by lenders, but landlords, insurers and, increasingly, potential employers. Some people swear off credit cards, but the plain fact is that they’re useful for establishing credit and should be used, responsibly. Not establishing your credit is a big mistake.

Making Minimum Payments Is Better Than Nothing

Sure, better than nothing, but not by much. You might maintain somewhat decent credit, but you’ll spin your wheels. Paying even 10% above your minimum can do wonders in decreasing you debt owed, which will decrease your debt-to-credit ratio. Whenever possible, pay above the minimum due.

Paying A Bit Late Is Not That Big Of A Deal

You must pay at least 30 days late for a delinquency to show up on your credit report (the are noted as 30/60/90/120+ days late). However, paying late has other ramifications. You will be charged a fee by your lender and your interest rates will shoot up, meaning you will pay more in finance charges, increasing your DTC ratio.

HOW YOU CAN LOWER YOUR SCORE

“Shopping” For Credit Excessively

Missing Payments

Ignoring Medical Or Utility Bills

Overusing Your Available Credit & Maxing Out Your Credit Cards

Failing To Report Changes In Address To Lenders

HOW YOU CAN RAISE YOU SCORE

Establish Yourself As An On-Time Payer

Keep High Credit Limit Cards Open

Use Cards Often If You Can Pay Balances Every Month