Money Management

Two Steps Toward Freedom From Credit Card Debt

April 23, 2016 By Twila Van Leer

Balance transfers help you get out of credit card debt.

There are perfectly legitimate ways to reduce the interest and ultimately pay off credit card debt. Personal finance experts suggest you use them.

First Step

Find a card that offers a 0 percent introductory balance transfer promotion and transfer your balance to it. These cards often offer new customers as much as 18 months during which no interest is charged on the transferred balances. The experts consistently track all the cards to find that ones offering these terms and there are reviews that are available to the public. Check bankrate.com.

It pays. Think of it: on a $10,000 balance, $100 to $200 of your monthly payment is sucked up by interest, leaving only about $50 to be applied to the principle.

Second Step

After you have found a card that will charge no interest for a certain period of time, use that time to break free of the debt. Continue to make the payments you would have done previously. Add a little if possible. You will see the overall debt dip very quickly.

After having been swimming upstream trying to make headway against your credit card debt, you’ll see immediate improvement. There simply is no way to make inroads until the high interest can be eliminated as a factor. Use this formula and then repeat the process with additional credit cards to see real progress.

Retirement Planning With Bridge Jobs

April 20, 2016 By Twila Van Leer

Many elderly are turning to bridge jogs in their retirement. — Many elderly people are turning to bridge jobs in their retirement.

For many Americans, the jump from employment to retirement means getting a bridge job. A bridge job is a bridge between full-time work and retirement for workers who are approaching full retirement but are not quite ready to totally leave the workforce. For some, that interim step can last for years. Retirement is no longer an event, but a process.

Lifestyle Choice

Many workers actively plan for an “old-age” job for many reasons. About 60 percent of aging workers take the bridge job route, according to a University of Minnesota study. And it isn’t just those at the low end of the financial totem pole. Many who look at today’s longevity stats and their relatively better physical condition choose to work awhile longer as a lifestyle choice. A fair number even “come out” of retirement and seek a bridge job. They could get by on their retirement savings, but find life without work doesn’t mean as much. They enjoy the extra income, but view the time filled with useful activity as an even greater bonus.

Erosion Of Retirement Savings

It is now so common that some financial experts look at it as just another job in a lifetime career. Most of those in the workforce now see multiple jobs as part of the standard scenario. The erosion of retirement savings is a factor, as well. Defined-benefit retirement packages are becoming rare and programs such as a company-sponsored 401(k) are taking their places. The move to a 67-year-old retirement target, rather than 60 or 65 amounts to a reduction in benefits, experts point out.

Lower Paying But Flexible

Bridge jobs tend to be lower-paying than the careers the elderly are leaving behind, are less likely to add anything substantial to retirement cushions and may be less strenuous. But the advantages may include more time flexibility, including part-time work.

Rewarding

Some seniors find this as an opportunity to look for jobs in a sector in which they have had an interest, but bypassed during the usual career period in favor of things that paid better. One woman, for instance, went into an education job that was very rewarding to her personally, though it paid much less than her career job. Such teaching or tutoring jobs are very attractive to those whose professional work enhanced their value in an education setting.

Working well beyond what was once considered time to retire is a necessity for some, a welcome change for others. As long as health allows and mental capacities hold up, some opt to keep on keeping on. As one women well into her 90s remarked, “By the time I’m 100, my finances may be in better shape and I can consider retirement by then.”

How Safe Is Your Pension?

April 8, 2016 By Twila Van Leer

How to know if your pension is safe. Is your pension safe?

For years, you worked hard on the assumption that when you were ready for retirement, a company pension would finance the final years of your life. It was a comforting cushion.

Now imagine that the cushion has disappeared. Your employer regrets to inform you that there has been a mistake and the amount of your pension is being drastically cut. It has happened frequently enough lately that it isn’t possible to ignore.

For instance, one Hawaiian man was informed by his former employer that he had been overpaid by $97,000 over a period of twenty years. The company wanted $66,000 back, please. The 65-year-old found his pension reduced from $1,300 per month to $800.

Changes in pension policy

The example is not without precedent. Huge changes in pension policy have left thousands of retirees blindsided and wondering what to do next, according to an AARP magazine article. Bankrupt cities such as Detroit are targeting pension plans in an effort to stay afloat. Private companies are selling off obligations in the form of annuities, freezing or under funding their pension plans or shifting their employees to 401(k)s, Traditional pension plans now go to only 16 percent of the country’s workers. That’s about half of the 35 percent in the early 1900s who put their faith in pensions to finance their retirement.

Recent federal legislation that allows some financially beset companies to cut benefits to former employees under age 80 has exacerbated the situation. A growing number of retirees find themselves with less to live on as their pensions are trimmed.

Some financial experts predict the demise of the traditional pension program in the United States. The congressional edict shifts the burden from the employers to those least able to afford it – retirees or their surviving spouses, according to the Pension Rights Center, which fought the legislation.

Multi-employer plans, which were created to provide a pool for pension plans for companies, primarily those dealing with unionized workers, are feeling the changes. Reduced union membership and market declines have created problems for at least 150 to 200 of those plans. Some are expected to run out of money within 20 years. A complex process for modifying benefits will protect workers for some time, but cuts are likely over time.

The legislation could leave millions of Americans with their retirement plans in shambles. The Hawaiian resident, who worked as a sheet metal worker in Chicago, found himself the unwitting victim of his company’s sloppy handling of its pension program. Over a thirty-year period, the company overpaid retirees (he was one of 588 affected) more than $5.2 million. Even a decade after the whopping error was discovered, steps hadn’t been taken to rectify the problem, hence the shock of learning that he was expected to help repay the over payments, with 7.25 percent interest tacked on.

An even more painful cut occurred when a South Carolina retiree’s monthly pension check dropped from $1,414 to just $5. His former employer’s reasoning: it had overpaid him by more than $263,000. They argued that disability payments the man had received should have offset much of the retirement payment. As an employee of the New York transit system, he had suffered serious injuries, including a bullet in the head and stab wounds in the chest, in encounters with thugs while working.

How retirees can protect themselves

These examples are not the only ones being reported in the country. In both the private and public sectors, pension problems are manifold. Attempting to recoup disputed pensions is now one of the leading tasks of some legal agencies. Local laws related to pension errors are not consistent, so recovery is unpredictable.

Retirees are advised to protect themselves by asking to see the calculations that figured the amount of their pension. If you are unclear on your situation or feel you need help in understanding your rights, contact the Labor Department at dol.gov or call, toll-free, 866-444-3272, If you are still working, file relevant materials such as W-2 forms and pay stubs. Also keep documents related to pension plans, including a plan description, benefit statements and notices you are sent.

Credit Card Or Debit Card? It All Depends

April 7, 2016 By Twila Van Leer

Which card is better to use between credit and debit?

It’s one of the questions that enters into discussion whenever issues of personal finance come up. And the answer is not as easy as it would appear on the surface. Purchases with both cards are subject to processing that makes a difference. Before you decide how to handle your card-shopping, consider these factors.

Debit Card

When you use a debit card, the transaction usually requires a personal identification number or PIN. The transaction is completed in real time, with the money coming immediately out of your bank account and transferring to the merchant.

Credit Card

A credit card does not require a PIN and is an offline transaction. The funds remain in your account until the merchant settles the purchase. It generally takes two to three days for the transaction to be apparent in your account.

Fees

Before the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed by Congress, card issuers could charge different fees for credit card purchases than for debit card transactions. Initially, interchange fees of 12 cents per transaction were set. They rose to a 21-cent cap before the bill was signed into law, but that was still significantly lower than the previous 45-cent fee that had been in effect.

Credit Unions

The law, however, does not apply to thousands of community banks and credit unions that issue cards. It is in effect for financial institutions with $10 billion or more in assets.

The caps tended to dry up the debit card rewards and free banking provisions that had been offered with cards.

Difference

With the regulatory changes it makes less difference if you use a debit card or charge card for your purchases. The major difference now is that a debit card does not help you build credit, while a credit card does. Many debit cards now will run transactions without the use of a PIN, which minimizes the prospects for fraud.

Personal Decision

If you pay off credit card purchases in a timely manner, avoiding the interest charges, the distinction between debit and credit is further neutralized. Most Americans are likely to have one or more of both types of cards in their wallets. How they use them as they shop is a personal decision.

5 Excuses Keeping You From Being Debt-Free

April 3, 2016 By Twila Van Leer

The only solution to debt is to stop the leakage and resolve to get rid of it.

There are many reasons why you may be stuck in debt and they’re not all necessarily related to the state of your finances. In fact, your money woes may be exacerbated by your mindset. Your beliefs are often what guide you, and if you’re carrying around problematic ones, you’ll have a much harder time getting debt-free.

Here are five excuses that could be keeping you in the red.

I Deserve It

One of the most common phrases debtors bandy about is “I deserve it,” Jeff Jones, a Certified Financial Planner in Huntsville, Ala., wrote in an email. “It’s an excuse and that transcends financial matters … but this usually comes at the expense of a larger, long-term goal.” This mentality, for instance, enables people to reward themselves with a lavish vacation (on credit) or a new car (and the payment to go with it), Jones added, when instead you should be thinking about becoming debt-free or saving more for retirement.

I Don’t Know Where to Start

Facing debt is overwhelming. It involves owning up to whatever got you there in the first place and taking responsibility for paying it off. Add to that the sinking feeling that comes with realizing how much you owe and the whole thing starts to become one sad situation that seems insurmountable. How will you ever get out from under this mountain of expenses? Fortunately, there are options, including, for instance, debt consolidation, balance transfer credit cards or the help of a credit counselor. You just have to be willing to face your debt head on and put the time in to research what strategy may work best for you.

I’ll Deal With It Later

Another day, another excuse. “I’ll draft a budget in the new year” or “When I get a better job, I’ll start paying off debt.” And on it goes. The problem with this mentality is that the timing will never be right. It’s like keeping a diet: If you always find an excuse to get out of it, you’ll never reach your goals.

I Only Need to Make the Minimum Payment

Initially choosing to make only a minimum payment on your loan obligations can be a hard habit to break. “This one is invidious because it anchors you to making a payment, which means that, in the case of a credit card, it will take, say, 10 years to pay off, assuming you don’t add to the balance,” Jason Hull, a Certified Financial Planner in Woodbury, N.J., wrote in an email. “We tend to become attached to the first number we see, so when we see the minimum payment, we assume that’s what we should pay. Instead, we should pay as much as we can on our credit cards to pay them off as soon as possible — and make sure that we’re not adding any more to the balance.”

You can see just how much adding a few dollars to your monthly payment can impact your debt-free timeline using this credit card payoff calculator.

Remember, high credit card balances can damage your wallet and your credit. You can see how your credit card debts may be affecting your credit score by viewing your free credit report summary, updated each month, on Credit.com.

I’m Not Responsible

It’s easy to blame our debt woes on external forces, like car repairs or a medical emergency, but when all’s said and done, we need to take responsibility for our actions. That could mean not living like an upper-class family on a middle-class paycheck, being able to sign off of our favorite shopping sites when we know our credit card bills are already too high and avoiding “friends” who spend to have fun (and encourage you to do the same.) It’s a good idea to try to stop justifying your habits with the idea your debts aren’t your fault — someone got into debt, and whether you acquired it by marriage, co-signing, or on your own, it’s yours, and yours alone, to pay off.

Coping With Debt PDF: Developed by the Federal Trade Commission, this pdf was designed to help consumers stay ahead of their debt. 20 pages of self help techniques that can help you through your financial difficulties.