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Emergency Fund Basics
Posted by: Alex Watson from Gold Max on Tuesday November 6, 2012 at 2:28 PM   (-08 GMT) | Comments (4)
Tags | RainyDay, | Savings | Categories: | Accounting, | Debt, | Finance - Managing your money, | Finance - Personal Investing
The personal finance blogosphere is abuzz with the topic of emergency funds and how and if you need one. Though opinions vary on what form your emergency fund should take and how big it should be, all agree that you should have some kind of financial plan for when emergencies do come. If you just want to take some basic steps toward being prepared for a rainy day, experts recommend building an emergency fund consisting of 3-6 months’ worth of expenses.

So, how does one go about creating such a fund?

First of all, start with a manageable goal, and break that goal up into smaller ones. Evaluate your circumstances and lifestyle, and determine what you would like your emergency fund to look like. Everyone should have some cash in a liquid asset such as a savings account to cover emergencies, but how much you choose to have will depend on your situation and personal preference. For example, a single person renting an apartment will probably not need as large an emergency fund as a family with a mortgage payment to cover the cost of most emergencies. Also, some people may feel comfortable with 3 months of expenses, and other may not want to settle for any less than 12 months’ worth. Thus, whether your goal is $1,000 or $10,000, set a goal and work towards it.

Second, open a new account. Shop around for the best savings rate, and keep your fund separate from your other accounts to avoid accidentally dipping into it. Some prefer to take a mixed approach, putting some of their emergency fund money into CDs and other investments with a higher return rate and keeping a smaller amount in savings accounts, which have lower rates of interest. Third, start building. Right—easier said than done, you’re thinking. There are bills to pay, after all, and pizza to eat, and Prada handbags to buy. But start now, because emergencies wait for no one. Jackie Beck on MoneyCrush.com outlines three basic strategies for getting your emergency fund started.

• Go crazy: This is a short-term strategy to get a quick start on your emergency fund goal right out of the gate, and it’s just like it sounds—you use whatever means possible to generate extra cash to put toward your emergency fund. These means might include reducing expenses (less eating out, for example), selling your gold jewelry, having a yard sale, doing odd jobs, whatever you can think of. Put every extra penny into your savings account for a short period of time, like two weeks or two months.

• Windfall: This method utilizes unexpected/extra funds to put toward your emergency stash. For example, save your tax return instead of spending it. Got some birthday money from Aunt Flo? Put it into your emergency fund. Bonus at work? Into the emergency fund it goes.

• Percentage: For this strategy, determine a percentage of each paycheck that goes toward your emergency fund. Many have reported success with treating their emergency fund as another bill and paying themselves each month just as they would the power company or the water company. Also, you can arrange direct deposit from checking to savings so you don’t have to think about it, and you can set up a payroll deduction with your employer that goes directly into your emergency fund. The automatic deposit approach helps particularly if you have trouble exercising the discipline to write a check to yourself every month.

To sum up:

Is an emergency financial plan important? Yes.

Does everyone’s emergency fund look the same? No.

Utilize strategies that work for you, and start your own emergency fund today.
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Comments

Posted by Prudence from United States posted at Monday, November 26, 2012 19:41
Comment from Prudence is -
Stellar work there everyone. I'll keep on reading.
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Posted by Lichtbringer from United States posted at Monday, November 26, 2012 15:48
Comment from Lichtbringer is -
Depending on your emergency fund (EF) needs, split beweetn the EF and the car loan. But the crux of the matter is not really how to divert your leftover savings, but how to increase those savings to erase your debt burden more quickly.Saving depends on1) Increasing Income (often less feasible).2) Decreasing Expenses (often more feasible).Most people focus on #1, and neglect #2. But most expenses can be decreased dramatically, or even eliminated. Share rent with lots of people, or live at home or in a low-cost area if possible, avoid owning cars in the near future (they suck a lot of money), eat out less, buy less (or better yet, nothing) or secondhand, don't engage in expensive sports/hobbies, no travel/tech gadgets/brand names/movies, etc. Reduce all water, power, phone, mobile + cable bills to the minimum. Analyze your biggest expenses (usually rent/car/food/leisure/bills), and find ways to cut all the financial fat. Since you'll have a lot of extra time on your hands, use it to invest in educating yourself and developing your professional talents/interests/skills so that you can achieve a higher future income potential. Go DIY don't pay others to teach you.Live poor because actually, you ARE poor. By my personal definition, if you need a job in order to feed yourself, you're poor. If you need to worry about what your boss thinks of you, you're poor. If you're in debt, you're in the hole poor. Don't be generous or ashamed you literally can't afford to be. Be generous and proud after you've saved up some $ $ $ . Extreme situations call for extreme measures. If you compare yourself to other people with lots of debt, you'll feel your situation isn't so bad, but you should be comparing yourself to people with positive net worth. I only make 18K/year now, but I save about 10,12K more than 50% savings on income. I've been doing this for many years now, so it all adds up. So despite my low income, I had my basic 1K EF in my first month. I intentionally chose to live in a lower-cost city that didn't require a car, and in the beginning I had to forego a lot of costly urban enjoyments (movies, dining, shopping, etc.). But the payoffs have been tremendous; I don't worry about money or jobs. Plus, I only work part-time now. If you can find a way to save 1K a month, you'll be well on your way. It'll only take 20 months to pay off all your debts. If you have higher income and can save 1.5K, you only need 13 months to be completely debt-free.After you pay off your debts, you should continue your hardcore saving for a couple years, (1yr =12K, 2y=24K, 3y = 36K, depends on what your long-term financial goals are), after which you can invest your savings, and your money can start working for you, instead of you always working for money. Then you can ease off on or abandon the Spartan lifestyle. If you're a guy, you might not want to though, because being a Spartan is actually pretty cool. It's good mental physical training, because it helps to cut away all the consumer materialist crap in life. Makes you focus on what's really important in life which is ironically, not the money, but yourself, your relationships, and your purpose in life. And coincidentally, all those 3 things suffer when you're working the 9-to-5 grind and spending nearly all of your hard-earned money on whatever. Best wishes to you -
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Posted by Gildas from United States posted at Monday, November 26, 2012 14:32
Comment from Gildas is -
Thanks for the insight. It binrgs light into the dark!
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Posted by Doll from United States posted at Monday, November 26, 2012 12:25
Comment from Doll is -
Your article was excellent and erudite.
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The Danger of Debt Settlement to Your Credit Score
Posted by: Ethel Wilson from Credit Score Resource on Tuesday November 6, 2012 at 1:48 PM   (-08 GMT) | Comments (0)
Tags | Legal, | Loans | Categories: | Debt - Credit Card, | Debt
The Danger of Debt Settlement to Your Credit Score Rating

Your credit score ratings could be negatively impacted by what you may consider a positive and responsible act. Though you might feel that making arrangements to settle a debt with someone you money to is a good, positive thing, it could seriously damage your credit score and ability to obtain credit at some point in the future. A settlement is when you make an agreement to pay off less than what you owe as a final settlement of the debt. Though it relieves your debt and helps the lender avoid the expense of hiring a collection agency, it could leave a big black mark on your credit score rating.

How Working With a Debt Settlement Company Can Affect Your Credit Score Rating

You can come to an agreement with a lender yourself, but more often settlements are made by arrangement through a debt settlement company. These are the companies you see advertising to consolidate all of your debt into one grand sum. They take an upfront fee from you, and then you pay them over a period of around six months instead of paying to those you owe. At the end of that period, the settlement company negotiates a deal with the lenders, usually to pay about thirty to fifty percent of what is owed, or what they have collected so far. If your account is more than ninety days overdue, credit card companies will generally accept the offer. They follow the “bird in the hand” philosophy in such cases.

The Effect Settling Has on Your Credit Score Rating

Your credit score rating will already have taken a good beating by the time it has reached the settlement stage. Your credit history will show a number of late and missed payments, many of them possibly more than ninety days overdue. Some will be at least thirty and sixty days over. Such a string of late payments can lower your score by as much as two hundred or more points. The way a settlement affects your report depends on how the lender reports it. If they report it as “paid as agreed”, or “paid in full”, your score will not be damaged any further. If they report it as “settled” however, your score could drop even further.

Negotiate How Your Settlement is Reported to Save Your Credit Score Rating

It is possible that you or the settlement company you are working with can negotiate with your creditors that they report your settlement as “paid as agreed” as part of the conditions of your settlement. They are not obligated to do so, but many will want to have the situation put behind them. In any case, it doesn’t hurt to ask, and their agreeing will benefit your credit score rating.

How to Have a Debt Settlement Removed From Your Credit History

Debt settlements and related payments should be automatically removed from your credit report after seven years. Sometimes, either because it wasn’t correctly reported by the lender, or just because of human error, they are not. If you have had any debts go to settlement, it is crucial that you obtain a copy of your credit report to check how it is listed. Wait about six months before doing so to give the lender time to report it. It should show up as “paid in full” or the account being closed. If it is still recorded as an open account with credit due, you need to contact the lender to have them fix it. If after seven years it is still in your record, you need to contact the credit bureau by means of a credit dispute letter to have it corrected. Debt settlement may not be the best tonic for your credit score rating, but it is better than having a debt go to a collection agency.

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Real Estate Investing
Posted by: Joseph E Poff, CPA CITP from Auburn Software, Inc. on Wednesday August 4, 2010 at 8:04 PM   (-07 GMT) | Comments (0)
Tags | Investing, | Mortgages, | Real Estate | Categories: | Debt, | Economy, | Real Estate

The Real Estate market has been and will continue to be a highly leveraged commodity. Sure, right now it's in the dumps - hardly anyone can get loans - those that can are too afraid. But there are signs it's already easing. For example, appraisals now must be made by those familiar in the area - there are issues about whether foreclosed properties should be in samples. Applications are becoming less restrictive too - ever so slightly but they seem to be easing. Credit score minimums have also been lowered.

The near or at 100% financing we had enabled a lot of people to buy property - residential and commercial alike who otherwise may not have been able to do so. Under some circumstances that 'can' and 'does' work - but you can't just blindly do it - you need to really look at the situation. Something that wasn't happening in the industry just prior to the collapse. But with or without the 100% financing 70-98% was common place and most of the time worked and still will work. It will be common place again.

In business you make money by leveraging yourself by your employees (or perhaps by machines). If you never had employees a business would have difficulty in growing or surviving.  It's the same in Real Estate - many clients of mine bought their own buildings to house their business in highly leveraged loans. It was rare when they didn't work out. Everyone won in those - my client was in better shape than renting - the bank did fine - things were great.

The concept of cheater intro interest loans, negative amortizations, the borrowers 'pretending' they didn't understand and the borrowers that really didn't understand - no wonder the Real Estate market had what the stock market calls a major correction. But we will go back to the heavily leveraged loans - it just has to happen. Along the way - Real Estate values will go up.

The market is still in a state of flux but smart - nerves of steel investors could make some money by buying some Real Estate. While prices might still drop - say another 10% if you buy now - the likelihood is that would be the extreme and we are probably at or near the bottom now. Signs of stabilization are showing up - not great - but stabilization. Also, pressure will be on our elected officials as the election season starts.

So, depending on your cash situation and investment strategy you might want to investigate the availability and pricing of some properties be that commercial, residential or land - all depending on your personal situation.

Be smart - don't over commit either physically, mentally as well as financially. Real estate transactions can be stressful but the more of them you do the easier it becomes. If you're planning on developing a property - well that's a lot of work - research it first - know what you are doing. If you want to be a landlord be prepared for it being vacant and the dead beats that leave your rental house in shambles. On the positive side - don't look for a quick return, but given time you will come out ok. Just think of the population increases - mathematically, they will have to increase in value.

As an alternative to investing directly into a project you could invest in a mutual fund or similar type investment that specializes in Real Estate projects.

Joseph E Poff, CPA

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