The Equifax Breach and What to do

Equifax, one of the three major consumer credit reporting agencies, recently revealed that hackers had gained access to company data that potentially compromised sensitive information for 143 million American consumers, including Social Security numbers, addresses, names, driver’s license numbers, and credit card numbers (THAT’S NEARLY HALF THE US POPULATION).

The three main credit bureaus, Equifax, TransUnion, and Experian, maintain reports on when consumers attempt to obtain a credit card, car or even a mortgage loan, their payment history, and the amount of available credit. Some companies use one or all three of these companies when consumers seek a credit card, mortgage or other loans.

Since the personal information was stolen, along with 209,000 credit card numbers, the breach will increase the opportunity for identity theft to occur.

BE PROACTIVE

Review the Federal Trade Commission’s website on the breach HERE

Equifax has set up its own program to help people find out if they were one of the millions affected by the hack. It requires a multi-step process that takes place over the course of at least one week.

http://bit.ly/2xutn6S

Equifax will advise if it’s likely your information was hacked and then it’s your responsibility to register to get Trusted ID Premier, which provides the following security

  1. 3 Bureau Credit File Monitoring

  2. Equifax Credit Report

  3. 1MM Identity theft Insurance

  4. Social Security number scanning

The service is free for 1 year and you will not be required to provide a credit card number to be charged after the year is complete.

Equifax has an updates page at https://www.equifaxsecurity2017.com/

Equifax will not be contacting individuals to notify them about the data breach. Check-in with your loved ones to ensure that they are also aware and protected

Should I be zeroing out my credit card every month?

by Rebecca Eve Selkowe, J.D

The best way to use your credit card is to pay the balance in full every month – that way, you don’t have credit card debt and you don’t pay interest. However, if you are using your credit card all the time, the balance will never be $0.

(It’s very confusing.)

Credit cards work on a “statement cycle” and a “grace period.” The easiest way to understand what this means is to use an example. Let’s say your Visa bill is due on the 20th of every month, and your statement cycle ends on the 23rd. Let’s say it’s February. How do you know what to pay this month?

Everything you charged from December 24 to January 23 (and anything you hadn’t completely paid off up to that point) makes up your January statement balance. That January statement balance will be due on or before February 20. If you pay the entire January statement balance sometime between January 23 and February 20, you won’t pay any interest. WOO HOO!

BUT! If you used the card in February, you’re still going to see a balance on the card when you pay it on the 20th. Not to fear… on February 23 that statement cycle will close and everything you charged from January 24 to February 23 will be due on or before March 20!

Avoiding the Horror Stories of Student Loan Debt

by Kevin Worthley, CFP, CDFA

For most students, going to college has become a near-necessity in the transition from childhood to self sufficient adulthood and their career path. Unfortunately, standing squarely in the middle of the path, like a tall NJ concrete barrier, is the ever rising cost of college. By some measures, the cost of college has risen 5 to 6 percent annually over the past decade and the average cost of attendance has doubled from 2000 to 2011.

In contrast to this rising trend, family incomes in the U.S. have stagnated over the past decade and may even be declining. This, plus the more limited capacity of governments to offer financial aid, is causing students and their families to finance college costs through obtaining loans, either by parental loans, student loans, or both. If the student and parents are not careful about how much the student is borrowing (and what their loan repayments after college could entail), the student may end college with a debt load they may have extreme difficulty paying back, and this debt is not allowed to be discharged in a bankruptcy.

Do

Do calculate total amount of debt

While contemplating your college choice, calculate the total amount of debt you expect to incur by attending that college and what your payments would look like. Once you have your financial aid award letters, look at the loans within the award. These could include Stafford and Perkins Federal loans andparent PLUS loans. Using an online loan calculator, determine what your total balance of each type of loan might be after four years and what your monthly payments would be if your repayment period was 10, 15 or 20 years. This could be helpful in determining if you can afford the payments after you graduate from one school versus another. Consult a financial professional to help you if needed.

Do consider your career path

Consider the career path you’re choosing. What could be your starting salary? Can you afford the payments on your student loans after graduation? Now that you have determined what your payments look like, will you be able to earn enough after graduation to afford them? Take your starting salary and calculate what federal and state taxes you might pay at that annual salary. Divide the result by 12. That’s your “after-tax” income. You’ll need to pay rent, utility bills, car payments and also buy food and clothing. After all of these necessities, what do you have left for student loan payments?

Do calculate your loan payment limit

Determine if your loan payments could be more than 10 to 15% of your after-tax monthly income after graduation. If so, it could mean you’ll be "in over your head”. Consider alternate, less expensive college choices or alternate means of paying for college without borrowing. Is working part-time while in college possible? Would you be able to attend college half-time (ex. night classes) while working to support yourself and paying for classes as you take them?

Do exhaust federal loans first

Make sure you borrow first from lower-interest fixed federal loan programs before you consider private student loans, which are generally at much higher and variable interest rates. Fixed rates are better than variable, especially as interest rates are historically low now; they may go up a lot at some point in the future, meaning monthly private student loan payments could be higher. Also, it could be easier to consolidate federal loans than private loans in the future.

Do pay down private loans first

If you must borrow via private student loans, try to pay these down to zero first before the federal loans. Like most other kinds of consumer debt (e.g. credit cards), to whittle down your debt load, it is generally recommended to tackle the most expensive (highest interest) debt first. Making sure you pay all monthly minimum payments on all your loans and then, if you can pay extra principal, do so with your private student loan balances first, then the next most expensive student loans and work your way down.

Don't

Do not lose your loan documentation

Keep your loan documentation organized in file folders and make sure you keep track of when your loans are transferred to loan servicing companies (yes, they can do this and they will). If you consolidate, make sure you keep track of which loans were consolidated as well as the new terms and the new lender or new service company. Many students get confused over which loans they have, the payments and the terms. Remain organized.

Do not miss or make late payments

When your payments begin, don’t miss or be late with a payment. Some programs offer a discount on the interest rate if you make 24 or 36 on-time payments. Set up an automatic payment from your checking account (and be sure there’s a sufficient balance to cover the payment each month). A good student loan payment history can be the basis for a good credit score later (such as when you’re seeking a car loan or mortgage for a first time home purchase). Conversely, a poor payment history could result in the opposite.

Do not ignore loan servicing companies

Don’t ignore calls or letters from student loan servicing companies. These collectors can make your life miserable if you are negligent with payments. Never forget that student loans are not dischargeable in bankruptcy. Delinquent student loans can adversely affect your credit rating for a long time and in extreme cases, especially with federal student loans, your wages could be garnished to force repayment. Student loan borrowing is serious business! If you’re having trouble with payments, try to discuss alternative payment options with the lender or servicing company. It may not work (they may insist you stick with the payment plan you have), but if you are earnest about repaying your loan, they may work with you rather than have you default or continue with missing or late payments.

Do not forget to consolidate after graduation

Don’t forget to try to consolidate your federal loans and separately consolidate your private loans after you graduate. Sometimes consolidation can make repayment more affordable (cash flow wise) while you’re launching your career.

Summary

As in most other personal finance matters, planning ahead is usually a worthwhile effort. It may involve more factors in your college decision, but with the cost of college so high today, families and students need to consider how workable the debt burden will be on the student’s future. Often, working with a financial professional (financial planner or accountant) can be helpful in calculating future payments and affordability. Too many students today are struggling with $50,000 to $100,000 or more in loan debt and wish they had been more thoughtful and aware of how much they were borrowing. Avoid falling into the same trap and learn from their mistakes.

How To Avoid The Pressure Cooker

by Jillian Beirne Davi

It’s not how you act when the pressure is on that determines your success. It’s how you act when the pressure is off.
— Jill :)

Today we're going to talk about a common habit that keeps people stuck financially for years or even decades and it's something you absolutely want to avoid if you want to achieve financial stability in your life once and for all.

It's called the "pressure-cooker" dynamic and it's a concept Tony Robbins teaches around diet and exercise but I see the exact same pattern happening with people and their finances.

So first, let me set up the scenario for you. Let's say your finances are a mess. Let's say you've been ignoring the problem, ignoring the problem, ignoring the problem.

Then something happens in your life and you are forced to deal with it. You can't ignore it any longer. Your bills come due, the creditors call, you get stranded somewhere with your credit cards maxed out. You finally total up how much you owe. You've reached zero in savings. Whatever the situation is, you wake up and decide that you have to make a change.

(By the way, I find that Life will ask you nicely several times to make a change before finally grabbing you by the collar and demanding that you change. So it's up to you to make an empowered decision to change before things get so bad that you're backed into a corner. But that's a topic for another day.)

So now, you're frustrated and you feel a sudden burst of energy to start taking action and change. And this lasts for a little bit. Now you're not AS frustrated as you once were. Maybe you've paid off HALF of your credit card debt. Maybe you've saved up a little bit of money. Maybe you've stuck to a budget for a few weeks. Or a few months.

What happens next is fascinating. Once the pain starts to subside, we slowly start feeling "okay" again. And we start to give ourselves permission to fall back into our old ways.

We justify with all sorts of reasons, too! (Trust me, I've been there -- that's why I'm aware of this.) We say: "Well my debt's not AS high anymore." Or, "well I've got SOME money in savings, it's not as bad as it used to be." Or, this one: "I've been working so hard on this, I deserve to take a break."

And then we take our eyes off the prize, we backslide, we go unconscious and the next thing we know we're right back to where we started. We go back into debt, we've spent our savings, we're back to our old spending habits. And this goes on until we get upset again, we get motivated to make a change, and the cycle begins again. Out of debt, right back into debt. Save $5K, spend $5K.

The reason this happens is because we're usually only motivated to take action when pain is really high. Once the pain goes away, we fall back into our old ways. Because without accountability, we tend to quit. We stop taking action.

So how do you end this cycle? Well, I teach this to my private clients and it's something that a great coach can call you out on when they start to see this happening in your life in real time. Not months or years later when the damage is already done.

One way to end this cycle is to make sure that when you make a decision to get rid of the pain, that you back it up with a plan that you can stick to long term. Not one or two things that you do in the short term to ease the pressure. But instead you use that motivation to create a plan that includes small daily rituals that become automatic over time and keep you moving forward once the initial motivation wears off.

Trust me. The initial motivation WILL wear off. So when you accept this up front, you can make a smarter plan.

Another way is to keep your focus in front of you on a daily basis as a reminder of why you're making this change in the first place. I call this knowing your "Big Why" and connecting with it often.

By understanding this dynamic, you can use your frustration and convert it into a long term plan that includes daily actions that you use consistently with your vision in front of you. When you get support you increase your chances exponentially of breaking the pressure cooker cycle and make lasting change.

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Jillian Beirne

Jillian Beirne Davi is a Financial Turnaround expert and the founder of Abundant Finances, a service that helps you get yourself out of debt and start amassing abundant savings in record time (without deprivation or eating cat food for dinner).   After digging herself out of $30,000 in debt and saving tens of thousands of dollars, she decided to share her strategies with others who struggle in this area.  Turns out:  They work! The Abundant Finances community continues to grow with conscious women who are committed to making RADICAL changes in their financial lives.   For more helpful money strategies to turn your finances around, visit http://www.AbundantFinances.com and sign up for the high-content, high value FREE newsletter today!

How to Stand Up To Creditors

by Jillian Beirne Davi

Have you been shutting your phone off out of fear of creditors calling? If so, read on.

Nearly six years ago, I drove off my own fiscal cliff. I was drowning in credit card debt and didn’t know what to do. I had to shut my phone off because creditors called me from 7:00am to 8:59PM. I was terrified.

I remember one afternoon during this time; I got a call from a representative of a well-known credit card company. He said that if I did not pay a minimum of $2,000 on my balance, he would be referring my "case" on to their team of attorneys for review and I would be sued for the balance.

Two thousand dollars?! I didn't know anyone with that amount of money. Everyone I knew, parents included, were broke. I felt trapped in my own misery; young, naive and sinking fast.

That conversation shook me to the core. In fact, I was so distraught I began to battle depression and morbid thoughts that lasted quite a few months. (I hope you don’t mind me being vulnerable with you here.)

Reflecting on that time is painful to write, even years later. To think that I wanted to throw my life away because of some scary credit rep and $2,000.

Yet this is a common result of bullying that occurs every day in the collections industry. Yes, I was irresponsible, lived beyond my means and created a financial mess. And yes I understand that there are true con artists out on the world that run up tremendous amounts of debt and skip out on the bill. I understand the need for collections. At the same time, I felt so trapped and worthless.

Eventually after many sleepless nights, I had a revelation of sorts. I remember thinking that I had enough of the bullying. Not just from this one company but from all of them. I decided that I was stronger than this situation, and made a powerful decision to dig myself out. Now, I must preface by saying I am not an attorney, licensed financial advisor, accountant or anything like that. I’m just one regular woman who decided to take action. Here are some steps that I took to stand up to creditors and I hope they inspire you to do the same.

1. Get them to stop calling. Turns out there are many resources that provide sample letters you can send to credit card companies or collection agencies that will either stop or dramatically decrease their incessant calls. I wrote letters to every credit card company and agency. About thirty days later, the number of calls dramatically reduced.

2. Get Clear on Who You are Speaking To: Collection agencies use manipulative language to get consumers to pay. Sometimes they misrepresent themselves. When you are on the phone, ask the person’s name and employer. Refuse to have a conversation if they cannot provide this simple information. In my case, the representative that called used slippery language to make it seem like he worked for the major credit card company. Turned out he was a collector misrepresenting himself on the phone.

3. Get Everything in Writing. All communication between you and the lenders or collection agencies must always, always be in writing. This might seem obvious to some but many people make verbal agreements with intimidating collection agency reps over the phone without ever asking for the agreement to be made in writing! Keep hard copies of every letter sent and received. Additionally, request a return receipt for all your outgoing letters and send them certified mail.

4. Challenge any and all requests for debt collection. If you are dealing with a collection agency, the burden to prove that the debt belongs to you is on THEIR shoulders. They must present evidence that they are authorized to collect the alleged balance. You may owe the total amount but write a letter requesting that the agency verify that they are authorized to collect in the first place. There are many shady agencies out there trying to collect debts without proper authorization to do so.

5. Check for the statute of limitations in your state. Though this varies from state to state, find out the period of time a creditor or collection agency is legally allowed to come after you to collect, before the debt becomes null and void. For example, if the alleged debt owed was from an account that’s seven or more years old, they may not be legally permitted to collect. The account is simply too old. But of course, unscrupulous agencies out there thrive on resurrecting what I like to call “zombie accounts” and bet on your ignorance of the credit laws in your state.

6. Get Professional Help. And of course, there are attorneys, free credit counselors and other professionals that can help you assess what your options are based on your unique situation. It’s great to clarity on exactly what you can legally do to stand up to your creditors. Most local governments have free or low-cost resources to help you decide which options are right for you. One resource I found particularly helpful through all of this is the Federal Trade Commission website under Consumer Protection. It lays out a lot of these guidelines clearly. http://www.consumer.ftc.gov/topics/money-credit

By getting everything in writing and getting crystal clear on my rights, I was able to take a stand against unethical practices. Though it required a lot of courage, I eventually paid off all my accounts. I vowed to leave that dark period behind and stay away from soul-sucking debt for good.

If you are secretly struggling in this area, I hope this inspires you to do your research and take action NOW. It is possible to take your power back and stand up for your rights as a consumer.

1 Comment

Jillian Beirne

Jillian Beirne Davi is a Financial Turnaround expert and the founder of Abundant Finances, a service that helps you get yourself out of debt and start amassing abundant savings in record time (without deprivation or eating cat food for dinner).   After digging herself out of $30,000 in debt and saving tens of thousands of dollars, she decided to share her strategies with others who struggle in this area.  Turns out:  They work! The Abundant Finances community continues to grow with conscious women who are committed to making RADICAL changes in their financial lives.   For more helpful money strategies to turn your finances around, visit http://www.AbundantFinances.com and sign up for the high-content, high value FREE newsletter today!

Radical Financial Care

by Suparna Bhasin, Founder of She Creates Change

One of my favorite sayings is “Money isn't funny, people are funny with money!” What this means really is that we as a collective have made this thing called money mean so much about who we are, our level of success, a way to happiness and so much more. In reality, money is actually a neutral tool to buy and exchange goods and services.

What continues to surprise me is the amount of people that buy lottery tickets. I say this with a bit of tough love and smile on my face to anyone who buys lottery tickets – you are participating in the biggest scam in the world and p.s. money does not in fact buy happiness.

Money, however, is a ticket to freedom, which is what most people are truly seeking in their lives. So instead of a lottery ticket (let’s face it, it’s a long shot!) a more important investment is towards your time and imagination in considering what you would do with your life if you won the lottery. Money is simply a means to the end, NOT THE END!

I first taught my practices of Radical Financial Care in the summer of 2009, almost a year after we were on the brink of the total collapse of our financial markets. My belief is that this has happened because as a nation we held a very distorted view of money and its use in our society and culture: a mindset of over-consumption and greed.

The other observation I have made about money is the amount of fear our society has around making it, having it, and losing it. Many people make the most important decisions in their lives because of money and cause themselves an incredible amount of stress along the way. The biggest heartbreak I have observed is the abandonment of one’s dreams over money.

Debt is also an important and significant part of our monetary system. Many people believe that debt is bad just as many people believe money is the root of all evil as well as the source of happiness. Debt can be the result of money invested in opportunities, whether it be financial or towards your future dreams – this could be in a program such as She Creates Change, an advanced degree, a start-up business, property, etc. – anything you believe could give you a worthwhile return on your accruing the debt to begin with.

Debt when misused, can become problematic as can anything else. Often times people are unwilling to take risk in the form of investing their money as they fear that there will be no pay-off in the long run. Remember, money is an energy and tool – just consider how to use what you have or borrow in a healthy way that allows for advancement of your life and your dreams.

Now I would be misleading and misguiding you if I told you that money WASN'T important and that it did not have an important role to play in our lives and in your life specifically. We live in a material world wherein I believe it is critical to live responsibly with money and to create a healthy relationship with it and live comfortably without the stress it causes by not having enough to make ends meet. Personal development work is about actualization – according to Maslow’s Hierarchy of Needs (see graphic), it is impossible to thrive without first meeting one’s survival needs.

Together we can lay the foundation and blueprint for how you’ll make your dreams a reality. The first step is to concretely evaluate where you are today financially and work wise. Is your work sustainable? What will it take to move out of your current reality into your new one? Looking at your financial resources is an important part of this change.

It is important to “right size” money in your life. People in first world countries, such as the United States, typically have met their survival needs but often times at the cost to their health, relationships, and happiness. I ask you to take a very close look at your complete financial picture, income, balance sheet and finally the choices you are making to ensure they are the best choices possible for making your dreams a reality. 

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Suparna Bhasin

Suparna Bhasin: Founder and CEO of  She Creates Change, Suparna is a successful entrepreneur devoted to creating personal and global transformation through empowering women. She is a true visionary and teacher, inspiring a movement of change and infinite possibilities.  Suparna is the President of the Board for Women’s Education Project, a non-profit organization dedicated to helping women of limited means discover their potential for college and career success. She served as a lead coach for Future Possibilities and sat on the board of SAAIDS (South Asia Against AIDS) from 2001 - 2004.  She is a certified coach from both Coach for Life and The Life Purpose Institute.

6 Smart Money Moves in Your Thirties

by Stacy Francis, CFP®, CDFA

A couple of weeks ago, I attended my friend’s thirtieth birthday party. A week later, she called my office to schedule an appointment. While I was delighted to accommodate her, I couldn’t help but scratch my head a little. She never asked me about money before. What was going on? 

It turns out that like so many people entering their thirties, she suddenly felt overwhelmed with financial responsibilities. Would she ever be able to pay off her student debt? What about buying a home? And retirement, it had dawned upon her, wasn’t as far off as it had seemed before. Nor was the whole baby thing.

It is true that your thirties bring a ton of financial responsibilities - but it is also a decade of wonderful opportunities! Below are six smart money moves and stepping stones toward a prosperous future.

  1. Learn to prioritize and keep your expenses down. While a few people pick this up in their twenties, many people never do – and they rarely enjoy a better-than-average standard of living.
  2. Pay off your credit cards. Not only will you save a bundle on financing charges, but as your FICO score improves, you can obtain better rates for mortgages and many other things.
  3. Build an emergency fund. Most experts recommend that you keep enough money to cover six months worth of living expenses in an easily accessible account. This is especially true today.
  4. If you haven’t done so already, start saving for retirement. You are best off stashing this cash in an account that scores you tax benefits, such as a 401(k) or a Roth IRA.
  5. Watch your debt. Get into the habit of spending less than you earn, making room for savings. Stay clear of high-interest and toxic debt.
  6. Review your insurance coverage. Chances are you have some sort of medical insurance already. Other types to look into include long-term disability and homeowner’s insurance (if you are planning to buy a home).

You don’t have to deal with them all at once. Just keep them in mind, and work on them whenever possible.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

5 Reasons Why the Recession Rocks!

by Stacy Francis, CFP®, CDFA

The conference I attended last week was a study in pessimism and negativity. I feel that right now, people are paying far too much attention to the negatives and far too little to the many wonderful aspects of the current financial situation. For inspiration, see below!

  1. We save more. For ages now, Americans have been living on plastic, spending far more than we earn, not giving tomorrow that much thought. When faced with fears of financial hardship, we start to set cash aside for emergencies – a first, staggering step toward a sounder financial future.
  2. We get ourselves out of debt. It may seem controversial: how are we supposed to pay down debt when we make less money? But statistics show that Americans are now shredding debt instead of adding to it – for the first time in ages.
  3. Investments become cheaper. Stocks, mutual funds invested in stocks, real estate – it seems these days, bargains are everywhere! True, many people have suffered immeasurable losses . . . but always remember that there are two sides to every trade. For every person selling a house at a loss, there’s another person buying it at a discount. If you have the money, this is a fabulous time to invest.
  4. We learn to prioritize. When money is easy come, easy go, we can have it all. When the supply is cut short, we are forced to set priorities and differentiate real needs from fluff. This will enable us to get more out of our money once we head for the next boom.
  5. We discover what really makes us happy. It is all so easy. We take a job we never really wanted because we need the money. We get a couple of promotions and raises, and adjust our lifestyles accordingly until we are completely dependent upon our income. Meanwhile, our dreams and passions slip further and further away. When we are thrust out of that security blanket and realize that we can survive on much less, we get another chance to give those dreams a go.

How Much Debt Is Too Much?

by Stacy Francis, CFP®, CDFA

I was in back-to-back meetings all day today. This is not unusual – neither is the fact that four consecutive meetings started out with a prospective client informing me that she had come to me because she is in debt and would like to regain the control over her finances.

Debt is truly a widespread problem these days. So with each of them, I started out by breaking down their finances – income, costs, spending, and debt. In every case, their debt-to-income ratio came out higher than the limits most lending institutions use when determining how large a mortgage an individual can carry. According to them, if your debt payments (including mortgage payments) eat up more than 36% of your gross income, you should consider changing your lifestyle. If you do not own a home, of course your debt payments should be much smaller than that. Still, many people are far deeper in debt.

The good news is, by taking an honest look at your finances, drafting a budget, and making changes – some smaller, some bigger – you can turn this around and face a brighter financial future. I see it happen all the time. All you need is determination and a network of people who support you.

 

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Steal These Four Habits from Extremely Wealthy People

This weekend, one of the moms from the park told me her two older kids had become obsessed with baseball games on TV. When their lack of productivity started to bug her, she asked them what was so fascinating about all that baseball.

“We want to be pros one day,” they told her, as though it was the most natural thing in the world, “so we are learning by watching the very best.” This, from two grade schoolers.

I though the concept was genius, so I decided to apply it to finance. Because apart from fat bank accounts, what really does set the very wealthy apart from the rest of us? What habits do they have in common that differs from the grand majority?

Here’s what I found.

  1. They are more likely to be business owners. Because let’s face it, while you can create a very nice life for yourself while on the company payroll, few employers will pay you enough to make you the next Bill Gates.
  2. They pay cash for their cars. Most people know that from an investment perspective, new, financed cars are some of the worst things you can get into, as their value drops like rocks during the first couple of years while your debt remains.
  3. They are smart about debt. Extremely wealthy people rarely carry balances on their credit cards – in fact, they are less than half as likely to be in credit card debt as the average person. They know that financing charges will eat your fortune faster than a herd of hungry lions an injured zebra colt.
  4. They donate to charity. Whether you believe in karma or not, helping those in need creates goodwill and a sense of generosity, which makes people more positive toward you. This promotes wealth.

 

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Credit Card Overwhelmed: Notes on Debt Consolidation

by Stacy Francis, CFP®, CDFA

“My credit cards are driving me insane,” a friend complained to me over mochas (bought with cash) yesterday morning. “It’s like I can’t stop thinking about how much debt I’m in, because the minute I’ve sent off one minimum payment, I get a bill from a different company.”

I asked her if she had considered debt consolidation, and she replied that she had heard about consolidation loans, but don’t you need to own your home to get them?

The truth is, there are numerous options for those looking to save time, hassle and frustration by combining all their monthly payments into one. Below are a few:

  1. Credit card transfers. This can be an excellent way to go, if – and only if – you are certain that you’ll be able to pay off your balance before the low introductory interest period is over. BEWARE: Watch out as rolling your debt from one card to another can hurt your credit scores.
  2. Home equity. This is the loan type to which my client thought I was referring. For those lucky (or unlucky, depending on how you view things) enough to own a house, this can be a great way to lower your interest and get better payback – and overall – terms for the money you owe. BEWARE: I know too many people who have innocently moved their credit card debt onto their home equity line of credit, only to rack up new credit card debt only months later.
  3. Loans against retirement funds or life insurance policies. Most employers allow this for 401(k) plans, and most insurance companies don’t even require that you pay back the loan – you can deduct the balance from the benefits paid to your beneficiaries. While the latter may not be too happy, this is an option and worthy of a mentioning. BEWARE: Taking money from a 401 K can impact your retirement security. Not to mention many loans are due in full 60-90 days after you leave or are fired from the company.
  4. Nonprofit credit counseling agencies. The employees of these agencies do debt consolidation for a living. They negotiate with credit card companies daily, and will be able to score you the smallest possible fees and most favorable interest rates. BEWARE: Not all credit counseling agencies are the same. Do your homework and make sure that you are working with a reputable company.

These are just a few examples of ways to get control over your debt situation – simple ways to commit to a plan that both eliminates your debt and takes your mind off it. Always remember that many people have had this problem before you – and many have gotten out of it.

 

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Different Types of Debt: Keepers and Losers

by Stacy Francis, CFP®, CDFA

A client asked me today whether I thought she should apply her upcoming Christmas bonus toward paying down her mortgage or the balances on her credit cards. While the answer to her question may come easily to some, the truth is, my client is far from the only one having a hard time keeping different types of debt apart. With this in mind, here’s a list of different types of debt, starting with the kinds you want to lose right away and ending with the types you may actually want to keep.

1. Credit card debt. Don’t do it, and if you have already done it, pay it back and never do it again. It’s that simple.

2. Loans against your 401(k). These are nowhere near as bad as credit card debt, but losing them will enhance your financial health significantly.

3. Auto loans. As long as you can afford your monthly payment without any problems, you can keep this type of debt.

4. Home equity loans/second mortgages. This loan type should be paid off before you consider losing the categories below.

5. Student debt. Student loans tend to be pretty favorable – pay them off after the types above, but before you consider making a dent in your mortgage.

6. Mortgages. Interest rates are generally favorable for mortgages, making it more important to contribute to 401(k) plans and other types of retirement savings accounts than paying off your mortgage.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Investing More or Paying Down Debt?

by Stacy Francis, CFP®, CDFA

At a recent get-together at my parents house, one of their friends was excited to tell me his company had given him a substantial bonus – one that far exceeded his expectations. Thrilled to have a financial expert at the party, he asked whether I thought he should invest the money, or use it to pay down debt.

This is a brilliant question, and one that is fairly simple to answer. It depends on the cost of your debt, as well as the return on the investment you are considering. Some types of debt, like credit card debt, are expensive, so if you have them you should definitely use the money to pay them off. I know it sounds boring, but you will be happy later, when financing charges stop eating half your paycheck.

Other types of debt, such as student loans and mortgages, tend to have fairly reasonable rates and long payback times. Hence, you may be better off investing the money than paying them off. Say, for instance, that you pay 6% interest on your mortgage, and the yield from the investment you would like to try is 8%. In this case, depending on what kind of risk comes with the potential investment, you may be able to walk away with an extra 2% per year if you invest the money rather than dumping it into your home.

As all the debt my parent’s friend had was a low-interest mortgage, he decided to invest the money – after treating himself to a cruise with his wife. After all, life’s supposed to be lived. As for you, next time you come across a larger-than-expected sum of money, compare rates. The answer to this question is simply mathematical.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Four Rules for Paying Off Credit Cards

by Stacy Francis, CFP®, CDFA

Numerous people have told me that Mary Hunt’s book Debt-Free Living is well worth a look. This weekend, I finally got a chance to read it. Sure enough, it had some excellent points. My favorite was her four rules for getting out of debt. I will share below.

According to Mary, shrinking your debt is not all that different from shrinking your waist, so just like your diet, your action plan needs to be simple and specific. It is also crucial that you can measure your progress, and that you have a specific completion date. All payment plans work in theory – but they will only make a difference for you if you can stick to them. So be realistic when crafting it, and your chances for success are much bigger. Then make sure you work these four rules into the formula.

  1. There can be no more debt. You are never going to be debt free if you keep borrowing. It’s a bit like binge eating while on a diet – except you can’t make yourself sick afterwards.
  2. Pay the same amount every month. Over time, as your balances and minimum payments start to look smaller, you will be tempted to slow down and make smaller payments. Don’t. The faster you pay it off, the less finance charges you have to pay, and the smaller number of dollars will stand between you and financial freedom!
  3. List your balances according to size and payback time.
  4. Whenever you’ve paid off one balance, add the size of the payment you used to make toward it to the next one, and really get the ball rolling.

Paying off debt is no more fun than being on a diet, but if you keep envisioning your goal and implementing these four steps, you will be out of your crunch before you know it.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.