Financial literacy...not just for bookworms

In a recent report referenced by Southern Methodist University, in a study called “Economic Factors and the Debt Management Industry” by Richard Briesch PhD, 41 percent of households give themselves a C, D, or F in financial literacy.

That’s not good.

What’s your level of financial literacy?

1. 57 percent of households do not have a budget. DMB Financial starts every engagement with clients by jointly developing a budget. Knowing where you are, where you begin, is the first step towards better financial literacy.
2. 32 percent of households admit they have no savings. DMB Financial helps you set up an independent savings account at an FDIC insured institution. This is your savings account. It holds your savings. Creating a savings mechanism is a critical. It gives you the tools to make good financial decisions. You have a budget and, over time, develop a healthy savings amount. Now you just have to put that plan into action.
3. 77 percent of households admit they’re saving less this year than they saved last year. Even in tough economic times, with a good budget and the right savings plan, you can improve your savings situation over last year. The average DMB Financial client is saving over $700 a month by the time they graduate our debt settlement program! That’s amazing, especially considering the average income is around $50,000 a year.
4. There is no long-term plan for wealth creation. Rich people have financial plans, investments, and advisors. Are financial plans, investments, and advisors only for rich people? Or, are those people rich because they have a financial plan, investments, and advisors! Many graduating DMB Financial clients transition to our partner’s financial planning services. They start retirement savings, college funds, and some even start buying stocks and bonds. In just a few short years they go from being buried in debt to having a plan that gets them to $100,000 in the bank or more. Hello retirement. Hello paying for kids’ college. Hello new home.

Financial literacy isn’t something just for the rich and famous. DMB Financial enters every client into its 36-month financial literacy series of email newsletters. We partner with a major financial planning service. They provide our clients with free financial planning consultations to help identify their goals, their dreams, and put a plan in place to reach them.

Get out of debt. Then create wealth. Come join the financial literate!

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For a free debt analysis and preliminary budget, call a Program Consultant at (866) 869-6959. You’ve got nothing to lose, except the debt.

 
This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.

Few people realize that there is another solution to burdensome debt, an approach that puts YOU in the driver’s seat, which levels the playing field between you and your creditors, without having go to court. That solution is debt negotiation–good old fashioned American haggling. Haven’t you ever haggled over the price of a purchase? Well, exactly the same thing can be done for your debts!

Just imagine. If you could wave a magic wand and turn that $25,000 of credit card debt into $12,500 or even as little as $9,000, wouldn’t that make a HUGE difference to your financial future? You bet it would! Most people are skeptical that this approach is possible. But if you have a professional debt negotiator on your team, the odds are very good that he or she can cut your debt in HALF or less.

How is this possible? It’s very simple, actually. Put yourself in the shoes of a manager of a collection department for a major credit card bank. You know that bankruptcies are at an all-time high, that consumers file bankruptcy at the drop of a hat these days, and that the chances of collecting any money gets worse as the debt ages. You have the opportunity to close your books on a delinquent account by collecting 50 pennies for every dollar owed by the debtor, or take a chance on never collecting a single penny by trying to hold out for the full account value. You also realize that once the debt leaves your bank (usually after six months or so), it will go to a third-party collection agency. The agency will take at least 15%-20% commission right off the top of whatever they collect, and they are unlikely to collect more than 70% of the debt even with the most aggressive tactics. So you’ll probably never retrieve much more than half the money anyway. When you look at it this way, collecting 50% now doesn’t seem like such a bad prospect.

Now, the way we’ve described it above, it sounds like a piece of cake. You might be thinking, “OK, I’ll get on the phone and do this myself.” What will happen? You’ll reach the “customer assistance team” described above, and the representative will inform you that other banks may settle for 50%, but their bank never settles for less than 85%, under any circumstances. But, of course, they do have that wonderful hardship program for you.

After you’ve called five or six banks and received the same treatment, you’ll probably end up with the idea that debt negotiation doesn’t work. The problem is that the banks will rarely take a debtor seriously. Unfortunately, they simply don’t believe you and they think your hardship story is phony. The banks are quite prepared for the amateur do it yourself negotiator. They have the telephone scripts all set up so that by the time the conversation is over, the caller feels guilty about the money owed, and their lame hardship plan sounds like a great deal after all.

We’re professionals, but if one of us ever got into a financial pickle, we’d never try to negotiate our own debts. Instead, we’d hire one of our colleagues to do the job for us. We can’t emphasize this enough. Just having a third-party professional on your team makes all the difference in the world. There is something almost magical about this simple approach. Once the banks realize that they are talking to a professional, someone who knows the rules and regulations, and then they quickly change their tune. A negotiator will obtain better results than you could ever obtain on your own, simply because all of the bank’s tactics are stymied by the fact that they can’t talk directly to you. They can’t apply psychological pressure to you, since your representative filters this out.

Besides, there’s no shame in seeking help. Look at it this way: the banks pull out all the big guns when you fall behind. They have an army of collectors ready to pressure you with carefully scripted techniques. They have collection agencies and attorneys waiting in the wings to go after you full throttle. Doesn’t it make sense to level the playing field? Doesn’t it make sense to concentrate on improving your finances and let someone else deal with the aggravation of the incessant phone calls that start flooding in once you get behind?

Let’s go over the negotiation process in a little more detail. When you become a client of a professional debt negotiator, he or she will impose two simple rules for you to follow:

Rule No. 1: Don’t talk to your creditors.

Rule No. 2: Save as much money as possible.

Do you think you can handle those rules? They’re tough, aren’t they? Let us explain exactly why these rules are so important.

Rule No. 1 is important because only one person can negotiate your debts for you. If you only allow the negotiator to handle some of the phone calls while you make other calls yourself, the odds are high that you will say something that is not in your best interests, thereby undermining your negotiator.

You’ve seen the cop shows on TV, where they always read a suspect his or her rights while they’re being arrested. “You have the right to remain silent,” and so forth. Well, in debt collection, there is a similar rule. A debt collector is supposed to tell you the following: “This is an attempt to collect a debt. Any information you give us will be used for that purpose.”

Your debt negotiator knows exactly what information to disclose, when to disclose it, and when to withhold information. The average person, on the other hand, has no idea what to say in that particular situation. We tend to respect authority. Collectors have a lot of nerve and present themselves authoritatively. They ask you where you work, how much you make, how much you pay in rent every month, and so on. The answers, quite frankly, are none of their business. But most people feel compelled to answer, in a misguided attempt to establish rapport with the collector.

So, the first rule is KEEP QUIET, and let your negotiator do the talking.

Rule No. 2 is even more basic. Successful negotiation of your debts will require a reasonable compromise with your creditors. It’s important that you save as much money as possible each month for your negotiator to work with.

With a little elbow grease and a quick workshop at your local home improvement center, you can save an average of $1,400 (and in some cases, much more) this summer with a wide variety of Do-It-Yourself home improvement projects.

Many home improvement projects require very little prior knowledge or skill to accomplish. Eliminating the need to pay costly carpenters or installers offers you the chance to save sizeable amounts of money, or complete multiple projects for the same amount you would pay a specialist to do a single job.

The majority of homeowners today find themselves within easy driving distance to home improvement centers such as Home Depot and Lowes. These retailers offer not only all the tools and equipment needed to complete most projects, but also provide many types of free weekend workshops designed to help the first time renovator add a little more sparkle to their home. Similar workshops are also available at most local and neighborhood hardware stores.

See below for a sampling of Do-It-Yourself home improvement projects to work on this summer:

•  Freshen Up The Walls: A new coat of paint can be a cheap and easy way to brighten up your home’s interior. Requiring little skill and only a few simple tools, such as brushes, buckets, painter’s tape, and drop cloths, fresh paint (particularly a neutral color) is also a great way to position a home for the real estate market. Also check for free workshops in your area to learn more advanced painting techniques for a truly unique look.
• Replace Fixtures: Switch plates, outlet covers, curtain rods, light fixtures and doorknobs are often overlooked when it comes to home improvement. But with little more than a screwdriver and a few hours of your time, replacing fixtures can completely change the look of your home’s interior; from modern, to country or antique, and anything in between.
• Reveal and Restore Hardwood Floors: In many older homes, beautiful hardwood floors are hidden beneath layers of old carpet or linoleum. If you suspect your home has hidden hardwood flooring, peel up an inconspicuous corner of the carpet or floor covering to check. Although many of these older hardwood floors require refinishing, the job is not as daunting as you would think. Most home improvement centers and local hardware stores offer tool rentals on large industrial floor sanders which speed up the process considerably. They can also offer professional pointers and advice for a high-quality finish.
• Fix Up The Bathroom: Installing tile floors, shower surrounds, updated vanities, light fixtures, and toilets is a surprisingly painless task. Although proper tiling requires some degree of skill and a few specialized tools, just about anyone can learn to do it quickly. Use the money you save by doing it yourself to purchase higher end products and give your new bathroom that true “spa” feel.
• Reface Your Kitchen Cabinets: At a fraction of the cost of new cabinets, cabinet refacing involves using pre-cut vinyl or wood veneers in conjunction with new doors and hardware to alter the look of your existing cabinets. This quick and easy process can drastically change the look of any kitchen in as little as two hours.

Credit can be a great financial tool when it is used wisely. Many times people use credit irresponsibly. Credit cards become a problem when we purchase items on impulse, buy things we cannot afford, or live a lifestyle that is way above our current income.

It is important to get in the habit of using credit responsibly. The first step in establishing this habit is to understand the cost of credit. Did you know that if you had a balance of $500.00 on your credit card and only paid the minimum balance every month it would take you almost seven years to pay it off?* The total interest would end up costing you $404.64. That means your $500.00 purchase on your credit card actually cost you $904.64! When you make a purchase on your credit card, an Annual Percentage Rate (APR) is charged. An APR is the percentage rate calculated on a yearly basis. Some banks have higher APRs than other banks. Before you apply for a credit card, find out what APR the bank is charging.

Being responsible with your credit means not spending beyond what you can afford. When you use your credit card, keep an index card in your wallet and write down the purchases you make. That way there will be no surprises when your credit card statement arrives in the mail. You will also be able to keep a handle on what you are spending. Make sure you are charging only what you can afford to pay.

Be cautious of the discounts that many stores offer if you sign up for their credit cards. Have you ever been to a clothing store and the clerk asked if you would like to open up an account and save ten percent on your purchase? Those cards usually carry high interest rates and, in the long run, will cost you more than the ten percent you saved on your initial purchase. If you choose to apply for one of these cards, be sure to inquire about the interest rate and grace period.

Always pay off your credit card balance in full every month. Since you will already know the balance due before you get your statement (because you wrote down your purchases on the index card), put money aside to pay the bill. When you get the credit card statement, pay it on time. By paying off your credit card balance in full and on time, you should be able to avoid some interest charges, late fees, and potential debt.

If you are having trouble disciplining yourself to pay off your balance every month, consider getting a card that requires you to pay the full balance every month.

Get in the habit of using credit responsibly while you are young and it will help you in your future. Be proud on graduation day, not only because you made it through college, but also because you made it through college debt free!

*Figure is based on minimum payment of 3% of balance and 1.75% interest per month; may vary by bank.

If you are nearing the completion of your debt settlement program you will soon be debt free and able to begin thinking about the future. Make the decision today to change from being a slave to credit card debt to being an active and successful long-term investor.

It has been a hard road to get to where you are today. You have changed your lifestyle, tightened your belt financially, reduced your monthly expenses, and have learned a hard lesson regarding credit card debt and its detrimental effect on your personal finances. But now that you have implemented effective strategies to get yourself out of debt, you can begin using these same strategies to become a successful investor, leading to increased financial freedom for you and your family.

When it comes to putting money aside for use in investments, the same rules that you used to set aside funds for your debt settlements apply. Stop accumulating debt, live within your means, develop a comprehensive monthly budget, reduce your monthly expenses, identify ways to save money around the house, and stick to the plan. Also be sure to pay yourself first with each paycheck. On payday, immediately place a portion of your income into a savings account before doing anything else.

Now that you have money set aside for investment use, its time to jump in with both feet. The first thing to keep in mind is that nothing happens overnight. Making successful investments is a long-term process. Even small investments can have a huge payoff if you have the patience to sit back and wait for them to mature. We’ve all heard stories about investors and day traders getting rich buying and immediately selling investments for a quick turnaround. In reality, this can just as easily backfire and leave you with investments that aren’t even worth what you paid. Ignore temporary fluctuations in your investments, and remember that you are in it for the long haul.

And when it comes to choosing your investments, you’ll need to do a bit of research and educate yourself on the current investment markets to select an investment that works for you. Think of it as your new hobby. If you don’t have the time or the patience to learn about the current investment markets, consider consulting with a licensed financial counselor to select investments that meet your needs.

This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.

While most of us try to identify as many possible write-offs on our taxes that we possibly can each year, there are many qualified write-offs that are often overlooked. Recognize these obscure write-offs and get ready to optimize your next tax return:

• Job Seekers: Expenses related to job seeking can be a legitimate deduction on your taxes. Qualified expenses include phone calls, unemployment agency fees, resume preparation costs, travel and transportation fees, and career counseling services.
• Teachers: Any classroom related expenses such as books, computer equipment (including software and services), supplies, and other materials used in the classroom are legitimate deductions. Save your receipts!
• Home Office: If your home has a space solely dedicated to use as a home office, depreciations in home office equipment, computer expenses (if solely used for business purposes), and even the percentage of heat and electricity used by your home office are qualified deductions.
• Charitable Contributions: Any donation you make to a legally recognized charity is tax deductible, as long as it meets IRS standards. Double check charitable organizations to which you have donated to ensure they qualify.
• Military Personnel: Active military personnel qualify for many legitimate deductions regarding travel, uniforms, and educational expenses. Check with your tax professional to see which write-offs you can claim.
• First Time Home Buyer: As a first time home buyer, expenses such as property taxes and mortgage interest are legitimate deductions on your tax return.
• Energy Efficiency: Tax credits for using energy efficient appliances and heating systems are deductible in addition to alternative energy systems such as solar panels, wind turbines, and residential fuel cells. Energy saving home improvements such as insulation, lighting, windows, and roofs also qualify.

Identifying and claiming these additional tax write-offs positions the educated taxpayer for a greater return come April. Make sure you are claiming every possible deduction and limit the amount of money you shell out to Uncle Sam.

This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.