GREENPATH NEWSLETTER
JANUARY 2014
Get Out of Debt Tips for 2014 The New Year is upon us and the holiday gifts and decorations are packed away. Shortly, mailboxes will be packed with credit card bills. “In the first few months of the year, we really see a surge in calls from people worried about their holiday bills,” said David Flores, GreenPath personal finance counselor. “Once the excitement of the holidays has passed, they realize they need to get serious about paying off their debt in the New Year.” Here are seven tips from GreenPath on getting your debt under control this year: Plan Your Finances – This is an important first step to take in the New Year. An active financial plan is a tool that helps reduce spending and increase savings. “You shouldn’t simply be content with having money left over in your checking account, at the end of each month,” said Flores. Developing a plan will allow more financial freedom and enable you to get through financial emergencies. Create a Budget – A budget forces you to get your spending under control, and to “live below your means,” which is exactly what you’ll need to do to start eliminating your debt. Making little adjustments to your lifestyle can add up to big savings. “Be sure to give yourself a bit of breathing room in your budget for unexpected expenses,” said Flores. Prioritize Your Debts – “Debts that take first priority are the ones directly related to your ability to survive, such as mortgages or auto loans,” said Flores. “If you don’t pay these loans, you can face foreclosure or repossession.” Flores recommends prioritizing payments into three categories: high priority (housing, child support, utilities, car loans); medium priority (personal secured loans, student loans, home improvement loans); and low priority (loans for household goods, credit cards, doctor’s bills).
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Estimate Available Income – Income can be a weekly paycheck, pensions, public assistance and investments. After you subtract taxes and other deductions from your total income, you will have your available income that you can work with each month. Check Your Spending – Identify your past spending patterns by reviewing cancelled checks, receipts, and charge statements, for the past two to three months. Place expenses in “fixed” or “flexible” categories. Fixed expenses occur at specific times and rarely change (car note or mortgage). Flexible expenses fluctuate from month to month, and may possibly be altered to balance the plan (credit card bills, electric bill). Use Cash for New Purchases – Unless you pay off the entire balance every month, you are probably paying interest on new purchases from the date of the purchase. If you stop using your credit cards all together, you will be able to reduce your debt more quickly. Because of compounded daily interest, it is far better to use cash for the things you need and adjust your budget to accommodate those expenses, rather than to use credit cards and then struggle to send large payments. Review Your Plan – You should review your plan about every two to three months. Do not be surprised if, in the beginning, actual expenses are quite different from what you initially listed. Your plan will become more realistic as you continue the process. Planning ahead early in the New Year can set you on a path to being debt-free in 2014.
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GREENPATH NEWSLETTER
Plan Ahead, as Store Return Policies Vary
While stores and online retailers were packed with holiday shoppers in December, they will again be packed this month with people making gift returns. Many stores are lenient when it comes to returns, but consumers need to do their homework before making the effort to return that sweater or tie. According to Kiplinger’s Personal Finance (“Stores Get Stingy About Returns,” Dec. 13), stores are implementing stricter policies to combat return fraud. According to the National Retail Federation, fraudulent returns cost retailers $8.9 billion last year. Of that total, $2.9 billion occurred during the holiday season. Tips to consider: • If you didn’t receive a gift receipt, reach out to the retailer to find out what proof you will need to return or exchange the gift.
• Does the store offer a cash refund or store credit? • What is the window of time that you can return the gift? Return windows vary widely from lifetime return to 30 days from date of purchase. • If the gift was purchased online and you want to return it to a store, call and ask ahead about their policy. • Bring your ID. More often, retailers are asking for identification in order to cut down on fraud. But, take heart. According to Kiplinger’s, many retailers tend to relax their return policies for the holidays. So lenient online return policies and acceptance of returns in stores for items bought online will likely continue.
Five Fast Facts: Helping Your Credit Score Here are five things you can do to build up your credit score in the New Year: 1. Pay your bills on time. 2. Use less than 30 percent of your total available credit. An example would be if you have $1,000 of available credit on your credit card, you should never have a balance more than $300. 3. Don’t open too many lines of credit. Having several open lines of credit, even if not all of them are in use, will raise red flags from potential lenders.
4. Maintain a good balance of credit. This includes installment loans, like a car loan, in addition to credit cards. 5. Check your credit report regularly. Checking once every 3 months should ensure that accurate information is being reported. Log on to www.annualcreditreport.com to download your free reports (one free from each of the 3 credit reporting bureaus each year).
Clients give us feedback on our Facebook page from time to time. Here’s a recent message. On November 13, Angela G wrote: “Thank you for our kindness, help and professionalism. It is greatly appreciated.”
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