How Much Debt Does It Take To Be Considered Drowning In It?

Many college students have graduated this past semester and are finding the prospects for jobs very limited. In a recent report, 2/3 of these students have a debt of at least $25,000. This amount reflects only students attending public colleges. Private college debt is said to be much larger.

These students should at least be congratulated for finishing their degrees. But as their reward for doing a great job they are finding a poor job market and a hefty monthly debt payment soon to begin. As a bonus, congress wants to raise the interest rate on the money owed.

If you were fresh out of college with no job and $25,000 in debt, would that be considered drowning in debt. According to FinAid.org the payment would be about $290 per month, on a 10 year repayment plan. This payment would be impossible even if the student had a job. You would need a salary of $34,000 and you would pay 10% of your income toward your student loan.

For new graduates finding an entry level job that makes that much, is tough to find. Add to that living in a medium to large city that might have such jobs is pretty expensive. Plan on spending 30-40% of your income on a resident.

With these kinds of obstacles in the college graduates way, it's no wonder the rate of student loan default is on the rise.

If these trends continue, the outcome won’t be good for this generation of college students or for the country as a whole. Especially if the cost of higher education continues to rise as predicted in this graph:

According to the Wall Street Journal, the administration has laid out a 3 part plan to help take off some of the pressure. 

1. 10% of Income — The income-based repayment program, which puts a percentage cap on the amount that individuals must pay toward their student loans, currently requires that people must pay at least 15% of their income, but Obama’s plan will drop that number to 10% starting in 2012 rather than in 2014 as previously mandated.
2. Forgiveness after 20 years — Also, starting in 2012 instead of 2014, participants in the income-based repayment program will have their debts automatically forgiven after 20 years rather than 25 years.
3. Consolidation of loans — Obama’s plan will allow people to consolidate all their federal and government-backed loans, which can translate to lower interest rates and lower monthly payments.

The proposal could cost the government as much as $1 billion. But the slow moving government has much to do to get this plan off the ground. Time will tell what the final result will be.

How Paying the Minimum Payment Makes You A Frog

 (Photo credit: Wikipedia)We don't realize how often companies use psychology on us to make money. There are many ways psychology is used but did you know it's used on your credit card statement. In a recent study the amount of your minimum payments can influence how much of your balance you decide to pay off each month.

Specifically, according to the Wall Street Journal, the study looked at how people’s behavior changed when they saw a specific number marked down as a required minimum payment on their hypothetical credit card bill:

"A random sample of 591 Americans saw a made up credit-card statement showing a balance of $1,739, and an annual percentage rate of 12%. Some people saw no further information, while others were informed that a minimum payment of 2% of the balance was due."

What they found is that people who did not see any minimum payment number desired to pay a higher amount of their balance — significantly more than 2% — whereas people who were shown the minimum payment number were inclined to pay closer to 2% (meaning they’d be in debt longer).

We can speculate that this is because the 2% amount acts as an anchor in determining what you consider a “reasonable” payment to be.

Maybe you had planned to pay off the balance in 6 months, but since the bank is only asking you for 2% on your credit card statement, you figure that’s the right course of action. After all, they’re your bank, they must know what’s appropriate for you, right?

And that’s how you become the proverbial frog in a pot of boiling water. You wouldn’t allow the bank to take $1,000 or $5,000 or $10,000 in interest payments from you in one day, but by convincing you to succumb to the minimum payments myth they quietly take that much from you over the course of several years. It happens so gradually that you might barely notice until it’s too late.

What You Can Do About It?

You need to fight this inclination to pay only minimum payments. Add up the dollar amount of the interest you will be paying over the life of the payback period. Realize that all that interest will be coming out of your pocket for no good reason. Ignore the minimum payment, double or triple it and send that amount in every month. Get the thing paid off and don't be a frog.

Why Is Your Phone Number Your Greatest Business Tool?

 (Photo credit: ronploof)

Starting a business comes from a dream of wanting to be successful in the field you have chosen. You pride yourself on doing professional work and having that work reward you. But as a small business you need to build a solid reputation. The customer needs to feel confident in your business or they won't call you for your services. One way to do that is to offer freephone numbers for them to contact you.

Even though many people use the Internet to look for goods and services your phone number is still of utmost importance. Surveys reveal that the use of the Internet is growing at a fantastic rate, but your phone number is the main way customers contact you.

A local phone number is adequate but a free phone number will help you expand your business from a small start up to a regional or national company.

Here are 5 Reasons you Need A Business Phone Number:

1. Providing good customer service is one of the most important ways a company is likely to get ahead and move from merely breaking even to becoming very successful.

2. Call centers need to increase their customer satisfaction and ensure they stay ahead of competitors in the current difficult economic market, in result making it important to employ freephone numbers for customers to contact them.

3. Marketing can play a big part in an enterprise's success and there are numerous methods of advertising and getting people's attention. However, for many smaller firms these may not be viable at present as they do not have the money or resources to spend on large campaigns spanning several different types of media. 

4. A 0800 number presents a national image, so no matter where an organisation is based it can attract clients from all over the country, thus encouraging even more business and driving up revenue.

5. Memorable phone numbers also promote brand recognition, as they help people to differentiate between different enterprises and build up relationships. In particular, 0800 numbers are well suited for this purpose, as they are free for consumers to contact from landlines.

6. If a company has a local number, it is most likely to be perceived as a smaller business offering more specialised, localised products and services to those living in certain parts of the area. While this is ideal for some firms that will no doubt be happy to create a friendly, personalised image to people who are likely to return with repeat custom and tell their friends and neighbours about their experience, this is not the case for organisations with aspirations of international trade and a nationwide reach.

7. If people see that the enterprise is willing to cover the cost of the call, they may consider it to be looking after its customers and therefore have no hesitations when it comes to returning with more business or recommending the service to a friend.

The way your customers contact you is of utmost importance to the success of your company. Your company is in competition with hundreds of other businesses. It's important to distinguish yourself from them, one way is at distinct and easy to remember phone number.

Are Zombie Debts Stalking You?

(Photo credit: Images_of_Money)Collecting old debts - even debts for which you are not legally responsible - is becoming a very profitable venture. Companies can buy those debts (sometimes referred to as "zombie debt") for pennies to the dollar, then go after the people who they think are most likely to pay up. A phone call can turn into badgering, harassment, threats to sue, and other inappropriate (and sometimes illegal) actions. If you ever get a collector asking you to pay up on a debt that's "come back to life", here's how to make sure your rights aren't violated.

1. Do not acknowledge the debt. If you're not sure whether you actually owe the debt, don't say anything that could indicate that the debt is yours, and certainly do not agree to make any kind of payment. Doing this can give the company the legal right to collect the debt, which they might not have had if you didn't acknowledge the debt.

2. Don't fall for any traps.

• illegally "re-aging" debts (reporting the old debt to the credit bureaus as if it's new)
• promising to wipe off a red checkmark on a credit report
• bait-and-switch credit card offers (they tack on the balance of the zombie debt)

3. Get it in writing. Ask for proof that you owe the debt, like the credit card agreement you originally signed, along with an account history. If they don't have that proof then they don't have the right to take action against you. Again, make sure you don't acknowledge the debt. Keep repeating: "I want to see evidence of this debt in writing. I do not acknowledge this debt."

4. Check the statute of limitations to make sure you're not responsible for the debt anymore. The statute of limitations essentially defines how much time you can go without paying a debt before a collector's right to collect through the court system expires. Every state in the US has different rules and exceptions regarding when the time period officially begins, how long it lasts, and what can "revive" the statutory period, so you really do need to check the laws or consult an attorney in your own state. Until you can do that, however, keep the following in mind:

• Even if the statute of limitation expired, agencies can still try to collect the debt; they just can't do it through the court system. (If your debt was discharged through bankruptcy, they can't attempt to collect it at all.)
• Moving to a different state, even temporarily, can affect the length of your statutory period.
• Do not allow the collector to convince you to make a payment to "show your good intentions" (such as if you're on your way to court). This can "reset" the statutory period and essentially bring the debt back from the dead.
• If the statute of limitations has expired, and you don't meet the criteria in your state for extending it, send a letter to the collectors stating those facts.

5. Write a letter explaining that you are not responsible for the debt, you do NOT acknowledge it, and you demand they stop harassing you or you will take legal action. If you've done your homework and you know that you are not responsible for the debt (such as if your statute of limitations expired and you don't meet the criteria in your state for extending it, or you declared bankruptcy), send them a letter through certified mail and get a return receipt. If you've filed for bankruptcy, send them your discharge order with your letter. If they insist on taking you to court, be prepared to tell the judge that you notified the collector in writing that the statute had expired.

6. Watch your credit report carefully. They might try to report the debt or taint your credit history. As mentioned earlier, collectors could post an old debt as if it's new, or lie about the date of delinquency (in an attempt to start a new statutory period). Dispute any questionable entries with the credit bureau and the agency. Again, asking for proof of the debt as advised earlier can make their claims invalid.

Some articles concerning debt:

• Seniors in Debt: Debt Consolidation for Older Adults
• What You Don’t Know About Debt Will Cost You
• Five Ways to Pay Down Your Debt Before Retirement

10 Money Conversations Most Families Never Have

. (Photo credit: BrethrenBenefitTrust)The conversations between adult children and their parents concerning money and financial subjects rarely happen. Even thought these conversations are difficult to have they are a necessary part of an estate transition. 

Sadly, these necessary conversations usually are forced to take place when the elder parents are to sick or impaired mentally.
It's important that this has to change and open conversations need to take place when all parties are in good health.

According to a report by the Alzheimer's Association, 5.2 million -- or 1 in 8 Americans -- over the age of 65 have Alzheimer's disease. The same report also cites a study which estimates 13.9% of Americans over age 71 suffer from some form of dementia. If you suddenly had to take over a parents financial affairs would you know where to start.

For the good of all the family you should start as soon as possible to get organized. It will be a benefit to yourself and your parents.

1. Have they named a durable power of attorney to manage their finances?
The first step is to find out if they have named a Durable Power of Attorney (POA). Without a POA in place, you'll have to go to court to get guardianship of your parent in order to access accounts on their behalf.

2. Where do they keep their financial records?
Whether they keep their money and documents in a bank, a safe, or under the mattress, you need to know where to find records when you need them. What is the location of keys or codes to lock boxes or safes?

3. What are their bank account numbers and names of their financial institutions?
In addition to knowing where they keep their money, you need specifics on all account numbers. What banks do they use? Who is their mortgage company? Do they have an investment firm?

4. What are your parent's monthly expenses?
Gather information on their mortgage, car payment, credit card debt, electric bill and other expenses.

5. How do they pay their bills currently?
If there are automatic deductions being taken out of a checking account, you need to know about it. Do they use online banking, or only paper checks?

6. How much is their annual income and where does it come from?
Does your parent receive a monthly pension check? Do they have dividends coming in from investments? Do they get money for a disability, or alimony?

7. Do they receive Medicare, Medicaid, or Social Security?
If your parent becomes incapacitated, you may have to investigate the status and eligibility of government assistance.

8. What kind of medical health insurance do they have in addition to Medicare?
Do they have health insurance provided by an employer? If they are retired, are health benefits included as part of a pension?

9. Do they have long-term care insurance?
A "regular" health insurance plan does not cover the cost of assisted living or a nursing home. Did they purchase a long-term care insurance policy to cover the cost of those residences? If not, and they can no longer live on their own, what can they afford in terms of housing?

10. Do they have an accountant or financial planner?
Who is it and how do you contact them? Have they done any estate planning?

These and many other questions need to be answered before a situation becomes to difficult. Even if many of these things can not be revealed presently, a file or drawer where all of this type of information can be found quickly is a necessity.

The Advantages of Trading Indices

(Photo credit: Wikipedia)

Stock market indices are a major component of our daily financial news. Indices have to be understood in their proper context for anyone who hopes to invest using the information on any given index. Stock market indices are used to measure or track a market by its performance and this will give a fair indication as to its ups and downs.

Indices are financial products that are constructed from the constituents of a particular global exchange, such as the UK 100 or US 30. Trading indices are widely used by financial professionals as well as individual investors, for portfolio protection.

Some of the advantages of trading indices are:

24 Hour Market.

While the international stock markets operate during regular trading hours most of the major indices are open for trading 24 hours a day. When the UK or US stock market closes at 4:30pm, you can find the UK 100, US 30, or the Germany 30 index will continue trading all through the night. Unlike many other financial markets, investors can watch index fluctuations caused by economic, political, or social events and be able to respond immediately. They do not have to wait to markets to open in the morning. The electronic platform provides a level playing field. 

Liquidity

The major global indices are the most heavily traded asset type in the world. It has a large daily turnover with many traders all over the world. Volume and open interest in the stock indices continue to grow - a clear indication of the growing liquidity and strength of these contracts.

Leverage

Indices are traded on margin, typically 1%, which is quite often referred to as 100:1 leverage. With some companies it can be even less. If you trade on margin you are using your money more efficiently. You only have to allocate a small portion of your position to trade. More leverage provides greater exposure to price changes and allows you to take larger positions.

Independently Operating

Major indices are so large and heavily traded that they are beyond the financial control of any individual participant. Even government economic controls can not influence it.

Investing in indices is of course much easier and cheaper than investing in every stock in the index itself. Of course investing in an index doesn’t guarantee that you will make money but historically returns on indices have been in the region of 10-11%. Trade indices with CMC, it just takes a little patience over the long term to see a return on your capital.