10. Don’t wait to get started. The biggest mistake you can make is putting off saving money until you get a new job or a bigger paycheck. It doesn’t matter if you start small—you can begin with things as simple as keeping your change. The key is breaking the cycle of mindless spending and becoming aware of where your money is going.

9. Save up spare change. As Benjamin Franklin famously once wrote, “a penny saved is a penny earned.” Spare change doesn’t look like much when you’ve only got a handful of it, and it can be a nuisance to carry around. Resist the urge to toss it in the tip jar—keep a coin bank in your living room and empty out your wallet whenever you get home. You’ll be surprised how quickly it’ll fill up! When you’re ready to redeem your jar for something more convenient, there’s probably a Coinstar at your local supermarket to convert the coins to bills.

8. Be good to the planet. Eco-friendly practices are also wallet-friendly. Even though it seems more expensive to buy a reusable water bottle or shopping bag at first, they’ll pay for themselves in a matter of weeks in terms of the money you didn’t have to spend getting a new one. Remembering to turn off lights and stopping the sink when you’re brushing your teeth cuts down the strain on the environment—and your utility bills.

7. Shop online and obtain coupons. You can get many items at a significantly discounted rate online, often in brand new condition. This is especially of clothes and jewelry, although sites like Ebay.com and Amazon.com can offer bargains that you’d never find at a department store. Even if you don’t end up purchasing online, checking prices at different stores before actually heading out can help you make comparisons and ensure that you’re getting the best bargain.  What’s more, you can print coupons from sites such as Coupon Code Raja.

6. Make a list before you shop—and take it with you! Have a clear idea of what you need before you head to the store so that you can get it all efficiently, without expensive distractions. We tend to splurge on unnecessary items when we’re just browsing. Having a list is a good way to distinguish between needs—and wants. It’ll also help you cut down on the amount of unnecessary outings if you can consolidate your trips, which will help save gas money and time.

5. Find a hobby. New clothes and jewelry can be fun, but shopping out of boredom a dangerous habit to have. Instead of hitting the mall, try some more inexpensive activities like going to the library, jogging around the block, or gardening. It’ll help you feel better about yourself and prevent your credit card bills from rising. You might even find ways to make some extra cash, like babysitting or dog walking.

4. Prepare things yourself. Don’t hit the store every day for something you can easily make for yourself. For example, don’t waste money on a cup of coffee every morning—you’ll spend well over ten dollars by the end of the week. Instead, buy some ground coffee from the supermarket and make it yourself—you’ll get much more bang for your buck. In the same way, make your own lunches instead of ordering or buying—those daily trips to Chipotle can really add up.

3. Brave the cold. If you turn down the heat a few degrees in the winter and wear a few extra layers around the house, you can cut your heating bill by a huge percentage. Likewise, in the summer, try opening the windows instead of amping up the air conditioner.

2. Set goals. Create targets and timelines for yourself so that you know what you’re working up towards. Having concrete goals can also make saving money a bit more bearable—you’ll know when you have to be careful with every penny and when you have a little wiggle room.

1. Write and record. The best way to save money is to put yourself on a budget and know how you are doing. Write down your income, figure out a spending plan that works for you, and stick to it. Don’t forget to put aside some money for leisurely spending every week—it’ll keep you from giving up on your budget and also put a cap on huge splurges. If you’re really up for the challenge, keep a notebook and record every single expenditure you make, which will help you create a realistic budget. It’ll also help cut down on unnecessary spending, since you’ll either be deterred by guilt or the pain of having to write it down.

The post 10 Frugal Things To Do When You are Bankrupt appeared first on Debt Kid.

Pay As You Earn is a repayment plan for eligible Direct Loans that is designed to limit your required monthly payment to  an amount that is affordable based on your income and family size.

What federal student loans are eligible to be repaid under the Pay As You Earn plan?

Only loans made under the Direct Loan Program are eligible for repayment under Pay As You Earn. Eligible loans are Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans made to graduate or professional students, and Direct Consolidation Loans that did not repay any PLUS loans that were made to parent borrowers.

Loans that are currently in default, Direct PLUS Loans made to parents, Direct Consolidation Loans that repaid PLUS loans made to parents, and Federal  Family Education Loan (FFEL) Program loans are NOT eligible for repayment under Pay As You Earn.

Who is eligible for Pay As You Earn?

You must be a new borrower. You are a new borrower if you had no outstanding balance on a Direct Loan or FFEL Program loan as of Oct. 1, 2007, or if you had no outstanding balance on a Direct Loan or FFEL Program loan when you received a new Direct Loan or FFEL Program loan on or after Oct. 1, 2007. In addition, you must have received a disbursement of a Direct Subsidized Loan, Direct Unsubsidized Loan, or Direct PLUS Loan for graduate or professional students on or after Oct. 1, 2011, or you must have received a Direct Consolidation Loan based on an application that was received on or after Oct. 1, 2011.

In addition to your being a new borrower, your federal student loan debt must be high relative to your income. While your loan servicer will perform the calculation to determine your eligibilityfor Pay As You Earn, you can use the U.S. Department of Education’s Pay As You Earn calculator at http://studentaid.ed.gov/PayAsYouEarn to estimate whether you would  likely qualify for the Pay As You Earn plan. The calculator looks at your income, family size, and state of residence to  calculate your Pay As You Earn monthly payment amount. If that amount is lower than the monthly payment you would be required to pay on your eligible loans under a 10-year Standard Repayment Plan, then you are eligible to repay your loans under the Pay As You Earn plan.

If you are married and you and your spouse ?le a joint federal tax return, and if your spouse also has eligible federal student loans, your spouse’s eligible loan debt is taken into account when determining whether you are eligible for Pay As You Earn. In this case, the required monthly payment amount under a 10-year Standard Repayment Plan is determined based on the combined amount of your and your spouse’s eligible loans. If the combined monthly amount you and your spouse would be required to pay under Pay As You Earn is lower than the combined monthly amount you and your spouse would pay under a 10-year Standard Repayment Plan, you and your spouse are eligible for Pay As You Earn.

Although only Direct Loans may be repaid under Pay As You Earn, your (and, if you are married and file a joint federal tax return, your spouse’s) eligible FFEL Program loans will also be taken into account when determining whether you qualify for Pay As You Earn based on the amount of your federal student loan debt relative to your income. For this purpose, eligible FFEL Program loans are Subsidized and Unsubsidized Federal Stafford Loans, FFEL PLUS Loans for graduate or professional  students, and FFEL Consolidation Loans that did not repay any PLUS loans for parents. FFEL Program loans that are currently in default, FFEL PLUS Loans for parents, and FFEL Consolidation Loans that repaid PLUS loans for parents are not counted as  eligible loan debt.

What are the bene?ts of Pay As You Earn?

• LOWER SCHEDULED MONTHLY PAYMENT: Under Pay As You Earn, your monthly payment amount will be less than the  amount you would be required to pay under a 10-year Standard Repayment Plan, and may be less than under other repayment plans.
• INTEREST PAYMENT BENEFIT: If your monthly Pay As You Earn payment amount does not cover the full amount of interest that accrues on your loans each month, the government will pay your unpaid accrued interest on your Direct  Subsidized Loans (and on the subsidized portion of your Direct Consolidation Loans) for up to three consecutive years from the date you begin repaying your loans under Pay As You Earn.
• 20-YEAR CANCELLATION: If you repay under the Pay As You Earn plan, any remaining balance will be forgiven after 20 years of qualifying repayment.
• 10-YEAR PUBLIC SERVICE LOAN FORGIVENESS: On-time, full monthly payments you make under Pay As You Earn (or certain other repayment plans) while employed full-time in a public service job will count toward the 120 monthly payments that are required to receive loan forgiveness through the Public Service Loan Forgiveness (PSLF) Program.  Through this program, you may be eligible to have the remaining balance of your Direct Loans forgiven after you have  made the 120 qualifying payments as described above. PSLF is available only for Direct Loans, but you may be eligible to  consolidate FFEL Program loans into the Direct Loan Program to take advantage of PSLF. For more information, visit StudentAid.gov/publicservice.

Are there any disadvantages to repaying under Pay As You Earn?

• YOU MAY PAY MORE INTEREST: The faster you repay your loans, the less interest you pay. Because a reduced monthly payment under the Pay As You Earn plan generally extends your repayment period, you may pay more total interest over the life of the loan than you would under other repayment plans.
• YOU MUST SUBMIT ANNUAL DOCUMENTATION: To set your payment amount each year, your loan servicer needs updated information about your income and family size. If you do not provide the documentation, your monthly payment amount will be the amount you would be required to pay under a 10-year Standard Repayment Plan, based on the amount you owed when you began repaying under Pay As You Earn.

How is the Pay As You Earn amount determined?

Under Pay As You Earn, the amount you are required to repay each month is based on your adjusted gross income (AGI) and  family size. If you are married and ?le a joint federal tax return with your spouse, your AGI includes both your income and  your spouse’s income. The annual Pay As You Earn repayment amount is 10 percent of the difference between your AGI and  150 percent of the Department of Health and Human Services Poverty Guideline for your family size and state. This amount is then divided by 12 to get the monthly Pay As You Earn repayment amount.

The following chart shows the maximum Pay As You Earn monthly payment amounts for a sample range of incomes and family sizes using the Poverty Guidelines that were in effect as of Jan. 26, 2012, for the 48 contiguous states and the District of Columbia.

After the determination of your eligibility for Pay As You Earn, your payment may be adjusted each year based on changes in your income and family size. However, as long as you remain on the Pay As You Earn repayment plan, your required monthly payment amount will never be more than what you would be required to pay under a 10-year Standard Repayment Plan.

Are there examples of borrowers who are eligible for Pay As You Earn and borrowers who are not?

Example 1: Based upon the Pay As You Earn repayment formula, a borrower with a family size of one and an AGI of $30,000 would have a Pay As You Earn calculated payment amount of $110 per month. If this borrower had total eligible student loan debt of $25,000 when the loans initially entered repayment, and the loan balance had increased to $30,000 when the borrower requested Pay As You Earn, the calculated monthly repayment amount under a 10-year standard plan would be based on the higher of the two amounts. Using an interest rate of 6.8%, the 10-year standard payment amount for $30,000 would be $345. Since the $110 Pay As You Earn calculated amount is less than the 10-year plan amount of $345, the  borrower would be eligible to repay under Pay As You Earn at a monthly amount of $110. However, if this borrower’s total  eligible loan debt used to calculate the 10-year standard amount was only $5,000, the 10-year standard payment would be  $58 per month, which is less than the Pay As You Earn amount of $110. Therefore, the borrower would not be eligible.

Example 2: A borrower with a family size of four and income of $50,000 would have a Pay As You Earn calculated monthly  payment amount of $129. If this borrower had total eligible student loan debt of $20,000 when the loans initially entered repayment, and this amount had not changed when the borrower requested Pay As You Earn, the calculated monthly repayment amount under a 10-year standard plan would be based on $20,000. Using an interest rate of 6.8%, the 10-year  standard repayment amount for $20,000 would be $230. Since the $129 Pay As You Earn calculated amount is less than the  10-year plan amount of $230, the borrower would be eligible to repay under Pay As You Earn at a monthly amount of $129. However, if the borrower’s total eligible loan debt used to calculate the 10-year standard amount was only $10,000, the 10-year calculated amount would be $115 per month, which is less than the Pay As You Earn amount of $129. Therefore, the  borrower would not be eligible.

For more information on other repayment plans and links to calculators, visit StudentAid.gov/repay-loans/understand/plans.

The post Federal Student Loan Repayment Program — Pay As You Earn appeared first on Debt Kid.

Senator Warren Introduces the Bank on Students Loan Fairness Act, her first piece of stand-alone legislation, on May 8, 2013. The bill would would students who are eligible for federally subsidized Stafford loans to borrow at the same rate the big banks get through the Federal Reserve discount window. The full text of Sen. Warren’s remarks:

Mr. President, on July 1st, the interest rate on new, federally subsidized student loans is set to double from 3.4 to 6.8 percent. That means unless Congress acts, for millions of young people the cost of borrowing money to go to college will double.

The student debt problem in this country is a quiet but growing crisis. Today’s graduates collectively carry more than $1 trillion in debt—more than all the outstanding credit card debt in the whole country. Doubling the interest rate on new student loans will just increase the pressure on our young people.

Keep in mind: these students didn’t go to the mall and run up charges on a credit card.

They worked hard, they stayed in class, they learned new skills, and they borrowed what they needed to pay for their education.

Their education will improve their opportunities in life, but their education won’t help just these students. When they acquire more skills, these students help us build a strong and competitive economy and they strengthen our middle class.

Student interest rates are set to double in less than two months, but so far, this Congress has done nothing—nothing—to address this problem.

Some people say that we can’t afford to help our kids through school by keeping student loan interest rates low.

But right now, as I speak, the federal government offers far lower interest rates on loans, every single day – they just don’t do it for everyone.

Right now, a big bank can get a loan through the Federal Reserve discount window at a rate of about 0.75%. But this summer a student who is trying to get a loan to go to college will pay almost 7%.

In other words, the federal government is going to charge students interest rates that are nine times higher than the rates for the biggest banks – the same banks that destroyed millions of jobs and nearly broke this economy.

That isn’t right. And that is why I’m introducing legislation today to give students the same deal that we give to the big banks.

The Bank on Students Loan Fairness Act would allow students who are eligible for federally subsidized Stafford loans to borrow at the same rate that big banks get through the Federal Reserve discount window.

For one year, the Federal Reserve would make funds available to the Department of Education to make loans to students at the same low rate offered to the big banks. This will give students relief from high interest rates while giving Congress time to find a long-term solution.

Some may say that we can’t afford this proposal. I would remind them that the federal government currently makes 36 cents in profit on every dollar it lends to students. Add up all of those profits and you’ll find that student loans will bring in $34 billion next year.

Meanwhile, big banks pay interest that is one-ninth the rate that students will pay.

That is wrong. It doesn’t reflect our values. We shouldn’t be profiting from our students who are drowning in debt while we’re giving great deals to big banks. We should be investing in our young people so they can get good jobs and grow this economy, so let’s give them the same great deal the banks get.

Some explain that we give banks exceptionally low interest rates because the economy is still shaky and banks need access to cheap credit to continue the recovery.

But our students are just as important as banks to a strong recovery. And the debt they carry also poses a serious risk to that recovery. In fact, in March of this year, the Federal Reserve said that, because of the economic impact on family budgets, high levels of student debt pose a risk to our shaky economic recovery.

If the Federal Reserve can float trillions of dollars to large financial institutions at low interest rates to grow the economy, surely they can float the Department of Education the money to fund our students, keep us competitive, and grow our middle class.

Let’s face it: Big banks get a great deal when they borrow money from the Fed. In effect, the American taxpayer is investing in those banks. We should make the same kind of investment in our young people who are trying to get an education. Lend them the money and make them to pay it back, but give our kids a break on the interest they pay.

Let’s Bank on Students

The Bank on Students Loan Fairness Act is my first standalone bill in the United StatesSenate. I’m introducing this bill because our students are facing a crisis. We cannot stand by and simply watch.

This is about our students, our economy, and our values. The Bank on Students Loan Fairness Act is a first step toward helping young people who are drowning in debt. 

Unlike the big banks, students don’t have armies of lobbyists and lawyers. They have only their voices. And they call on us to do what is right.

Thank you.

The post Sen. Warren Introduces the Bank on Students Loan Fairness Act appeared first on Debt Kid.

Chapter 2 is all about not making matters worse. If you’re considering bankruptcy, odds are that things are pretty bad already. You might be sweating even the minimum payments on your credit cards, neglecting medical and dental care because you can’t pay the doctor’s bill, or waking up in the middle of the night worrying about money.

But get this—you’re not alone. There are tons of Americans who are going through, or who have gone through, the exact same thing. The important thing to keep in mind is that there’s a way out. Although personal bankruptcy can seem pretty devastating, you need to maintain a positive, can-do attitude and focus on getting out of the hole. It’s time to take a step back and assess the situation through clear eyes—figure out what you own, what you owe, and what you can do in the short term to prevent further damages.

Preventing Further Damage Now

It’s time to be careful, not take even larger risks. Until you meet with a bankruptcy lawyer and know just where you stand, don’t take any big steps that have a large financial impact. This includes:

• Borrowing any more money
• Making any payments on debts to friends, business partners, or relatives
• Getting married—or divorced
• Ignoring lawsuits
• Moving out of your homestead or entering into a contract to sell it
• Voluntarily leaving your job

Credit Card Arbitration Proceedings

These are important—don’t ignore them! Some credit-card companies are part of a National Arbitration Forum, which is basically a way for creditors to get stealth judgments against consumers without going through a real court with a real judge. It starts with a legalistic notice that arbitration proceedings have been started against you, and that if you do not respond, an award may be turned into a real court judgment against you.

They’re counting on you not to respond, which is of course how they screw folks over. If you get one of these notices, don’t ignore it if you have any reason to question the amount of the claim against you.

Controlling Your Spending

The first step to controlling your spending is keeping track of all your expenditures. Caher and Caher suggest carrying around a little notebook so you can record every expenditure you make for a month. Not only will this let you prepare a realistic budge, it’ll also make small spending such a hassle that you’ll be motivated to spend less.

Next, figure out where you can eliminate unnecessary expenditures. Here are a few things to focus on:

• Credit-card payments: Bankruptcy might be the best solution if a big chunk of your monthly income is going to credit-card bills.
• Daily dribbles: It’s easy to develop habits of unnecessary spending such as that cup of coffee in the morning, or the afternoon snack from the vending machine. It all adds up in the long run.
• Extravagances: Think twice before that expensive sushi dinner or the pay-for-view TV show. It’s helpful to calculate how many work hours it took to pay for each luxury.
• Impulse purchases: Many people buy tons of stuff that they never end up using—just head to your attic or your garage if you want proof. Figure out what you really need and avoid the rest.
• Overwhelming mortgage payments: the home might not be worth keeping if most of your monthly payment is going toward the interest.
• Killer car payments: Consider selling your expensive new car and buying something more affordable if you’re struggling to maintain payments.
• If you have to buy things, visit a coupon website such as Coupon Code Raja.

What You Owe and What You Own

Document your assets—and how much you owe on debts. Figuring out what you have helps to create a basis for figuring out what property you may lose by filing bankruptcy, lets you know if avoiding bankruptcy by selling things is a viable option, and demonstrates how little you have to show for thousands of dollars of credit-card debt.

Even if it’s painful, knowing the total amount of what you owe is critical. Creditors want you to think in terms of monthly payments instead of considering the total amount—it’s easier to buy that new car when you only consider the $400 monthly payment instead of the $25,000 total.

The post Book Review: Personal Bankruptcy Laws — Chapter 2 appeared first on Debt Kid.

Given the options of investing in mutual funds, index funds, and individual stocks, I have made my choice.

As of now, my entire portfolio has less than $1,300 in mutual fund.  That is in a college saving plan, and the only thing available in the plan are mutual funds.

The number one reason I have mutual fund is that the performances sucks.

Thanks to my brokerage, I review the number very easily.  Back in February 2006, I invested $1,000 in the plan and the performance is as  it follows.

The performance for the past 1, 3, 5 years and since inception (2/28/2006) are 16.90%, 10.82%, 3.84%, and 2.47%, respectively.

It has been more than 7 years since I invested the money, and the annualized return has been merely 2.47%.  If you read about my personal investment performances in accounts that I manage by myself, you will understand why I regret I put money in the mutual funds.  My personal investment performance during the past 1, 3, 5, and 10 years has been 28.52, 35.51, 19.12, and 13.69%, respectively.

I could have done better by throwing money in and S&P 500 index fund. The index returned 16.89, 12.80, 5.21, and 7.88% during the past 1, 3, 5, and 10 years.

And my observation is confirmed by a report entitled S&P Indices Versus Active Funds (SPIVA) Scorecard done by Standard & Poor, publisher of S&P indices.  According to the report, 66.08% of all domestic USA Equity Funds failed to beat their benchmarks during the year of 2012.  Longer term, 74.35% of the funds failed to beat benchmarks in three years and 68.56% failed to beat for the past five year.

The odd to select a fund that will beat the market is against individuals. As in my case, the situation is worse as one really do not have a choice when it comes to invest in this college saving plans . For this reason, I avoid mutual fund as much as I can. In situations such as College Tuition Plans when mutual funds are the only choices, I have been avoiding  in these plans and choose instead max out my Roth IRA, which allows me to invest in individual stocks and ETFs.

More on this last point in the future.

The post Why I Hate Mutual Funds appeared first on Debt Kid.

It is the largest custodian of retirement asset in the nation that is based in Boston, in case you wonder who my brokerage is.

Between my wife and I, we have several accounts with the brokerage for ourselves and four accounts for our kids to fund their education.  The kids accounts have very little asset in them and are not included in this presentation.  The reason these accounts have very little money is that for over 15 years during the past 18 years or so, I invested those money in mutual funds instead of manage it myself. The mutual funds had not appreciated much by the time I pulled all except one account out of mutual funds.

It was a bad decision to invest in mutual funds and you will see why soon.

As time of this writing, I have exactly $1298.29 in a college saving plan account.  That is it.  The rest are in stocks (80%) and cash (20%).  Cash is on the high side because the imminent tuition expenses.

In order to protect my personal information, I only present the performance numbers and omitted the account name and account balance information.  But these numbers are true as they are screen shots from my brokerages website.

The following is the annualized view, the last row is the performance of all the accounts combined.  Highlight: I achieved an average return of  28.52% for the past one year, 35.51% for the past 3 years, 19.12% for the past 5 years, , and  13.69% for the past 10 years.

The following is the cumulative view. Again the last row is the performance of all the accounts combined. One way to look at is that one dollar invested in my accounts would become $1.285 in one year, $2.49 in 3 years, $2.40 in 5 years, and $3.61 in 10 years.

The numbers look decent enough, but how do they compare with the stock market in general? Here is the S&P 500 Index annualized performance:

And cumulative view: 

Yes, I beat the stock market by a large margin in any of the past 1-year, 3-year, 5-year and 10-year periods.  Of course, as hard as I try, there is no assurance that I can achieve the same investment return in the next decade.

In the future, I will share how I achieved these returns.

The post My Personal Investment Performance Beats the Stock Market Hands Down appeared first on Debt Kid.

You can say I start with the worst of the worst.

The great thing about this country is that there’s always a way to get back on your feet, financially speaking—unless you’ve done something illegal. And even if you’re being sued, there’s something that can halt almost every kind of lawsuit—filing bankruptcy, an option for those who don’t have many options.

What is it? Sounds complicated. Thankfully, James P. Caher and John M. Caher already did the work for us, and wrote a nice guide called Personal Bankruptcy Laws For Dummies. I’m just here to read, summarize, and reflect.

What is Filing Bankruptcy?

In 1705, Parliament enacted a law that enabled a person to wipe out unpaid financial obligations, although this required the consent of the creditor. Over time, bankruptcy laws have become more compassionate and less punitive, and was seen by the Founding Fathers as a constitutional right; debtors deserved the ability to have a fresh start. Current bankruptcy procedures are defined by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Filing bankruptcy is essentially a procedure in which a person admits that they are not able to pay their debts, and receives help from the court. Bankruptcy can discharge most of your debts, stop foreclosure of your home, avert repossession of things such as your car, prevent your driver’s license from being revoked for unpaid fines, prevent garnishment of wages, and stop most evictions if bankruptcy is filed before a court enters a judgment from possession.

Types of Bankruptcies

There are mainly two types of bankruptcy Chapter 7 liquidation, which enables you to eliminate most of your debts but may require you to forfeit some of your assets, and Chapter 13 reorganization, which enables you to pay off all or most of your debts during a time period but doesn’t require you to forfeit any of your assets to pay unsecured debts- those that are not secured by property, such as your car.

In order to qualify for Chapter 7, you have to pass a Means Test in order to show you don’t have enough income to pay a significant portion of your debts. If you earn less than the median income for your state, you can skip this test altogether.

To qualify for Chapter 13, you must pass a best interest test, which mandates that unsecured creditors be paid at least as much as they would receive if you’d filed a Chapter 7 instead, and the best efforts test, which requires that you pay all your disposable income to the trustee for at least the first 36 months of your plan.

Other specialty kinds of bankruptcy exist—Chapter 11 bankruptcy, primarily for large business reorganizations, and Chapter 12 bankruptcy, which is particularly helpful for family farmers and family fishermen.

Drawbacks of Bankruptcy

Sounds pretty good right? Of course, bankruptcy is not a panacea, and certainly when your motive is anything other than reasonable relief from your debts. Bankruptcy generally can’t prevent criminal prosecutions, proceedings against someone who cosigned your loan, contempt of court hearings, actions to collect back child support or alimony, or governmental regulatory proceedings. In short, if you broke the law, filing bankruptcy can’t get you out of the mess.

Filing bankruptcy also doesn’t come without consequences. First of all, it’s a matter of public record, which means that your future landlord or your next employer might be able to find out you filed bankruptcy. Although governmental agencies and employers aren’t supposed to discriminate against you for filing bankruptcy, they can still do so in a roundabout way.

Second, your credit rating might go down—although your odds of obtaining credit are still pretty good even with bankruptcy on your record, you’ll probably still have to pay higher interest rates on new credit.

Third, friends and relatives can be forced to give back money or property if you’ve repaid loans or given them anything within the past year. There’s also the off chance that you could lose your home—rare, but it could happen.

Finally, there may be a stigma attached to filing bankruptcy. It’s easy to view filing bankruptcy as the easy way out for sleazy deadbeats who can clearly pay their bills, but just don’t want to. There have always been those who think that bankruptcy threatens the ethical foundations of our society, that the government shouldn’t just go easy on people because they screwed up.

I’m not here to get into a political debate, but this book makes a good case about why aggressive and sophisticated credit marketing techniques can easily drive any ordinary, hardworking consumer to lose control. The second largest growing segment of bankruptcy filers are consumers between the ages of 18 and 25, students and other young people who lack the maturity and resources to handle debt. But credit companies are more than willing to extend credit to folks with no income, no assets, and no track record, just because it’s extremely profitable.

Despite all that, bankruptcy seems like a reliable option to have around, so I’ll explore the ins and outs of it for the next few weeks with this book as my trusty guide. Stick around!

In the meantime, you can check out how much it costs to file bankruptcy here at www.debtkid.com.

The post Book Review: Personal Bankruptcy Laws For Dummies — Introduction appeared first on Debt Kid.

It’s not just foreign travel that can leave us tongue-tied though. The world of investment, like many areas of business, comes with its own set of words and terms that can be very daunting to the uninitiated. If you are looking for more information on investments then CSS Partners, an established financial investment company, is a great place to start.

To give you a basic overview on some of the terminology you may encounter after making your enquiries, here is a brief beginners’ guide to investment jargon but you can also check out fantastic online investment dictionaries for a more comprehensive explanation of terms.

Jargon: Bid rate

Definition: This is the interest rate bid by an investment provider for a product in an investment auction. In other words it represents the amount of interest they will be happy to pay.

Jargon: Liquidity 

Definition: Liquidity is a measure of how easily you can get out of an investment and get your funds back.

Jargon: Foreclosure investing

Definition: This is the process of investing cash or capital into the sale of a mortgaged property. It occurs after the foreclosure of a loan secured using that property, hence the name, and our post on the three entry points for foreclosure investing can offer more information.

Jargon: Fallout risk 

Definition: No business venture or financial process is without its risk and in investments you’re likely to come across the term fallout risk. This represents the lending risk you’ll face from your investment decisions. An example would be when dealing with a mortgaged property. As the terms of this agreement are not finalised until the sale has been completed, investors are at risk of their transaction not being completed and this is the fallout risk.

Jargon: Mergers and acquisitions

Definition: This is a general phrase used to explain the consolidation of companies into a single body but there is some differentiation between the two terms. Technically speaking, a merger is where two companies combine together to form a new business while an acquisition is the purchase of one company or firm by another. In an acquisition, there is no new business formed.

Jargon: Capital

Definition: To make an investment you need capital – but just what is it? According to definitions, capital is simply a term used to refer to financial assets which may include cash, properties, equipment or other business possessions.

Jargon: Insolvency

Definition: Representing the other side of the coin when it comes to investment, insolvency is used to refer to the state an individual or business faces when they can no longer meet their financial commitments. This can lead to insolvency proceedings where legal action can decide to liquidise assets to pay outstanding debts.

Jargon: Learn the language

Definition: If you’re looking to find out more about investments and the jargon used why not check out CSS Partners, experts in the field and qualified to give you all the right information about investing? Once you’ve learned the language of investing, you will never feel powerless again.

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When the cost of production, overhead, employees and benefits are added up, many entrepreneurs find that they’re short the necessary funds to cover all their business expenses. It’s hard to imagine a startup company being able to negotiate the ups and downs of a new business venture without having access to an outside source of revenue. This is the scenario for many start-ups to begin using credit.

There’s no doubt that credit is a necessary factor in building many businesses. Just as an individual benefits from having a lengthy credit history and an excellent credit score, so does a business. Without them, it will be difficult for a business to secure the necessary loans they may need for improvements, growth and hiring additional employees.

The Cost of Borrowing
Interest charges are by far, the costliest factor when borrowing. The best rates are rewarded to the businesses that have excellent, lengthy credit histories. Previous loans that have been repaid without late or missed payments, will go a long way to establishing a history that reflects responsible money management. Lenders will be more inclined to lend to your business at lower interest rates, as well as longer periods of time. If the first venture into the field of business credit cards is a less than desirable interest rate, don’t let it get you down. After demonstrating your ability to handle the debt, other opportunities will come your way to secure a lower rate card in the future.

Legal Warnings
Business owners who use their personal credit cards to pay for company expenses are making a bad business move. Instead of helping the business, the credit history is benefiting the individual and not the company. For a credit card to benefit your business it must be in the name of the business entity, either a corporation or LLC. In addition to a name, you’ll need a tax ID number from the IRS in order to open an account for your business. An accountant can advise you on the best legal structure for your particular situation, as your choice in entity can have some pretty significant tax implications. Apply for your business’ EIN online through the IRS site — and don’t worry, the process is fast and simple.

The Ease of Approval
Business credit cards are one of the most practical credit line options for start-ups and small businesses and generally easier to secure than a business loan. Large corporations with annual revenues over $25 million typically qualify for corporate credit cards and commercial loans and other financing options. A small business credit card will provide the needed funds at reasonably low rates (averaging 15.50% as of April, 2013) and require no collateral, making them a wise choice for a business hoping to build a credit history.

Full Credit Report Disclosure
If your credit transactions are not reported to the major reporting agencies, you won’t be building a history. This is when you need to be proactive in checking that your vendors are fully disclosing your credit activity. Just as your personal credit score and history is built on a variety of activity, the more vendors that report a good payment history for your business, the healthier your credit history will be.

Keep Good Personal Credit
While you are establishing a reputation for your business, lenders will be looking at your personal credit history as the owner. It is common practice that you will also be expected to accept responsibility for the actions of the business’ credit card. So it’s important that your personal behavior matches that of your business.

Just as your personal credit history takes time to grow, building impressive business credit isn’t going to happen overnight. The process can be quicker when you practice impeccable money management. An excellent credit history will provide loan and credit opportunities for your business to grow and prosper. Easy access to bank funds will also help your business navigate changing conditions and position your company for success.

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It seems we do not need a vulture investor around here. 

But before you usher me out,  please let me say the reasons why guys investing in foreclosure situations are not the bad guys, and who knows, maybe one day the former debt kid who lost his/her house in the foreclosure will have a major comeback and pick up a few good investments.

We are not talking about stealing houses from widows and orphans. 

A fair deal involves a buyer and a seller who are willing, well informed, and of sound mental capacity to evaluate the deal.  In foreclosure situations, it is possible strike a win-win solution in which the distressed seller comes out better and the buyer wins as well. As a whole, the foreclosure investors provide the capital to the market so the distressed will not get stuck with their situation for extended period of time.

There are really three points of entry a foreclosure investor can step in:

1. Pre-Foreclosure: Buy the property before the foreclosure auction happens or the property transferred the trustee.
2. Foreclosure Auction: Buy the property at the sheriff or the court auctions or after the property is transferred to the trustee.
3. Post-Foreclosure: Buy the property from the lender or from the Real Estate Owned (REO) broker.

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