How To Be Rich In 2010

Published by Tisa Silver on Thursday, December 31, 2009 at 1:01 am.

happy_new_year_bbWhen I was a child, I remember teachers asking me and my classmates, “What do you want to be when you grow up?” The answer I remember hearing most often was, “I want to be rich!”

Back then, “being rich” to us meant having a million dollars.

We didn’t really know what it meant to have a million dollars. We just knew from things we had seen and heard that $1 million was a lot of money.

Recently, I read an article on what it is like to have one million dollars now. Needless to say, it isn’t what it used to be.

When I was a teen, I remember getting an attitude when the price of gas rose above $1 per gallon. Now, I am thankful that it is staying below $3. Time changes everything, doesn’t it?

Well, one thing that hasn’t changed is the desire to be rich. But, what does it mean to be rich?

“Rich” is relative. Making a million dollars in a day would feel like hitting the jackpot to the average person, but for a billionaire, it may feel like an average day at the office.  

Speaking of a million dollars, according to the Wall Street Journal, there were 2.5 million millionaires in the United States at the end of 2008. There are over 300 million people in the United States, so millionaires make up less than one percent of the population.

Are they all rich? I don’t know. There is no dollar figure which makes you officially rich. Being rich is more about how you live and view your life as opposed to how much money you have. Looking at things this way, your chances of becoming rich are much greater than your chances of becoming a millionaire.

As the New Year is upon us, many people will make resolutions to “get rich.” If your resolution is to get rich, then define what “being rich” means to you and map out a plan to get there.  The plan may not be easy and it will not work overnight. New Year’s Eve is no exception.

Before you do anything else, take a look at what you have and you may find that you are rich already.

Happy New Year!

Until next time,

Tisa

Don’t miss the relaunch of “Pay It Off,” now in a half-hour format. Tune in Fri., Jan. 22 at 8 PM/7C.

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Payday Loans: Convenience Worth The Cost?

Published by Tisa Silver on Tuesday, December 22, 2009 at 4:11 pm.

Around this time of year, the pressure to spend is on full steam. Where can you go if you need extra cash?

For people with no savings, no available credit, bad credit or no credit at all, payday loans offer a convenient way to get out of a temporary jam. While payday loans may be convenient, they can also be costly.

As for the convenience…According to the Community Financial Services Association of America, there are over 22,000 payday lending outlets in the United States. Just to put the figure in perspective, there are about 14,000 McDonald’s restaurants and fewer than 4,000 Walmart locations.

As for the costs…Payday loans usually charge a flat fee, perhaps $30 or $40. These amounts seem negligible, but for payday lenders, these amounts provide a generous return. In the business of lending, profitability is gauged by interest rates. So, if you took out a $500 loan and paid the lender $540 two weeks later, the lender made a 20 percent return on their investment.

As for the consumer…If you take the money and use it to go shopping, then for everything you buy, you will spend an extra 20 cents on the dollar. A $100 iPod will really cost you $120. A $300 weave will really cost you $360. If you don’t really need either, then you should skip the payday loan and save yourself some money.

The interest rate in the example above only applies to a two-week pay period. According to credit.com, the average annual rate on a payday loan is 400 percent. Just to put the rate information into perspective, take a look at some other relevant interest rates below.

Average credit card rate for consumers with excellent credit: 12.98%

Average consumer credit card rate: 16.36%

Average credit card default rate: 27.8%

What does this mean? On average, in just one pay period you could pay a higher interest rate on a payday loan than a credit card company would charge you over the course of one year.

A couple of points to remember when using payday loans:

Pay it back – If you have to use a payday loan, pay the loan back as specified in your agreement, or else you will be subject to additional fees and finance charges. If you go into default on a payday loan, the lender could sue you to recover the balance and the default will show up on your credit report.

Look at rates not dollars – When evaluating your financing options, use interest rates NOT dollars to determine which lender gives you the most bang for your borrowed buck. For one dollar borrowed with a credit card, you will pay back an average of 16 cents per year, whereas a payday loan could force you to pay back 20 cents in two weeks.

It’s an expensive habit – “One and done” is easier said than done. According to creditloan.com, typical payday loan customers take out 11 or 12 loans per year. The average annual rate is 400 percent, but some lenders charge as much as 1,000 percent. The best way to beat an expensive habit is not to start it!

Spend your time and money wisely this season. Happy Holidays!

Until next time,

Tisa

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How It Feels To Get Paid

Published by Tisa Silver on Tuesday, December 15, 2009 at 1:30 pm.

piggybankIt’s Friday night and you just got paid…or did you? If you did get paid, how does it feel?

Many of us earn a paycheck, but claims on the funds we have earned often keep us from seeing any of our earnings.

It is an awful feeling to earn money and not be able to spend it on something you actually want or better yet, have the opportunity to save or invest it. How can you get there? Following these steps can help you make a way to pay yourself first.

Take an honest look at where you are – Sometimes, we do not know where our money is going until it is already gone. Track your inflows against your outflows. Starting with just one month, compare your income and expenses to determine if you are operating at a surplus or deficit. If you are breaking even or operating at a deficit, then you will have to make some changes. If you are operating at a surplus, you can still make changes in order to increase it.

Change what you can – There are three ways to create or increase your surplus: increase your income, decrease your expenses or do both. Making more money is not the solution to every problem. In fact, it often leads people to spend more money. Instead, examine your expenses, which can be fixed or variable. Fixed expenses such as rent, a mortgage, or a car note remain the same each month. On the other hand, variable expenses such as entertainment, beauty and food can be adjusted. Pay close attention to the variable expenses, as they may offer the most room for change.  

Make plans for the surplus – You can spend, save or invest the surplus. In terms of earnings potential, spending offers no return. Saving will offer solid, but relatively low rates of return. Investments such as stocks and bonds can provide varying rates of return since nothing is guaranteed. Be sure to examine the potential risks and returns of any investment BEFORE you invest.

Stick to the plan – Savings and investments will not grow overnight. Investing requires discipline and patience. Set a time horizon and rules for your investments and try your best to stick to them.

If your priorities change from time to time, it is okay. Life-changing events can bring about significant costs and benefits, some of which may require you to change your financial plan. Regardless of life’s changes, you should be able to enjoy your earnings, and that is a good feeling.

So stake your claim and learn how it feels to get paid. If you don’t pay yourself first, who will?

Until next time,

Tisa

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Writing Checks Is Not What It Used To Be

Published by Tisa Silver on Monday, December 7, 2009 at 1:25 pm.

checks“Don’t let your mouth write a check, that you…can’t cash”

We have all heard several versions of this statement, some raunchier than others, but the point is simple: do not make a promise you cannot keep. Financial promises gone wrong can have far-reaching consequences of varying severity.

So, let’s tackle some common misconceptions about writing bad checks.

It won’t go on my credit report – Writing a bad check will not show up on your credit report, however there are agencies which keep a record of banking activity. If you write bad checks, then banks may deny your future attempts to open a checking account. Merchants with access to bad check databases may also refuse your checks.

The bad check itself will not appear on your credit report. However, writing a bad check to cover a debt could trickle down and eventually damage your credit. If the debt remains unpaid and is sent to a collection agency, then the agency may report the unpaid debt to multiple credit bureaus.

Checks are slow, I can use float – Float is not what it used to be. The term “float” is used to describe the lag time between when a check is written and when the funds are cleared from the account. For example, suppose you put a check in the mail today to pay your phone bill. The funds may not be withdrawn from your account for another seven days because of the time it takes the phone company to receive the check, process it, deposit it and then, withdraw the funds from your account.

In theory, you could write the check today, knowing you cannot cover it and then, make a deposit next week. But what if the phone company and the postman are faster this month? What if your deposit does not arrive as expected? There are too many “ifs” and each one can result in a fee or penalty for you to repay.

Many companies are now processing checks electronically, thus reducing or eliminating float altogether. Every vendor is different, so it is best not to take a chance on float.

But, there’s no real punishment – Depending on where you live, writing a bad check can be a classified as a felony. It can be pursued as a form of fraud or theft and there can be legal consequences, including jail. Several people, including many celebrities, have been arrested for check fraud.

Even if there was no real punishment, it is not good to get in the habit of writing bad checks.

Financial relationships, just like other important relationships in your life, are based on trust. If you are known to have behaved in an untrustworthy manner, then people will expect the unsavory habits to continue. As such, finding business partners and financiers can be more difficult and more costly.

Keeping your word is a valuable habit which can enhance your financial and personal dealings.  Making good on promises today can save you time, money and stress in the future. A good place to get some practice is with your checkbook!

Until next time,

Tisa

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Collection vs. Deception: How to Know When Debt Collectors Cross the Line

Published by Tisa Silver on Tuesday, December 1, 2009 at 10:46 am.

telephone_wiretap

“Don’t answer the phone, it’s a bill collector!”  

Maybe you have witnessed someone look at their Caller ID and say this, or maybe you have said it yourself after seeing “Unknown Caller” or the name of a creditor pop up on your own phone. Either way, folks have been dodging bill collectors for ages.

In some cases, dodging them is understandable. After all, they may have called your home at 6 AM or 10 PM. Perhaps, they have called every hour on the hour for several days. Some may have threatened to come and arrest you.

No one wants to deal with this kind of harassment, and no matter how far behind you are on the bills, you shouldn’t have to deal with it. Why? All of the actions are illegal.

When I started to type “harassment from creditors” into a search engine, I only got as far as the “f” in “from” when the search engine offered me suggestions to finish my term. The top suggestion: harassment from creditors.

It’s no secret that some bill collectors go to creative lengths to collect outstanding debts…calling from blocked numbers, speaking in a friendly tone to catch you with your guard down, or using the first name only when asking who to speak to, as if they know you personally. I don’t like when strangers call and start off by getting personal. News flash: Mispronouncing the one name you chose to ask for is often a prelude to a dial tone!

I understand what is at stake for the debt collectors. They have purchased a bad debt from a creditor and they want to turn a profit on their investment. Regardless of what is at stake, there is a difference between being creative and being deceptive–and being deceptive is illegal.

So, what is illegal? The Fair Debt Collections Practices Act prohibits debt collectors from engaging in the following activities:

Deception – It is illegal for debt collectors to misrepresent facts regarding your debt, their identity or their company. Some examples of misrepresentation include inflating the amount of your debt, falsely claiming to be an attorney or police officer, using a phony business name, or claiming to forward your debt to the “legal department” if no such department exists.

Threatening – Debt collectors cannot threaten you with violence or any other criminal means to harm you (physically), your reputation or your property. They cannot threaten to arrest you for non-payment. Debt collectors cannot threaten to seize your property unless it is legal for them to seize the property and they actually intend to do so.

Harassment – Debt collectors cannot call you repeatedly or at unreasonable hours (before 8 AM or after 9 PM local time). While communicating with you in regards to your debt, they are not to use abusive or profane language.

When dealing with debt collectors, here are some things you can do:

Document your interactions – Put your correspondence in writing. Sending all correspondence via Certified Mail with a return receipt can help by creating a record of receipt for your documents and letting the recipient know you mean business.

Ask for proof – If you have doubts about any piece of a debt collector’s claim regarding what you owe, request a debt verification. Make your request in writing within thirty days of the first written notice you receive about the debt. The debt collector cannot continue collection efforts on the account until they respond to you with verification of the debt. 

Report the offense – If you have been a victim of illegal debt collections practices, contact the Attorney General’s office in your state (www.naag.org) or the Federal Trade Commission (www.ftc.gov).

Crooked debt collectors prey on, and profit from ignorance. They assume you will not take the time to learn your rights and if they are correct, then you will not be aware if or when your rights are being violated. Prove them wrong!

I am not suggesting that people run from their debts. I am suggesting that people face their debts equipped with the tools to resolve them while being treated with fairness and respect.

Until next time,

Tisa

This post includes some common illegal practices, for a complete explanation of the law regarding debt collection practices, read the Fair Debt Collection Practices Act or the FTC’s Debt Collection FAQs

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Don’t Let Black Friday Push You Into The Red

Published by Tisa Silver on Tuesday, November 24, 2009 at 3:56 pm.

creditcard

Black Friday is fast approaching, and an estimated 76.9 million* consumers will head out to take advantage of the seasonal promotions. Are you going out?

I just can’t do it. I am not into dealing with crowds at every stage of my shopping experience!  But, enough about me.

The “black” in Black Friday is actually linked to accounting jargon for “profitable.” The sales revenue generated on the day after Thanksgiving can be responsible for pushing retailers from “in the red” (aka losing money) into “the black” (aka turning a profit). Recent statistics show that Black Friday may be the busiest day in terms of traffic, but not necessarily sales.

Either way, every retailer wants to get into the black. There are two ways to get there: cutting costs or increasing revenues. The “increasing revenues” part is where shoppers enter the picture. Around this time every year, it seems as if the big retailers have the same formula: limited time only promotions + limited quantities + special hours + huge sales = more money in their pockets and more money out of yours.

Retailers have been fine-tuning their Black Friday formulas for quite some time. If you plan on shopping that day, then you should have a formula, too. The goal: to keep you in the black.

Here are some ways to prevent Black Friday from pushing you into the red:

Make a list – If you go shopping on Black Friday, then you will be confronted with seemingly unbelievable deals. Giving in to everything you see can land you in one of two places (or both): broke or in debt. Having a list encourages discipline, and discipline can keep you from going off the deep end.

Develop a budget – I do not know anyone who wants to come up with an itemized budget for Christmas shopping and believe me–I understand. But unfortunately, shopping without limits can lead to trouble. Unless you have got money to blow, consider setting an overall spending limit for your holiday shopping or a maximum amount you are willing to spend on each person you plan to shop for.

Consider paying with cash – The most immediate benefit to paying with cash is that you cannot spend more than you have. Aside from the limitation on spending, paying with cash also saves you money in the long run because you will not owe any interest. Credit cards and charge cards allow you to buy more, but if you buy more then you will certainly owe more.

Revisit your reason for the season – What are you celebrating? How much of a role should shopping play in your celebration? Having an answer to these questions may cause you to shop differently.

Many of us place the most emphasis on giving material things, but giving too much, materially, can cost you in other ways. For instance, suppose you max out your credit card to buy your child a video game system. Your child may be entertained, but you develop an attitude because you are stressed about how to pay the bill or the prospect of having no available credit in case of an emergency. The negative attitude may adversely impact your interaction with those around you during what is supposed to be a time of celebration. With non-monetary consequences considered, a seemingly good gift may not be so good after all.

If you are planning to brave the Black Friday crowds, I wish you the best. More than anything, I wish you a truly happy holiday season. Free of stress, and free to spend with those you cherish.

The gift of time well spent has proven more memorable and more valuable to me than any material thing I have ever received.

Remember: your loved ones may want gifts, but they should not want to see you stressed out or financially maxed out because of those gifts.

Until next time,

Tisa

*Source: IBIS World

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For The Love Of Bling And Things

Published by Tisa Silver on Thursday, November 19, 2009 at 1:22 pm.

bling

 

I am looking for an end to our love affair with bling and things. The word “bling” has been played out, but the state of mind behind the word never seems to get old. People go broke to get it and go to great lengths to flaunt it, but what for? To love something that cannot love you back–not a good look!

I went to church this past Sunday and the pastor talked about how a young woman came to his office all decked out with fake hair, fake nails, leather pants, and so on. Her complaint to him: “I’m hungry.” His complaint to her: “You are wearing your food.”

If you are in college why are you, literally, wearing your meal plan? If you are a working man or woman, why are you wearing your mortgage?

For the record, I am not trying to act like I have never had fake nails or as if I have never spent a pretty penny on fashion. And I am not saying those are bad things. What I am saying is we need to think about why we spend what we spend BEFORE we spend.

Think about it. Why do you buy what you buy? Is it for you or someone else? Whatever “it” is, are you buying it because you like it, because it is a good product, or because you think having it will cause someone else to think of or treat you differently? Hmmm…

I can appreciate the finer things in life. But, “finer” is relative. Follow me for just a minute:

You pull up to a red right, feeling like you have arrived in your S5 (550 to be exact) until someone pulls up next to you pushing the S600. You give the driver the side-eye until a SL65 AMG rolls up in the third lane and steals your attention. The driver of the S6 turns to see what snatched your gaze away from him. Within seconds, a SLR McLaren cruises past you all. While you were busy checking out the AMG, and its driver was basking in the glow of your adoration, the light turned green.

Meanwhile, all four “fancy” cars look like ants to the executive staring down from his G4 window. He is flying overseas to broker a deal, and chuckles to himself thinking about the days when he actually had to drive himself around in a car. Imagine that!

From my story you can tell that I have a vivid imagination, and I know a bit about a Benz or two (ninety percent of which I learned from the Mercedes Benz web site in preparation for this piece!).

Anyway, I have seen a purple label once in my life and the only reason I knew it was special was because Beyonce said so. Maybe I am due for an upgrade…if so, please excuse my ignorance!

Some people may count that kind of ignorance against me, but in my world, do those people count? No! In my world, celebrity endorsements via song (or any other medium) do not make for life-altering commentary– and they surely do not pull my purse strings. So, in this regard my ignorance is bliss.

In all seriousness, there will always be someone with bigger and deeper pockets or bigger and better possessions. If you keep trying to play catch-up, the game will never end and the one-sided love affair will continue…but, it does not have to.

What stops us from deciding what “finer” means for us? Whatever it is, in the end, we pay for it.

Until next time,

Tisa

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Net worth: How minding your own assets can create wealth

Published by Tisa Silver on Friday, November 13, 2009 at 10:24 am.

Have you ever thought your financial problems would be solved if only you made more money? Making more money can help, but if you make more money and spend more money, then you will still have the same problems. For this reason, high income cannot be accepted as an accurate indicator of wealth. Wealth is actually measured by net worth.

High net worth

Think of your net worth as the gap between your assets (what you own) and your liabilities (what you owe).

To determine your net worth, you will need to list your assets and liabilities. Assets include cash, property and investments. Liabilities include any debts you have which may or may not be associated with your assets. For example, if you have a car or a home, then the current value of each item would qualify as an asset, and the balance you owe on each item would be classified as a liability.

The remaining assets you have purchased will fall into one of two categories that I refer to as money-makers and money-takers.

Money makers and money takers

Money makers – These are assets which offer potential appreciation in value. Land, real estate, and investments in financial assets such as stocks and bonds fall into this category. It’s important to remember that these assets can fluctuate in value, but they still offer the possibility for growth.

Money takers – These are assets which depreciate, or lose value, over time. Items such as clothes and cars fall into this category because more often than not, these items cost more today than they will be worth in the future. Loading up on these items will certainly decrease your net worth.

Assets – Liabilities = Your net worth

Once you have tallied up your assets and liabilities, subtract the liabilities from the assets and examine the difference. Positive net worth indicates that your assets outweigh your debts, and negative net worth indicates that your debts exceed your assets.

Every asset has a price, but not every asset can create or even retain value. High net worth is achieved by putting money into assets which increase in value. Here are a few things you can do to add value and help improve your net worth:

Draw the line between needs and wants – We all need clothes and transportation, but we don’t need to have the most up-to-date or most expensive versions of each. Remember, quality over quantity and functional over flashy!

Don’t just “throw it in the bag” – Shop with a budget and a plan to avoid going overboard. Not paying attention to prices is a quick way to lessen your chances of accumulating wealth.

Avoid costly debt – Many stores offer special discounts or promotions if you open up a charge account. Unless you pay off the balance immediately and/or refrain from charging anything else to the account, then the interest you accumulate will probably cover the initial discount several times over.

Until next time,

Tisa

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