Money Crashers » Economy

We Want To Hear Your Debt Elimination Story!

Erik Folgate — Fri, 14 Aug 2009 05:12:18 +0000

Do you have a great story about how you became debt free? Did you sell a bunch of stuff, make sacrifices to speed up your debt elimination? What’s your story? Maybe you started getting out of debt, and you are on track to destroy your elimination goals. We want to hear your story, too!

Still in debt? Read my debt elimination series.

The Prize

Email your debt story to me at erik(dot)folgate(at)gmail(dot)com, and I will review them. I will pick one winner and send you a $25 itunes gift card! Please send them in by next Friday, August 21st. If you send me your story, then you are agreeing for me to anonymously post your story. I’ll make up an alias for you but i’ll use the current city you live in. So, get writing, I can’t wait!Related Posts:

We Want To Hear Your Debt Elimination Story! is a post from: Money Crashers

Five Money Tips For People Not Struggling During The Recession

Erik Folgate — Tue, 28 Apr 2009 03:20:17 +0000

There are many people struggling right now to pay their mortgage and other bills because they either lost their job or bought a house they could not afford. However, for every person struggling right now, there are a majority of people who are doing just fine in this economic climate. Yes, most of us saw our retirement accounts rapidly decline, but there is plenty of time to recoup those capital gains lost. Many financial blogs are focusing on those of you who need help the most, but the rest of you are being left out. So, here are five money tips for those of you who are NOT struggling with money right now.

Don’t Be Complacent. Continue to save money and make career moves to make your job or business more secure. It’s easy to get comfortable in your situation, but realize that something unexpected or bad could happen to you at any moment. I’m not trying to make you paranoid, but preparing for bad times is very important when it comes to financial planning.
Continue to invest in the stock market. If you are under 55, investing in the stock market right now could help you recoup your losses and gain big if the market goes back to levels it hit last summer. I still believe the market is undervalued right now, and it its volatility is due to investors trading based on emotion and news headlines.
Look at real estate investing. It’s no secret that there are huge discounts on real estate right now. Real estate is a tangible asset and a decent long-term investment. If you can find a steal, go for it, and rent it out. My opinion is that real estate will get us out of this economic slump. As soon as houses start selling again, prices will go up, and builders will start building again. The jobs and stock market will follow.
Reflect on what you did right. You are doing well financially for a reason. You either made a good career move, saved up a big emergency fund, and made wise financial decisions. Always remember the good decisions you made in the past, so you can replicate them in the future. Wealthy people find a system for creating wealth that works, and they repeat that system over and over again.
Give To Others. Is there someone who needs help in your church, neighborhood, or at work? I don’t want you to enable someone, but if you know of a single mom who is struggling or a friend who got laid off at work, don’t ask them to help. Simply deliver or send them some money anonymously. Most people won’t turn down anonymous money!

If you know people who are struggling, don’t help them feel sorry for their situation. You don’t need to feel guilty because you aren’t struggling with money. Instead, be proactive and help them remain positive during these times. Unfortunately, the people that do everything right with their money or have a secure career, get left out during harder economic times. There’s no problem with that. Just be grateful and know that you are making good financial decisions!

Dave Ramsey’s Town Hall Meeting For Hope

Erik Folgate — Wed, 15 Apr 2009 01:16:47 +0000

For those of you who are Dave Ramsey fans or those who are looking for a positive message about the economy and your finances, Dave Ramsey will be hosting a town hall event all across the country on Thursday, April 23rd.

Here is the link to the official site to find a place near you that is hosting the event: Dave Ramsey’s Town Hall for Hope

The event will have a “town hall” feeling to it, because Ramsey will answer questions from people all across the country. He is on the radio every day, and he has seen the need to give people answers about these uncertain economic times, so he is hosting this event to help you see the silver lining through the clouds and answer your most pressing questions about your life and your money.

Look For The Make Work Pay Tax Credit In Your Paychecks

Erik Folgate — Sat, 04 Apr 2009 22:51:52 +0000

President Obama asked employers to start making adjustments to federal withholdings starting April 1st for the Make Work Pay Tax Credit. This was a stimulus-based tax credit that passed in the recent economic stimulus legislation passed in February. Last year’s stimulus plan sent lump-sum checks to individuals and couples with the hopes of these individuals putting the money back into the economy. This year’s plan will systematically distribute the tax credit in your paychecks.

Who Is Eligible?

Basically, anyone who has earned income. If you make less than $75,000 as a single filer or $150,000 as a married couple, you will receive the full amount. After that, there is a sliding scale of how much of the credit you will receive. The earned income amounts are based on your modified adjusted gross income, which is basically the same as your adjusted gross income. It adds back in income earned in foreign countries, Puerto Rico, or American Somoa.

If you are a very low income earner that does not qualify to pay any federal taxes, the credit is refundable, which means you would get the lump sum at the time you filed your 2009 taxes.

How Much Will I Receive?

It all depends on your marital status, how much you make, and the number of exemptions you claim on your W-4 form. Typically, individuals will get an extra $10 to $15 per week, and married couples who file jointly will see an extra $15 to $20 per paycheck. Single filers will receive up to $400 per year for the rest of 2009 and part of 2010, and married and filing jointly couples will receive up to $800.

Who Is Not Eligible?

Anyone who is claimed as a dependent on someone elses tax return is not eligible for the credit. Also, adults that received social security or veteran’s affairs benefits are not eligible for the benefits, but instead, you will receive a one-time $250 payment by sometime in late June of this year.

How Does Is It Work?

It modifies the tax withholdings tables, so employers will take less from your federal tax withholdings out of your paycheck. Again, low income earners who don’t have federal withholdings taken from their paychecks can claim the entire credit on their 2009 taxes when they file them in early 2010.

What Should I Watch Out For?

An article on Yahoo Finance courtesy of CNN Money has a good list of things to look out for:

The IRS has a calculator online that you can use to figure out how many allowances you should take if you’re eligible to receive the credit and don’t want to be overpaid — or to put it another way, don’t want to have too little tax withheld.

Those most likely to be overpaid are:

Anyone who holds more than one job. You will get paid the Making Work Pay Credit twice, up to $400 ($800 for a joint filer) from your first employer and up to $400 ($800 for a joint filer) from your second employer.

Joint filers whose spouses work. Each spouse will end up being paid the credit for married couples by each of their employers.

There’s a twist, too. Because of the way the withholding tables were set up, each working spouse may be paid up to $600 this year — instead of up to the $800, Mezistrano said.

In other words, the husband would receive $600 at his job and the wife $600 at her job, for a total of $1,200. Since they’re only entitled to $800 total as a couple, that means they would have to pay $400 back to the IRS — or see their refund reduced by that amount.

Anyone who receives income from a rental property or investment, such as interest and dividends. Your employer only knows about the income you earn at the company. If you receive other income that increases your modified adjusted gross income — or even pushes you past the income limits for the credit — you may end up owing the IRS some or all of the credit you received in your paycheck.

Anyone who started receiving their credit at the end of Febuary or anytime in March. The withholding tables are structured so that payments starting in April will add up to $400 for single filers and $800 for joint filers by year end. If payments start sooner than that a tax filer may actually receive a bit more than he’s due by Dec. 31.

Conversely, if your employer doesn’t start your payments until the end of April or in May — there’s no penalty if an employer doesn’t meet the April 1 deadline — you may end up getting a little less of a credit than you’re entitled to, in which case you can claim the rest when you file your 2009 tax return.

As many of you know, I am not a big fan of these “economic stimulus” plans. I don’t believe in spending our way out of a recession. If the government would start spending less money than they take in, the economy would be better off in the long-run. The biggest problem is that the government is spending someone else’s money, OUR money. It’s not coming out of their own pockets, so they don’t mind spending more and more money in an effort to restore the economy. Personally, if they are going to hand out money, I would rather receive it in a lump sum like we did last year. Then, I have more control over the money, and I can allocate it as I see fit. I doubt that I will notice an extra $50 spread out over two paychecks per month.

Will this extra money help you?
Related Posts:

Look For The Make Work Pay Tax Credit In Your Paychecks is a post from: Money Crashers

Will Obama’s Housing Rescue Plan Work?

Erik Folgate — Thu, 05 Mar 2009 03:14:39 +0000

Obama is making an effort to rekindle the housing market, and here is a good article outlining his propose plan.

I think the housing market is the key to jumpstarting our economy again. Everyone is focusing on the financial services and auto industry, but I think the real estate industry is the key to an economic recovery. I don’t like the idea of bailing out people, not because I don’t have a heart, but because buying a home is a risk. Failure is not always such a bad thing. Anyway, we are going to bail them out, and we’ll see how Americans respond to this gift.

Who will ths plan help?

For the most part, it will help those who have already defaulted on their loans. Lenders will have the ability to restructure the loan by reducing the interest rate and possibly the principal amount. They will try to reduce your loan payment to 31% of your household income. Obama says that this plan will weed out helping those who could never afford owning a home in the first place, because they will not restructure a loan that offers no plausible way to make the payment affordable based on the borrower’s income.

The mortgage must have originated before Jan. 1, 2009, and the unpaid principal can amount to no more than $729,750 for a single family home (more for a home with two-to-four units). Borrowers with other debt, such as car loans and credit cards, exceeding 55% of their incomes, may still qualify for a modification, but they’ll be required to accept debt counseling in a HUD-certified program.

Obama also claims there will be relief for some people that are unable to refinance their home, because they are upside down on their mortgage. I think this will be the minority of people that get relief from this package, because they will allow a refinance up to 105% of the value of the home. I know that many people are about 10% to 15% upside down on their homes, so I am not sure how many people this will help.

Who is not eligible?

If your house value has dropped more than 5%, you are out of luck.

How Do You Get Help?

Start calling your lender. Explain to them that you want help restructuring your mortgage and go from there. If they give you a hard time, refer to Obama’s plan and explain that you qualify for help.

Is there a catch to all of this?

Kind of. The restructured loan payment amount will only last for about 5 years, and then the loan will revert back to the original loan terms after that.

The reduced payment would stay the same for five years and then gradually revert back to the conforming loan rates in place at the time of the modification, increasing by no more than 1% a year.

I hope this works, because if more people start making their payments and confidence is restored in the housing market, we will see the financial services industry and the real estate industry make a rebound over the next 12 to 18 months. Related Posts:

Will Obama’s Housing Rescue Plan Work? is a post from: Money Crashers

Dow Jones Index Drops to 6800 For The First Time In 12 Years

Erik Folgate — Tue, 03 Mar 2009 02:08:28 +0000

I don’t know what to tell you. Even Warren Buffet has lost confidence in our economy. Much of the country is not paying attention to the fact that we are 10 percentage points away from nationalizing a bank, the government pledging about $1.5 trillion dollars in 6 weeks, and the largest insurance company and auto maker dwindling to nothing.

Here are my thoughts on why the stock market continues to go south:

Investors are reacting negatively to the massive amounts of spending in the Obama economic recovery agenda.
Investors started out requesting bailouts of large companies, but now they think it’s a bad idea to keep pumping money into a lost cause. AIG is looking like a lost cause. I have no idea what they got themselves into, but for a company like that to fall as hard as they have in one year is insane. What did they do, back every subprime mortgage in the country?
Continuing to invest in the stock market will either backfire or make you look like a genius in a few years. It will backfire if the recession runs deeper and takes a decade to recover from. It will make you look like a genius if you buy stock shares at a 50% discount, and the stock market surges back to 14,000. You’ll double your money and have a ton of shares at a discounted price that continue to grow. What will happen? I have no idea. If you are in your 20’s or 30’s, you might want to bet on our economy recovering in the next 5 years.

What Can We Do?

I am going to start building up a large emergency fund. If the worst happens, it will be magnified three fold in this economic climate. Consider piling up a large amount of cash in an online savings account, and continue paying off debt. Reducing debt will reduce the amount of risk in your life. Ask yourself this question: Do I want added risk in your life during these times?

The Final Breakdown For The 2009 Economic Stimulus Bill

Erik Folgate — Wed, 18 Feb 2009 03:31:48 +0000

President Obama signed the economic stimulus bill into law today in Denver. The Wall Street Journal has a great breakdown of the final allocations of money inside the bill. It is broken down by categories, and I love that they designate one category as “Spending”, because that’s exactly what quite a bit of this bill has in it. There is a ton of money allocated to projects that definitely could have been left out of a bill coined as an economic stimulus bill. But, it is what it is, and we need to hope and pray that it does something to bring the economy back to what it was a couple of years ago.

Click here for the Wall Street Journal’s Breakdown of the Stimulus Bill

This bill is the largest piece of government intervention in American history, and the problem is that it’s not focusing on what caused the economic downturn in the first place. Our economy slowed down from a housing bubble that burst, which exposed the mortgage and credit corruption that ran rampant through financial institutions on Wall Street. Jobs are being lost because companies with horrible products and services can’t handle the economic downturn any longer and their executive management would rather pay themselves than pay their shareholders and customers.

So, be a good citizen, check out the breakdown and see if you think the government did a good job at spending your money.
Related Posts:

The Final Breakdown For The 2009 Economic Stimulus Bill is a post from: Money Crashers

The Stimulus Package Passed: Should You Factor In An Extra $10,000 to Your Debt Snowball?

Erik Folgate — Fri, 13 Feb 2009 20:49:58 +0000

According to the House Minority Leader in Congress, the American people will be taking on an average of $10,000 in debt per person due to this stimulus package that just passed.

“With a price tag of more than $1 trillion when you factor in interest, it costs every family almost $10,000 in added debt. This is an act of generational theft that our children and grandchildren will be paying for far into the future.”

This was a completely partisan quote by a Republican that did not agree with the economic recovery bill that just passed in the House of Representatives, but if you divide the cost of this bill by the amount of taxpaying Americans in the United States, his numbers are roughly correct about the debt that is being passed onto us. I know, the title to this post was a little silly, but not really when you sit down and think about it.

For those of us working very hard to eliminate our personal debt, the government has just handed each of us an extra $10,000 in debt to add on to the total we already have in our own personal debt. Sure, we won’t get monthly loan coupons in the mail from China, the U.S. Treasury, or whoever we borrow this money from, but we will pay this money back in the form of tax increases and/or increasing our spending to stimulate the economy. In a perfect world, this package will generate enough income tax from job creations, but if it doesn’t generate enough money to repay the money we are spending for this plan, the only way for the local, state, and federal government to recover the money is to increase income, capital gains, property, and sales taxes.

Maybe I will put an extra $10,000 in my debt snowball with an asterisk next to it. Great, now my debt snowball is going to look like baseball’s statistic for the homerun leader.
Related Posts:

The Stimulus Package Passed: Should You Factor In An Extra $10,000 to Your Debt Snowball? is a post from: Money Crashers

Update On the Final Version Of The 2009 Economic Stimulus Plan

Erik Folgate — Thu, 12 Feb 2009 14:36:45 +0000

Tidbits of the final version of the economic stimulus plan are being released, and I am guessing that not many people will be happy about it.

Here is the full story from the AP wire, via Fox News. (this is an AP story, not a Fox News story)

$13 More Per Week in Everyone’s Paycheck . . .

It looks like these tax cuts are not going to be tax credits like last year’s checks which were advances on a tax credit created for 2008. They will merely restructure the tax brackets, which on average, will put another $13 a week in your pocket. Doesn’t sound too exciting, does it? Will this change your world and help you pay your bills more? Please comment below.

The $15,000 home buying tax credit was axed . . .

This would have really stimulated the real estate rebound. It would have encouraged banks to start lending money again, and it would have put more mortgage brokers, processors, real estate agents, home inspectors, appraisers, and title agents back to work. Instead, they increased the existing $7,500 first-time home buyer tax “credit” that was really a zero percent interest loan, to a REAL $8,000 tax credit that does not have to be paid back. They extended the date until August to qualify for the credit. This is still a nice deal, but it’s not a credit, it’s a 0% interest loan from the government.

About $46 Billion went toward major infrastructure projects . . .

All this talk about pumping money into infrastructure jobs, and it gets is about 7 or 8% of the total spending bill? If 1/3 are tax cuts, and 2/3 are spending, then what else are we spending money on? This is the huge problem with this bill. Obama is stating that it will create millions of new jobs because of the investment in infrastructure projects, but only $46 billion is going towards major infrastructure projects.

More money is being spent on health care than infrastructure. . .

There will be a 60% subsidy for COBRA health care to people on unemployment benefits, and about $86 billion will be divvied up among the states to subsidy their Medicaid programs over the next 2 years.

The only people getting a check will be SSI recipients, veterans on pensions, and people on welfare. . .

A $250 dollar check will be issued to the people described above. Again, how this will rock their world, I am not sure, but it’s in there.

I’m definitely disappointed in this entire package and how it all played out. Hardly any thoguht was put into it. It only took 24 hours for the Senate and the House to agree on a revised plan. And do you know the reason why it only took 24 hours? Because there was no bipartisan representation. It was all Democrats in there deliberating in the conference after the Senate passed their version. So much for bipartisanship, huh?

How do you feel about it? Are you disappointed or happy about it? How will it affect you? Do you think it will affectively stimulate the economy? Do you think the economy will get worse if it doesn’t work? Related Posts:

Update On the Final Version Of The 2009 Economic Stimulus Plan is a post from: Money Crashers

The Proposed $15,000 Tax Credit For Home Buyers in 2009

Erik Folgate — Tue, 10 Feb 2009 03:29:35 +0000

If you were thinking about buying a house this year, you might need to get serious about buying wthin the next few months. There have been rumors that the final economic recovery bill currently being debated by the Senate could include an amendment to help stimulate home buying in the coming year. A few Senators have proposed a $15,000 tax credit for ALL home buyers from the date that the bill is signed into law extending for one full year.

Last July, a bill was signed into law that included a $7,500 tax “credit” for first-time home buyers. Here are the differences between the credit that is active now and the one that has been proposed.

The current $7,500 tax credit:

It’s not really a credit. It’s like a 0% interest loan from the government. You can claim the $7,500 credit this year, but you’ll have to pay it back over a 15 year period or quicker if you choose.
It’s only for first-time home buyers or if you haven’t owned a principal residence within the past 3 years.

The Proposed $15,000 tax credit:

It would be a TRUE tax credit that you don’t have to pay back! You can even claim the credit on this year’s taxes if it passes into law this week. This means that you’d get $15k less any taxes owed back in the form of cold hard cash to put towards a down payment or improvements on your new home.
It would count for ALL home buyers, not just first-time home buyers. Congress will require that it’s a primary residence so investors can’t take advantage of the credit.

This would be an unbelievable credit if it passes, and I think we will see a huge spike in home sales if this amendment makes it to the final bill when it passes. The process is somewhat complicated like anything Congress does. The Senate and House will have to collaborate to create a final bill that incorporates any and all amendments, and then Obama will sign it into law. So, there’s a possibility that it could still be chopped out of the bill. I will keep you updated when I hear anything.