Get It Together! 5 Steps to Organizing Your Financial Life

Let's talk about organization. In today's society,the importance of keeping things organized has diminished because it takes time and dedication to make it happen effectively. If you are willing to take the steps, however, you will find that getting your financial house in order isn't quite as bad as it sounds. 
  
Here are five steps to help you on your path to financial organization, and ultimately, freedom from debt. 

• Collect all necessary documentation in a single location. 
• Take a day off each quarter from work, known as a "personal finance day," to gather your account information and place it in organized files. Ideally, there will be files for banking information, credit cards, investments, mortgages, and insurance. 
• If you are not utilizing your bank's online resources, sign up for an account. Many banks provide an array of tools that can also aid in organizing expenses and income. 

  

• Create a written budget, and review it monthly. 
• Once you have gathered all your account information in a safe, central location, create an accurate budget that includes a savings trigger and properly notates your money needs. Adjust spending in key areas such as food and entertainment, and allocate those funds to debt elimination and savings. 
• At the beginning of each month, review your budget. Holidays and special events will give your budget a different look than in other months, and your spending plan should reflect those changes to give you the best idea of where your spending should be for that time.

  

• Set a schedule for paying bills. 
• When creating your monthly budget, write down specific dates to pay various bills. As a rule of thumb, it is best to pay bills in bulk on key days of the month. For example, if Sam & Diane's mortgage is due on the 1st, their phone bill on the 5th, and electric bill on the 7th, it would be ideal to pay all three bills on the 1st. This ensures these bills are satisfied, and eliminates any chance of incurring late fees from the creditor, or overdraft fees from their bank. 

• Write down all one-time expenses for the year
• One stumbling block many face when embarking on budgeting is the occurrence of one-time expenses that pop up throughout the year. These may include license plate renewals, professional dues, or insurance premiums. Divide these costs by 12, so that you can include them in your monthly budgets. By employing this method, you can save towards those costs as they come, rather than losing large amounts of your monthly income in one fell swoop. 

• Shred, shred, shred!!
• If possible, invest in a shredder. In the age of rampant identify theft, it is imperative that you take every available precaution to protect your personal information. Not only will shredding documents keep you safe from possible theft, it also frees your home of tons of unnecessary paper. 

By taking these steps, you are, in a way, deputizing yourself to free yourself from the prison of indebtedness. It all begins with a willingness to say, "Yes, I'll do it." We'll be here to help you along the way. 

With you on the journey, 

Daniel Sims

 
Daniel Sims is the newest member of the Madam Money team. He is the creator & host of Financial Rebirth Live!, a personal finance podcast on BlogTalkRadio.com, and managing partner of RDSF Consulting in Little Rock, Arkansas. We look forward to his insights in the coming months. 

5 Things Asked on a Loan Application Used by Collectors

Have you (or someone you know) ever wonder why certain information is requested on a loan application that may not have anything to do with making the loan decision? I have.

  

When applying for credit, the loan application is not only a tool to acquire necessary information for the lender to make a judgmental credit decision. It is also a source of valuable data that is used to help collectors collect money that is owed to the lender if the borrower does not make their payments on time or at all.

 

Here are 5 Things Asked on a Loan Application Used by Collectors.

 

CURRENT & PREVIOUS ADDRESSES

The current address is not only used to request the applicant’s credit report, but it is also used to mail payment reminder or collections letters and, when necessary, for Skip Tracing.  Skip Tracing is a process of acquiring as much information about a person to find out where they are. Once the person is located, the collector can proceed with collection efforts or take further legal action.  Some skip tracing tools used are credit reports, white pages, a system called “Accurint,” social media, and especially Google.

  

EMPLOYER INFORMATION

The name and address of the applicant’s employer is sometimes used to have the borrower served if the lender chooses to sue the borrower by filing for a default judgment. However, this information is mainly used to file for wage garnishment.

 

PHONE NUMBERS

Home, work and cell phone numbers are used by collectors, of course, to call borrowers to discuss missed or past due loan payments and to acquire, what is called a “Promise To Pay.”  A Promise To Pay, is the borrower’s promise to make the agreed upon payment(s) to bring the loan account back to a current status.  Most collection calls may be friendly reminders. However, the more past due the loan becomes, the more “concerned” the collectors may be when calling.

  

EMAIL ADDRESSES

Most collectors are aware that many people may not answer unknown callers or callers that they do not want to speak to. They are also aware that many people may not read or ignore collection notices in the mail. This is why email addresses are very valuable.  In today’s electronic age, most people may respond faster to their emails than letters and voicemail messages.  This also gives the borrowers time to respond in a less intimidating manner.

  

REFERENCES

The names, addresses and phone numbers of the applicant’s family members and friends are usually requested in a loan application as references. This information is also used for Skip Tracing, when necessary.  Collectors may contact those references to obtain more information about the borrower and their whereabouts to continue collection efforts or further legal action.

  

  

Most first party collectors, which are usually employees of the lender, may be very open to assist borrowers that are dealing with financial hardships with payment plans. They are usually friendly and willing to assist as best as possible. So, please don’t ignore them.

 

Just make sure that you are aware of consumer rights regarding normal collection action, especially when dealing with third party collectors. No collector should verbally abuse or threaten you. That is against the law. The Fair Debt Collection Practices Act governs third party collectors, collection activity, as well as Consumer Rights.

 

Financially True,

   

Tarra Jackson, Making Money Sexy

  

What other application information is used by collectors?

Foreclosure Confession: Why I had to tell my bank to Kiss My ...

...Have you (or someone you know) ever thought about letting or have let the bank foreclose on your house?  I have.

 

Seriously, in 2008 the economy was so bad that I reluctantly had to tell my bank to kiss my a**. Even though I knew it was going to kill my credit score, hurt my great long-term financial relationship with my bank and inhibit me from getting a mortgage soon after; I allowed the bank to foreclose on my home.  Here are 3 of the reasons why.

  

MY HOUSE COULDN'T SWIM!

Here is how I learned that houses can't swim ... The house that I purchased in 2005, with over $30,000 in equity, all of sudden became worth $50,000 LESS than what I owed the bank in 2008. In three years the value of my home was "under water" by a little over $80,000!  How could this be?

I drove through my neighborhood and saw an unusual amount of houses with foreclosure notices. But, I was in denial. I was so excited about the new job that I accepted and about relocating to another state where I always wanted to live, that I ignored the signs.

I quickly learned that it didn't matter what I believed my home was worth. Rather, it was all about how much buyers were willing to pay for the properties around my home that determined it's value. I was also frequently reminded that a property will not sell for more than it is valued, regardless of how much more is owed on the mortgage in a buyer's market with significant amount of homes for sale.

I even thought I would save money by doing a FSBO (For Sale By Owner) instead of turning the property over to a professional immediately. By the time I handed it over to a real estate professional, the market was sinking fast and it was too late. Not working with a real estate professional early ended up costing me more money.

I was so mad at myself because I knew better!

I JUST DIDN'T QUALIFY

Say what? A single mother, getting next to nothing in child support and the "sole bread winner" paying ALL of the bills alone, didn't qualify for a modification or short sale.  How could this be? I felt hurt and confused. That's when the fear started to settle in. "Now, what am I going to do?" "How will I explain this to my son, my family, my boss?" "OMG ... foreclosures are public record," I remembered, "What if people see that my home was being foreclosed?"  "How could I help other's with their financial situations while dealing with my own financial mess?"

Unfortunately, there was no Olivia Pope back then for me and Foreclosure Prevention organizations and programs didn't really exist until after the Foreclosure Prevention Act of 2008.

  
I felt so embarrassed that my financial dirty laundry was going to be exposed. And, as much as I wanted to be upset with the bank, I was more upset and disappointed with ME. 

  

I WAS JUST 'SICK AND TIRED'!

Dealing with this situation made me physically, mentally, emotionally and financially SICK and TIRED!  My blood sugar and blood pressure was always elevated because of the stress of worrying, which was definitely not good for a diabetic with hypertension. I worried all of time about the fact that my house would not sell AT ALL. It stressed me out more because I was honestly trying to figure out how to minimize the loss to the bank. The stress was literally killing me. It wasn't that I was emotionally attached to the property. It was that I was emotionally attached to my FINANCIAL INTEGRITY! I had to fulfill my promise to pay back the money I had borrowed.  And the fact that I had a willingness to pay but lacked the ability to pay the mortgage, ate me alive.

I had sleepless nights filled with crying. I prayed to God for guidance and consulted with my money mentor for advice. I had a great long-term financial relationship with my bank and it really felt like I was going through a heart wrenching, heart breaking, and bitter break up with them. I even started ignoring my bank's calls, letters and notices. It was that whole "blood from a turnip  philosophy and somehow, I convinced myself that if I ignored them, I wouldn't be as stressed out. Of course, that financial fairy tale didn't (and still doesn't) work! The more I ignored them, the more intense they tried to reach out to me. As they should have!

I finally realized that if I continued to ignore and prolong the situation any further, I was going to suffer more mentally, emotionally, physically and financially. So, despite the negative social and financial consequences, I had let it go and walked away. 

   

Yes, it killed my credit and my credit score. And, YES, I was not able to apply for a mortgage for several years after. BUT... there was LIFE AFTER FORECLOSURE.

I am clear now as to why I had to go through this. I had to experience the negative consequences of my financial ignorance, bad financial decisions and bad timing. I had to experience and feel the pain. This experience helped me to become more compassionate to better help others going through this and similar financial issues. This test turned into my Testimony to share the lessons learned about some consequences and benefits of certain financial decisions, actions and non-actions.

I don't blame my bank for my foreclosure! I wasn't in an exotic mortgage and I was fully aware of the terms and agreements of the mortgage contract. Not all banks or credit unions were involved in the mortgage C-O-N-spiracy. Most financial institutions helped consumers obtain the American Dream to own their own home.  I completely accept responsibility for my bad financial decisions and especially my financial ignorance.  

  

The GREAT NEWS is that today there are now hundreds of reputable resources to help homeowners who are facing foreclosure today. 

• Click here for a summary of the Foreclosure Prevention Act of 2008. Know your rights!
• Operation HOPE also has a wonderful Foreclosure Prevention Program. Contact an office in your city or state.
• The Neighborhood Assistance Corporation of America (NACA) has a Home Save Program. Go to their website at www.NACA.com to locate an event in your city or state.

Also, most financial institutions have their own Financial Prevention programs or departments that may be able to assist you.

Whatever its worth, you are not alone and there is help. So please ask if you feel or think you might need help before it's too late. If you are on the verge or are now going through a foreclosure, make sure you have a Financial Resurrection Plan. Look out for my blog about the benefits of a Financial Resurrection Plan.

Financially True,

  

Tarra Jackson ... Making Money Sexy




If you need more information about creating a Financial Resurrection Plan, feel free to contact me.

What you need to know about Debt Cancellation during Tax Time

Question: Madam Money, I settled a debt with a creditor and they sent me a 1099-C. What is a 1099-C and how does this affect my credit?

Answer:  Good question.  A settlement is the acceptance of a partial payment of the amount of debt owed. The remaining amount of the debt is known as the deficiency balance.  The deficiency balance, not collected, is essentially forgiven. Debt cancellation is the forgiveness of the entire amount owed. 

The creditor can file a 1099-C, which is a cancellation of debt form, with the IRS if the creditor has either 1) reached a settlement with a debtor for less than was originally owed, or has 2) forgiven the entire debt, concluding it will never be able to collect the debt.  If the creditor files a 1099-C for the amount forgiven to the IRS, that amount will have to be claimed as income on the person's personal tax return.

If and when a creditor issues a 1099-C in your name to the IRS, the amount included on the form is considered income that you must claim and pay taxes on.

Creditors must file a 1099-C with both the IRS and with the debtor for all debts of $600 or more under the following circumstances:

1. Cancellation or extinguishment making the debt unenforceable in a receivership, foreclosure, or similar federal or state court proceeding.
   
   
2. Cancellation or extinguishment when the statute of limitations for collecting the debt expires, or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. Expiration of the statute of limitations is an identifiable event only when a debtor's affirmative statute of limitations defense is upheld in a final judgment or decision of a court and the appeal period has expired.
   
   
3. Cancellation or extinguishment when the creditor elects foreclosure remedies that by law end or bar the creditor's right to collect the debt.
   
   
4. Discharge of indebtedness by agreement between the creditor and the debtor to cancel the debt at less than full consideration.
   
   
5. Discharge of indebtedness because of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. A creditor's defined policy can be in writing or an established business practice of the creditor. A creditor's practice to stop collection activity and abandon a debt when a particular nonpayment period expires is a defined policy.
   
   
6. The expiration of nonpayment testing period. This event occurs when the creditor has not received a payment on the debt for a 36 month period beginning on December 31st. (this 36 month period is rebuttable by creditor based on facts and circumstances)

 
If you settle with a creditor or if they agree to forgive the debt, be sure to ask the credit if they file a 1099-C with the IRS.  A settlement or cancellation of debt may help you with your budget and credit on the front end but it may cost you during tax time if you have to claim that amount on your taxes as income.

Some creditors may settle a debt with the debtor without filing a 1099-C and just report the debt as a debt "settled for lessor amount" on the credit report. The affect on the credit report will relatively both be the same. These accounts will eventually have less of a negative affect on the credit report the older they get. Time heals all credit report wounds.

If you received a 1099-C, make sure to give this to our tax accountant for further guidance and assistance.

Tarra Jackson
Madam Money
www.MadamMoney.com
FB.com/tarrajacksonenterprises
Twitter: @MsMadamMoney