Short Sales - What you need to know about mortgage debt forgiveness.
With the value of properties dropping over the last couple of years many people have been forced to sell their homes for less than they owe on the property. When this happens, the bank can require that the people who owe the mortgage still owe the outstanding balance or it can forgive the outstanding amount, called mortgage debt forgiveness. While having the bank forgive the outstanding mortgage balance sounds great, there are other considerations that you need to think about first.
Generally, any debt that has been forgiven is considered taxable income by the IRS. However, Congress passed the Mortgage Forgiveness Debt Relief Act of 2007 which forgives taxes on the amount of mortgage forgiveness if a few conditions are met. First, the property sold on which mortgage forgiveness was given must have been the taxpayers primary residence. Second, if the debt forgiven was for a refinance, the income from the debt forgiveness can only be forgiven if the refinance was used to improve or repair the primary residence. Thus, if you refinanced and used the money to pay off credit cards or other debt, the debt forgiven would still be taxable as income for IRS purposes.
Black Friday is Coming, Start Planning Now
If you are like me, Black Friday is one of the best days of the year. Last year I stayed up all night to check out a midnight sale at my local outlet mall and from there it was one store after another as they opened. However, if you don’t know what you are looking for ahead of time, you can miss out on some great deals and also waste a lot of time looking around stores that you think might have something worth the effort but then has nothing you want. If you don’t know exactly what you want, you could also get caught up in the spirit of shopping and end up purchasing a lot of things that you don’t need.
My advice, start checking the sales now. Most of the stores already have their Black Friday ads available online so you can start shopping now.
http://www.theblackfriday.com/
This website has the Black Friday sales for every store you can imagine. By planning things out early, you can make sure that you get everything you want/need so that you are well on your way to getting your Christmas shopping over so that you can just enjoy the holiday without all the stress of last minute shopping, hint hint to the men out there.
Credit Card Woes
With the new legislation passed by Congress taking effect soon that will limit the rates and fee increases that credit card companies can charge, many companies are making last minute changes to their cards. Keep an eye on your statement for July and August to see if there have been any changes to your rates and fees.
Need money? Start shopping!
With so many people out of work or just looking to make some extra money to help with the bills you may have considered clicking on one of those advertisements for mystery shopping. Here’s the good news, you don’t have to. Those advertisement require you to pay before they give you the lists of who offers mystery shopping. Save that money and read this blog instead.
I have made extra cash as a mystery shopper for several years and I can give you the real scoop on the industry. First, don’t waste your time paying for lists of companies that offer mystery shopping, instead check out the link at the end of this blog and you can get the information for free.
Second, don’t expect to get rich from mystery shopping. While it can be a nice way to make a couple of extra bucks or get a free meal every now and then, don’t expect to make enough money to pay your car payment. If you make friends with the people who choose which person gets the job and you show that you are a reliable and conscientious shopper you can make some nice money. However, when applying for shopping positions you need to consider how much you will make and how far you will have to go to get to the shop. As these shops are all over the place, there might not be one close enough to where you live to make it feasible to accept. After all, you have to consider the gas money, the amount of time it will take to complete the shop, and whether you have the access to internet, a camera, and a fax machine, which are often required to complete the shop.
While mystery shopping can be a nice way to make some extra bucks, don’t expect to make a career change. However, if you are still interested in checking it out, stop by this website to get the list of available shops for free!! www.volition.com
Budgeting to Survive
How much do you spend each week on eating out? How much on gas? Groceries? Impulse purchases? Until you know where your money is going you won’t know how much money you really have to spend and how much you could be saving.
To survive this economy you need to start running your household like a small business. Small businesses have limited resources so when they make a purchase they first do their research to make sure they get the best purchase for their needs and budget. What are your needs? Do you really need dessert with your lunch? What about the HBO movie package you pay extra for each month with your cable? A small business isn’t likely to purchase a soda machine just because one of its employees requested it. Similarly, you shouldn’t go to the movies once a week just because your kid wants to see the latest movie.
This is a time to prioritize and make those tough decisions. While you should not completely cut out spending you need to determine what spending is profiting you and what spending is just a waste of money. To some people getting a cup of coffee at Starbucks a couple of times a week is the only way they can relax for a few minutes and just enjoy life. If that is you then you shouldn’t cut out the Starbucks because without your relaxing me time you might not be able to function as well as you would with that me time. To you that is important so you can make it a priority and cut out something that isn’t as important to ensure that you have the money to keep that up.
While life isn’t great right now we need to remember that this doesn’t mean that we bury our heads in the sand and pretend that everything is normal and spend the same way we did a couple of years ago, but neither can we totally close our purse strings and save every dime we get. There has to be a happy medium where we make allowances for what is important and save for the future by cutting those things that aren’t as important.
Discharge of Debt - Cutting my Credit Card Bills
There are many companies out there offering ways to reduce credit card debt. While this sounds like a great idea, you need to get more details. After all, if it sounds too good to be true, it probably is.
What these companies are not likely to tell you is that they usually reduce your income by getting the credit card companies to discharge some of your debt. Which may sound great but will have a very negative effect on your credit score. Thus, while it may help you in the short term, in the long term doing this will result in higher interest rates the next time you try to get a card, vehicle, or house.
In the past, many people dealt with credit card debt by taking out second mortgages on their house to pay off the debt. Now, however, it is difficult if not impossible to do that in many states due to the declining home values and reluctance of banks to lend money.
The best way to get rid of debt without negatively affecting your credit score is to not accumulate debt in the first place. However, if you do have the debt, you need to come up with a plan to get rid of it. Start budgeting to pay a certain amount of the credit card each month and don’t put anything extra on the card. It is nearly impossible to pay off a large credit card debt if you keep putting more debt on the card. While that can be very tempting this time of year, to get ahead you have to say no.
One way to keep from spending on your cards is to keep them in a safe or drawer rather than your purse. If the credit card isn’t always right there tempting you to use it, you will be more likely to just buy spend wisely because you know the money is coming directly out of your account rather than thinking about a bill that will have to be paid someday in the future.
Once you get out of the habit of reaching for the card for impulse purchases, you will be amazed to realize that you don’t really need the credit card as much as you thought. Try living without a credit card for 3 months. At the end of that time, you will likely realize that you haven’t even missed it and that your finances are in a better position because you are watching your spending more carefully.
The best way to get rid of credit card debt is to not have it in the first place, but if you do have debt that you need to get rid of, put the card in a place you won’t be tempted or cut it up. Then, set aside some money each month to start paying down the balance. I would also recommend using any extra money you receive such as your income tax return or some extra cash from friends or your boss at Christmas to pay down a little extra on the debt. Life really is much simpler and less stressful without the debt. Try it and I’m sure you will feel the same.
What if I get laid off?
Christmas is literally just around the corner and the market delivered more bad news today. In November a record 533,000 people lost their jobs and 1 in 10 families is behind on their mortgage. That doesn’t paint a very pretty picture of the economy or encourage must optimism in market forces. Instead, many people are wondering if they could be next. The best way to survive this economic crisis is to make a plan.
In several of the previous columns I mentioned the importance of budgeting, whether you are budgeting to ensure you have enough money to pay the bills, shop for Christmas, or save for retirement, budgeting is key. In this market, you also need to be budgeting for the rainy day possibility that you may become one of the thousands losing their jobs.
In the past when times got tough, Americans got plastic. Now, however, credit cards are increasing their fees and interest rates and reducing their credit limits because they are afraid of not being able to last this crisis either. Like it or not, Americans now need to prioritize their needs, learn how to budget, and start saving, which means eliminating the plastic unless you can afford to pay the entire bill when it comes due.
By prioritizing what you need from what you want, you may find that you can live without a few little comforts and use the money you would have spent on that to pay down your credit cards or save just in case the unthinkable happens and you do get laid off. The government can’t save everyone.
Is the Worst Over?
So far, indications are that sales were strong for Black Friday, the stock market has been going up all week, and gas prices seem to be steadying so are we over the worst of this financial crisis?
While not normally a pessimistic person, this seems to quick and easy to be a long term fix. One weekend of strong sales will not fix the entire economy. One weekend of strong sales will not make up for the thousands of people who have lost their jobs over the past two months.
I went out to a few stores on Black Friday like any woman in need of a shopping fix at prices that won’t crush my budget, however, while I saw spending, most stores were selling only their holiday bonus items. The items that are marked down to uneblievable prices to lure shoppers into the store in hopes that they would impulse shop as well. However, to my surprise, these specials were not selling out. At Wal-Mart, there were several sale items that lasted until 11:00 AM, however, when my husband and I were there at 10:30 AM, there were still some of these items available. In past years these would have been gone by 8:00 AM.
We also stopped by the Midnight Madness at the local outlet malls for a free pair of pajamas and some early discounts. While the mall parking lot was so full that people were making their own parking spaces in the grass, there were surprisingly few bags in people’s hands as they walked through the outlet. Rather than becoming a shopping frenzy, this special looked like any day at the mall with people walking around and hanging out. Yes some stores had huge lines to get into the stores, but there were very few people exiting with shopping bags in their hands.
This Christmas is going to be all about priorities. People will find the money to spend or put on their credit cards for what is most important to them. However, in January when the bills come rolling around to pay for this stuff, I have a feeling that the market will not be as happy as it has been this week.
If you were wise this weekend, you didn’t use your credit cards for things you don’t need because those purchases will have to be paid sometime.
Alternative ways to pay for Christmas
Many stores are touting their layaway plans this year as well as store credit cards. While these are both ok options, I prefer to stay away from credit cards and thus avoid the temptation to overspend. So this year, instead of throwing Christmas on your credit cards or putting something on layaway, check out these great ways to save or make a few extra bucks that you can put towards the Santa fund.
1. http://www.volition.com/
This site offers information on getting paid to surf the web, freebies from a variety of websites, coupons, and much more. I often use Volition to sign up for mystery shops when I have some free time. While mystery shops will not pay the bills, they are great if you want some extra cash. Many sites make you pay to have access to this information but with Volition you get it all for free. So if you are interested in making some extra money shopping or eating out, don’t pay for the info, check it out here instead.
2. http://riveroffers.com/?cogid=frend&refid=
This site offers everything you can imagine, If you are tired of your current cellphone provider, check this site out. You get the newest phones free from all the name brand providers plus free shipping and accessories as well! My husband and I don’t shop anywhere else when it comes to cellphones because nobody has been able to beat these deals. They also offer over 25 different credit cards sorted by what you want out of your card, ie points, low interest rate, cash back, etc. They also offer web hosting, domain names, high speed internet and much more. The best part, you can become an agent for free and then purchase what you need from yourself for additional discounts. Check it out.
3. www.couponmom.com
While not as exciting as the other two, this website offers a variety of ways to save money on your grocery bill and nights out on the town. Their weekly emails give you the best sales in town and options to print out coupons for additional savings.
Making a Budget Stick
Budgeting is like dieting, people always start out with good intentions but often fail to see it through. One reason for this is unrealistic expectations. The best way to budget is to make it a life change by doing a lot of little things to save money and live within or under your means.
One problem I have noticed is debit cards. Yes, they make life easier, but people no longer keep track of everything in the bank account. With checks you saw the money coming out of your account with each purchase, at least if you kept a running balance in your checkbook. If you aren’t keeping track of what you make and what you spend, you will be more likely to run up excessive fees for overdraft or other bank goodies. One way to avoid this is to create envelopes.
Envelopes? Yes, when you deposit your check, take out your money budgeted for food, groceries, and other items you usually purchase with your debit card. Put the amount for each category into an envelope and when you go to the store, don’t take your debit card. Instead, take only your envelope so that you can’t spend more than budgeted. This way, when you are tempted to purchase those chocolate chip cookies and the roasted chicken, you will have to decide what you can really afford and which item you can live without.
As an added bonus, put all the money left in the envelopes at the end of a month in a special savings account to save for a rainy day and watch the funds grow.