Homeword's Family Financial Survival Guide

HomeWord's Family Financial Survival Guide

Unemployment is up . . . home prices are down . . . and no one is really quite sure where the Stock Market is going to land from one day to the next. In these challenging economic times, it’s easy to be worried about your family’s financial health. “HomeWord’s Family Financial Survival Guide” gives you practical tools that are biblical, practical and recession-proof.

For this special audio presentation, Dr. Jim Burns welcomes noted financial experts Dave Ramsey (author of the book, The Total Money Makeover), Ron Blue (author of Master Your Money), Howard Dayton (Founder of Crown Financial Ministries), Wall Street Journal business reporter Francine Huff, and Ellie Kay –“America’s Family Financial Expert.”
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HomeWord's Family Financial Survival Guide




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Credit

This post is all about credit. I know I’ve skimped over it briefly in a few other posts, but this post is the motherload. I think people compensate with what they think they know to cover up the things they don’t really know anything about at all. And credit is no exception to that rule. People sometimes don’t know that there are Advantages to credit along with disadvantages. People jump into credit without taking their own character into consideration and find themselves in a world of problems. The various Acts that were enabled to protect consumers, the different variants of credit, and how you should truly calculate your credit.

Where there is a pro there is a con and understanding the advantages and disadvantages to credit is the first step:
Advantages:
• Able to buy needed items now
• Don’t have to carry cash
• Creates a record of purchases
• More convenient than writing checks
• Consolidates bills into one payment
Disadvantages:
• Interest (higher cost of items)
• May require additional fees
• Financial difficulties may arise if one loses track of how much has been spent
each month
• Increased impulse buying may occur


I borrowed money from a friend recently. And I paid her back within a reasonable time frame. Does that reflect my character when it comes to credit? Well, to a degree. It definitely doesn’t reflect on my ability to pay off my debt entirely within a reasonable time frame, but it might suggest that I would make one hell of an attempt to get it done. In terms of credit, you’re not a robot. You’re unlike anyone else, so you should ask yourself a series of questions before you endeavor to take a new credit card or any other line of credit.
Character—will you repay the debt?
From your credit history, does it look like you possess the honesty and reliability to pay credit debts?
• have you used credit before?
• do you pay your bills on time?
• do you have a good credit report?
• can you provide character references?
• how long have you lived at your present address?
• how long have you been at your present job?
Capital—what if you don’t repay the debt?
Do you have any valuable assets such as real estate, savings, or investments that could be used to repay credit debts if income is unavailable?
• what property do you own that can secure the loan?
• do you have a savings account?
• do you have investments to use as collateral?
Capacity—can you repay the debt?
Have you been working regularly in an occupation that is likely to provide enough income to support your credit use?
• do you have a steady job? What is your salary?
• how many other loan payments do you have?
• what are your current living expenses? What are your current debts?
• how many dependents do you have?


So you have your character cross-examined and you’re still going to go for the line of credit. Here are some very sound guidelines to keep you on the right track:
• borrow only what you can repay.
• read and understand the credit contract.
• pay debts promptly.
• notify creditor if you cannot meet payments.
• report lost or stolen credit cards promptly.
• never give your card number over the phone unless you initiated the call or are certain of the
caller’s identity.

You should also know what your rights are as a consumer. If you feel your rights are being infringed upon, having knowledge of the following acts will help you to take the appropriate action. There are very few decisions you can make in life without the proper information and without properly educating yourself. Credit is definitely not one of those decisions.
Truth in lending act (1968)
Ensures consumers are fully informed about cost and conditions of borrowing.
Fair credit reporting act (1970)
Protects the privacy and accuracy of information in a credit check.
Equal opportunity act (1974)
Prohibits discrimination in giving credit on the basis of sex, race, color, religion, national origin, marital status, age, or receipt of public assistance.
Fair credit billing act (1974)
Sets up a procedure for the quick correction of mistakes that appear on consumer credit accounts.
Fair debt collection practices act (1977)
Prevents abuse by professional debt collectors, and applies to anyone employed to collect debts owed to others; does not apply to banks or other businesses collecting their own accounts.


Also you should educate yourself on the types of credit:
Single-payment credit
Items and services are paid for in a single payment, within a given time period, after the purchase. Interest is usually not charged.
• utility companies, medical services
• some retail businesses
Installment credit
Merchandise and services are paid for in two or more regularly scheduled payments of a set amount. Interest is included.
• some retail businesses, such as car and appliance dealers
Money may also be loaned for a special purpose, with the consumer agreeing to repay the debt in two or more regularly scheduled payments.
• commercial banks
• consumer finance companies
• savings and loans
• credit unions
Revolving credit
Many items can be bought using this plan as long as the total amount does not go over the credit user’s assigned dollar limit. Repayment is made at regular time intervals for any amount at or above the minimum required amount. Interest is charged on the remaining balance.
• retail stores
• financial institutions that issue credit cards

And finally a few general rules of thumb to get you on the right track:
Never borrow more than 20% of your yearly net income
• If you earn $400 a month after taxes, then your net income in one year is:
12 x $400 = $4,800
• Calculate 20% of your annual net income to find your safe debt load.
$4,800 x 20% = $960
• So, you should never have more than $960 of debt outstanding.
• Note: housing debt (i.e., mortgage payments) should not be counted as part of the 20%, but other debt should be included, such as car loans, student loans and credit cards.
Monthly payments shouldn’t exceed 10% of your monthly net income
• If your take-home pay is $400 a month:
$400 x 10% = $40
• Your total monthly debt payments shouldn’t total more than $40 per month.
• Note: housing payments (i.e., mortgage payments) should not be counted as part of the 10%, but other debt should be included, such as car loans, student loans and credit cards.

Where's my Debt?!?!

Hopefully I will never have to say that out of fear. I've devised the coolest system known to man. I wanted to wait and test out my system before I blogged about it and I've got to admit its worked out better than I can even begin to tell you about.

First step, visit Powerpay.org and get your Debt Snowball going. Questions about this, see my second or third post to learn about how to use this helpful website.

Second step is to set a calendar for repayment on each snowball step to each debtor. This is going to be your financial plan until you are debt free.

Third step is to get a box of envelopes. One envelope for each debt you plan on repaying until all your debt is paid back. An optional step is to include a letter inside your envelope explaining your anticipated payment plan with dates and amounts, the final envelope should request a receipt of full and complete payoff.

Fourth step is to neatly organize the envelopes by date in a shoebox or other box.

Do you know what you have now? A box. Full of your debt. Its something you can see, feel, smell and once you throw your payment (in the form of check, cashier's check or moneyorder) something you can lick and mail. Its your debt and you are now responsible for mailing out each and every single envelope until you are debt-free. What does this mean? Well your debt is now in physical form. You can see the envelopes disappearing over time and it means significantly more to you. You can't avoid something that you are physically responsible. Having your debt scattered over little bits of paper, in your mind or in a filing cabinet keeps it out of sight and out of mind. A box full of your debt strategically placed on your dresser, kitchen counter or next to the front door is something you'll have to interact with.

My debt is in an old fedex box. I put christmas paper lining the bottom and my debt repayment calendar taped to the front. Its on my dresser in my bedroom. I know where it is, I have a better understanding of what my debt situation is like and I couldn't be more happier! Sending the first envelope out was terrifying, but you know I'm getting better. And the envelopes are disappearing! AND I CAN SEE IT HAPPEN!!!

So, I ask you... Where's your debt?

Illegal Interest rates, check your state

Thanks to Debt-Professor.com.



STATE USURY LAWS

ALABAMA, the legal rate of interest is 6%; the general usury limit is
8%. The judgment rate is 12%.

ALASKA, the legal rate of interest is 10.5%; the general usury limit
is more than 5% above the Federal Reserve interest rate on the day
the loan was made.

ARIZONA, the legal rate of interest is 10%.

ARKANSAS, the legal rate of interest is 6%; for non-consumers the
usury limit is 5% above the Federal Reserve's interest rate; for
consumers the general usury limit is 17%. Judgments bear interest at
the rate of 10% per annum, or the lawful agreed upon rate, whichever
is greater.

CALIFORNIA, the legal rate of interest is 10% for consumers; the
general usury limit for non-consumers is more than 5% greater than
the Federal Reserve Bank of San Francisco's rate.

COLORADO, the legal rate of interest is 8%; the general usury limit
is 45%. The maximum rates to consumers is 12% per annum.

CONNECTICUT, the legal rate of interest is 8%; the general usury rate
is 12%. In civil suits where interest is allowed, it is allowed at
10%.

DELAWARE, the legal rate of interest is 5% over the Federal Reserve
rate.

DISTRICT OF COLUMBIA, the legal rate of interest is 6%; the general
usury limit is in excess of 24%.

FLORIDA, the legal rate of interest is 12%; the general usury limit
is 18%. On loans above $ 500,000 the maximum rate is 25%.

GEORGIA, the legal rate of interest is 7%; On loans below $ 3,000 the
usury limit is 16%. On loans above $ 3,000, the limit appears to be
5% per month. As to loans below $ 250,000 the interest rate must be
specified in simple interest and in writing.

HAWAII, the legal rate of interest is 10%. The usury limit for
consumer transactions is 12%.

IDAHO, the legal rate of interest is 12%. Judgments bear interest at
the rate of 5% above the U.S. Treasury Securities rate.

ILLINOIS, the legal rate of interest is 5%. The general usury limit
is 9%. The judgment rate is 9%.

INDIANA, the legal rate of interest is 10%. Presently there is no
usury limit; however, legislation is pending to establish limits. The
judgment rate is also 10%.

IOWA, the legal rate of interest is 10%. In general consumer
transactions are governed at a maximum rate of 12%.

KANSAS, the legal rate of interest is 10%; the general usury limit is
15%. Judgments bear interest at 4% above the federal discount rate.
On consumer transactions, the maximum rate of interest for the first
$ 1,000 is 18%, above $ 1,000, 14.45%.

KENTUCKY, the legal rate of interest is 8%; the general usury limit
is more than 4% greater than the Federal Reserve rate or 19%,
whichever is less. On loans above $ 15,000 there is no limit.
Judgments bear interest at the rate of 12% compounded yearly, or at
such rate as is set by the Court.

LOUISIANA, the legal rate of interest is one point over the average
prime rate, not to exceed 14% nor be less than 7%. Usury limit for
individuals is 12%, there is no limit for corporations. (As warned,
you cannot evade the limit by forming a corporation when the loan is
actually to an individual.)

MAINE, the legal rate of interest is 6%. Judgments below $ 30,000
bear 15%, otherwise they bear interest at the 52 week average
discount rate for T-Bills, plus 4%.

MARYLAND, the legal rate of interest is 6%; the general usury limit
is 24%. There are many nuances and exceptions to this law. Judgments
bear interest at the rate of 10%.

MASSACHUSETTS, the legal rate of interest is 6%; the general usury
rate is 20%. Judgments bear interest at either 12% or 18% depending
on whether the court finds that a defense was frivolous.

MICHIGAN, the legal rate of interest is 5%; the general usury limit
is 7%. Judgments bear interest at the rate of 1% above the five year
T-note rate.

MINNESOTA, the legal rate of interest is 6%. The judgment rate is the
"secondary market yield" for one year T-Bills. Usury limit is 8%.

MISSISSIPPI, the legal rate of interest is 9%; the general usury
limit is more than 10%, or more than 5% above the federal reserve
rate. There is no usury limit on commercial loans above $ 5,000. The
judgment rate is 9% or a rate legally agreed upon in the underlying
obligation.

MISSOURI, the legal and judgment rate of interest is 9%.
Corporations do not have a usury defense. (Remember that a
corporation set up for the purpose of loaning money to an individual
will violate the usury laws.)

MONTANA, the legal rate of interest is 10%; the general usury limit
is above 6% greater than New York City banks' prime rate. Judgments
bear interest at the rate of 10% per annum.

NEBRASKA, the legal rate of interest is 6%; the general usury limit
is 16%. Accounts bear interest at the rate of 12%. Judgments bear
interest at the rate of 1% above a bond yield equivalent to T-bill
auction price.

NEVADA, the legal rate of interest is 12%; there is no usury limit.

NEW HAMPSHIRE, the legal rate of interest is 10%; there is no general
usury rate.

NEW JERSEY, the legal rate of interest is 6%; the general usury limit
is 30% for individuals, 50% for corporations. There are a number of
exceptions to this law.

NEW MEXICO, the legal rate of interest is 15%. Judgment rate is fixed
by the Court.

NEW YORK, the legal rate of interest is 9%; the general usury limit
is 16%.

NORTH CAROLINA, the legal interest rate and the general usury limit
is 8%. However, there is a provision for a variable rate, which is
16% or the T-Bill rate for non-competitive T-Bills. Above $ 25,000
there is no express limit. However, the law providing for 8% is still
on the books- be careful and see a lawyer!

NORTH DAKOTA, the legal rate of interest is 6%; the general usury
limit is 5 1/2% above the six-month treasury bill interest rate. The
judgment rate is the contract rate or 12%, whichever is less. A late
payment charge of 1 3/4% per month may be charged to commercial
accounts that are overdue provided that the charge is revealed prior
to the account being opened and that the terms were less than thirty
days, that is, that the account terms were net 30 or less.

OKLAHOMA, the legal rate of interest is 6%. Consumer loans may not
exceed 10% unless the person is licensed to make consumer loans.
Maximum rate on non-consumer loans is 45%. The judgment rate is the
T-Bill rate plus 4%.

OREGON, the legal rate is 9%, the judgment rate is 9% or the contract
rate, if lawful, whichever is higher. The general usury rate for
loans below $ 50,000 is 12% or 5% above the discount rate for
commercial paper.

PENNSYLVANIA, the legal rate of interest is 6%, and this is the
general usury limit for loans below $ 50,000, except for: loans with
a lien on non-residential real estate; loans to corporations; loans
that have no collateral above $ 35,000. Judgments bear interest at
the legal rate. It is criminal usury to charge more than 25%.

PUERTO RICO, the legal rate of interest is 6%; all other rates are
set by the Finance Board of Office of Commissioner of Financial
Institutions. Judgments bear interest at the same rate as the
underlying debt.

RHODE ISLAND, the legal rate of interest and judgment rate is 12%.
The general usury limit is 21% or the interest rate charged for T-
Bills plus 9%.

SOUTH CAROLINA, the legal rate of interest is 8.75%, and judgments
bear interest at the rate of 14%. Subject to federal criminal laws
against loan sharking there is no general usury limit for non-
consumer transactions. The South Carolina Consumer Protection code
provides regulations for maximum rates of interest for consumer
transactions. Please consult with counsel for the latest rates.

SOUTH DAKOTA, the legal rate of interest is 15%, judgments bear
interest at the rate of 12%. There is no other usury limit. There are
certain limitations on consumer loans below $ 5,000.00.

TENNESSEE, the legal rate and judgment rate of interest is 10%. The
general usury limit is 24%, or four points above the average prime
loan rate, WHICHEVER IS LESS.

TEXAS, the legal rate of interest is 6%. Interest does not begin
until 30 days after an account was due. The judgment rate of interest
is 18% or the rate in the contract, whichever is less. There are a
number of specific ceilings for different types of loans, please see
counsel for information.

UTAH, the legal rate of interest is 10%. Judgments bear interest at
the rate of 12%, or a lawfully agreed upon rate. There are floating
rates prescribed for consumer transactions. Please see counsel for
information.

VERMONT, the legal rate of interest and judgment rate of interest is
12%. On retail installment contracts the maximum rate is 18% on the
first $ 500, 15% above $ 500. The general usury limit is 12%.

VIRGINIA, the legal rate of interest is 8%. Judgments bear interest
at the rate of 8%, or the lawful contract rate. Corporations and
business loans do not have a usury limit, and loans over $ 5,000 for
"business" or "investment" purposes are also exempt from usury laws.
Consumer loans are regulated and have multiple rates.

WASHINGTON, the legal rate is 12%. The general usury limit is 12%, or
four points above the average T-Bill rate for the past 26 weeks,
whichever is greater. (The maximum rate is announced by the State
Treasurer.) Judgments bear interest at the rate of 12% or the lawful
contract rate, whichever is higher.

WEST VIRGINIA, the legal rate of interest is 6%. The maximum
"contractual" rate is 8%; Commissioner of Banking issues rates for
real estate loans, and, may establish maximum general usury limit
based on market rates.

WISCONSIN, the legal rate of interest is 5%. There are a myriad of
rates for different type of loans. There is no general usury limit
for corporations. Note that a loan to an individual, even if a
corporation is formed, will violate the law. The judgment rate of
interest is 12%, except for mortgage foreclosures, where the rate
will be the lawful contract rate.

WYOMING, the legal rate and judgment rate of interest is 10%. If a
contract provides for a lesser rate, the judgment rate is the lesser
of 10% and the contract rate.