Archive forHelp With Debt

Renting instead of owning may be the right choice

We made a budget and we think we can pay off the equity loan within three years. Should we go ahead with our plan? — Stella

DEAR STELLA: It sounds like you have your affairs in order. I dont see anything wrong with the proposal you have made. Youre correct in observing that you will be paying substantially less to the bank than you are to the credit card companies. In short, you thought it out well, and I applaud your thinking.

DEAR BRUCE: I saw an article about a firm that was trusted to do debt consolidation. Could you please tell me how to reach them? — RS

DEAR RS: There are a number of companies that can be trusted to help with debt consolidation. My personal experience leads me to recommend American Consumer Credit Counseling. They will take you under their wing and show you how to reconstruct your payments to your best advantage.

I am not suggesting this is going to be easy, but the fact that you recognize that you need some help is a wonderful first step. If youre not satisfied with this company, there are many others that would be productive.

Send questions to bruce@brucewilliams.com. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.

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Mind the income gap – it’s biggest where least expected

Parallel lives was the term used to describe communities in the north of England that were segregated by race and religion. It followed a number of riots in towns and cities in 2001 involving large numbers of people from different cultural backgrounds. Surrey’s stockbroker belt couldn’t be further from Oldham and Burnley, but in the land of gated mansions a new report finds that residents are just as divided, though here it is by income rather than colour or creed.

Inequality in Elmbridge, researched and written by the New Economics Foundation, uncovers hidden pockets of deprivation and wider gaps in wealth between the haves and have-nots than in the rest of the UK. The borough of Elmbridge, which includes affluent Weybridge, Cobham and Walton-on-Thames, is home to 130,875 people. Among its residents are tennis player Andy Murray, BT boss, Gavin Patterson, and a high proportion of professionals and company directors. Analysis by accountancy firm UHYHacker Young notes that Elmbridge’s residents paid the highest amount of income tax in the UK in 2012, at pound;1.18bn. While fewer middle and low earners live in the area, the pay gap between the highest and lowest earners is much more pronounced than the UK average.

Official figures show that 2,300 children – 8.7% of those under 16 – in Elmbridge live in poverty (where household income is below 60% of national median earnings). NEF’s report states that poverty is a function not only of earnings but of living costs and household needs. Childcare and housing all cost more in the borough than in many other places in the UK, and transport costs are prohibitive for many people who can’t afford a car, all of which makes it harder for those on medium and low incomes to meet everyday needs. A single adult would have to be earning pound;21,089 a year before tax (pound;4,000 more than nationally); a single parent with one child pound;32,414 (pound;6,000 more); and for two parents with two children, the main breadwinner would have to bring home pound;30,129 (pound;11,000 more).

Related: ‘We must use the living wage to slay the ogre of income inequality’

In 2013-14, Citizens Advice Elmbridge prevented 180 families from losing their homes. Last year, 153 local households received grants from the local Walton Charity, to help with debt or rent arrears.

Eleven residents were interviewed in depth from across the income spectrum about inequality for the report early last year. Those on benefits or low earnings described either being looked down on or ignored. Loss of skilled manual labour had contributed to this. “David” remembers both his dad and grandfather worked in a factory. Now he says, “if you don’t work in McDonald’s and you’re not a policeman, then you’ve got to be an estate agent”.

Residents on low incomes also expressed how they felt they had no influence or say over decisions affecting them such as the provision of, or lack of, social care. Middle earners appear to be overstretching themselves financially as they struggle to keep up with the Joneses, while high earners like “Gareth”‘ who commute to work at 6am each day reported feeling disconnected from the area. When driving through the high street for the first time in two years, he said: “I hardly knew where I was and it was only five miles from my front door, perhaps less.” He was even more startled by what happened in his local Tesco at 8pm. “I couldn’t believe what I saw. A large group of people were hovering around the vegetable section. A man came along and reduced all of the food. Then it was a free-for-all and I have never seen anything like it in my life. A cabbage which was probably pound;1.50 was reduced to 20p and it was a fight to get the food,” he recalls. “I guess these people live in Elmbridge, I don’t know.”

He wouldn’t know them, because according to the study, people from different income groups don’t mix. One low-income resident said it was difficult when you feel you are bottom of the pile. High earners said there was little time to mingle.

The report was commissioned by the Walton Charity, founded 800 years ago to give assistance to the poor of the parish. It’s an admirable response to the changing nature of poverty at a time when the government is redefining it so to be poor no longer means to lack money. Yet the structural nature of rising inequality means that the community activities the charity is supporting as a result of the report’s finding, from strengthening the local foodbank to purchasing a house for homeless people and funding arts projects for older residents, will do little more than scratch the surface of the problem.

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Report shows millennials have high debt and little savings

The report, Millennials and Financial Literacy: The Struggle with Personal Finance, paints a grim picture, according to GFLEC Academic Director and Denit Trust Chair of Economics and Accountancy Annamaria Lusardi.

Millennials are a generation at risk, Dr. Lusardi said. High levels of debt and low savings expose them to unexpected shocks.

Nearly 42 percent of millennials are turning to payday loans, pawnshops, auto title loans and other risky alternative financial services. And despite concerns over long-term debt, only 12 percent of millennials sought professional help with debt management.

Poor debt management could be linked to a lack of education, the findings show. Despite claiming the title of most educated generation, only 24 percent of young adults born between the early 1980s and mid-1990s exhibited basic financial literacy.

George Washington Today writer Brittney Dunkins spoke with Dr. Lusardi about the report.

Q: How would you characterize millennial financial literacy and health after analyzing the results of the survey?

A: The levels of financial literacy are alarmingly low among millennials–too low to expect them to be equipped to make good financial decisions. This is reflected in some of the statistics about their personal finances. About half of millennials dont believe they could come up with $2,000 in 30 days if an unexpected need arose and many of those who have retirement accounts are tapping into them or overdrawing their checking accounts.

Q: Many millennials lack savings or a clear financial plan. Why do you think that is?

A: Millennials are young, and they do not have a lot of experience in financial decision-making. Also, they are heavily indebted. Thus, they lack savings because they are trying to pay off debt, which also restricts their planning horizon.

Q: Considering high rates of long-term debt, low savings and a rise in the use of alternative financial services, what poses the highest consequences for millennials?

A: The use of alternative financial services speaks of the difficulties they are facing and the high costs they are paying as well to service the debt. However, in my view, what poses the biggest challenge is how millennials are managing debt. There are severe consequences connected to poor debt management. For example, being late or defaulting on debt payments will affect the credit score, which will make borrowing even more expensive, potentially creating a spiral of debt increases.

Q: How might society suffer because of poor financial literacy among millennials?

A: Millennials are a very important and large generation. They will soon become the largest share of the labor market. Poor financial decision-making can easily become costs for taxpayers and society at large. There can also be consequences for the stability of financial markets.

Q: Is poor financial literacy only a problem among millennials, or are they assuming the habits of older generations?

A: According to our research, older generations are also not financially savvy, though levels of financial literacy are particularly low among the young. While we see there is some transmission of knowledge across generations, the decisions that millennials have to make are different than the experience of previous generations. See, for example, student loans. These new decisions mean that learning from parents or older people is not always viable.

Q: What are the first steps that millennials can take to improve their financial literacy?

A: My recommended step is to take a course on personal finance or participate in a financial education program. There are several of these programs now offered in the workplace or the university. At GW, we have a course on personal finance, and I encourage all of the students–undergraduates and graduates–to take it.

Explore further:
Financial literary bailout for the younger generation

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Who Finds Out When You Get Help with Your Debts – Can It be Private?

If privacy is important to you, then you need to be careful of the path you choose. Some debt repayment arrangements can become part of a searchable online database.

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Northern Ireland families dogged by money worries advised to draw up a budget and stick to it

It also discovered that around 193,000 individuals who have money difficulties are not getting any debt advice.

The shocking statistics come after it emerged that people here spend more on a variety of goods – including clothing and footwear, childrens garments, cosmetics, toiletries and electronic appliances – than anywhere else in the UK.

Northern Ireland also boasts the highest regional spenders when it comes to holiday outgoings and takeaway food, according to the Office for National Statistics family spending report, published last month.

Money Advice programme coordinator at Citizens Advice Kathy McKenna said that 41% of adults fail to use a household budget that could help them plan ahead. Now the Christmas decorations have been put away and the credit card bills have dropped on the mat, this is the perfect time to shine a light on our finances, she added.

Citizens Advice has devised a monthly budget planner for 2016 that should help ordinary people better understand their income and outgoings.

January is the best time for a new year financial spring clean and hopefully this will make it easier to see where your money is going and underline areas where you can drive down costs.

Following these simple steps can help put your household bills on a steady footing for the rest of the year – and beyond.

An individual is defined as being in debt if they have missed three out of six monthly payments.

The Money Advice Service said it was particularly concerned that eight out of 10 adults do not have savings equal to three or more months household income.

Having a savings buffer can help build financial resilience to deal with unexpected life events such as redundancy, bereavement, divorce or other major crises, added Ms McKenna.

It can also reduce money-related stress and the effects it can have on health, relationships and a sense of wellbeing.

A good rule of thumb is to have three months essential outgoings available in an instant access account for emergency savings.

So, if you spend £1,000 a month on mortgage or rent, food, heating bills and other things you cant live without, you should aim for £3,000 in emergency savings.

If moneys short, start small. For example, saving just £3 a day adds up to £1,095 over a year.

Another way of managing money effectively involves keeping a spending diary.

If you save up all your receipts and add up how much you have spent at the end of each day, you might be shocked at just how much you have blown on treats and impulse buys.

The Belfast Telegraph has reproduced online a monthly budget planner from Citizens Advice for anyone wishing to save a fortune with a money makeover in 2016.

To complete the process, just grab your bank statements and look at all your income and outgoings, including direct debits, standing orders and bills.

For a more in-depth analysis of your finances, the online Citizens Advice Budgeting tool can be found at https://www.citizensadvice.org.uk/debt-and-money/help-with-debt/budgeting/budgeting-tool

Case study

Jenny and Tom are married and have a 13-year-old daughter. They rent their home and both work full-time.

Jenny says: I was paying minimum payments to my credit cards and loans and struggling to keep within my overdraft limit until I contacted Citizens Advice for help.

As part of the money advice process Tom and I completed a monthly budget planner. It involved writing down all our household income and expenditure – not just our monthly outlay but also irregular expenses that come up occasionally such as birthday presents, annual rates bill, visits to the dentist and annual spending on school uniform and trips for our daughter. On paper we should be managing well and we couldnt understand why we were going overdrawn each month. In the past, when our overdraft became too high, we took out a further loan but we didnt want to do that again.

When the money adviser examined our budget it became patently clear that we werent making provision for irregular monthly bills such as the breaking down of the washing machine, Christmas presents, the annual holiday or the annual MOT and car service.

By carrying out the spending review we understood the need to budget for irregular expenditure and how important it is to set aside money each month (for example in a separate bank account) to cover exceptional expenses when they arise.

Citizens Advice helped us negotiate reduced payments with our creditors so as to resolve the situation and get back on track.

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GUEST COLUMNIST: CAB manager explains how to handle financial woes head on

Firstly, the earlier you get help with debt problems the easier it is to get them sorted. Trying to carry on as if everything is normal can make things worse, as debts can pile up quickly. Letting your creditors, like your mortgage company or local council, know if you will be unable to pay them is key. Creditors should consider reasonable repayment plans and may be able to offer you more time to pay.

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SMART MONEY: Plan to pay off credit cards makes good sense

DEAR BRUCE: My husband and I are planning to get a home equity loan. Our mortgage balance is $150,000 and the house is valued at $475,000. Our monthly mortgage payment, including insurance and taxes, is $1,010.

The bank told us we can apply for a credit line up to $50,000 with an interest of 2.99 percent. Our plan is to get a loan of $20,000 to pay off our credit cards (about $7,000) and use the rest for house repairs. We think we can save by paying off the credit cards since the interest on them ranges from 14 to 25 percent.

We made a budget and we think we can pay off the equity loan within three years.

Should we go ahead with our plan? Stella

DEAR STELLA: It sounds like you have your affairs in order. I dont see anything wrong with the proposal you have made. Youre correct in observing that you will be paying substantially less to the bank than you are to the credit card companies. In short, you thought it out well, and I applaud your thinking.

DEAR BRUCE: I saw an article about a firm that was trusted to do debt consolidation. Could you please tell me how to reach them? RS

DEAR RS: There are a number of companies that can be trusted to help with debt consolidation. My personal experience leads me to recommend American Consumer Credit Counseling.

They will take you under their wing and show you how to reconstruct your payments to your best advantage.

I am not suggesting this is going to be easy, but the fact that you recognize that you need some help is a wonderful first step.

If youre not satisfied with this company, there are many others that would be productive.

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CAP Larne provides help with debt stress

CAP Larne provides help with debt stress

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Debt Problems Soar To New High

New figures show that record numbers of people in debt are contacting Citizens Advice Bureaux for help.

New figures show that record numbers of people in debt are contacting Citizens Advice Bureaux for help. They come out at the same time the Department of Trade and Industry has published research saying a quarter of households reported they had been in financial difficulties in the last 12 months, reinforcing fears that personal debt is reaching unsustainable levels.

The figures highlighting the growth in debt problems coincide with the forthcoming publication of the Child Poverty Action Group’s Debt Advice Handbook.

Consumer debt problems handled by Citizens Advice Bureaux have increased by 46% over the last five years. In the last year (2001/2002) CAB advisers have taken on more than a million new debt cases. Indications are that the number seeking debt advice is still rising.

But research suggests that many people only seek help with debt as a last resort, often when they are already deep in crisis.

Debt management
Spend, spend, spend – instant credit makes it easy to lose track An Eurodebt agent goes through Andrews income and outgoings. Its website covers personal budget planning, sample letters for writing to creditors, debt advice and debt management plans.

Council tax overtakes credit cards as the most common debt problem for British households as thousands struggle to meet basic expenses
The charity also said that self-employed are burdened with more debt than unemployed people. Payment protection insurance is excluded.

13 Things a Debt Collector Wont Tell You
Will you accept that as payment in full?” If I say no, ask what I’m willing to accept as a settlement and negotiate from there. 7. A lot of agencies buy debt for pennies on the dollar, so always start your settlement offer low, maybe 25 cents on the dollar.

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New REPAYE student loan repayment plan

Are you having problems managing your student loans? Would it help you to limit the amount of monthly federal student loan payments to 10 percent of your discretionary income? If so, there’s now a fresh opportunity. Further federal facilitation for student loan repayment from the US Department of Education through REPAYE may fit your needs and is available for 2016.

What is the purpose of REPAYE?

Drowning in student loans requires help. If you are a troubled student loan borrower, REPAYE offers increased flexible repayment opportunities. Former US Secretary of Education Arne Duncan indicated, “REPAYE is one of a number of key national economic policies this Administration has implemented to make America again the leader in college graduates in the world, while preventing student borrowers from facing unmanageable student loan debt.” In 2016, Acting Secretary of Education John Key continues President Obama’s higher education agenda.

Is REPAYE available right now?

Increased options under REPAYE are available for 2016. In December of 2015, eligible borrowers could begin to apply to REPAYE, an expansion of the President’s Pay As You Earn (PAYE) repayment plan designed to help bring relief to millions more Americans struggling with student loan debt.

Under the Revised Pay as You Earn (REPAYE) plan, those eligible borrowers, who need help with debt, can reduce monthly payments to as low as $0 and will never have to pay more than 10 percent of their income towards their student loan payments. The REPAYE Plan improves upon the current Pay As You Earn Plan while extending its protections to all student borrowers with Direct Loans. For example, there is a new interest subsidy benefit strategy in REPAYE that can help prevent ballooning loan balances for eligible borrowers.

Where to go to apply?

It’s smart to investigate closely to see if REPAYE is right for you, if its benefits and parameters best facilitate your individual needs. Do you need to learn more about income-based repayment options? Then, go online to learn about FOUR federal student loan income-driven plans or contact a federal student loan servicer.

If you need to apply for REPAYE or any other income-driven repayment plan for your student loans, it’s possible to begin that process online by registering for a new FSA ID (Federal Student Aid that is not the same as the PIN used in the past) and to begin your new REPAYE application process.

REPAYE can be a strategic help opportunity

If you can’t afford your monthly payment under your current repayment plan, it’s now possible to consider REPAYE or one of the other income-driven repayment plans. Individual situations are different, but if your situation is appropriate, student loans under REPAYE can be easier to pay back. Further, specific information is available that can help you understand assistance options like differences between rules for undergraduate and graduate loans, that married borrowers payments are calculated differently, and whether or not REPAYE benefits you if you already are on an earlier plan. If you’re struggling with student loans, get the new information. Then, consider carefully and choose the right, current benefits and plan that best assists your student loan repayments.

Find the take in this article to be helpful? National and Local Education as well as National and International Travel materials come from a husband and wife creative team, who travel extensively, enjoying photography and writing. One is an experienced, retired scientist with a doctorate in Material Sciences and background in pharmaceutical and optics research. The other is former Vice President of GKE (Global Knowledge Exchange), who served as a US Web-based Education Commissioner during the Clinton administration, and was a former US National Techamp;Learning Teacher of the Year.

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