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9 Ways to Reduce Debt in 2010
When it comes to your debt in 2010, you’ll want to combine a strong offense (grab a mortgage or refinance) with a powerhouse defense (beat back rising credit card rates and fees).
Mortgage rates are at historic lows — 5.07 percent for a 30-year fixed — and home buyers will be able to snag a special tax credit until July. So early 2010 will be a prime time to refinance your mortgage or apply for a new home loan. But credit card issuers will continue turning the screws on customers in 2010, raising rates and hiking or inventing fees. Because the credit card law taking effect in February will restrict lenders from punishing riskier customers, many good-citizen cardholders will be told to pay more.
The nine best strategies for borrowing in 2010:
1. Refinance your mortgage
Low mortgage rates will make refinancing tempting as the year begins, especially if you have an adjustable-rate mortgage resetting in 2010 or 2011. Many mortgage analysts think rates are as low as they’ll ever be. So the longer you wait, the more you risk the low-interest window shutting. Just remember the advice of MoneyWatch Editor-at-Large Jill Schlesinger: Don’t refinance if you don’t expect to stay in the home long enough to recoup the closing costs. Skittish lenders will be quick to reject applicants who seem too risky, so be sure you have what it takes to get approved for a refinancing. For example, your mortgage costs shouldn’t total more than 29 percent of your income.
If you’re upside-down in your mortgage and unable to refinance to a lower rate, but you’re current on your payments, you may be eligible for the federal government’s underutilized Home Affordable Refinance Program, which expires June 10. If you got your home’s first mortgage before January 2009 and it’s owned or guaranteed by Fannie Mae or Freddie Mac and doesn’t exceed 125 percent of your home’s current value, you’re eligible. “The refinancing program is the Rodney Dangerfield of government programs,” says Greg McBride, senior financial analyst for Bankrate.com. “It doesn’t get any attention.” If you’re behind on your mortgage payments or experiencing financial hardship, investigate the government’s Home Affordable Modification Program. Although both programs suffered from a slow ramp-up in 2009, look for efficiency improvements in 2010.
2. Buy a house
If you’ve been sitting on the sidelines waiting for the right moment to make an offer, 2010 will be the time. Says Mark Vitner, a senior economist for Wells Fargo: “We’re not going to see dramatic increases in interest rates, but they’re likely to gradually move higher over the year.” If you’ll qualify for the $6,500 home-buyer tax credit for current owners or the $8,000 credit for first-time buyers, make an offer before winter ends. You need to be under contract by April 30 to get the tax break.
3. Keep an eye on your credit score
A good credit score is more important than ever for anyone trying to get approved for loans or credit cards in 2010 and qualify for the lowest rates. Lenders consider a credit score above 720 to be good. To learn your score, order your free credit report from annualcreditreport.com and spring for the $8 additional charge for the magic number. Or take the results from the credit report and feed the info into the Score Estimator at MyFICO.com.
4. Check for any closed credit card accounts
When you read your credit report, make sure all your credit card accounts all still open. You may have cards buried in a drawer that were canceled without your knowing it, and a credit-card cancelation could have reduced your credit score. Even after the new credit card law takes effect in February, issuers will still be allowed to cancel your account without notifying you. Believe it or not, “that’s not considered a material change in the terms of your account,” says John Ulzheimer, president of consumer education for Credit.com.
5. Consider a credit union
Interest rates on cards from credit unions are about 20 percent lower than at banks, according to an October 2009 study by Pew Charitable Trusts. One reason: Unlike banks, which can slap on sky-high rates, federally chartered credit unions can’t charge more than 18 percent. (State-chartered credit union rates are also capped at about that rate, but state laws vary.) You’ll have to become a credit union member to get a card; find one at FindACreditUnion.com.
6. Charge every card you have (sensibly)
In 2010, credit card companies will be looking for any excuse to lower your credit limit, raise your interest rate, or nix you as a customer. Banks are still dealing with a serious increase in uncollectible balances. Bank of America, for instance, wrote off 76 percent more in uncollectible loans in 2009 than the previous year. If you’re not charging on a card and not carrying a balance, you’re not making the company any cash. That means you’re creating a bulls-eye on your credit line. So charge at least a little on every card most months.
7. Fight higher rates and fees
No matter how good a customer you are, don’t be surprised if you get hit with higher rates or new fees in the coming year. If that happens, call the card issuer and politely, but firmly, ask the rep to reverse the move. If you’re a longstanding customer on good terms with the company, there’s a decent chance you’ll get satisfaction, especially if you threaten to walk. Ken Lim, CEO of CreditKarma.com, a credit-score service, says card issuers these days often toughen up “on a batch basis” without paying much attention to the particular cardholder’s history. “Or sometimes they’re simply relying on you not even noticing the change,” says Lim. “You’d be surprised what a phone call can do.”
8. Opt out of overdraft charges
Beginning in February, you’ll have to tell your credit card issuer if you want to be allowed the ability to go over your limit (and owe an overdraft fee of up to $39) when making a purchase. Starting in July, you’ll have to do the same thing with your debit card — that is, you must “opt in” if you want overdraft protection on your debit card purchases and ATM withdrawals. If you do nothing, you’ll automatically opt out of both.
Banks will lobby hard to get you to opt in and add this “protection,” so they can rack up overdraft fees. Don’t fall for the bait. “I can’t think of a reason why you’d want to opt in,” says McBride. True, you might get embarrassed if your card is declined in public. But to us, that seems better than having to cough up $39.
9. Add your college-age child to your card account
Starting in February, a child under 21 won’t be able to get a credit card without a parent or legal guardian as co-signer unless he has proof of enough income to afford the monthly payments. This will protect some kids from predatory credit card practices and getting hooked on credit before they’re old enough to drink. And that’s a good thing. But it also means that some college students will have a harder time developing their own credit history.
That’s where you come in. If you have a responsible teen and want to help her build credit, add her as an authorized user to a card of yours. But don’t cosign for plastic with your child. “There are too many downsides to cosigning,” says Ulzheimer. “Cosigning means equal liability for both parties.”
What to Do in 2010: Banking, Loans, and Credit Cards
by Kate Ashford in moneywatch.com
Categories: How to make money Tags: 9 ways to make money, 9 ways to riches, cut your taxes in 2010, how to be debt free in 2010, how to reduce debt in 2010, make money in 2010, reduce debt in 2010, way to reduce debt, what to do in 2010
Warren Buffet’s 9 Money Secrets
The World’s Smartest and Definately richest Man
If you have never heard of Buffett, Forbes currently ranks him as the third richest man in the world and he is arguably the world’s greatest investor. He has amassed his fortune by making astute investment decisions and investing in businesses. Here is what I have learnt from Buffett:
1. Rich Is A State Of Mind
“I always knew I was going to be rich. I don’t think I ever doubted it for a minute.” – Warren Buffett
The difference between being poor and being rich is really just a state of mind. Poor people think thoughts of poverty and lack, rich people think thoughts of abundance and prosperity. Your beliefs are going to determine the way you perceive wealth, the decisions you make and the way you act towards it.
2. Success Is More Than About Your Bank Balance
When asked by CNBC what is the secret to success, Buffett replied “If people get to my age and they have the people love them that they want to have love them, they’re successful. It doesn’t make any difference if they’ve got a thousand dollars in the bank or a billion dollars in the bank… Success is really doing what you love and doing it well. It’s as simple as that. I’ve never met anyone doing that who doesn’t feel like a success. And I’ve met plenty of people who have not achieved that and whose lives are miserable.”
3. Spend Less Than You Earn
“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” -Warren Buffett
It seems like common sense advice and you’ve no doubt heard financial experts preaching about it for years. You can’t possibly get ahead financially if you’re spending more than your paycheck. Buffett is famous for living a simple and frugal lifestyle. He is the only billionaire I know that still lives in the same house he bought back in 1958 for $31,500. He drove a 2001 Lincoln Town Car for years which he bought second hand. Buffett has a net worth in excess of $52 billion and yet lives off an annual salary of $100,000. The relative percentage of his spending based on his overall net worth is minuscule.
4. Avoid Consumer Debt
The sooner we realize that consumerism is a social plague that has been propagated by billion dollar marketing machines to keep you shackled to your job, the sooner we can stop spending money on useless stuff. It is a fool’s game to spend today so that you can work tomorrow to pay it off. It is a losing proposition because one day your working days are going to be over but the debt is still going to be hanging over your head. Clever marketing has convinced our society that to be happy you have to have more, be more and do more. Buffett abhors consumer debt instead choosing to use debt wisely by leveraging it in investments. To help you deal with your debt consider reading “How To Get Yourself Out Of Debt“.
5. You Are Who You Associate With
“It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.” -Warren Buffett
If you want to succeed financially you need to associate with people who are most conducive to encouraging and cheering on your financial journey. If the people you associate with see money as evil, object to capitalism and find wealth a foreign concept then your financial health and well being is going to be influenced by their views. Whether we like it or not we are all influenced to some extent by the people we spend our primary time with. If you aspire to achieve financial security then you need to find a mastermind of people in your life whom you can all encourage and help each other.
6. Gambling Is A Fools Game
“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” – Warren Buffett
While we are young and naive we choose to take risks with our money that are dumb and stupid. Trying to hit a home run with your money every time is a losing proposition with long term consequences. To chase investments that offer a high rate of return you must also assume that it also comes with a higher rate of risk. Bill Gates once quipped “Warren’s and my betting has always been confined to $1 bets” when talking about them paying poker together. If two billionaires take risk management this seriously, it’s time we average punters did the same thing.
7. Give Back To The Community
“Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.” – Warren Buffett
They say that to have more you need to give more. A contradiction in terms, maybe, but it’s a simple truth that is as enduring as time. As the bible says “It is more blessed to give than to receive -Acts 20:35”. Buffett has announced in 2006 that he was giving away over $30 billion to the Bill and Melinda Gates Foundation making it at the time of writing the largest charitable donation in history. He also contributes large sums to his children’s charitable foundations.
8. Generosity and Abundance Goes Hand In Hand
“Even though Ben Graham [Buffett's mentor] had everything he needed in life, he still wanted to give something back by teaching, So just as we got it from somebody else, we don’t want it to stop with us. We want to pass it along too.” – Warren Buffett
A famous bible quote goes: “What benefit will it be to you if you gain the whole world but lose your own soul?” – Mark 8:36. The path to wealth isn’t a solo endeavor. How sad would life be if you come to the end of your life and there is no one to share it with. So as you journey on your path to financial abundance remember that there will be many people who generously helped you on your journey so it is only fitting to pay it forward when the opportunity arises. Generosity with your time, with your money, with your resources are great virtues to have. The greatest ally to building a strong friendship is to help others achieve what they want from life.
I leave you with this last quote “You only have to do a very few things right in your life so long as you don’t do too many things wrong.” – Warren Buffett
9. Work Smarter and Step Up
One does not have to work hard and work long hours. You have to work smarter than others and this includes working others harder, delegating routine and mundane jobs. Look at much much income you generate per hour and then focus on income producing tasks. Delegate all admin and non income producing task to others at a cheaper rate so that you can focus on making money. One needs to step up in life to only accept and deliver the very best. Do not settle for mediocre results coming average effort. Demand and Delivery nothing but your very best in all areas of life and life will give its very best back to you.
Categories: Ways to make money Tags: 9 laws of money, 9 money secrets, 9 principles of the rich, 9 secrets to money, 9 ways to make money, 9 ways to riches, Money, Secret, secrets of warren buffet, warren buffet, Ways to make money
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