NEGATIVE SAVINGS SHOCKER

I was recently appalled by a statistic I came across stating that in 2005 the American personal savings rate averaged -0.5%. We have gotten so used to living above our means that we have reached a savings low that hasn't been matched since the DEPRESSION!

Spending more than you bring in is nothing but a recipe for disaster. I know it's a challenge to live within your means but it's a bigger challenge to live under a growing pile of debt.

As Thomas Fuller said, ''Debt is the worst kind of poverty.'' If you're living in the red, you're in pretty bad shape and any money you make isn't really yours, it's your debtors! But there is hope if you can discipline yourself and figure out what method works best for you. Then you can not only be debt free but you can also begin to grow savings and do your part to increase this nation's embarrassing savings rate.

Investing In ETFs

ETFs or Exchange Traded Funds and similar to index fund and mutual funds in that they are invested in an index, commodity or basket of assets. The difference is that they trade like a stock on an exchange.

Investing in both individual stocks and mutual funds have their drawbacks. When you buy an individual stock, all of your investment dollars are riding on the company you invest in. One factor of successful portfolios is diversification and to obtain diversification investing in individual stocks is extremely expensive, it would cost tens of thousands of dollars to create a portfolio that held just one of each of the stocks in the S&P 500. Not to mention the amount of transaction fees you would rack up. The obvious alternative to this mutual funds and index funds.

Mutual funds on the other hand offer the diversity and balance needed for a successful portfolio and there are a wide range of funds that track the different indices, sectors and markets. Mutual funds do have their drawbacks though. Most mutual funds have a minimum investment, $2500 is not uncommon. Additionally, mutual funds carry expense ratios and fees that can take a huge chunk out of your earnings. Mutual funds are meant to be held long term and you don't have as many options as you would with individual stocks. On top of that the majority of actively manages mutual funds fail to beat their benchmark.

ETFs To The Rescue

ETFs offer the best of both worlds. You receive the automatic diversification that you would with a mutual fund but it behaves like a stock. This means that you can buy as little as one share. ETFs also have lower expense ratios than their mutual funds counterparts.Unlike mutual funds that are priced once daily, ETFs price fluctuates throughout the day just like a stock. Since ETFs behave like a stock, you have the option to short sell and buy on margin.

Additionally, there is an ETF for pretty much everything you can think of. The most common are Spiders (SPY) which tracks the S&P500, Diamonds (DIA) which tracks the Dow Jones Industrial Average and Cubes (QQQQ), which tracks Nasdaq 100. There a so many many more though for every index and every and sector. ETFs are also broken into categories such as large cap, small cap, growth, value, etc...There are also ETFs for bonds and fixed income and they too are categorized into everything from total bond market to short term bonds. There are even ETFs for commodities such as gold, oil and silver.

The only costs involved in purchasing ETFs are you're regular transaction fees. You can buy stocks free or at a low cost with either http://www.zecco.com/ or www.sharebuilder.com

Good luck and happy investing,
Finance Girl

Making A Deal With Your Creditors

Creditors lend money with one objective: to make money! They want their principal back and they want their interest revenue. From time to time they have defaulters who just won't pay up. This is when they are willing to recover any amount they can and cut their losses.

If you are severely behind in your bills and have over 90 days past due debt (tsk tsk) you can negotiate. Call your creditors and make them an offer to pay up 20% to 75% in a lump sum to settle the account. If they agree, and odds are in your favor that they will! This will automatically benefit your credit because the outstanding balance will be settled however previous late payments and delinquencies will remain.

Getting Your FICO Score

You are entitled to one free copy of your credit report from each of the three credit reporting agencies annually at www.annualcreditreport.com.

Unfortunately, there is no ''free'' way to obtain your FICO score. When you obtain your free credit report you are offered the opportunity to purchase your score (usually for under $10).

There are also several credit monitoring websites, such as http://www.truecredit.com/ and http://www.freecreditreport.com/

which allow regular access to your credit reports and FICO score on a monthly subscription basis.

If you really just want to get a free peek at your score, you can visit http://www.freecreditreport.com/. This site offers a 30 day free trial of their service. You can sign up for the service, view your report and score as often as you like and cancel before the trial is up.

However I recommend keeping the credit monitoring service because your score changes on a month to month basis and it is a good way to track your progress if you are working to boost your score. An additional benefit is that you can view your score on a month to month basis which allows you to catch any errors or suspicious and fraudulent activity in a timely fashion. This is important because many victims of credit fraud don't realize what has happened until they're knee deep in a mess.

Although your credit score is easy to obtain, it isn't free. Paying a small monthly fee is a good investment in monitoring and managing your credit as well as protecting yourself from fraud.

Yours Truly,
Finance Girl

Seven Ways to Spend Less and Save More

Everyone should be saving at LEAST 10% of their income, however many people spend every last dime and then some.

Having a cushion of savings equaling 3-6 months of living expenses is extremely important for everyone. Unforeseen events such as job loss, illness and injury can be disastrous and can leave you in financial ruin that can take years to climb out of...if you're unprepared. If you're thinking to yourself that you can't afford to save 10%, then you need to be saving it more than anyone! Saving money takes time, effort and discipline but you can do it and the following steps can help.

1. Make saving automatic. You can start an automatic savings plan with your bank where they transfer a specified amount from your checking to your savings on dates of your choosing. You can also make the same arrangement with an online bank which tends to offer higher interest rates than traditional banks. Some good options are http://www.emmigrantdirect.com/ and HSBC's online banking service.

2. Set yourself a limit for how many ATM withdrawals you will make and for how much, then stick to it!

If you know that the cash you have on you has to last till your next planned ATM visit you will find yourself spending your money smarter and making less frivolous purchases.

3. Subtract credit card purchases from checking account immediately so you're prepared for the bill.

Credit cards are a form of financing. Whenever you use a credit card and carry a balance, you are taking out a high interest loan. Why would you finance groceries and gasoline outside of times of desperate financial hardship. Charging day to day purchases is fast, convenient and allows you to go about your day without walking around with wads of cash but pay the balance in full at the end of the month and only resort to financing charges in emergencies and irregular large expenses such as car repairs and the like.

4. Avoid impulse buying! Give yourself a cooling off period before making purchases, the larger the purchase the longer the cooling off period should be!

If you give it some time and still can't live without it, then by all means treat yourself.

5. Spare change adds up! Put all your spare change in a jar at home or at work and then deposit it in your savings account when it gets full.

Loose change is something that many of us don't even make note of and you're not going to amass a fortune saving it. However it is painless and effortless to save and when your container is full, the cash will feel like found money.

6. If you're a nonstop shopper, it's time to stop! Reward yourself every time you pass up a purchase no matter how small the purchase is (hey, lattes add up!), put the money you would have spent in a clear jar somewhere where you can see it on a regular basis. You will impress yourself as you watch it grow.

7. Once you have finished paying off a credit card or loan keep making payments into your savings, investment or retirement account. People always claim to be low on funds available for saving and investing so take the opportunity to put some freshly freed up cash to work.

These steps are simple, practical, ans they work! Hopefully you will incorporate them into your daily life and it won't take long before you see the benefits of saving money and spending smart.

Yours Truly,
Finance Girl

Building Wealth With Sharebuilder

If you want to invest money but can't meet the large account minimums that many brokers and mutual funds require you can open an account with www.sharebuilder.com and put your money to work for you.

The beauty of Sharebuilder is that there are no minimums. No minimum balances, no minimum investment amounts and no minimum amount of transactions. You don't even have to buy a whole stock! If you have your eyes on a stock that's $100, you can buy 1/5 of a share for $20! For this reason Sharebuilder is perfect for beginner investors and those with modest resources.

Another plus is that, if you buy a security but find yourself too strapped for cash to invest any further for, say, the next 5 years you can rest assured that your money will grow untouched because Sharebuilder does not charge inactivity fees!

Now is a wonderful time to open an account because they are offering a 30 free trial on their standard membership. Before the close of the trial period you can switch to the basic membership which has no monthy fee. Opening an account with Sharebuilder is easy, you don't even need to make a transaction on the same day you open the account. Once you have filled out the simple application form you have a few choices. You can set up automatic monthy transactions or you can make one-time transactions with no obligation to make further ones within any timeframe or ever for that matter.

Sharebuilder also has several account type choices. One being the basic plan where you do not pay any monthy amount but you are charges $4 a transaction, ideal for the infrequent investor.
There are also other account types that charge a monthy fee but include several transactions (equaling a lower rate per transaction than the basic plan, you can also made additional transactions for $2 or less). These plans are great if you want to purchase several securities within a month.

The way it works is, Sharebuilder takes the funds out of your linked bank account the Monday immediately following your order, your order is then executed the next day, Tuesday. You can make any changes you want up until 5:00pm Monday. Though the service offers real-time trades, the kind of trades you will be doing (wisely chosen securities to be held long term) do not require them.

Diversification is a crucial aspect of any successful portfolio. This is why I urge you to select the free trial account type that includes 6 transactions and $2 thereafter. Transaction fees are based on each security purchased so when you take advantage of your free trial you can start with a diversified portfolio free!

Congratulations on making the first step to putting your money to work for you and building wealth! Check back for more investment and financial advice and thank you for reading!

Yours Truly,
Finance Girl

A Borrower and a Lender BE!

The famous Shakespearean quote ''Neither a borrower or a lender be...'' goes out the window with Prosper. Prosper is a new and promising site for both those looking for low interest loans for up to $25,000 and for investors looking to make a high interest on their money with as little as $50.

So how does it work?

Prosper connects people in seek of funds with those willing to lend funds with interest.Technically you're buying the loan from prosper. Borrowers have their credit checked and are then rated from AA (high credit scores) to HR (high risk). Their rating in addition to their Debt to Income ratio is displayed in order for investors to gauge the risk of the borrow.

You can lend as little as $50 and loans are ammortized on a 3 year schedule. There's the potential for high interest revenue and you are urged to spead your risk by lending small amounts to various borrowers as opposed to putting all of your capital into one or two borrowers. This works like any other bank loan and you get to be the banker! Late payments are charged a late fee, defaulted loans go into collections and have negative impacts on the debtors credit report and score.

Now let's talk fees. On the borrower's side there is a $25 fee to Prosper and of course the actual interest on the loan. On the lender's side there are no fees however Prosper does keep half of one percent of the interest on the loans. Good deal for such high returns.



Have a brother, sister, cousin hitting you up for a personal loan? You can agree to fund them through your Prosper accounts. This is a wonderful way to help out a friend or relative in need without getting burned because this loan is for real. Interest is charged, late fees are assessed and non-payment is reflected on credit reports so they have much more at stake than a personal falling out and don't worry, although loans are on a 3 year schedule, they can be paid off at any time.

Sample Dispute Letter

10/11/2006

Jane Doe
33-22- Elm St.
Somewhere, NJ 10607

Dispute Department
[Name of Credit Reporting Agency]
[Address]
[City, State, Zip Code]

Dear Sir or Madam:

I am writing to dispute information on my credit report. The items I wish to dispute are listed below and also highlighted on the attached copy of my credit report
[List the items that you feel are inaccurate including the type of accounts, names of the financial institutions, and full or partial account numbers. Include what changes you feel should be made.]
Enclosed are copies of [payment records, credit report, letters from the creditor, court documents, etc.] supporting my dispute. Thank you for investigating this matter.

Sincerely,
[Signature]
[Your full name]
[Date of birth]
[Social Security number]

Enclosures: (List what documents are enclosed with your letter)

TransUnion
2 Baldwin Place
P.O. Box 2000
Chester, PA 19022
http://www.transunion.com/

Equifax
P.O. Box 740241
Atlanta, GA 30374-0241
http://www.equifax.com/

Experian

go to http://www.experian.com/ and submit a dispute online

The Deal With Credit Counseling, Credit Repair and Debt Consolidation

Most of us have heard of credit counseling, debt consolidation and credit repair companies and many of us have sought or considered seeking their services. The whole business of fixing and helping people with their credit problems is a highly profitable industry, generating billions of dollars a year.

All credit counseling services and debt consolidation services do is negotiate payment arrangements with your creditors to lower rates and sometime waive fees, all of this at a cost to you somewhere upwards of $25 a month, that goes straight into the counseling service’s pocket. I suggest calling your creditors and trying to strike your own deals before turning to these companies. If you feel you can’t get anywhere with creditors and need to use a credit counseling service or a debt consolidation company, do your homework. Use the Google search box below and do a search for credit counseling and debt consolidation. Take some time to review each company and their fees and terms and pick the best one with the best terms and fees. A small difference of as little as $5 in fees adds up quickly and can spell big bucks over the life of the arrangement. Many debt consolidation services are actually loans, they pay off your creditors on your behalf and then you pay them back at a rate lower than your original debts.

While Credit counseling and debt consolidation are legitimate businesses, be wary of most companies that claim to do credit repair. We’ve all heard the saying, “if it sounds too good to be true it probably is”, well what sounds better than having hundreds of points added to you fico score or going from bad credit to good credit in 30 days? Get real! Most of the time when you see these things, it’s a scam, they will take your money and you will never hear from them again, but why take my word about it when you can read about it for yourself. See the Federal Trade Commission's Warning about these companies . Don’t be a victim and find out the hard way.

What You Should Be Saving For

The Unplanned
Anything can happen! Life is full of unexpected curve balls and the only thing you can do is make sure you’re not caught with your pants down. Surprise car break downs, lay-offs and injuries are stressful enough and for a lot of us there is the added strain of not being financially prepared to deal with it. Do you really want to be laying in a hospital bed worrying about the debt you’re going to be in over the bill or find yourself jobless without enough money in your account to get you to the end of next week? Of course not! And you can avoid finding yourself in that situation if you build an emergency fund. A “reserve” of 3-6 months living expenses is commonly recommended and more than that is even better! 3 months of expenses can become a huge number but it doesn’t have to be overnight but be disciplined and put as much as you can spare away over time and slowly but surely it’ll begin to pile up.

Special Expenses
Weddings, college, new car and first home purchases are just a few examples of some pretty expensive milestones. Why drown in debt to pay for special events when you can prepare. I’ve met too many people who are still paying the bills for their wedding after the divorce! If it means that much to you to incur huge amounts of debt it should mean that much to you to save up as much as possible ahead of time. Of course I’m not suggesting putting off buying a home until you have every last dollar in cash but do find a middle ground. Remember, it all has to be paid sooner or later…with interest! The less you finance, the better off you are.

Retirement
It may seem a long way off but it creeps up on you and it’s better to save a slow and steady amount every year starting now that to be scrounging for money to live off of later. Social security will be non-existent before most people retire and it was never anything to count on count either way. At 20 years old you would only have to save $33 a month at 12% interest to have a million by age 67, however for a 30 year old to get the same results they would have to save $109 at the same interest rate. You don’t need a calculator to figure out which is the smarter move.

Raising Your Credit Score

Who doesn't want to raise thier credit score? A1 credit can be yours through active and responsible credit management and it's easier than you may think.

Following these golden rules will rocket you above and beyond the ideal 650 fico score range.

The first rule is to make punctual payments! Payments of 30, 60, 90+ days late stay on your report for 7 YEARS!!!! Yikes! Avoid making late payments at all costs, make a minimum payment or a strike a deal with the creditor. Collect cans from the garbage for recycling if you have to but whatever you do, avoid late payments!It's just not worth it! And think of all the late fees, it's hard earned money down the drain, give away your money to charity, not banking insitutions!!!!

Next rule, check often, check closely. Order copies of your credit report and go over it with a fine tooth comb. Check for errors and unusual or unauthorized activity and take care of them ASAP!

Curb debts, don't max out or keep high balances. It's a huge waste to pay interest month to month on high balances and it puts up a red flag to potential creditors AND it lowers your fico score. Ideally, balances on accounts should be 30% of the total limit or LESS or even better, pay everything in full every month.

Stop applying for credit! Don't apply for every credit offer that comes your way because this lowers your fico score and ultimately hurts you in the end. Once you have a sufficient amount of open accounts in good standing only apply for offers that are really neccessary or have not just good but GREAT deals.

Patience. Waiting SUCKS but it's neccessary for optimizing your credit reports. A long history of accounts in good standing are indispensible on your credit report. Like fine wine the older the accounts, the better! It's important to always think twice about closing your oldest account because it may make your credit history appear shorter than it actually is.

Building Credit From Scratch
Have little to no credit is both a blessing and a curse. At times having no credit seems like the equivalent of having bad credit and understandably so. You can't get a loan, a credit card or a decent interest rate when someone does take a chance on you. The reason is simple...you're risky! Nobody knows how your going to behave and manage debt, they have no way of telling if they'll ever see thier money again once they lend it to you. So how do you show them that you're responsible or deserving?

You get a credit card! But wait, you can't get a credit card without a credit history and you can't build a credit history without a credit card or loan or some other kind of credit. What to do what to do...

If you're in college, you're in luck! College campuses are one of the easiest places to get your hands on a credit card without any credit history. After reading this search "student cards" and "credit cards students" in one of the google search boxes on this page and see what's available to you. Avoid cards with annual fees and secured cards, these are last resort.

If you're not in college, don't lose hope, there are still many options available to you. One option is to have someone who you know and trust and more importantly, who trusts YOU to add you as a secondary card holder on one of thier existing credit cards that are in good standing. Although the primary card holder is responsible for the bill, you will be issued your own card with you name on it and it will apear on your credit report building your history.

A secured credit card is an undesireable option but an option nonetheless and it's guaranteed! Nobody will deny you a secured card!

It's hard to get you foot in the door but once you do a whole new world will open up to you...whatever you do...don't screw it up!!!!!

Keep your eyes on the prize.

The prize being a score of 650 or better, the magic number that will get you approved for most credit and loan terms.

It takes time but your credit score will increase over time as long as you prove yourself responsible and credit worthy, make yourself desireable to creditors.

For tips on managing and maximizing your credit score, read "Raising Your Credit Score" and to understand how your FICO score (credit score/rating) is calculated read "Fico Breakdown"

The Credit Report Timeline
Most of us have SOMETHING negative on our credit report and then there's those whose credit is just....shot! Late payments, tax liens, accounts in collections, bankruptcies and even credit inquiries are just a few of the harmful things that work against us on our credit reports. These tarnishes on your report join forces to lower your score and stand between you and the sweetest deals and interest rates.

Fortunately the saying "time heals all wounds" applies to credit reports as well as broken hearts. Here is a list of the different types of accounts and how long negative information concerning them will remain on your report:

Bankruptcy Chapter 7, 11 or 13 stay on for 10 years.
For some reason it is widely believed that it stays on 7 years but 10 years is the actual length of time.
Charge-Off Accounts - 7 years
Closed accounts -7 years
For negative accounts but positive accounts can stay on longer which is a good thing!
Collection Accounts - 7 years
it is 7 years from the last 180-day late payment in the ORIGINAL account.
see *special note about collection accounts* below
Inquiries -1 to 2 years
see ** special note on inquiries** below

Judgements - 7 years

Late Payments - 7 years

Avoid these at all costs, I know sometimes it is unavoidable but even if you can make a bare minimum payment, do it!

Unpaid tax leins stay on your report indefinitely until they are paid, then they remain for 7 years from the payment date, sorry guys this is one that just won't go away so always take care of these as soon as possible!!

*Special note about collection accounts*
A paid off collection account is noted on your report as "paid in collection"
and an account settled for reduced amounts are reported as "paid for less than due" which looks HORRIBLE on your report!

**Special Note On Inquiries**
These only include hard inquiries and they stay on for a maximum of 2 years. Keep in mind that soft inquiries such as checking your own report do not reflect on your report or score. Never be discouraged from checking your own credit for fear of it affecting your score. You can check your own credit report an unlimited amount of times a year and I strongly encourage you to actively stay on top of your report and catch any errors or fraudulent activity as soon as possible.

I hope this information was helpful and informative, don't forget to check out my blog:
"FICO BREAKDOWN: How Your Credit Score Is Calculated" at http://finance-girl.blogspot.com/2006/09/fico-breakdownhow-your-credit-score-is.html

Fico Breakdown:How Your Credit Score Is Calculated

Unfortunately with credit reports the bad tends to outweigh the good. Mortgages and loans are determined by your fico score (credit score/rating) which is calculated based on the information on your credit report.

35% of your fico score is based on your payment history and the more recent a late or missed payment the more it hurts your credit score. Generally, missed/late payments (more than 30,60 and 90+ days past due) are reported to credit agencies and remain on your credit report(s) for a period of up to 7 years.

30% of your fico score is the current usage of credit, meaning how much on a current loan do you still owe and how much of your credit limit on your cards is used? If your balances are close to the limits it has a negative effect on your FICO score. Balances close to the limits make you appear risky to potential creditors.

15% of your fico score is the length of credit history- how long have you been using credit, 1 year, 10 years, the longer you've been reliably using credit the better. Accounts that have been open for long periods of time with good payment histories are invaluable.

10% of your fico score is based on your applications for new credit. Applying for too many new accounts is bad for your FICO score and it's a red flag to creditors. It's based on how many places have requested a credit report on you, so even if you apply for credit and don't get it then it still reflects negatively on you. New accounts include car loans, store credit cards, regular credit cards, etc... However keep in mind that only "hard inquiries" count against you. You requesting your own credit report is considered a "soft inquiry" and can be done an unlimited amount of times with no reflection on your credit report.

The last but not least 10% of your fico is based on how well you've been able to pay off different types of debt. Having a mix of different types of debt reflects well on you. Successfully managing various loans, from credit cards, mortages, auto loans, reflects better on you than having all of one or two kinds of loans.

It's in your best interest to get your FICO score as high as possible before applying for a mortgage or any loan or credit for that matter because it's the key to securing the lowest available interest rate. You can then put all the money you're NOT paying in interest in a Roth IRA!