Some Misconceptions Young People have about Credit

By Nicole Rutledge 12 July 2010

When well-known financial commentator Ben Stein was asked whether he worries about having enough money in the future, he confidently replied that he does not. That’s because he asserted that his “young self” made sure to take good financial care of his “old self.”

His celebrity notwithstanding, Stein isn’t burdened by his financial future because he avoided common money traps in his 20s and stuck to a long-term savings plan. You can do the same by making sure you don’t fall prey to the biggest misconceptions that young people have about money:

“I don’t need to start saving until I’m in my 30s.” Wrong. Saving today creates financial security for the future. In your 20s, you have a small window of opportunity to take advantage of the power of compounded interest. For example:

• If you save $3,000 a year in an IRA between the ages of 20 and 30 (and only between this time period) – and earn an average annualized rate of return of 7% – at age 65 you’ll have $442,000.
• However, if you begin saving when you’re 30 the same amount each year at the same average rate of return until you’re 65, you’ll have $283,000 or 35 percent less than if you had just saved the money in your 20s.

Another way to think about saving in your 20s is this:

Assuming this same 7% annual rate of return, if you begin saving $3,500 per year when you’re 20 until you’re 65, you’ll have $1 million, whereas if you didn’t start saving until you’re 35, you’d have to save $10,600 every year to reach $1 million.

In addition, your young age creates a longer investment horizon and the opportunity to take on more investment risks. To plug in numbers to see how fast your money will grow when you start saving at a younger age, utilize an online  Savings Calculator.

“My parents have it all – so I will too.” A lot of us see the things our parents have acquired and think that lifestyle was quickly realized. However, it’s important to not have inflated expectations about what “living well” means. Remember, you didn’t know your parents when they first started out. They most likely struggled with saving too, and didn’t accumulate a lot of material goods at first. A friend’s college finance professor once stressed that you should always “act your wage.” In other words, live within your means and don’t overextend yourself for the appearance of having more than you really do.

“Bad debt only happens to other people.” According to www.credit.org, a 2009 Sallie Mae study showed that the average undergraduate student owes over $3,000 in credit card debt and in addition to that, graduates with approximately $20,000 in student loans.  Accruing debt isn’t something that happens overnight or a product of one bad financial decision – it creeps up on you. You can’t wrestle your way through your finances by just making minimal credit card payments. Who wants to ultimately pay $300 for an outfit you originally paid $75 for? Unfortunately, many circles of friends often avoid talking about debt. If you feel like you’re not able to keep up with your finances, reach out for help from reputable organizations. And remember: You might not be able to rely on your parents for a financial lifeline because their financial condition may change.

“I’m sure my credit is fine.” With identify theft more prevalent and many of us having numerous credit cards, it’s imperative to check your credit report at least once a year. I knew one college student who had forgotten about a small debt on her credit card – and with interest and fees the debt rose to about $500. The balance was eventually classified as a collection on her credit report, and she had a difficult time qualifying for student loans because of what was originally a minor oversight.

“I don’t spend that much.” Most of what can deter you from reaching financial goals is spending on the “everyday” stuff – not the big-ticket items. It’s Starbucks each morning and extra cell phone charges. I’m not saying that you should sweat all the small stuff, but if you’re an impulsive buyer, you have to remember that spur-of- the-moment purchases add up. For one month, keep a detailed record of everything you spend. Then evaluate where you can cut back. I guarantee you’ll find little ways to save a lot – even if it’s $20 a month. Also check out the services of Mint.com, a free and easy way to track spending.

The key to a healthy financial future is living within your means. This sounds easy, but every choice you make about the house you buy, the car you purchase, whether you eat out or cook at home, has a deleterious impact on your ability to save and live within your means. It requires awareness of an overall goal and doing the math to be sure.

If you want to develop money management skills, becoming financially literate is the best tool to help you avoid financial pitfalls.

Ultimately, time is on your side – and you’re in an ideal age bracket to plan how your “young self” will help to financially secure your “old self.”

Nicole Rutledge is a Certified Financial Planner^® and a Senior Advisor for Orlando-based Resource Consulting Group, the largest fee-only financial planning and investment advisory firm in Florida.

Debt Article In McCleans

Hi Reader's
I just found a really excellent article about the worlds debt ratios, and what to expect in the future as our world ages and financial pressures rise.  The web address is http://oncampus.macleans.ca/education/2010/12/01/what-the-boomers-are-leaving-their-children/ .  Be sure to check it out, and give us a call for savings and debt restructuring while you're thinking about it.  This article really will hit home for a lot of people.

Credit Card News

The recently signed Credit Card Accountability Responsibility Disclosure Act of 2009, also called the Credit Cardholder' Bill of Rights, makes many changes to the way credit cards are regulated.

The following is an overview of the law as it is written; please check out our glossary if you have any questions about any of the credit card terms used in this article.

• Most of the provisions take effect 9 months after the bill is signed, around the end of February, 2010. The new rules about notifying consumers 45 days in advance of any change in interest rate take effect at the end of August, 2009

• Your credit card company must notify you 45 days in advance of any change of your interest rate

• Universal Default is now prohibited

• Two-cycle billing is now restricted

• Your creditor can only raise your rate according to clearly disclosed conditions

• Creditors can only close your account after providing 30 days' notice

• Creditors can only raise your rate under specific circumstances:

• if your rate is tied to a national rate that varies, like the Fed's Prime Rate
• if they previously disclosed to you that your current rate is only temporary (in which case the introductory rate must last for at least six months)
• if you are 60 days late on your payments
• for new credit card accounts, the rate can only be raised after a year has passed

• If you have balances with different APRs (for example, if part of your balance is due to a cash advance and part is from purchases), any amount you pay over the minimum must be applied to the balance with the higher APR first

• Creditors must send you a credit card statement at least 21 days before your payment is due

• Creditors must post the text of their credit card agreements on the web

• Creditors may not charge an extra fee for consumers to make payments by web or by phone, unless you are making a payment on the day it is due or on the day before and need expedited service

• You can only go over your credit card's spending limit (and incur overlimit fees) if you "opt in" to allow overlimit transactions on your account

• Creditors are required to provide details about how long it will take to pay off a balance if you only make the minimum payment required, and how much interest will accrue during that time

• The fees a creditor may charge in connection to a "sub-prime" credit card are restricted

• Many fees on Gift Cards and Stored Value Cards have been banned, and gift cards cannot expire in less than five years

• No one under 18 may be approved for a credit card, unless they are fully emancipated under the law. They may be added to their parent's accounts

• Adults under 21 may not get a credit limit greater than $500 or 20% of their annual income, and college students may not be offered incentives to sign up for a credit card

There are more provisions in the law, including a review of the government's financial literacy education efforts.

While these new provisions will help the typical consumer avoid traps and unfair fees and rate hikes, it is likely that credit will be more expensive for everyone. Many analysts expect annual fees for using credit cards to become the norm. Also, people with poor or no credit history will find it more difficult to gain access to credit card accounts under these new restrictions.

As much as the Credit CARD Act of 2009 helps consumers get fair treatment from creditors, it makes it more important than ever to pay down existing credit card debt to manageable levels and to maintain a healthy credit rating.

Now that they are bound by these new rules, creditors will be looking for customers with the best possible credit before they offer credit cards. Read our "Consumer Guide To Good Credit" (available here as a free .pdf download) to learn ways to ensure your credit report and score are accurate and reflect positively on you.


http://www.credit.org/resources/Articles/archive/167.html

Be sure to check out Integra Benefits for information on restructuring your debt if you or someone you love is in trouble with thier credit cards.

Student Loans

Here is an article more about information giving on student loans, than about debt restructuring, but everyone knows that student loans lead to mass amounts of debt.

In Canada, student loans are granted to students pursuing postsecondary degrees as to help them finance their education. The Canada Student Loan Program is funded by the federal government while the provinces may run and finance their own programs parallel with the government program. The Canadian banks also feature commercial loans that are intended for students enrolled in professional programs.

The government offers two types of financing that are specially tailored to the needs of the student population: grants that are not to be paid pack and student loans. Under the CSLP, loans are extended to part- and full-time postsecondary students who study in most territories and provinces in the country and demonstrate financial need. To qualify, one must be a Canadian citizen or permanent resident living in Canada for more than a year.

The Canadian government provides a maxim of $210 in loans per study week or 60 percent of the student’s assessed need. The remaining amount could come in the form of territorial or provincial loan. Nine territories and provinces work in partnership with the program, determining eligibility and assessing financial need, based on criteria provided by the federal government. Although Nunavut, the Northwest Territories, and Quebec do not participate in the program, they have developed their own Student Assistance Programs, and the Canadian Government provides alternative payments toward the latter.

Part-time students also benefit from the funding provided through CSLP, but provincial loans are not extended to them. In addition, they have to make interest payments while pursuing their degree and start paying off the interest and principal when they cease to be enrolled as past-time students. Students who face special difficulties in accessing postsecondary level education may apply for grants. Persons who come from low-income families or have permanent disabilities qualify for grants.

Provincial student loans are available through one’s province of residence which is typically defined as where one’s whereabouts have been for 12 or more consecutive months, excluding the time spent as a full-time student enrolled in a postsecondary establishment. Typically, one’s province of residence is defined as the province where the student lived before the onset of his or her postsecondary studies.

The student loans extended through provincial programs normally suffice to provide students with funding that covers their assessed need’s balance. Part-time loans are in the sum of up to $4000, and the debt of students cannot exceed this amount at any time. In addition, students may also qualify for grants extended by the Canada Millennium Scholarship Foundation Bursary, as well as for other grants offered by their provinces of residence.

The majority of Canadian charter banks offer funding to students enrolled in professional programs, and these are typically extended as a line of credit going with lower interest rate. On top of it, students may also qualify for interest-free loans provided by the government as private student loans do not count against the grants and loans extended by the federal government.


Please feel free to call or email us at info@integrabenefits.ca for more information on how to tackle your student loan debt.  There is a certain amount of time that has to pass before any debt consolidation can be considered.  Our phone number is (403) 331-4567.  Happy reading!

Financial Fitness

Are You Financially Fit?

Most people are financially flabby. How fit are you?

People spend a lot of time worrying about what they eat, how much they weigh, and how healthy their hearts are. According to Statistics Canada, life expectancy rose by almost 2 1/2 years for men and by almost 1 1/2 years for women between 1986 and 1996. But while we are all now living longer and healthier lives, for many people, financial fitness still isn't a reality.

Only 30% of Canadians follow a monthly budget {1} while just 40% of us have a formal financial plan in place {2}. Yikes! The fallout of all this inactivity (is it inattention or procrastination?) is that the realities of Canadians' lives are a long way off their expectations.

The CIBC Financial Health Poll conducted by COMPAS Inc., showed that 37% of those who retired and then returned to work did so because they didn't have enough money. What would they have done differently if they could do it all over? Well, 60% say that in hindsight they would have started investing earlier and they would have saved more. Hmmm.

More than just having enough money, our level of financial fitness reflects our ability to bring our current and future needs into balance.

To have a balanced financial plan, you must set some realistic goals. Just as most athletes have specific goals towards which they consistently work, the key to financial fitness is to set achievable goals and consistently work towards them.

What weighs most heavily on your mind? Very likely there will be several issues competing for your limited financial resources. Do you want to accumulate a specific amount of money, eliminate your mortgage or pay off that new car? Weighing each of your goals against the others will help you to see which are the most important ones.

There are no right or wrong answers at this point. Right now, you're just laying the plan. Later, if you want to double-check it, you can ask your financial adviser to look it over and see what's missing. Okay, it's time to pick up a pen and get to work.

• Make a list of everything you want to achieve
• Make sure you've covered each of the seven areas of a financial plan
• Prioritize your list
• Pick two goals
• Make sure your goals are realistic
• Set some dates
• Write it all down
• Check your progress every six months

Having decided where you want to be, you need to determine where you are now so you can size up the gap. Complete a net worth statement to see just how balanced your finances are and update this statement annually. It is your scorecard of how much your efforts are paying off. Next, do a budget so you can see exactly where your money goes each month. Estimate how much you spend monthly, track your expenses for about three months, and revise your budget to reflect your actual expenditures. Don't cop out and say, "Well I had unusually high expenses this month because..." Emergencies always crop up, and part of being financially fit is having a plan for dealing with those nasty little surprises.

Now look at your income relative to your expenses. If your expenses seem too high, you can either cut back on what you're spending or increase your income.

• Consider a part-time job to boost your earnings on a short-term basis.
• If you have extra space, think about renting a part of your home for extra income or sharing your home to reduce your living expenses.
• Consolidate bank accounts to save on fees.
• Brown-bag it for a few months to trim your waistline and your budget.
• Share newspapers, magazines and books with friends and co-workers.
• Park the car.

Having done your warm up exercises - you've written your financial goals down in order of priority, completed a net worth statement and set up a budget - you now have to decide how to meet your goals.

Let's say you plan to start an investment program. You want to save $25,000 over the next five years. If you're looking at your budget and thinking, "There's just no way!" maybe you need to adjust your time frame. Or perhaps you need to look at how you're investing your savings. One rule of investing is the longer you have to reach your goal, and the more your money earns during that time, the less you have to set aside each year.

If you haven't already done so, establishing an emergency fund for large, unforeseen expenses or temporary job loss should be a priority. Ideally, your emergency fund should be able to support you for three to six months. If someone in your household shares the expenses, consider how long it would take him or her to find another job.

Check over your accounts and make sure you're getting the most for the least. There's no point in paying for services that you'll use only once in a blue moon. Little things like choosing a passbook option rather than receiving a statement can save you money. If you can reduce or eliminate your fees by maintaining a specific minimum balance, consider consolidating your accounts to reduce your costs. If maintaining a monthly balance is a problem, then you'll have to compare individual service charges to choose the least expensive account for your purposes. Attracted to the "packaged" accounts? Take the time to compare the individual fees with the package costs to see if you come out ahead. The idea is to pay for only the services you'll use.

Now it's time to look at your debt. Begin by eliminating credit card balances and consumer loans. Often people pay only the minimum required without realizing how much interest costs work against their overall plan. If you have several cards with high balances, consider a consolidation loan to reduce your interest costs. Does your card charges a high rate of interest? Transfer your balance to lower cost card. If you have only a small amount to work off, put your cards away until the debt is cleared. Once you're debt free, by all means take advantage of the convenience credit cards offer, but keep tight control of them and pay your balance off in full every month.

Prepare for the risks of everyday life. The risks we seem to deal with quite easily are property insurance, car insurance, contents insurance. The risks we tend to overlook are those associated with our economic earning power. If you or your partner were to die or become ill or disabled and unable to work, would your family have the resources to meet their day-to-day needs? It's a tough question to face, but the consequences of not facing it can be even tougher on your family.

• Life insurance will protect your family's standard of living if you die.
• Disability insurance will provide you with an income if you cannot work due to illness or injury.
• Critical illness insurance will pay you a lump sum if you are diagnosed with a specific illness.
• Long-term care insurance will pay the bills should you (or other members of your family) need in-home or facility care.

Don't forget to do some retirement planning. The only one you can count on is YOU. Through means testing of pension and age tax credits, and reduction in senior's benefits, the government is saying loudly and clearly "You are responsible for providing for yourself." Thankfully, we still have Registered Retirement Savings Plans. Any money contributed to an RRSP remains tax-deferred until the funds are withdrawn. And since investments held in RRSPs also grow on a tax-deferred basis, they grow much more quickly than investments held outside an RRSP.

Despite the fact that almost everyone should have a will and a power of attorney, many people don't. Some think their wishes will be carried out by a family member or that they do not have enough money to justify the cost of making a will. Others avoid making a will because their personal circumstances -- marriages, divorces, and accumulated children and stepchildren -- just seem too complex to unravel. However, if you die without a will, trying to figure out who gets what, and when, can be a mess. And your estate may end up paying more in fees and taxes than it should, leaving less for your loved ones.

Partnered? Have your wills drawn up together so that they reflect an integrated estate plan. Review and update your will every three or four years, especially when family circumstances change (weddings, divorces, births, and deaths all result in changes in family structure), your financial circumstances change, new legislation is implemented, or you change your province or country of residence.

Financial fitness isn't achieved overnight. It takes time, a sound plan, a strong commitment and, perhaps, a financial coach. If you are serious about taking control of your finances and about your independence, you too can become financially fit. Believe in yourself and in your own ability to take charge. Then just do it! See you in the winner's circle.

This post was found in Gail Vaz-Oxlade's mother-load of articles at this website: http://www.gailvazoxlade.com/articles.html.  I extensively explored this website and found every single budgeting tool and tip out there for the masses.  However, sometimes it takes a little helper to motivate.  Feel free to call, visit or email us at Integra Benefits for an appointment to see Shawna about any debt issues you might be having.  The email address we have now is info@integrabenefits.ca and our website where you can find out more about us is http://www.integrabenefits.ca/. Have a great day!

Erin

All About Your Credit Rating

How to check your credit rating — and why everyone should

Everyone who's ever borrowed money to buy a car or a house, or applied for a credit card or any other personal loan has a credit file. Because we love to borrow money, that means almost every adult Canadian has a credit file. More than 21 million of us have credit reports. And most of us have no idea what's in them.
Are there mistakes? Have you been denied credit and don't know why? Is someone trying to steal your identity? A simple check of your credit report will probably answer all those questions. And it's free for the asking.

So what's in a credit report?

A surprising amount of detail, actually. It contains information about every loan you've taken out in the last six years — whether you regularly pay on time, how much you owe, what your credit limit is on each account, and a list of authorized credit grantors who have accessed your file.
Each of the accounts includes a notation that includes a letter and a number. The letter "R" refers to a revolving debt, while the letter "I" stands for an instalment account. The numbers go from 0 (too new to rate) to 9 (bad debt or placed for collection or bankruptcy.) For a revolving account, an R1 rating is the notation to have. That signifies that you pay your bills within 30 days, or "as agreed."
Any company that's thinking of granting you credit or providing you with a service that involves you receiving something before you pay for it (like phone service or a rental apartment) can get a copy of your credit report. Needless to say, they want to see lots of "Paid as agreed" notations in your file. And your credit report has a long history. Information remains on file for six years.

What's a credit score? And why is it so important?

A credit score (also called a FICO score) is not part of a regular credit report. Basically, it's a mathematical formula that translates the data in a credit report into a three-digit number that lenders use to make credit decisions.
The numbers go from 300 to 900. The higher the number the better. For example, a number of 750 to 799 is shared by 27 per cent of the population. Statistics show that only two per cent of the borrowers in this category will default on a loan or go bankrupt in the next two years. So that means that anyone with this score is very likely to get that loan or mortgage they've applied for.

How can I get a copy of my credit report and credit score?

You can ask for a free copy of your credit report by mail. There are two main credit bureaus in Canada: Equifax Canada and TransUnion Canada.
Complete details on how to order credit reports are available online. Basically, you have to send in photocopies of two pieces of identification, along with some basic background information. The reports will come back in two to three weeks.
The "free-report-by-mail" links are not prominently displayed - the companies are anxious to sell you instant access to your report online. For TransUnion, the instructions to get a free credit report by mail are available here.. For Equifax, it's easier to phone 1-800-278-0278 and listen to a recording. If you can't wait for a free report by mail, you can always get an instant credit report online. TransUnion charges $14.95. Equifax's rate is $15.50.
To get your all-important credit score, you'll have to spend a bit more. Both Equifax and Trans Union offer consumers real-time online access to their credit score (your credit report is also included). Equifax charges $23.95, while TransUnion's fee is $22.90.

What if I find an error in my credit report?

Well, you won't be the first. In millions of files and hundreds of millions of reported entries, there are bound to be mistakes. Some are minor data-entry errors. Others are damaging whoppers. For example, we've heard of instances where negative credit files from one person got posted to the file of someone who had a similar name (the "close enough" school of credit reporting).
Years ago, CBC's Marketplace program asked 100 people to look over their credit reports to see if there were any mistakes. Were there! More than 40 people spotted errors. And in 13 of the cases, they were serious enough to affect their credit status. So check your report carefully!
And if you spot entries that don't seem to relate to you (such as charge accounts you never opened or bad debt notations you never got), you may be a victim of the rapidly-growing crime of identity theft. You should notify the credit reporting company immediately.

What are credit monitoring services?

There are companies that will take the effort of checking your credit report off your hands - for a price. Usually, a pretty steep price. If you go to TransUnion's website, for instance, the first thing you see is their effort to sell you on their credit monitoring service. It costs $14.95 a month and includes unlimited access to your credit report and credit score.
There are several other companies offering the same service for similar prices. They usually include features like e-mail alerts when there's a change to your credit report.
It's a personal decision whether the service is worth the money. The bottom line is: You can always check your credit report for free by mail. Or, you could pay to get it online whenever you want. But for people who have been the victims of identity theft or people worried that they may be susceptible to ID theft, the expense may be worth it to ease the anxiety.

Should I pay to use a credit repair service?

In a word, no. Firms that say they can "fix" a bad credit report are often little more than fly-by-night operations designed to relieve you of hundreds of dollars in return for nothing. The only thing they can fix on your behalf is an inaccuracy in your credit file. And you can do that yourself free of charge.
Simply write the credit reporting agency and tell them you think there's an error in your file. The credit reporting agency sends along the form you need when it sends you the credit report. Use it to spell out the details of any information you dispute. And there's a form online, too. Also send along any documents that support your version of the matter in dispute. The reporting agency then contacts whoever submitted the information you're disputing.
If the file is changed, you will be sent a copy of your new report and any company that's requested your credit file in the previous two months will also be sent the corrected file.
If the item is not changed to your satisfaction, you have the right to add a brief statement to your credit file with your side of the story. You can also ask to have your credit file, along with your comment on the disputed entry, sent to any company that has requested your credit report in the previous two months.
There's no way a credit repair clinic can change accurate information that doesn't reflect well on you. A statement from Equifax puts it bluntly: "Only responsible credit practices over time can improve a poor credit history."

http://www.cbc.ca/news/background/identity-theft/credit-rating.html

Contact Integra Benefits by phone (331-4567) or by email (info@integrabenefits) to learn more about debt restructuring and how to improve your credit score.  You can also check out our website at http://www.integrabenefits.ca/

Debt Trouble and Credit Solutions

Hello Readers,

I found a couple of articles on the CBC website that I thought would be of real interest for those of you out there struggling with the debt issue.  They speak to issues about what to do if you are in debt, what options you have, where to go and even a follow-up article entitled "Options For Those In Serious Debt Trouble"  Here are the websites: http://www.cbc.ca/news/background/personalfinance/dealingwithdebt.html  and http://www.cbc.ca/news/background/personalfinance/credithelp.html.  Check them out and be sure to call (331-4567) or email us at info@integrabenefits.ca if you want to speak with Shawna for some real help and solutions to your debt problems.  Also visit our website http://www.integrabenefits.ca/ for further information about our products and services.