Bankruptcy & Foreclosures

Ever wonder if your current financial situation literally keeps you from getting ahead? It is easy to blame poor spending habits or lack of control as the primary causes of our financial woes but what if our debt simply outweighs our income? There was a time when you had to sit down and draft a budget or call a financial advisor to figure out exactly how your debt to income ratio looked. I was digging around the web and came upon a very useful tool called the debt evaluation calculator. The system is very easy to use and requires that you simply plug in your numbers where prompted.

From the site:

The first step to knowing whether you’re potentially in financial trouble is to know how much you spend each month to pay off debts and other ongoing obligations. This calculator will help you find out how much you’re paying each month and whether your ratio of debt to income is acceptable or too high.

The first step of attempting to control your debt situation is to determine if you even have a situation in need of correcting. Stop by and punch in your numbers to determine what kind of help you need (if any) to get ahead. The calculator can be reached directly by clicking here.

Once you’ve established the specific relationship between your incoming and outgoing finances, the process of fine tuning your budget or making corrections in your spending habits becomes much easier.

I often use my blog space to talk about the importance of not only creating, but also sticking to a financial budget as a means of staying on top of your debt. Wealth manager, Russell Bailyn claims to dispense the same advice to deaf ears on a daily basis. In his recent blog post, Russell ponders a very interesting question; who’s really following a budget? It’s a pretty good question and the answer may surprise you. From his blog:

My most common experience when creating budgets has been that more money exists than one realizes. On paper, it seems near impossible that a shortfall could exist. It’s the casual discussion afterwards when the “oh yes, I’m addicted to downloading music” and “I needed those sunglasses” comments come out.

This morning I’ve come to a new realization: Most people will probably never follow a budget. While we’re on the topic–budgets are annoying! They make you feel like you don’t earn enough money and they force you to scrutinize how often you cut your hair and buy a scratch-off lottery ticket. So, my plan is to begin a new approach. When someone asks me to help them create a budget, I’m going to ask “why?”

Most people don’t follow the budget anyway, so we may as well try to find some other solution. Perhaps an investment program can be tweaked to create more income. Perhaps try transferring some of those stocks into bonds or a savings account which can provide a stream of monthly income. Or, some people need to take a closer look at their W-4 (tax withholding) form and use that as a budgeting tool. If you’re on a salary and get a tax refund every year, you’re effectively letting the IRS hold your money for you–and they don’t pay you any interest for it.

Russell says if you’re having trouble with the budget, their may be more realistic solutions than simply itemizing your expenses from month to month. Think about how and when you earn money. Think about how and when you spend money. Consider how your taxes get paid and whether you could put a better strategy to work. Think about your savings plan too. Is your current allocation (stocks/bonds) the way it should be? Best of luck to all on this never ending and often frustrating task.

The entire post can be read here.

We’ve all heard horror stories about the Great Depression and while economic rises and dips are constantly occurring, we look to these patterns hoping for the best but preparing for the worst. We are currently in an economic slump that is credited to three main factors: A prolonged and taxing war in the middle-east; instability of oil prices, and a recent fallout in the housing market (credited to the sub prime mortgage industry). So the question then becomes, what can be done to pull us out of the slump?

In a recent blog post at Debt Free, this question is answered by none other than the Federal Government themselves:

According to Fed Governor Frederic Mishkin and the head of the San Francisco Fed President Janet Yellen both seem to have a pessimistic outlook on our immediate economic future. Mr. Mishkin stated “consumer and business spending also could be damped as a consequence of the recent financial turmoil” The timing of such pessimism, directly before the traditionally busy Q4 retail season, might give consumers pause before they head out to max out their credit cards yet again. Keeping Americans from going even deeper into debt would be a good thing, but, in the short term could give rise to all manner of economic problems, especially when combined with the troubles faced by the lending industry of late.

Mishkin and Yellen may be basing their opinions on the Fed report from July indicating that consumer credit slowed substantially over the same period a month before. Overall consumer credit showed a 5.9% growth rate in June, but that plunged to a 3.7% clip for the month of July. The 37% decline in month over month growth in consumer indebtedness may actually portend increased health in consumer spending patterns, for as sure as the debt financed spending has driven the economy to new heights, it hasn’t helped many Americans personal financial picture. Even more ominous for many Americans personally, the revolving (credit cards, store accounts) sector of the consumer credit report indicated substantial growth (6.6%), while non revolving credit (HELOCs, mortgages, car loans) showed much slower growth, at 1.9%.

The blog goes on to say that it seems too many feel leverage is the name of the game. Sadly, the majority are leveraging presents, travel, and new goods with which to fill up their homes. This is leverage to indebt, rather than leverage to enrich, a much more appropriate use of the most powerful of financial and business principles.

Within the Fed, there remain those who are hopeful on the direction of economy as a whole, however. The trend among annalists is that there is no need to worry about a repeat performance of this recession becoming a depression. The informative blog can be read in its entirety here.