The last article has discussed about negotiating with the lenders for settlement. There I’ve suggested that it’s better to settle with lump sum payment and when you negotiate, be prepared to offer the sum upon agreement. So, how would you come up with the money when you’re finding it hard even to stay current on your bills?

In this write-up I’ll share few saving tips to help you deal with the debt problem.

Saving is all about cutting down unnecessary expenses. Well, that doesn’t mean that you need to live like a pauper but curtailing expenses that are not really required can help you in saving some funds.

• Try to cut cable TV expenses: You can restore the connection when you’re out of debt but for the time being, try to live a life without television and cut the cable or dish connection.
• Combine the services: Many companies offer combined utility services. You can get discounted rates if you take the offer. So, if you can get internet, cable and phone services from one provider, you’re likely to get discounts.
• Grab the rebates: Yeah, it’s all about scraping money from wherever you can. So, if you have bought a product on discounted rate, sent away the discount form immediately and also follow up with the company if you don’t receive the check on time.
• Ask to reduce credit card interest: When you’re trying to settle with one creditor you can request the others to reduce the interest on the cards. The banks may agree to reduce rates if you explain your hardship. The same route can be adopted for the home equity line of credit.
• Refinance your home: If refinancing is an option, you might not overlook it. Even if it offers only 1% reduction in the rate you can save big amount in terms of interest payment over the term of the loan.
• Get rid of unnecessary coverage: Do you know that you can drop the PMI once you acquire 20% equity on your home? Similarly, check if you need warranty insurance and credit insurance. Often these are unnecessary coveragse and you can do better without them. The same theory applies to rental insurance and coverage offered by car dealers. These are overpriced and often redundant.
• Shop around for better rates: By investing little more of your time you can get better deals for car and home insurance and save hundreds on insurance premium. Deductibles can also pay an important role in reducing premium rate.
• Avoid paying bank fees and checking account fees: Many banks offer free checking accounts. So, why pay fees on them? Also, search for credit cards with no/minimum annual fees.
• Arrange a garage sale: It is one effective way to raise money when you need. Many of us have unused goods stored at our attics, these can be arranged for sale to raise funds for settlement.

When the debt burden keeps mounting, everything seems to go wrong. The situation can go worse further on events like job loss, medical emergency or a car accident. But before you lose all hopes and stop paying bills and let your credit tank, it’s better to take initiative to control your situation.

We often avoid negotiating our financial difficulties with our lenders. But it can always save you from dealing with the notorious collection agencies.

How to initiate negotiation

• Be preempt in contacting your lenders and let them know your problem. Some creditors, if not all, may empathize with your situation and agree to set up a convenient repayment schedule. Remember that they are more concerned about getting their money back.
• Settle with a lump sum amount if possible. However, the success of a settlement proposal would also depend upon factors like – how much you owe, who’s the creditor and such.
• Try to set up a payment plan if you can’t come up with lump sum amount for settlement. However, you may have to pay little more for the debt than you would have paid in a lump sum settlement.

Points to remember when negotiating with creditors

• Be committed to your plan: When you have decided to negotiate with the creditor, try to live up to your commitments as well, i.e. donit commit to an amount or plan that you can’t meet. If you have decided to settle with a lump sum amount, be prepared to come up with the money upon agreement.
• Ask for settlement proposal in writing: It’s always important to get promises written on papers and signed in ink. This precaution is necessary to restrict the creditors from following illegitimate means to collect the debt later on.
• Ask for ‘pay for delete’: Remember to ask the creditor to remove the negative information from the credit report after the debt is satisfied. The pay for delete request works more effectively with the creditors than collection agencies. Some creditor may agree even to remove the negative information from the credit report upon settlement.

It’s usually said that original creditors are easier to deal with than the collection agencies, as the later often violate collection laws. Also you can save yourself from being sued for the debt by being proactive. Your willingness to repay the debt would put the creditors at ease and they might not sue you for the money.

Having a perfect retirement is every man’s desire. But for the dream retirement you need to start planning early and systematically. The younger you start the better and bigger will be your retirement fund.

Importance of Planning
It’s important to plan ahead, what you want to do after your retirement. If you have a dream to tour the world after retirement, you may need to assess its expenses and start saving accordingly. Anticipation of the future expenses is important towards proper planning. Hence, do not forget to incorporate the inflation rate and health expenses when you plan.

Saving and investment
The surest way to accumulate enough to live your dream is to save. A savings account wouldn’t only hold the money for you but give you interest on the deposit. Hence your money would grow at the same time. It also pays off to invest prudently. Investments earn greater return and help your money grow faster.

401k plan offers tax deferred savings
401k plan helps you save for your retirement in a tax deferred way. However, it is related to employment, i.e. if 401k is available with your employer, only then you can join the program. However, not all employers offer 401k benefits. Hence, it is one thing that you need to check before taking up a job. Further, 401k plan also limits ($15,000) the maximum amount that you can save in a year.

Individual retirement Account (IRA)
Since the option to save in a 401k plan gets limited to your employment, you can set up an individual retirement account if you’re self employed or don’t have a 401k plan at your job.

Employer matching programs
In an employer matching plan, the employer matches the contribution with the employee in his 401k account. However, it may require you to contribute a fixed percentage of your income everytime towards the fund but the employer’s participation can act as a good incentive for that.

Annuity plans
Annuity plans can help you to save in a tax deferred tax deferred way for your future. Deferred and immediate are the two major types of annuity plans from which you can choose the one that suits you.

Given the economic condition and acceleration in the cost of living, now is the time to act towards securing your future. The idea of living long may turn into an unpleasant experience if you find yourself with no money to live with when your paycheck isn’t there.

According to many, the Credit Card Reform Act is the most significant reform work done by the Obama Government since rising to power at the beginning of this year. This Act is expected to save the consumers from getting ripped off by the credit card companies.

Given the economic situation, consumers are finding it hard to keep up with the whims of credit card companies, resulting in a significant rise in delinquency rate. Studies have shown that between July and September 2009 alone, the number of defaulted customers has risen by 11%. Hence, when the country was struggling under the overwhelming $ 963 billion credit card debt the reform was most welcome.

What does the Credit Card Reform Act promise?

• This Act is said to restrict the credit card companies and banks from changing interest rates at any time and for any reason, which is quite in contrast to what these companies can do now.
• This law would also restrict the companies from increasing the interest rate of the customers in the first year of the card. Also the companies can only alter the interest rate when the customer is 60 days late in payments or the rate change is stated in the contract.
• The new legislation requires banks to review accounts at every 6 months and has also mandated them to lower the interest rate of the customer who has been making timely payments during the period of the review.
• It has also mandated the banks to disclose how the interest is to be paid and how long it would take the customer to pay the debt off by making only the minimum payments.
• The new law has restricted the banks from charging over-the-limit-fees without receiving proper authorization from the customer.
• The law has also prohibited fees on over-the-phone or online bill payments.
• Under the Credit Card Reform Act customers below 21 years would now require parents or guardians as co-signer to get credit card.
• From now on banks would need to notify the customer 45 days (initially it was 15 days) before any change in interest rate.
• The billing statement should be mailed 21 days prior to the payment due date.

But, the Act has its limitations too

The new law has certainly promised more security to the credit card customers but like any other law it has loopholes, such as

• Though the new law has imposed restriction on the ability of the credit card companies to increase interest rate, they are still charging sky high for late payment and other such infractions and can charge as much as they want.
• The Reform Act has also not stopped companies from imposing new fees on the customer and as a result you may see inactivity charges, annual fees etc. attached to your card.
• Also the credit card companies have shown a trend of increasing the minimum payment limit on their cards. Many banks have raised minimum payment from 2% of the due amount to 5%.
• Customers are also experiencing sudden slash in their credit limits or finding their accounts closed without any intimation from the banks. The banks have been really jumpy and taking harsh measures like closing accounts even at the slightest opportunity.
• Banks are also getting tightfisted with rewards and points. Certain banks have severely cut back cash back offers and other privileges.

The Credit Card Reform Act can be looked at as a significant step towards bringing down credit card delinquency rates. It’s expected to regularize the lending system and let customers get better control over their finances. We would need to be patient to see its effects on our lives. But for now we can definitely hope for the best.

It pays to build up equity on your home since you can take a loan against it at the time of need to take care of purposes like- paying off debts, college tuition or simply to remodel your kitchen. But when it’s a question of taking a second mortgage against your property, you need to be extremely careful with your choice since a wrong decision can damage your financial stability to a great extent.

The second mortgage may come in various forms but the two main types are the home equity loan (HEL) and the home equity line of credit (HELOC).

Home equity loan (HEL)

The home equity loan allows you to borrow a fixed amount against the equity accumulated on your property. Home equity loan works like any other mortgage loan. You would make monthly payments towards it to pay it off.

The advantage with home equity loan however is that the interest rate would remain fixed for the entire loan term.

Home equity line of credit (HELOC)

Home equity line of credit offers a revolving credit line to the homeowner, thereby works just like a credit card. But at the same time you’d continue enjoying the tax advantages on the interest you pay. Again every time you make a payment towards the principal, the limit again rises to its original level. This flexibility is the key feature of HELOC. You can continue borrowing till the amount withdrawn does not exceed the available credit limit.

Which one would suit you?

It’s only you who can decide the best. If you only need a certain amount of fund and would not need tapping your home equity in near future, the fixed rate home equity loan may fit into your requirements more appropriately.

However, the issue with the home equity loan is that it would available in lump sum at the closing of the loan and for once only, i.e. if you feel the need to receive additional funds later some time you would then need to pay off the existing HEL first. It’s not the case with HELOC.

HELOC is more suitable when the need is likely to exist over a period of time, like paying the college fees. But remember that the interest rate usually doesn’t stay constant with an HELOC.

The home equity line of credit may further pose threats to people with bad record of money management. You can run yourself into huge debt by being negligent towards its repayment and since you’d put the home as collateral against the loan you may end up losing it too.

Further, there can be differences in the rate of interest charged by the lenders. In most cases HELOC offers variable rate, i.e. the rate would vary with the market; often lenders offer typically low rates or teasers (to attract the customers) which can later on increase to a high level. But this typically doesn’t happen with a home equity loan.