Those of us who are old enough to have watched the television series "Lost In Space" will recall the robot who would issue a warning when danger was sensed. I heard on the local news that Hurricane Katrina evacuees who are temprarily housed in our area can receive free birth certifcates. This sent up my red warning flag.
While I am all in favor of Hurrcane Katrina evacuees receiving all the help we can give, I am concerned about opportuinities created by the loosening of the usual requirements for unscrupulous characters. Identity theft comes to mind.
While volunteering at the local Red Cross Service Center, I did hear about a local individual who came into the center and signed in three different times in an effort to receive services and aid to which he was not entitled. He was not an evacuee. The staff were on to him which is good, but I do feel the opportunity for increased fraud is present.
Be encouraged to check your credit card statements for errors. Notify the complany of errors immediately. Also, get the three copies of your credit report that you now are legally entitled to recieve for free during time span of a year (one copy from each of the three credit reporting companies). Space your requests every 4 months to allow periodic monitoring for identity theft and fraud.
Follow this link to read an article about how now is a good time to break the chains of debt. Some tips are given: http://www.sanluisobispo.com/mld/sanluisobispo/business/12678097.htm
Monday, September 19, 2005
Thursday, September 15, 2005
Wolf in Sheep's Clothing
I had an interesting conversation today with a gentleman from a credit counseling company. I saw the listing in the local phone book and decided to explore what services they offered. The company was listed under Credit and Debt Counseling Services. A very friendly gentleman answered the call on the 800 number. He indicated that they provided budget counseling, education, and a debt management program. It's all done by phone and fax. They have 1100 clients nationwide. They do not have any classes. They are a non-profit organization. They only handle unsecured debt. They will not help you with your mortgage payment or any other type of secured debt.
When pressed as to fees for service I was told there was a $75 set up fee that would be a tax deductible donation to the non-profit organization. Then there would be a set fee of $25 to $50 per month depending on the number of debt accounts they managed for me. This fee, and the amount of money needed to cover the actual monthly debt payments, would be electronically debited from my checking account each month. He emphasized that the fee was tax deductible.
I questioned how payment for a service could be tax deductible. I did not get a clear answer. "All I know is that it is tax deductible." I stated that if I went to the Mental Health Center (also a non-profit) and received a service, my payment would not be tax deductible. He responded that he did not write the laws, he just knew it was tax deductible.
I have two major concerns about this type of "credit counseling service." First, I think they are trying to hide their fees under the category of tax deductible donations and therefore cheating Joe taxpayer and Uncle Sam. Secondly, I do not believe they put much energy into teaching their clients the skills needed to handle their own finances and debt payments. They are not about empowering people to learn to do for themselves, or turning bad financial habits into good financial habits. I do believe they are about making money.
If they empower their clients to properly manage their own accounts then the debt management program, as it exists, would not be needed. There would be no collection of the monthly "tax deductible donation" for the 3 to 5 years required to payoff the debts. Do the math, that is a lot of donation. A mid-range fee of $35 for 5 years is $2100. At 1100 clients that adds up to be $2,320,000 in tax deductible donations ($464,000 annually). This is just an estimate as there is a fee range and all accounts do not continue for 5 years. However, I think I am in the wrong type of debt reduction business!
As a consumer, I would rather make arrangements myself for the automatic debt payments to go directly to the creditors, negotiate my own lowered interest rates, and then automatically deposit the $35 per month into my own tax deferred retirement account. I would much prefer the fee amount go toward building my retirement nest egg.
On the flip side, if you are late with a credit card payment, just once, they will hit you with a high interest rate, as high as 29% and a late fee as high as $39. It would be worth it to pay the credit counseling service their tax deductible donation if you are unable to arrange automatic payment for your revolving credit accounts to ensure you are never late with a payment. However, I would feel much more comfortable dealing with a company that was up front and honest about their fees.
Automatic bill pay is becoming an everyday occurrence. Most utilities and credit card companies have automatic payment options available from their websites. In my opinion, only if you are unable to automate your own debt payments should you consider one of these agencies. Even then, do your homework to make sure you are dealing with a reputable company.
When pressed as to fees for service I was told there was a $75 set up fee that would be a tax deductible donation to the non-profit organization. Then there would be a set fee of $25 to $50 per month depending on the number of debt accounts they managed for me. This fee, and the amount of money needed to cover the actual monthly debt payments, would be electronically debited from my checking account each month. He emphasized that the fee was tax deductible.
I questioned how payment for a service could be tax deductible. I did not get a clear answer. "All I know is that it is tax deductible." I stated that if I went to the Mental Health Center (also a non-profit) and received a service, my payment would not be tax deductible. He responded that he did not write the laws, he just knew it was tax deductible.
I have two major concerns about this type of "credit counseling service." First, I think they are trying to hide their fees under the category of tax deductible donations and therefore cheating Joe taxpayer and Uncle Sam. Secondly, I do not believe they put much energy into teaching their clients the skills needed to handle their own finances and debt payments. They are not about empowering people to learn to do for themselves, or turning bad financial habits into good financial habits. I do believe they are about making money.
If they empower their clients to properly manage their own accounts then the debt management program, as it exists, would not be needed. There would be no collection of the monthly "tax deductible donation" for the 3 to 5 years required to payoff the debts. Do the math, that is a lot of donation. A mid-range fee of $35 for 5 years is $2100. At 1100 clients that adds up to be $2,320,000 in tax deductible donations ($464,000 annually). This is just an estimate as there is a fee range and all accounts do not continue for 5 years. However, I think I am in the wrong type of debt reduction business!
As a consumer, I would rather make arrangements myself for the automatic debt payments to go directly to the creditors, negotiate my own lowered interest rates, and then automatically deposit the $35 per month into my own tax deferred retirement account. I would much prefer the fee amount go toward building my retirement nest egg.
On the flip side, if you are late with a credit card payment, just once, they will hit you with a high interest rate, as high as 29% and a late fee as high as $39. It would be worth it to pay the credit counseling service their tax deductible donation if you are unable to arrange automatic payment for your revolving credit accounts to ensure you are never late with a payment. However, I would feel much more comfortable dealing with a company that was up front and honest about their fees.
Automatic bill pay is becoming an everyday occurrence. Most utilities and credit card companies have automatic payment options available from their websites. In my opinion, only if you are unable to automate your own debt payments should you consider one of these agencies. Even then, do your homework to make sure you are dealing with a reputable company.
Tuesday, September 06, 2005
Is It Time to Trade the SUV
My father and I were discussing the rising gas cost. He recalled the last time there was a gas shortage some years ago. He and a friend were partners in a high end used car lot. He recalled the soars of people who traded their Cadillac and large luxury vehicles for more fuel efficient Mercedes coups and diesel engines. He recalled that he and his partner made a lot of money from those trades. He said they stopped to figure how much the people were saving in gas costs by making the trade. They computed it was about $200 per year. They were glad to make the money but remarked how foolish the people were to trade the vehicles for the purpose of saving on gas.
Do not assume the best course of action is to trade the SUV for a vehicle that gets better gas mileage. If your SUV is paid for, it is best to keep it. In many other instances, it is better to keep the SUV than to trade it in for a car that gets better gas mileage. If you can make an even trade, go for it. If you do decide to trade, pay cash and make certain you will save more per year in gas costs than you are losing by spending the money. Calculate carefully. In most instances, it is better to keep the car you have.
The better plan is to make sure you are getting the best possible gas mileage from your vehicle. My friend who builds race car engines for a living offered these tips:
Do not assume the best course of action is to trade the SUV for a vehicle that gets better gas mileage. If your SUV is paid for, it is best to keep it. In many other instances, it is better to keep the SUV than to trade it in for a car that gets better gas mileage. If you can make an even trade, go for it. If you do decide to trade, pay cash and make certain you will save more per year in gas costs than you are losing by spending the money. Calculate carefully. In most instances, it is better to keep the car you have.
The better plan is to make sure you are getting the best possible gas mileage from your vehicle. My friend who builds race car engines for a living offered these tips:
- make sure your tires are properly inflated
- rotate your tires on schedule
- keep your engine oil and oil filters changed
- maintain recommended vehicle maintenance schedules
- change air and fuel filters as recommended by the manufacturer
- avoid revving the engine and making accelerated starts
- make sure the engine is properly tuned
- turn off the air conditioning when feasible
- maintain a modest speed limit, 55 mph uses much less gas than 75 mph
- unload the vehicle, extra cargo means fewer miles per gallon
- make sure your car has the correct coil and spark plugs, and the ignition wires are in proper operating condition
- change the engine coolant annually and check it periodically
- use a hose and a medium pressure nozzle to spray the radiator and condenser from the engine side out to remove dirt, debris, and bugs that can hinder the effectiveness of the cooling system
My friend changes the oil filter in his truck in between oil changes. He claims it extends the life of the engine. When he changes the filter he also adds a quart of oil because the old filter holds a quart of oil. He strongly recommends Mobil Drive Clean Oil for older vehicles. Use the oil type that corresponds with the mileage on the vehicle (75,000 mile oil for a vehicle with 75,000 miles showing on the odometer, and 100,000 mile oil for an odometer reading of 100,000 miles, etc). He says it comes in all grades.
Never, never run your engine with a low oil level. Check the oil each time you fill up with gas. The oil is the lifeblood of the engine, keep it clean and at the proper level for a healthy engine that performs at its best.
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