2 More Common Credit Myths

2 More Common Credit Myths

 

The media, newspapers, internet are full of information, but sadly, much of the information concerning credit is inaccurate. Let’s check out some common credit myths:

 

Credit Myth: “A co-signer is not responsible for the debt.”You will run into this one a great deal, and the consequences of this mistaken assumption can be devastating. In all actuality, a co-signer is every bit as responsible as the signer on the account. In recent years, as well, many mortgage applications were originated based on there being a co-signer, but in all actuality, the co-signer was the primary borrower. And, many times the person who thought they were getting just a co-signer, wound up not even being a part of the transaction in any way.

 

So the co-signer is quite definitely responsible, but tragically many of them will never realize this until they’re answering for it in court years later. Keep an eye out for educating people about that, because it’s a very pervasivemyth! Help them to realize that on mortgage applications, they’re looked at virtually identically.

 

Credit Myth: “You’re not liable for (X) after getting a divorce.” This one is the catalyst for some of the stickiest, most contentious situations you can deal with as a credit repair specialist. If a judge in a divorce proceeding orders a spouse to pay a debt, many will assume that it’s no longer affected by credit. Well, the reality is that judicial orders don’t negate an existing contract. The contractual obligations are based on how they were initiated. The judicial order in a divorce decree could force one spouse to pay, versus another spouse, but that does not negate that spouse’s obligation to pay, based on the initial obligation.

 

Therefore, you have to be strongly advising in divorce situations to realize that you don’t let your emotions get involved with it. Sometimes you have to pay a little bit even though the other person is responsible, just to save your own credit. This is not an occasion to make a stand on principles, because you can pay for it dearly. It’s much better for a spouse to pay a couple of minimum payments on a credit card, or pay a car loan, than to ultimately have their credit ruined, and take a long time to be repaired. So remember, and help your clients remember, that a judge’s order does not negate the person’s responsibility to pay.

 

Piggybacking does not work anymore. It’s another myth. Ultimately, as we’ve discussed previously in this book, FCRA will wait, was supposed to change the way piggybacking rules were, which is based on authorized users, but they have since, decided to change that. Most lenders, at the writing of this book, still are not using FCRA 08, and it’s been out for a couple of years already.


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Eight Ideas For The 78% of Americans Living Paycheck By Paycheck… 

This week, Harris Poll released the stunning results of a survey that indicated that a whopping 78% of Americans currently live paycheck to paycheck. Some of the other stunning findings from this survey:

+ Nearly four in 10 (38%) of Americans don’t participate in a 401k, IRA, or similar retirement plan.
+ More than half (56%) of American workers feel they will always be in debt.
+ More than half (56%) of Americans also save $100 or less a month.
+ Almost one in 10 (9%) of American workers making more than $100,000 per year are living paycheck-to-paycheck.

Perhaps just as amazing is this Bankrate survey, which indicates that 57% percent of Americans don’t have enough cash to cover a $500 unexpected expense, and that half of Americans with an income of over $75,000 a year don’t have enough cash to cover such an unexpected expense.

Here’s the reality: The vast majority of Americans are completely unprepared for any kind of unexpected financial event.Something as simple as a failed car starter can send their financial life whipping in the wind, without a clear path for handling it. Something like a job loss or a major unexpected illness will bring about very rapid changes in their entire way of living.

That’s a bleak picture, no matter how you slice it. It’s also a picture that many Americans simply refuse to face. Instead, it often sneaks up on them in the quiet moments of reflection: in the shower, on the subway, while driving kids to soccer practice, in bed just before sleep. It’s also there, in the background of life, as a constant shadow.

I used to be in this exact boat. We had tonsof consumer debt. Our non-mortgage debt was in the six figures. I remember that exact feeling all too well: the feeling of subtle dread at getting the mail, the feeling of worry when I was in the shower, the desire to buy things a little more and party a little harder just to prove to myself that life was okay.

It wasn’t. We almost fell off that proverbial cliff.

Fast forward to today. We’re debt free. We own our own home without even a mortgage. We have more than adequate savings for retirement, healthy savings for our children’s education, a huge emergency fund, and extra savings beyond that for things like car replacements. We’re on pace to retire early.

The difference is night and day, not just in terms of our finances, but our overall quality of life. There were definitely moments that were not easy along the way, I would not trade my current life for my old life for virtually anything.

Here’s the thing: Most Americans are where I used to be; relatively few Americans are in the financial place that my family is at today. Between the two groups, there’s a field that looks quite treacherous and challenging, but it’s actually not nearly as bad as it seems

Here are eight things I want to shout across that treacherous field, ten things I want to shout to my past self and the 80% or so of Americans that are in that same boat.

“If you’re convinced you have to spend money to enjoy life and that more joy comes from more spending, you’re making the single biggest financial mistake you can make!”

You don’t have to spend much money to enjoy life. There, I said it.

Study after study has backed up this fact. Once you meet a certain income threshold, one that’s somewhere between $30,000 and $70,000 a year depending on where you live, additional income doesn’t add any additional happiness to your life.

Why? The purchases you make beyond those covering your basic needs do not add any sort of lasting happiness to your life. Any quality of living improvement that comes from spending money beyond that basic level is eaten up by the stress brought on by having less financial flexibility and more career dependence.

Let’s put it a different way. Let’s say you make $60,000 a year. $35,000 or so covers your basic living expenses – basic shelter, basic food, basic clothing, basic utilities, a small amount of entertainment. You have some choices with the remaining $25,000 a year, but the reality is that if you spend that money on things that will bring you some degree of happiness, that happiness is counterbalanced by the stress of spending everything that you earn.

You put yourself on a financial tightrope where one misstep can send things in your life crashing to a halt.

But wait a second – doesn’t it feel really good to splurge?

“You really don’t need most of the stuff you spend money on – it just provides those little bursts of happiness that don’t last and leave you feeling miserable!”

The reality is that most of the things that we spend money on beyond our basic needs provides a little burst of momentary joy that quickly slides away and leaves us roughly at our base level of happiness that we were at before.

Think about it. You buy a new television for your family room and the process is really fun! You love having this big, bright new television in your family room! It feels great!

Flash forward three weeks and it’s just a device sitting in a corner on which you watch the same old television programs that you were watching before you spent $1,000 on that new television.

You go out to lunch with coworkers and it’s fun! You have a few laughs together and you drop $30 on the check.

Two days later, no one can even remember where you ate. Why not just eat with the same crew out of a brown bag in the office or go to a park or something and save yourself the $30?

This happens over and over again. You buy some item and have a burst of fun doing it, but then that new purchase is forgotten or becomes part of the normal landscape of your normal unchanged life. You’re doing the same things you do every day without any real change.

That’s the reality of most of the things we spend money on beyond our basic needs. They provide a little burst of happiness that simply doesn’t last. It vanishes, and we’re left with the same life we had before. Often, we completely forget the purchase at all.

But what we don’t forget is the stress from not having enough money to feel secure or to make ends meet. We spent our money on a bunch of forgettable stuff, and now we stand in the shower hoping that the car will start this morning because there is no way we can afford this right now. Even if the car starts, the whole thing is still stressful.

The vast majority of spending beyond our basic needs matches this pattern. It gives us this little burst of happiness that fades so quickly, and we’re left in slightly worse shape than before.

Most people get on board with the idea of constantly buying things. They want constant little bursts of pleasure in their lives and keep riding that wave, but underneath that is a bedrock that’s wearing away. It’s not built on anything, and when it crashes, it crashes hard.

“Your reward for working hard is low stress and fun! Neither involve spending money!”

“I work hard! Shouldn’t I have fun?”

Absolutely, but fun does not have to equate with spending money! Spending money and fun are two completely different groups of things with some overlap, but the amount of fun things to do that doesn’t involve any significant spending money is enormous.

Everyone’s different, of course, but I can literally list hundreds of things I enjoy doing that involve very little spending. I love to read. I love to go on hikes. I love to go to the park and play soccer. I love to make meals from scratch. I love to play board games with my friends. I love to go to community events. I love to watch occasional television, but I’m really picky about what I watch and I don’t bother with just anything. I love to do a slow Wikipedia crawl where I’m learning about new things. I love doing some types of exercise (again, some things I don’t enjoy, while others make me feel great). I love doing things with my family, even simple things like just going on a wandering walk.

I can go on and on and on like this. There really is no such thing as boredom in my life.

The thing is, unless I’m specifically choosing to do so, none of those things involve spending money. I mean, I can always buy a new board game, but I don’t need to – I have a lot of games on my shelves. I can always buy a new book, but I have a ton of them already and a ton more are available at the library.

However, fun is about doing things, not buying things. It’s about using the things you have to have a great experience, not simply buying more stuff that you may or may not have time to use or enjoy.

I don’t want to buy books, I want to readthem. I don’t want to buy games, I want to play them. I don’t want to buy sports gear, I want to play sports. I don’t want to constantly upgrade my camping equipment, I want to go camping.

Fun comes from doing, not from buying. The little burst of pleasure that comes from buying doesn’t last long and you’re right back where you started, except with a little less money in your pocket. However, the experience of delving deep into doing something you truly enjoy is something that lasts and lasts and it costs almost nothing at all.

“A lot of modern culture works to confuse your sense of needs and wants!”

I’m not even talking about advertisements. I’m talking about much of the actual culture – television programs, magazine articles, news reports, music, films, everything. The vast majority of it depicts aspirational lifestyles adorned with products of all kinds that are put there to convince you that you need those things to have the great life that’s being depicted.

There’s a rich, well-dressed, beautiful family on television. In the back of our minds, we want to emulate some of the things that they do in order to be more like them… and the easiest thing to do is to buy some of the stuff they have on the table.

There’s a news report about the benefits of some life-changing product. It sounds great. We want some of those benefits, so that product gets lodged in our heads and nudges us toward a purchase.

A new restaurant opens in town and receives breathless media coverage, even though the food and ambience really isn’t anything new. You hear about it and suddenly you want to go, to enjoy what you think will be a great meal and be a part of something.

It’s subtle, but it’s constant. We are constantly being pushed to spend money on something new, on something more than what we have. We are constantly receiving hints that in order to be happy, in order to be smart, in order to be beautiful, we need to buy this new product. Every single psychological button we have is being pushed, leaving us feeling somehow inadequate if we don’t buy.

It’s hogwash, every single bit of it. You already have a rich life. You don’t need stuff to make it rich. You don’t need expensive “experiences” to make it somehow great – it already is great.

Don’t let the airbrushed images of what someone else wants to sell you convince you that your life isn’t already amazing.

“Most of the things that create lasting happiness don’t involve spending money!”

If there’s one key truth I’ve figured out in my adult life, it’s that the only way to anything approaching lasting happiness is contentment with yourself and your life. If you’re content with what you have – if you aren’t constantly seeking more, more, more – you’ll find that happiness naturally bubbles up in your life.

My happiest moments in the last few months came from feeling a lack of major stress in any area of my life. It came from doing something simple that I really enjoy, like curling up for three hours with a great book or going on a six mile hike through a gorgeous park. It came from spending time with people whose company I deeply enjoy.

Those experiences were on top of a foundation of life meant to produce contentment. It came from taking simple steps to keep my stress low – meditating every day, putting aside devoted time for hobbies, keeping my body in decent shape through exercise and better diet, and so on. It came from staying on top of known stressors in my life and taking care of them before they got out of hand.

Part of that, of course, is taking care of money.

“Being in bad financial shape adds constant stress to your life, which contributes to feeling absolutely awful!”

Financial uncertainty provides a cloud of constant stress over your life that drags down everything. It is really, really hard to find a state of contentment when you are living under a constant cloud of financial threats due to living paycheck to paycheck. Without that contentment, it becomes even more tempting to just spend money to have that burst of joy, to feel good for a while.

It’s a cycle, one that’s very hard to break, of course.

When I was stuck in that cycle, I constantly felt a glimmer of worry about finances. I was often afraid to check the mail. I wanted to avoid bills. I sometimes had to juggle credit cards to avoid public embarrassment. I wondered at night if I was ever going to achieve any of my dreams. My thoughts in the shower were about how things felt directionless.

And that’s just when things were flowing along normally.

Anytime anything went even slightly wrong, the panic and worry crept right up on me. I would get upset so easily at unexpected financial events because they usually meant some sort of crisis. Almost always, I had to juggle things very carefully to avoid a meltdown.

Sometimes, I did melt down. I remember some very painful moments along the way.

All of this added up to a lot of stress, and that stress subtly wreaked havoc on my health. I gained weight. I didn’t feel good. I got sick quite often. I felt like I was completely lacking energy.

Yes, some of the stress was professional, too, but that was also led by the financial stress. I couldn’t mis-step at work. I couldn’t afford the risk. Standing up for myself at work was a very risky proposition, especially after our child was born.

Stress was eating me alive. It was making me unhappy. Poor financial decisions were right near the core of it.

“When in doubt, cut out expenses! You can always bring them back later!”

What can you do? Cut the expenses! Cut, cut, cut! Cut out everything that isn’t essential and build back from that later on!

Empty out your closets and sell off everything that you’re not currently using or going to use in the very near future – if it’s just sitting in storage, it’s just locked-up money. Don’t dream of using it – sell it and use the money to patch up your finances.

When you move, move to a smaller place, not a bigger one. It’s cheaper, there’s less to upkeep.

When you replace your car, get a late model used one – or consider whether you can live life without one.

Cut your cable bill. Cut your cell phone. Cut your internet. If you can’t imagine living without those things, try. Turn them completely off for a while and find out that your life won’t fall apart without them. It won’t!

Eat at home! Make your own meals! If you want to eat outside the house, pack a picnic lunch, toss it in a bag, and go eat somewhere beautiful! Eat your lunch under a tree in the park! That’s far better scenery than a $100 restaurant!

Dig into hobbies that involve doing things rather than buying stuff. Read books that you borrowed from the library. Go to free community events. Start a garden. It goes on and on. Cut back on your hobby spending that isn’t associated with the multitude of free things.

Cut, cut, cut! When in doubt, cut! Sell that stuff! If you end up really regretting one or two of those choices later on – and, trust me, you won’t – you can always get it back.

“When in doubt, ask yourself if you’ll remember this when you’re eighty!”

This is the one question I’ve come to ask myself when it comes to purchases. Will I really remember this purchase when I’m eighty?

It’s such a powerful filter. It gets rid of so many meaningless day-to-day purchases. I won’t remember this candy bar when I’m eighty, so why am I buying it?

Here’s what I will remember about the food I eat when I’m eighty. I’ll remember maybe one or two meals eaten at restaurants with great friends and family – and that’s fine. I’ll remember a few meals that I made myself from scratch for a dinner party at home with friends. That’s it. Everything else? Why bother spending more than the minimum on it?

What will I remember about the cars I owned? I barely remember anything from the car cycle that I owned before our current one. Honestly, it’s nothing more than a tool to get from point A to point B, so I just buy the one that does it at the best bang for the buck with reliability.

The only thing I’ll remember about my television is the programs I watched on it. I won’t remember the stunning glory of 1080p versus 1080i. So, I get a television upon which I can watch the shows I want to watch at the lowest price. (In fact, if I lived alone, I wouldn’t own a television at all.)

I won’t remember these things when I’m eighty. What I will remember is the great moments with people, the moments when I don’t feel any stress and I’m completely in the moment with someone I care about. What I will remember are some of the great books I read and some of the amazing hilltop views I hiked to.

Everything else is just details. Why throw money at it? Why spend myself into stress and worry for things I won’t remember when I’m eighty?

Final Thoughts

I wish I could shout all of these things to myself as I was about to graduate college. So many of the choices I was about to make in the next several years were just farcically bad. I spent piles of money on things that I can just barely remember if I really try to. They have no impact on my life.

What does have an impact, even today, is all of the money I wasted. If I hadn’t wasted that money on stupid things and properly used it, I would not be working right now, at all. I would be fully retired, filling my days with fun and people and almost no stress at all.

Don’t let the constant pursuit of stuff and expensive experiences fill your life with stress. Don’t put yourself on an employment and lifestyle tightrope that fills you with unbelievable stress every time it jiggles. Don’t believe that the things you buy will bring you any sort of lasting happiness, and instead seek it from within. Erase those financial worries by spending less than you earn, wiping out your debts, and building such security that it no longer matters too much if you get a pink slip. Relish the natural joys that life has to offer.

The paycheck to paycheck lifestyle is a trap that leads almost inevitably to stress and unhappiness. Get off that train, the sooner the better.

Good luck

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Sneaky Methods Creditors Are Using… 

More Sneaky methods creditors are using to hurt your credit scores.

More and more credit reports are found to have erroneous, inaccurate, or unverifiable. Most estimates show that between 76-100% of reports contain errors.

We have been dealing with creditors for years and our own internal study showed that 100% of reports contained errors.

It is not a fluke that these percentages are so high.

Many creditors are intentionally initiating tactics to lower consumer credit scores. This then gives them more leverage to try to collect the debt or charge more interest.

One of the most aggressive tactics these creditors are using is the re-aging of the Date of Last Activity (DLA) on your credit reports.

The DLA measures how recent your credit accounts are on your credit reports. With collection accounts this date is based on the last date you made a payment on that account.

But many creditors are changing these dates to make it look like your negative accounts are more recent than they really are.

Most collection companies are also blatantly violating Federal law and miss-representing the Date of last Activity.

They report the DLA as the date they took over the account, when really it is supposed to reflect the date you last made a payment.
The end effect of these actions is devastating to your credit scores.

Instead of the negative accounts having a lesser credit score effect through time, now creditors are reporting it for many years to make it look like the account was recently defaulted.

This keeps your credit scores low and prevents you from using your credit to qualify for financing. Not only are these practices unethical, but they are also illegal and can be stopped with proper credit dispute tactics.

We always insure our clients have accurate Date of Last Activities reporting.

If they are not being reported accurately on a negative account, we use this Federal law violation as leverage to force the creditor to delete the negative item.

As our client, make sure you let us know if you see an account on your report that reflects an inaccurate DLA. This way we can even more quickly increase your credit scores.

Contact us today to learn how you can have the exceptional credit you deserve.

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How To Prepare For a Possible Economic Recession… 

Over the last few weeks, I’ve come across a number of articles predicting an upcoming recession: The Winter Is Coming: A Case For A Recession from SeekingAlpha, Is a Recession Coming? from Forbes, and There’s more than 60% chance of a global recession within the next 18 months, economist says from CNBC, among others, are all in agreement that a recession is coming.

But what does that mean for most of us? Here’s what being in a recession means for the average American.

There’s a higher risk of job loss. During a recession, companies and organizations often cut back due to slowing revenue growth or even revenue shrinkage. They’re not making as much money, and one way to continue to make ends meet and make their stocks still look good is to cut employees.

It’s harder to find a job. Unsurprisingly, companies don’t hire as much in a recession, meaning it’s harder to find a job, and the jobs you do find often don’t pay as well on average.

The value of investments in the stock market will drop, as will the value of your home (most likely) – and other markets may drop, too. The stock market usually begins to downturn once signs of a recession become evident, which can have an adverse effect on retirement savings and other investment goals. Other markets may also enter a decline – recessions often have a negative effect on housing prices, for example. Some markets tend to go up during a recession, but they’re less predictable.

These changes alter life patterns and cause family stress. A job loss or an inability to find work or a sudden drop in retirement savings can rapidly change family dynamics. There’s suddenly more money stress on the table, and things like vacations and other enjoyable major expenses suddenly become a lot more risky.

None of these outcomes are pleasant ones, but they’re the economic reality of all Americans during an economic downturn. That’s the new financial landscape.

The question is, how does the average American deal with those changes? More importantly, as we sit here with months or perhaps even years to go before a recession sets in, how can the average American prepare for those changes?

Here are some simple strategies for getting you and your family ready for all of these scenarios.

Preparing for Increased Risk of Job Loss

One of the biggest risks to come with a worsening economy is an increased risk of job loss. Think about it in simplest terms: if the unemployment rate is rising, that means that people who were once employed are becoming unemployed, which means that there’s a rise in people who once had a job who no longer do so.

Being laid off or fired doesn’t just happen to “bad” employees. It can happen in any organization where a decision has been made to downsize a department or “reorganize” in order to remove positions.

Here are five things you can do to prepare for this.

Make sure you’re meeting your performance standards. Most workplaces offer some form of regular performance review. Take that review to heart. Take a look at your most recent performance reviews and see how you’re doing with regards to the standards being presented there. Are you meeting or exceeding them? Are you documenting how you’re meeting or exceeding your goals?

Since an economic downturn is still on the horizon, it’s worthwhile to start keeping track of things now by using your performance standards as a guide and documenting your efforts as you’ll likely have additional performance reviews between now and when job loss might become a serious risk.

Build up a strong emergency fund. Having a few months of living expenses sitting in your savings account makes the stress of job loss much easier to handle. You don’t need to have a new job the next day to avoid a personal crisis – instead, you do have a little bit of time to find a new job while you live off of your savings.

The best way to start (if you haven’t already) is to instruct your bank to start transferring money regularly from your checking to your savings automatically. If your bank doesn’t allow such an automatic transfer, open up an online savings account at a bank like Ally or CapitalOne 360 and set up that transfer yourself. You’ll be glad you did.

Work on building a strong reputation of positivity and trustworthiness. Positivity and trustworthiness are two traits that tend to improve a person’s value in the workplace. People who don’t cut each other down are great to have around because of the positive value they bring to office culture; they keep people out of management’s hair. People who are trustworthy tend to deliver when they make promises and tend to have the respect of those around them.

Combine those two traits and you have a valuable employee, one that makes consistent positive contributions to the workplace and one who other employees will vouch for.

Become a key part of important, high-profile projects. When there’s a major project going on at work, get involved with it if at all possible. Become a part of that team and bring your traits of positivity and trustworthiness to the project. Make real contributions along the way.

While this might be somewhat stressful in the short term, what it does for you is demonstrates that you can handle high-impact situations productively, which is what most employers are looking for in their employees. An employee who steps up to a difficult challenge and manages to be a useful member of the team is one that they’re not going to want to cut loose unless they have to.

Make your boss’s priorities into your priorities. A final strategy that works well at almost any job is to step back and look at your job through the eyes of your boss. What does your boss want to get out of your position? What does your boss care about the most?

Then, do your job in such a way that it provides maximum value to your boss. You want to make sure that your performance ensures that the boss reaches his or her objectives with a minimal amount of fuss from you. Bosses (usually) notice when things are done well and they don’t have to worry about them at all, and that type of notice will make you golden.

Preparing for a Tougher Job Market

What if you’re going to be seeking a new job? How do you prepare for a job market that’s about to become significantly more difficult? Here are five things you can do to prepare yourself for a time when it might be harder to find a new job.

Focus on resume-worthy uses of your time and energy. Ask yourself whether you’re using your time and energy on things that can bolster your resume or not. Are you taking on tasks at your current job that can be added to your resume? If not, make an effort to prioritize them. If you’re not currently employed, or not working in the field you want to be working in, what are you doing every single day to add something of note to your resume?

Take classes. Get involved with projects that use your skills. Get involved with resume-worthy community projects. You need things that will help you stand out from other candidates. Make sure you’re spending at least part of each day doing just that.

Build up your network of strong professional contacts. Quite often, jobs are obtained because you have your foot in the door in a positive way with someone already in the organization. Get your foot in the door by building and reinforcing a network of professional contacts.

How do you do this? One of the most powerful ways is to attend professional meetings in your area. See if there are any meetings of professional organizations in your area and start attending and get involved. Similarly, check out Meetup.comand see if there’s anything relevant in your area.

Of course, there’s also the internet…

Make yourself known in the online community of your profession. Many people build out their professional network by getting involved in social media in their field. They use Twitter, LinkedIn, Facebook, and even things like Instagram to get to know people in their field better and engage in conversation. Many people start a blog that allows them to share knowledge with the world under their own name, associating that knowledge with them and further bolstering their reputation.

Use social media to seek out online communities for your field. Keep looking until you find interesting and relevant conversations, then join in consistently. Use those conversations to make yourself better, but also use it as an opportunity to share your knowledge with others. Every person that you help is another step toward having a healthy online presence with a lot of connections, and those connections can prove invaluable when you need to change positions.

Get education and certification that’s valuable in your field. Take a look around your field and see what certifications and education are expected from someone with your experience level who might be looking to move up or even to move sideways, then make it your priority to obtain those certifications and that education.

One great place to look is at the job listings for the positions you’d like to have. What skills and certifications and education are being asked for over and over again? Those are things that you, too, should have. Make sure you’re checking as many boxes as possible on other job listings.

Take on leadership opportunities in your current position. Look for any and all opportunities in your life and in your current job to step up to the plate and take on leadership positions. Leadership demonstrates a willingness to take on responsibility for larger tasks and to handle their organization, both of which are appealing to most organizations hiring anyone above a pure entry-level position.

If there’s an opportunity at work to help lead a project or a group, stand up. If there’s an opportunity at church to be a leader, stand up. If there’s an opportunity in a community group to be a leader, stand up. You’ll be glad you did.

Preparing for a Drop in the Value of Investments

Another big factor in an economic downturn is the reduction in value of investments. Most recessions start off with a big hit to the stock market, and many other markets – real estate, bonds, and other things – can also go through some awkward stages as well. Here are five things you can do to prepare your finances for an economic downturn.

Reassess your financial plans regularly, independent of market changes. Sit down and really consider why you’re investing and what your goals are, particularly regarding the timeline. Are you investing for retirement? How far off is retirement? Are you investing for a house? How far off is that house purchase?

The thing to remember is that the further off your goal is, the more risk you can tolerate regarding that goal. For example, if your goal is only a year away, you probably shouldn’t be investing in the stock market to achieve that goal, and you should be pulling money out of the stock market if you can’t handle any volatility between then and now. On the other hand, if your goal is twenty years away, sitting on an aggressive stock market investment makes sense.

Don’t try to “time” the market. Many people get swept up in the idea of “buying low and selling high” and try to “time” the market by guessing when it will peak and when it will hit bottom.

The problem is that when you do this, you almost always miss the peak and miss the bottom, which eats up an awful lot of what you might gain from market timing. Add in the fact that you miss out on dividends along the way, are paying transaction fees and taxes, and so on, and it’s generally not worth it to try to time the market. Instead, let your investments ride and only make changes if there are non-timing reasons to do so.

If you’re investing for retirement, strongly consider having your money in a target retirement fund. The advantage of simply having your money in a target-date retirement fund is that it automatically handles investment shifts you might want to make as you approach retirement and want to dial down the risk a little. Most target retirement funds gradually start moving into bonds and cash as retirement comes closer, which naturally mitigates the risk of a stock market downturn.

See if your retirement plans offer a target-date retirement fund and strongly consider simply putting all of your money into that fund. It might not be perfect, but it’s a pretty efficient solution for someone who doesn’t want to study investments deeply.

If you intend to start withdrawing in the near future (less than 10 years), make low-risk additional contributions. Some investments, such as retirement investments, involve making withdrawals slowly over a long period. That means you want to have some of your investment in a long-term investment (like stocks or real estate) and some in a short-term investment (like bonds or cash).

As you’re contributing money toward that big goal, it makes a lot of sense to gradually move your contributions from the long-term investments to the short-term investments. That way, when you start taking out money, you have a mix of short-term and long-term investments because you’re going to want some of the money in the short term (the first ten years of retirement or so) and some in the long term (everything after that). You want a balance.

If you don’t intend to touch anything for more than ten years, leave things alone. It can be very tempting to move money into a safer investment when you’re looking at a potential real estate or stock market downturn, but if you don’t intend to touch a particular investment – or part of that investment – for 10 or more years, leave it alone and let it ride out the storm.

Remember, market ups and downs are a normal part of investing. You shouldn’t make moves based on those normal fluctuations, and recessions and stock market dips are completely normal.

Preparing for an Increase in Family Stress

Financial changes, particularly unexpected ones, can put a real burden on your family. It can cause all kinds of stress, and money stress can be extremely damaging to marital and family bonds.

You can take action right now to head off the negative effects of those burdens. Here are five things you can do to prepare for a potential increase in family stress down the road.

Communicate clearly with everyone involved so that there aren’t any negative “surprises.”If you see a potential difficulty coming, communicate. Be clear with your family what may happen and what the consequences are.

While that may be a difficult conversation, putting it out on the table and discussing what the ramifications are eliminates the surprise. It helps everyone to prepare in their own way for that potential change, and it encourages everyone to work together to minimize the impact of that change.

Find inexpensive ways to bond as a family.The best way to survive a family crisis is to have strong family bonds in place that help your relationships survive a stressful period, and you can start building those bonds now.

All you have to do is make a sustained commitment to spending quality time together as a family. Turn off your devices, get off the couch, and go do something together. Plan weekend hikes. Go to local community events. Play a game. Even things like working on homework together can make a big difference.

Don’t promise expensive plans in the future.If you’re making expensive plans for the future, like a trip to Disney World next summer, minimize the talk of that trip until you’re incredibly sure that the plan is in place. The hotel is booked and paid for, the tickets are bought, the transportation is paid for – that’s when you start talking about it.

Before then, you run the risk of setting up false expectations that you can’t live up to, and when you fail to come through on your pledges and promises, you begin to dissolve trust. Avoid doing that, particularly when heading into a period of uncertainty.

Instead, plan and promise a lower-cost vacation and lower-cost upgrades. A much better approach is to plan for a leaner future in the short term while bolstering your family’s financial security. Instead of promising a trip to Paris next summer, plan a camping trip to Yellowstone. If you decide at that time that you can afford to “upgrade” the vacation, stay a little longer or add on an extra leg at the last minute.

With the money you’re saving from more realistic plans and expectations, you can prepare yourself financially for what may come by paying down debts and building up an emergency fund.

If you have children, make an even larger emergency fund than you would as a single person or as a couple without children. My general advice on emergency fund size is to shoot for a month’s worth of living expenses, then add to that an additional month’s worth of living expenses for each person living under your roof.

So, for example, if you’re single, two months of living expenses is completely appropriate, while a family of five may want to shoot for six months.

Why do this? The more dependents you have, the more likely it is that something will seriously go wrong. It’s also more likely that a job loss will cause a severe crisis that will affect lots of lives, not just one or two. Prepare accordingly, and have a big emergency fund.

Final Thoughts

A financial downturn isn’t something to be scared of. It doesn’t need to keep you up at night with worry. However, it is something that’s worth preparing for, at least a little. Preparation makes it easier to survive a downturn with few scars, and you can get started now with very easy steps

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Every Item On a Credit Report Must Meet 3 Standards… 

Every item on a credit report must meet three standards

1st Standard: Item must be reported within the allowable time periods. It must be reporting timely information.

2nd Standard: Item must be one hundred percent accurately reporting all of the information on the account. So all of the information on the account – name of the creditor, account number, status, date of last activity, date the account was opened, date of last delinquency, balance, payment amount, history. All that information must be reported one hundred percent accurately.

3rd Standard: The item must be verifiable. Is this item verifiable? Well, dispute can be simply that this item is not verifiable, because there was no contractual obligation, or there was no written agreement amongst any of the parties, therefore this item is completely one hundred percent unverifiable. “If you can’t prove it, please remove it.” 

These are the three thresholds that every item that they’re putting on a credit report must meet. If it doesn’t meet it, they must delete it.

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How the Bureaus REALLY Get Paid… 

The paying clients of the credit reporting industry are not consumers, but the creditors who both furnish and use the information contained in the credit bureaus’ databases. For example, discovery in recent lawsuits has uncovered the fact that TransUnion had received over $6 million per year from MBNA (Maryland Bank of North America) alone.

Litigation discovery has also shown that the credit bureaus have made it their business to drive down the cost of disputes to such a low point that processing these disputes has become a substantial source of revenue stream for the credit bureaus.

And also according to Automated Injustice, outsourcing of disputing has become a highly profitable business for the credit bureaus. Before 2004, when Equifax still handled some disputes in-house, its average cost per dispute was $4.67.

Toward the end of 2004, Equifax began using an outsource vendor called ACS in Montego Bay, Jamaica. ACS investigations cost Equifax only $1.08 each. An almost 80% cost reduction was apparently not enough, though.   As it stands today, DDC, an agency in the Philippines, has enabled Equifax to reduce the cost to $0.57 per dispute, despite the number of accounts that are disputed.

Many consumers look at their report and find multiple inaccuracies.  The consumer then files one dispute to cover all five errors.  The credit bureau forwards the dispute to the outsourcing agency overseas and pays them $0.57 to process all five errors.

The credit bureaus charge a fee to data furnishers for providing incorrect data.  Each dispute on a report is assessed a $0.25 fee per bureau; therefore, if five items are disputed each credit reporting agency charges $1.25 to the lending institution that reported the information incorrectly (five errors @ $0.25 each). The bottom line is a $0.68 profit on a $0.57 investment.

While this information is public record, based on Congressional testimony, it has not been widely reported on any media outlet, including the Internet.

Considering the number of people who are injured by the credit bureaus need to turn a profit from everything they do, one would assume that the report would have made national headlines. However, due to the credit reporting agencies considerable investment in propaganda campaigns, advertising and lobbying, negative information about them is rarely publicized.

But now you know how the bureaus really get paid, so pass this on to your affiliates and clients.

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