Lately, my husband and I have been talking a lot about charitable giving and what our level should be in this time of conserving funds in an effort to reduce our consumer debt.
We recently increased our giving by 1%, which seems like a little, but is $975/year or $18.75/week (we actually raised it $20/week – $18.75 is such a weird amount). Part of this is in response to our gratefulness that as we have started this journey to face our financial issues and deal with them, we have started to feel freedom from the weight of never-ending debt. The other part is that we feel a responsibility to help those who are even more impacted by the state of the economy, because no matter how bad it is for us, we are actually in great shape compared to the rest of the world and a big section of our own country. Our woes come from bad decisions and the inability to deal with circumstances because of those bad decisions. But there are those who a geographically and socially less able to earn as much or bounce back from the economic climate. So we feel a need to try to give something to help, even if it is small.
A recent article from the Washington Post noted that Charitable giving is down for the first time in 21 years – just at the time that it is needed the most.
Local charities said they have been struggling as the economy has faltered, just as many nonprofit agencies, such as food banks and homeless shelters, have been experiencing skyrocketing demand for their services. A surge in giving around the November and December holidays probably prevented a worse overall picture, some said.
A CNN Money article talks about considering the decision (click HERE to read) to reduce charitable donations. Their recommendation is that:
What you should do, though, is tell the folks who run the food bank that they won’t be able to count on you for an anchor donation this year, and tell them now. They need as much time as possible to find replacement funds and/or to figure out how best to cut back their services.
This seems like a reasonable and responsible way to approach this issue if you find that you need to make the some cuts in this area. And it may be that there are time and effort resources that you could offer/volunteer to the charity that would absorb some of burden that would normally be addressed by your financial donation.
I had a conversation with my parents this weekend where my dad asked me what my credit score is – I explained that at one time, I had purchased them from the “Big Three” and they were all different, so I decided not to buy them anymore. I did buy one last year when I ordered my “Three Free” credit reports (I’ve yet to get one from Equifax, BTW – it’s a little hinky) – it was 695 and it was reported by Experian.
So I saw this Washington Post article the other day about credit scores and this quote stood out to me:
As scores become increasingly important, they have also become increasingly perplexing. Consumers have free access to the credit reports used to determine their scores, but they have to pay to check them. With the heightened interest, many borrowers have been doing just that, buying their scores from a variety of Web sites, only to find out that they might be different from the ones lenders use, according to bank officials and consumer advocates.
They go on to say:
Complicating matters is that Experian and TransUnion have developed their own scores, which the agencies call educational scores because they are intended to help consumers gauge their own creditworthiness. Lenders cannot even buy Experian’s score. They can buy TransUnion’s but tend to go with the FICO score instead.
All of this makes me think that I should order my FICO score. I *would* like to know what lenders are looking at, even though it’s been nice not to get so many credit card offers in the mail since they’ve upped the eligibility requirements.
What has been your experience with credit scores and which have you ordered?
I’m not a huge follower of Suze Orman, but I’ve seen a few of her talks on television, and when she offered her 2009 Action Plan as a free e-book on Oprah.com, I downloaded and read the whole thing, so I know a little bit of what she is about. I recall being very used to hearing her say that a person who is carrying credit card debt has no business putting money into savings because they would save more by paying the higher interest debt off.
But things change…
A posting on her website says:
I want you to only pay the minimum due on your credit card balance and instead make it your top priority to build as much of an emergency cash fund as you can.
Let me tell you why I am now telling you to do this. With rising unemployment, having a big emergency cash fund is vital. The sad reality is that the credit card industry is taking actions to protect themselves with no regard to your needs or how good you have been in paying your bills on time. The problem is that most credit card companies are either reducing your credit limits, revoking your credit cards all together, raising your interest rates and are even paying you to close down your account.
So I’ve been reading a lot of blogs and articles about approaches in paying down debt – there are several different programs being championed out there and I’m interested to know what yours is. Here are a few of the most prominent in my life.
Dave Ramsey – The Debt Snowball I’m not a “Dave Ramesian,” so I may not be 100% on the details of this approach, but my understanding is that you list out all of your debts and the minimum payments on each. You then aggressively pay down the debt that is the smallest, using any additional funds that you can from your budget. When that debt is paid off, you put that payment toward the next smallest debt, along with its minimum payment, until that is paid off. Wash. Rinse. Repeat.
Suze Orman – Highest Interest First Suze’s approach is slightly different – she also wants you to list out all of your debts and the minimum payments on each, along with the interest rate. You then aggressively pay down the debt that has the highest interest rate, using any additional funds that you can from your budget. When that debt is paid off, you put that payment toward the next highest interest rate, along with its minimum payment, until that is paid off. Say it with me “Wash. Rinse. Repeat.”
My Microsoft Money program set up a debt reduction plan for me after I entered all of our obligations and targeted what amount we could pay above the minimums. It targets the highest interest rate first, also. We had 6 months of extra big debt payments (see Success), so I wasn’t sure that it was calculating everything correctly, but as I looked down the road at the total payments in 2009 and 2010, it showed that as we paid off out debts, Money would not apply that “left over” money to the next debt in line. It was really confusing to me for a time, until I realized that it was trying to help me build a reserve in my checking account. When we have about $5,000 in reserve, it tapers off and then starts applying the full amount towards the minimum payments, along with the extra that I said I could pay. At first, I thought that I should take the $5,000 and get us out of debt 3 months earlier. But then I realized that this is a great way to build up our emergency fund and that in a 3+ year plan, getting out 3 months earlier would feel great, but wouldn’t be any protection in an emergency, as we have closed the majority of our credit card accounts.
So, I’m comfortable with the Microsoft Money plan for now – I’m looking forward to having the emergency money and staying on track with the plan.
Well, today is a great day for my husband and I as we celebrate a success in our journey. Since this process will take about 3 years, we’re excited to celebrate each milestone as it comes and so today is important because it is the day that we fully paid off one of our creditors!
In 6 months, with lots of strategy and sacrifice, we paid over $9,200 to this one creditor that gave us a settlement deal of paying 75% of our balance with no more interest, as long as we did it in 6 months. Today, my husband made the call and paid the last payment – paperwork is on its way to us 🙂
We won’t be able to pull the same results long-term, but we are on a plan to pay our 5-year payment plans off in 3 years, so there will still be a lot of hard work and sacrifice coming.
But this one success makes it all feel a lot more possible!
Saw an interesting report today – it shouldn’t surprise anyone that U.S. Households are experiencing a drop in net worth, but what about the fact that
Liabilities of households fell by $114 billion in the quarter, as consumers reduced their debts at an annual rate of 1.1%. Consumer credit card debt fell at a 3.5% annual rate, the largest decline since 1980.
Yesterday, as I was making my way home, I realized that I am no longer dreading getting the mail from the mailbox. I used to think about what kind of letters and bills would be in there and I could feel my blood pressure going up. I would avoid opening some things as long as I could, and unopened pieces of mail would pile up for my “paper monster” attack that happened about once a month.
Now, I have no angst when getting the mail and I open the pieces as soon as I get them. Part of it is because I now have a clear picture of our debt and there are no more surprises that I’m avoiding. The other part is that we have chosen to be accountable and face our obligations, no matter how painful it seems at times. And what is the ultimate result?