11 May Good Advice For Tough Times
and my favorite, Rule 5. Reduce your debt and build savings. This is one rule that everyone can follow, whether you are on a financial tightrope or flush with cash. This is common sense economics, spend less than you earn and you can avoid bankruptcy or credit card lawsuits. Here is the rule, in its entirety.
It’s even more important to get rid of bills and amass extra cash now that the economy is on shaky ground. That’s because various assets, such as homes and stocks, that helped bail out Americans out in the past few years have now plummeted in value.
For example, homeowners tapped $1.6 trillion in home equity from 2001 to 2006 to access extra cash, according to the watchdog group Demos. But that lifeline is already well-frayed.
“You need an emergency fund,” Lee says. “Three months is realistic. No frills such as meals out or vacations — just basics.”
Unfortunately, “more low- and moderate-income households don’t have adequate savings,” says Stephen Brobeck, executive director of Consumer Federation of America.
So start saving.
“Most families can find $100 a month,” Brobeck says.
This is also the time to eliminate plastic debt. Six out of 10 households don’t pay off their entire credit bills from month to month, according to Demos.
Pay off your most expensive credit cards first. While credit card rates may fall, don’t count on it, especially if you have a tarnished payment history. A shaky economy often gives banks a reason to increase rates.
“Banks are writing in terms that say ‘We can change our rates for economic conditions or financial conditions,'” says Linda Sherry, director of national priorities at Consumer Action. “If they’re not making profits in other areas, they have to make up that income.”
Those who make late payments shoulder any increase in rates.
“At any given time, 5 percent of the population is delinquent,” Robert Hammer, chief executive of R.K. Hammer, a bank card consulting firm. “You’ll generally have to pay on time for at least a year before you can start renegotiating lower rates.”
However, if a job loss pushed you to fall behind on payments and you have found new employment, don’t wait the year.
“Call the company and ask for relief,” Hammer says. “You may get it.”
Andy Miofsky, Esq.
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