Make Charitable Contributions Safely

When you donate money to a charity, you want to be sure that it ends up furthering the cause you intend to support. Here are six steps to take when donating to ensure the charity delivers on its promises.

1.    For your donation to be tax-deductible in the US, the charity must be a registered, qualified non-profit. Search for the organization’s name in the Internal Revenue Service (IRS) database of tax exempt organizations.

2.    Check out the organization’s website. Look for the organization’s mission statement, then find evidence of outcomes or impact of the organization’s work that align with its mission. Is the information updated and current?

Does the organization publish an annual report or other documentation of its claims of effective use of funds? Read accounts by persons served by the organization, but also look for statistics.

Check the staff’s contact information. Is it possible to identify actual persons you could call or email? Read their biographies to get a feel for the types of people intimately involved in the work of the organization.

3.    How do others feel about this organization? While you do not necessarily have to agree with people who offer either glowing testimonials or scathing negative reviews, it is useful to read both.

The Better Business Bureau (BBB) issues reports based on 20 Standards related to governance, finance, effectiveness, and informational materials about organizations for which they have received complaints. (Charities can also request a BBB evaluation. Those which meet all 20 Standards are then display the BBB National Charity Seal.)

Several independent organizations monitor the spending patterns of charities. It is felt that reasonable organizations spend no more than 30% of their income on running the business (salaries, office expenses, fundraising, and marketing). The charity should put at least 70% of donations toward the organization’s mission. Here are places to check how the charity you plan to donate to will use your dollars.

Charity Navigator shows the percentage of the organization’s budget spent on everything not related to its mission for organizations on their alphabetical listing. The website has a separate list of charities their experts have various levels of concerns about.

Charity Watch is like Charity Navigator but is organized by category rather than alphabetically. This can be helpful if you look for alternatives to the charity you were originally thinking of.

GiveWell is a VERY picky site. They create an annual short list of top global charities in the healthcare and poverty reduction arenas that are evidence-based and under-funded. This is useful if you want to donate where funding would be most effective.

GuideStar is perhaps the best-known source of information about charities. Free registration offers you tons of information on nonprofit organizations.

4.    From your research in steps 2 and 3, write a list of questions you would like answered about the organization.

Charity Navigator has a great list of questions that each organization should be able to answer, either through online documentation or by phone call or email.

5.    Contact a real person by phone or email and get answers to your questions. Follow up if you don’t understand an answer or need more depth.

6.    If you are planning to donate online, take these extra safety precautions.

·         Don’t ever consider giving your financial information through a website unless it is “secured.” You can identify a secured website by the letters in front of its URL. Secured websites begin with “https” where the “s” stands for “secured.”

·         Give directly to your desired charity instead of to a third party who is collecting donations “to be sent to” it.

·         Protect your personal information. Read the website privacy policy. Find out how the charity says it will use the information you provide. They should give you an “opt in” choice to allow them to disclose your information to other organizations. Find out if they place “cookies” on your hard drive.

·         Print out a paper record of the confirmation screen (or confirmation email) that your donation was received. Put this with your tax records.

Most charities are reputable and strive to improve the human condition. Don’t refrain from donating to charities. They need our support. Just be sure you donate safely.

TIP - What are you saving for?

Everyone should save for emergencies. This is the most popular savings goal. You can’t usually plan ahead for a specific emergency, but it’s wise to have some funds held back “just in case.” You should plan to have at least $500 stashed away as emergency savings. Learn more here: https://americasaves.org/for-savers/set-a-goal-what-to-save-for/save-for-emergencies

You might also be thinking of saving toward your education. This is the second most popular savings goal. Improving your education status increases your employability, but college can be costly. Here are some suggestions of ways to save for college, and how to lower the costs of attending: https://americasaves.org/for-savers/set-a-goal-what-to-save-for/save-for-education

If you are presently employed, you will want to invest some of your income in savings for your retirement. Some employers offer a sponsored retirement plan, such as a 401(k). However, even if your job does not include this benefit, you can save through an Individual Retirement Account (IRA). Read about retirement savings here: https://americasaves.org/for-savers/set-a-goal-what-to-save-for/save-for-retirement

Maybe you need a car, to get to school or work. The average American car owner spends $8000 per year on car purchases and maintenance. (Don’t forget that cars come equipped with ongoing costs!) Consider whether alternate forms of transportation would work instead. Then, if you will be needing to buy a car, it’s wise to save up in order to make a larger down payment. Here’s some suggestions: https://americasaves.org/for-savers/set-a-goal-what-to-save-for/save-for-a-car

What are you saving for? Don’t be left out in the cold without adequate financial resources. Start your savings plan today by setting a goal.

Information for Financial Literacy

There are an enormous number of websites offering financial information to help us pay less and spend our money wisely.  Unfortunately that information is hard to find without reading through website after website after website.  Enter Twitter.  One of the great things about it is you can find entries that people have added using hashtags.  Searching for a hashtag (such as #VirtualAbility) finds all comments that have that hashtag.  Also, each account is its own “subsite” where an organization can post information in its own space.

To use Twitter, go to https://www.twitter.com and sign up for a free account.  You will need to verify the account using a link sent to the email address you used to create the account.  Below are several Twitter hashtags and subsites that will show useful financial tips and tricks, along with associated websites that contain more information.

• #SavingsTipTuesday
• #SavingsFactFriday
• @Career1Stop (https://www.careeronestop.org/):  A great employment starting point for people with disabilities.
• @RealEconImpact (https://www.nationaldisabilityinstitute.org/):  has free classes on strategies to build financial wellness of people with disabilities.
• @AmericaSaves (https://www.americasaves.org/):  America Saves is a campaign coordinated by the nonprofit Consumer Federation of America (CFA - https://consumerfed.org/) and is dedicated to helping individuals save money, reduce debt, and build wealth.
• @IRS (https://www.irs.gov/):  the one and only USA Internal Revenue Service.  While many people denigrate the IRS and try to avoid all dealings with it, there is no question that their website contains the original source material for all Federal tax information.  There are useful pages on how to get free tax preparation help, how to file, etc.
• @FDICgov (https://www.fdic.gov/):  the official Twitter channel for the Federal Deposit Insurance Corporation.  The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation's financial system... (https://www.fdic.gov/about/strategic/strategic/mission.html).

Other sources of information:

• ABLE National Resource Center (http://www.ablenrc.org/):  Living with a disability is often associated with significant amounts of extra costs. That’s why individuals and families can now contribute to ABLE accounts—tax-advantaged savings that can fund disability expenses.
• Five things you should know about ABLE accounts:  https://americasaves.org/blog/1323-5-things-you-should-know-about-able-accounts.
• Multiple states now offer ABLE accounts. Compare programs here: http://www.ablenrc.org/state_compare/
• Learn more about tax time savings here:  https://americasaves.org/for-savers/make-a-plan-how-to-save-money/saving-at-tax-time
• Tax assistance is available for individuals with disabilities from https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/disability-and-earned-income-tax-credit
• Money Smart has accessible materials frequently used by disability organizations:  https://www.fdic.gov/consumers/consumer/moneysmart/
• Individual Development Accounts are a savings option for people with disabilities where funds are matched.  Check out Prosperity Now (https://prosperitynow.org/issues/individual-development-accounts) and the USA Health and Human Services website (https://www.acf.hhs.gov/ocs/programs/afi).

If you have other good sources of information, comment below!

Tip - Caring for Smart Chip Cards

New credit and debit cards have a small metallic microchip embedded on the front, which can be read by special card readers when inserted properly.  This allows for more secure transactions than the older cards.  But the smart chip can be damaged and will then malfunction in the reader.

Be sure to protect the microchip on your credit or debit card from physical damage by scrapes from items with sharp edges, such as coins and keys.  Don’t spill liquids on it.  Protect the card in your wallet or a card holder.  If your card is rejected by one card reader but does not seem to appear damaged, the fault could be in the machine, not the card.  Try it out in another machine before contacting the card-issuing company for a replacement.  The customer service phone number to get a replacement card sent is on the back of your card.  If you manage your card account online, look on the company website for a link to “replace lost or damaged card.”

When you get your new card in the mail, be sure to compare its information (e.g., expiration date) with the old one.  You may need to update stored payment information or automated bill payment settings.  While you are waiting for a replacement for a damaged smart chip credit or debit card, you can still use the card for online purchases.

Keep Your Financial Files in Order

With Tax Season starting soon in the United States, it's a good time to take stock of your financial records and get organised, to make your tax filing process just that much less painful. Even when it's not tax season, wherever you live, these are good habits to get into.

Try these hints to make keeping your finances organized a little easier.

1. Use the same names for electronic and paper files.
   You probably get some bills and statements electronically, and others paperwork through the mail. You may even get some bills in the mail that you turn around and pay electronically. Make sure your filing systems are parallel for the two kinds of documents.
2. Don’t keep everything.
   
   • While it’s tempting to just keep all financial records, forever, it’s really not necessary. Documents you’ve saved as tax records need only go back 3 years (7 years if you saved them to show a loss).
   • Keep transaction receipts only until you verify them on the next monthly credit card or bank statement. Keep the credit card and bank statements only until you receive the year-end summary reconciliation.
   • You get a new insurance policy booklet every year. Throw away the old one.
   • For a handy list of what to keep and what to shred (don’t just toss financial records!), please click here: http://www.forbes.com/sites/kellyphillipserb/2016/04/25/how-long-to-keep-tax-records-and-financial-documents-after-tax-day/#451b9b8028e3. If you do not live in the United States, a tax accountant (or the equivalent) can help you determine what records to keep and for how long.
3. Keep up every day.
   Once your system for financial record-keeping is in place, spend a few minutes each day keeping it updated. Put incoming bills to pay in either a physical or electronic folder. Make a note a few days before the due date on your calendar (to allow time for the mail to arrive). When you check your calendar each morning, you’ll know what payments to make on that date. When you have paid each paper bill, write PAID on the portion you keep and the date, and file it correctly.


4. Make a notebook for tax documents.
   Create a Tax Notebook with folders for holding paperwork. Print off copies of electronic records that are tax-related and include them in the notebook’s folders along with paper records. Store all tax-related documents in the proper folder, labeled by document type. Be sure to keep all proofs of charitable donations and 1099 forms for miscellaneous income. Keep the notebook updated as part of your daily financial filing chores. Next spring you’ll have all your tax records neatly stored in the notebook.

Image Credits: Ducklings photo by Magdabed on Pixabay, Autumn pond photo by jill111 on Pixabay

Budgets, Money and (Maybe) Peace of Mind

Contributing Author: Gentle Heron

Although everyone ought to work from a budget, how their budget is made is up to each individual. Some people keep a paper budget, others use a spreadsh

eet or app. Below are six different types of budgets, who they work best for, how they work, and a resource to start from.

Envelope Budget
This works best for people who need to control their spending, people who are very visual, or people who deal mainly in cash.

What you do is create sturdy envelopes labeled with spending categories (e.g., rent, utilities, groceries, medicine, transportation, eating out, entertainment). Put the amount you will spend for the coming month into the envelope at the beginning of the month. When the envelope is empty, you have to stop spending in that category.

This budget type also works with other budget types. If you know you tend to overspend in certain areas (such as fast food or movie rentals), you may only need an envelope for particular categories.

This budget type also works virtually. Check out the app Goodbudget which is available on the web or for Android or iPhone.

For simple record keeping based on receipts, try Wally for iPhone or Wally+ for Android: http://wally.me

50/30/20 Budget
This budget method may be the best for you if you are just beginning to use a budget.

It’s simple. You divide your monthly income into three pieces: half (50%) should go to meet your needs. That means rent, utilities, groceries, medicine, and transportation. About a third (30%) will be for “wants” which includes eating out and entertainment, but also things like your cell phone and cable plans and new clothes. The remainder (20%) should be used to pay off debts and add to your savings. Think of this smallest portion as how you’re going to eventually get ahead financially.

For more information about this budget type, and information about its flexibility, please see this article: https://blog.mint.com/saving/the-minimalist-guide-to-budgeting-in-your-20s-072016/

Need help figuring out how much for each category? Look half way down this page: https://nerdwallet.com/blog/finance/how-to-build-a-budget/

Bottom-Up Budget
This is the budget type most useful for people with large fixed expenses, and anyone trying to understand their spending pattern better.

When you have large medical or child care expenses, or a mortgage, you can’t really cut back on that area of spending. Your budget should begin by acknowledging the actual costs of your daily expenses in these categories. The remaining categories are where you can economize, and that amount can go toward savings.

Personal Capital offers a free mobile app that may help with bottom-up budgeting.

Top-Down Budget
The opposite of bottom-up budgeting, this budget style works best for people with a strong savings ethic and specific saving goal, who are able to look at the future as a “big picture.”

This type of budgeting is like the 50/30/20 budget, but you set your own categories and percentages, based on your financial goals and future plans. It takes personal discipline to make this budget plan work.

Zero-Sum Budget
This budgeting style requires frequent oversight. It’s best for very detail-oriented people.

The idea is to “pay yourself first,” by setting money aside for your saving goals or to pay down your debt. After that, you allocate the remainder of your monthly income to your expenses, until nothing remains. Some people say this is like “giving every dollar a job.”

Consider using a mobile app like You Need A Budget to achieve your goals using this style of budgeting.

Reverse Budget
This budget is not for everyone; it works best for people who already have a financial safety cushion, who are experienced at using a budget, and who have specific savings goals.

Reverse budgeting is similar to zero-sum budgeting because you pay yourself first toward your saving goals. After that, you do away with categorical spending and just pay for everything else as it comes along, knowing that the amount needed for each category will change month to month.

An app like Qapital can help with this advanced type of budgeting.

What happens when you don’t keep a budget?
A study by Bankrate found that about 20% of Americans says they budget “in their heads,” which often means “not at all.” This might partly explain why the majority of Americans can’t dip into savings to cover a small ($1000) unexpected expense, let alone a catastrophic financial need.

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Image Credit: Pixabay

Where Do I Go to Complain?

Contributing Author: Gentle Heron

The answer is, “It depends on what you are complaining about.”

If a roofing contractor is going door to door in your neighborhood after a storm, or if someone is walking around knocking on doors and soliciting, you should call your local police to report the incident. You can also report it to your state attorney general.

Various federal agencies deal with specific types of scams and frauds. The FBI, for instance, runs the Internet Crime Complaint Center. While it does not itself conduct investigations of claims, it refers them to the appropriate agencies. If you receive a phishing email or your computer is hacked or you are approached over the internet with a fraudulent scheme, this is where you would report it.

If the scam is conducted by postal mail, such as chain letters or fake sweepstakes “winner” announcements, report it to the Postal Inspection Service. This is also where you would report mail theft.

You will want to list your phone number with the National Do Not Call Registry. After your number has been on the list for 31 days, if you continue receiving unsolicited phone sales calls, you can report them. However, calls from survey firms, debt collectors, and registered charities are exempt from Do Not Call restrictions.

Report identity theft, romance scams, unwanted telemarketing, malware concerns, work-at-home schemes, abusive debt collectors and other types of fraud to the Federal Trade Commission. Your information will be pooled with other complaints to build a case against con artists. You should also report fraud to your state attorney general and local police.

The Consumer Financial Protection Bureau intercedes on your behalf with companies that provide financial services, credit reports and payment cards.

Your credit card company or bank is where you would report lost or stolen cards (credit, debit, or ATM) as well as fraudulent use of the cards. Make a copy of the fronts and backs of all such cards, and keep it in a safe place. Contact information is usually on the card itself.

Graphic by iSkye Silverweb

It's Holiday Shopping Season - Be Smart!

This time of year in many parts of the world, what we call "the holidays" are observed: Hanukkah, Kwanzaa, Christmas, and others. Gift giving may be one of the traditions of these holidays.

Spending oneself into a financial hole need not be one of your traditions. Here are four tips on limiting spur-of-the-moment buying that you may find useful now and throughout the year.

1. Don’t use credit cards unless you have to (e.g., shopping online). Seeing cash go from your wallet to the cashier is a powerful motivator to spend less.
2. Try “envelope budgeting.” After the month’s fixed expenses are taken care of, take out the remaining available money in cash. Divide it among envelopes labeled with the categories “food,” “entertainment,” “lunches and lattes,” and whatever else is not a fixed expense. Once the money in the envelope is gone, you can’t buy any more in that category until next month.
3. Put yourself on a weekly allowance. Once you’ve spent it, no more impulse buying until you get your next allowance.
4. Tally your regrets. Look at your credit card and bank statements for the last few months. Are there things you now regret buying? Write them down and post the list by your computer or on your cell phone, to help you think twice about the next purchase you want to make.

Here is one additional tip for you. To avoid temptation, plan your holiday shopping; don't leave it to the last minute. By controlling your impulsive purchases you can go into the new year free of buyer's remorse!

Humpday Hint: Using Credit Cards Wisely

Contributing Author: Alice Krueger

Credit cards are useful ways to build credit ratings by showing future lenders that you are responsible in your spending and borrowing habits. They are also helpful in the rare financial emergencies.

Get the right card to begin with.

When you are first eligible for credit cards, you often are inundated with mailed offers from a variety of companies. To begin with, select just one card with a low spending limit. Choose one that also has a low annual fee and low interest rate. You’ll be building your credit rating by using this one card wisely.
Be sure you read your cardholder agreement carefully. It will explain all the fees and finance charges that apply to your type of account. If you have questions, call the toll-free customer service number, usually found on the back of the card or the top of each statement document.

Don’t use your credit card for everyday purchases.
That’s what cash or a debit card (that takes money directly from your bank account) are for. Use your credit card for purchasing more expensive, longer lasting items.

Check your budget first.
Don’t use your credit card to buy things you really can’t afford. Always follow your budget. Before using the card, you have to be sure you can repay it. Try to keep credit card debt low enough that your required payments never exceed 10% of your lowest monthly income.

Pay off as much of your monthly balance as you can.

Always make at least the minimum payment required each month. If you can afford to pay more than the minimum, do so. Pay off the entire balance whenever possible. The more you pay off each month, the lower the finance charges you will have to pay. You should try to keep the owed balance on your card lower than 70% of the card’s credit limit at all times.

Pay your credit card bill on time.
Be sure your payment will arrive before the due date. Paying your bill on time each month is one of the best ways to build good credit; it shows future lenders that you’re reliable. Plus it also helps you avoid being charged additional late fees.

Stay under your credit limit.
Credit card companies will charge you an over-limit fee if you spend over your specified limit (check your cardholder agreement for the exact percentage.) You can avoid this problem by keeping track of your credit card use during each month. Keep a slip of paper in your wallet to write down every time you use your card, and keep a running total. You’ll want to be sure you always have about 30% of your allowed total available in case of an emergency.

Cash advances are only for emergencies.
Don’t take a cash advance just because your credit card company offers one. Use advances only in real emergencies. You’ll probably be charged an additional fee for the cash advance, and the interest rate on cash advances is usually much higher than the regular interest rate for the credit card. Check your cardholder agreement document for full details.

Get debt help early.
If you’re in financial trouble, get professional help right away. If you feel you are getting into trouble with debt, get help soon rather than waiting for the situation to get worse. Set up an appointment with a credit counselor, an experienced financial professional who can help you plan ways to get out of debt.

Images credit: Pixabay

How to Do Your Budget

Personal finance is exactly that: personal. Like one man's meat, ideas for money management, strategies and styles are individual - what works for you may not work for someone else. Choosing a budget plan for yourself from the multitude available may still require personalisation: you have to tweak it till it fits.

Budget planning is done in two parts. Part one is determining the how; part two is the what.

How To Budget

Begin your budget planning by considering four main budgeting styles and choosing which best fits your style.

The Classic Category Method
The classic budgeting style assigns a fixed spending limit on each of your expense categories - such as Food, Entertainment or Transport - for the month's budget. Once you have hit your limit for the particular category, you are done for the month.

The Zero-based Method
This is a budget style for the regimented and organised mind. Every dollar, pound, euro, etc. of the monthly income is accounted for in your budget plan. There is no 'left-over' or extras: the aim is to get your spending down to zero each month. The zero-based method requires you to plan your spending limits in advance, and the willpower to stick to it.

The Envelope Method
The envelope system is based on the classic category method with one difference: it requires you to pay for things in cash. After taking care of priority categories (rent, utilities, retirement contribution, etc), assign to each of a series of envelopes a category, spending limit and its fund of cash. Once you've spent the amount in an envelope, you may move cash from another envelope across, but you may not draw out more money from your account. What is in the envelopes is your limit for the month.

The Priority-based Method
Automate everything important, such as the rent, utilities, retirement contribution, etc. Cover all important and required priorities. What is left is the amount you can spend as you wish, until it has gone. This method allows you the security of always covering all your financial priorities, and the freedom of not having to set up categories for the rest.

When you have decided on a suitable method, you can follow these next steps to determine what goes into your budget.

What to Budget

1. Get organised. This is the part where you gather all the necessary paperwork and documents you will need to plan your budget. These will include:
   
   • several months' worth of bank statements
   • recent credit card bills
   • copies of your household bills
   • copies of your medical bills
   • details of your savings and pension/retirement contributions
   • information on any other sources of income
2. Add up your income. Make a list of all income, savings, investments, self-employment, rent from properties you own, and anything else, after deducting compulsory payments such as tax or national insurance. Add any weekly, yearly or sporadic earnings as well, such as dividends from shares. Separate your regular/monthly and irregular/annual earnings into columns, then calculate overall totals for each income trajectory, as well as a 'yearly earnings' figure. This is also a good time to check that you are paying the correct amount of tax. ASIC's online budget planner may help you with this and the following stages of determining what goes into your budget.
3. Work out what you are spending. Look at your bank statements, credit card bills, and household and medical bills to determine where your cash is going. Be realistic and avoid guessing. The more accurate your figures, the better your budget plan is going to work. Remember to account for occasional spending such as vacations, festival gifts, birthdays, insurance policies, car maintenance and tax, etc. Add these costs to your list of expenses in a separate 'yearly/occasional outgoings' column. Once you have included everything you need to, add up your monthly and occasional spending separately into two totals. Next, calculate an overall figure that incorporates all your yearly expenditure. If you divide this number by 12 and check the difference between your result and the 'regular spending' total, you will see how much money you need to earmark each month for 'irregular' spending such as gifts and car insurance.
4. Compare incoming and outgoing. You now examine your income and spending totals against each other. Subtract annual and monthly expenditure totals from annual and monthly income figures. The result will indicate the yearly and monthly surpluses or shortfalls in your finances (a shortfall will have a negative number).
5. Draw up your budget. Base your plan on the budget method you have chosen. Be as realistic as possible when budget planning. Balance detail and practicality. Your plan should consist of what you intend to spend each month on priority items, and in some cases each year. Keep in mind, however, that there will always be unforeseen costs, or emergencies. Once you have your budget plan, remain as faithful to it as you can.

Added Note. Financial planners will often advise you when determining your expenses, "First, pay yourself." When determining your spending, allocate some percentage of your pretax income for yourself. Ten percent is a good figure, if you can manage it. if you receive a paycheck via direct deposit, arrange to have that percentage of your paycheck deposited into a separate savings account, so you don't even see it right away. If direct deposit is not an option for you, set aside that percentage and deposit it into your savings account manually. Do this religiously. A little will add up to a lot over time. Additionally, don't forget your retirement. Creating a retirement nest egg can give you some peace of mind in your golden years.

Humpday Hint: When to Pay with Debit or Credit

Contributing Author: The Tortoise

Many people own both debit and credit cards nowadays. But how do you know when best to use one and not the other? And what exactly is the difference between the two, anyway?

A debit card is a payment card that deducts money directly from your transaction account (also known as a current or checking account) to pay for a purchase. In theory, it removes the need for you to carry cash or a chequebook. A debit card also allows you to withdraw money from your transaction account through an automated teller machine. A credit card, on the other hand, is a credit facility which allows you to buy things immediately, up to a pre-arranged limit, which you then pay for at a later date. It is not linked to your transaction account. Both debit and credit cards have different advantages in different spending situations.

How do you decide which to use, and when? Here are several tips:

1. If you are trying to maintain a good credit score, then paying with a credit card will help. The more you use your credit card while paying off its balance punctually each month, the healthier your credit report is going to be.
2. If you need to track your expenses, paying with a debit card is useful. Since it is linked to your transaction account, where full details of all transactions are logged, you can always check your payment history via postal statements or an online tool.
3. Debit cards are also a great convenience when it comes to recurring bill payments such as phone bills, utility bills, the monthly rent, etc. You can set up automatic payments which are taken directly from your transaction account. Just make sure there is enough money in the account to cover these payments when they are due!
4. There are certain situations when it is both wiser and safer to use a credit card. These include car rentals, booking travel, vacation costs, making deposits on purchases, medical bills and large purchases. In all of these, a credit card offers more security and protection than a debit card. Credit cards often also include insurance and concierge services, and the chance to earn points or rewards. In addition, replacing a stolen credit card on vacation is easier than replacing a debit card, and no funds need come out of your account.
5. If possible, do NOT use your debit card for online purchases. Since your debit card is linked directly to your bank account, entering your bank account information online increases your risk of identity or account theft. The recent spate of hacked user information from companies such as Target, EBay, Sony and TalkTalk is a grim reminder to keep your digital security tight at all times.

Sources:

• 'Debit Card', Investopedia
• 'Debit or Credit? 11 Tips on Knowing How to Pay for Your Stuff', Mamiverse
• 'What's the difference between a debit and credit card?', Barclays Bank

Understanding and Improving Your Credit Score

Contributing Author: The Tortoise

Credit reports. Credit history. Credit scores. To anyone who has never owned a credit card, bought insurance or taken out a bank loan, these things might sound unutterably alien. For the average citizen of the digital age, however, maintaining 'financial cred' has become an inescapable, sometimes stressful, part of modern life. Unlike 'credit ratings' which are assigned to businesses and governments, a 'credit score' is a numerical evaluation of an individual's creditworthiness, or the likelihood that you will pay your debts. Consequently, a good credit score often goes hand in hand with healthy personal finances, functioning as one's 'financial barometer'¹.

Most people will have a credit history. In the United States, three major credit reporting bureaus - Equifax, Experian and TransUnion - receive credit information about consumers. Any company which supplies you credit, from student to personal loans, mortgages or credit cards, will report information about your credit events to these three agencies. From this information, the bureaus calculate your credit score. Most lenders, however, depend not upon the bureaus' scores, but upon the Fair Issac Corporation (FICO) score, which is a calculation based upon information taken from the credit bureaus². Scores over 720 are considered to be excellent, while scores below 650 are considered poor. A 'good' credit score will make banks, insurance companies and potential landlords look benignly and favourably upon you, while a 'poor' score might get you shown the door. Potential employers often also look at applicants' credit reports.

So how do you improve your credit score? Your first course of action should be to avail yourself of the free annual credit reports from Equifax, Experian and TransUnion. Financial consultant firm Credit Karma has a good tip: Space out these three reports at 4-month intervals, so you get a year-long indication of how your credit health is doing³. Check your reports for accuracy. Knowing what goes into the calculation of your credit score is also an important battle strategy. The five key factors used by FICO to determine your credit score are: 1) payment history; 2) amounts owed; 3) length of credit history; 4) new credit; and 5) types of credit card⁴.

Your financial cred battle plan should aim for the following: Always pay your bills on time, in full. This is possibly the most important single factor affecting credit score calculation. Pay off any small balances on your credit cards. Use your credit cards less. Try for a credit utilisation rate below 20% between all your credit cards⁵. If you cannot lower your spending, request for higher credit limits on your cards, to improve utilisation percentages. Keep old (even unused) accounts open, to show that you have multiple options for credit usage, and to avoid decreasing the length of your credit history. Cancelling cards gives you fewer payment options while retaining the same amount of debt. In general, a longer credit history is better for your credit score. Do not open several new credit accounts in a short period of time, especially if you do not have a long credit history. Lastly, review the types of credit you are using. Different types of credit cards are viewed differently by the scoring algorithm, and major credit cards are generally better regarded than departmental store cards⁶.

NOTE: This article describes the credit scoring system in the United States. Every country has its own system. Some information about the credit scoring system in the United Kingdom is available here: http://www.moneysavingexpert.com/loans/credit-rating-credit-score. Wikipedia has some basic information about credit scoring systems in other countries: https://en.wikipedia.org/wiki/Credit_score.

References:

¹Mamiverse, 8 Tips on How to Raise Credit Score Right Now
²Investopedia, What's the difference between a credit rating and a credit score?
³Mamiverse, 8 Tips on How to Raise Credit Score Right Now
⁴MyFICO, What's in my FICO Scores
⁵Mamiverse, 8 Tips on How to Raise Credit Score Right Now
⁶Money Management International, Understanding Your Credit Score

Other Sources:

Credit Karma, https://www.creditkarma.com

Money Management: It’s You vs. Them

Contributing Author: Gentle Heron

When you think about managing your finances, you have to understand that it is you against everyone else. No, I don’t mean you vs. the tax man or the government. I don’t mean poor vs. rich. I mean you vs. those who already have a financial plan and goals, and the discipline and motivation to achieve those goals. By that I don’t even mean your neighbor who has better financial literacy than you do. I mean… professional marketers. They want you to spend your money on their product, whether it will do you good or deplete your wallet. That doesn’t matter to them, but it should to you!

So how do you start improving your financial situation?

Look Carefully At What You Spend
Most people do pretty well keeping track of about nine-tenths of what they spend. Typically these are larger items for which you have credit card or checkbook records. (You do keep those records, don’t you? And look them over each month?)

If you use a debit card, you should also record those purchases in your checkbook, so that you can reconcile your bank balance at the end of the month. Do you pay cash for a latte on the way to work? Use coins at a snack or drink machine in the cafeteria? Tip waitresses or cab drivers? Perhaps you need a little notebook to jot things down on all these smaller expenditures. That way you will have a much better handle on your spending patterns. You will find lots of helpful tools from the National Endowment for Financial Education in their resource library. then search by topic.

It may take you a few months to get used to this record keeping, but it will be worth the effort, because then you can…

Make a Budget
A budget is really just a spending plan. It can be as simple as a pen-and-paper list, or can involve spreadsheets and specialized software. Use whatever strategy works for you, but plan how you will spend your monthly income.

Start by looking at necessities. List what you must spend for:

• housing (rent or mortgage),
• transportation (include upkeep if you own a car),
• utilities (electricity, water, propane, telephone, trash, etc.),
• food,
• medicines and medical costs not covered by insurance,
• insurance payments (renters or homeowners, medical- often paid yearly rather than monthly),
• loan or other debt payments,
• carers, etc.

Next list non-necessities, such as entertainment expenses, hobbies, etc.

Are there obvious places you could save some money?

Also, if you come up short at the end of the month, your budget plan will help you realize which bills must be paid (you have to have electricity and water, so pay that first) and which might be let slide til next month (although credit card debt piles up).

Plan to Save
A sad truth: The US is the only industrialized country with a negative savings rate. This means we are spending more than we make!

Why do you need to save? For the proverbial rainy day. That means emergencies as well as the expected future.

One good way to start saving is to set aside any unexpected income, such as presents, bonuses, or winnings. You weren’t expecting that money, so you won’t really miss it if you sock it away instead of spending it. You will still be getting more than you had before, because what you save now earns interest! But if you can, leave the interest in your savings account to allow it to compound, or earn even more interest next time around.

Savings should be a category in your budget. Even if it’s a small amount you set aside each month, doing so will add up over time. And the sooner you start saving, the more you will have when you eventually need to tap into it.

Make Saving Easy
Put your savings goals in writing. Establishing and prioritizing short- and long-term, goals, printing them out and posting them in a prominent place will make them concrete and help motivate you to achieve them.

Plan to save a little at a time. Sometimes the savings goal seems too big to accomplish. If you want a DVD player priced at $120, that’s a lot of cash to think of all at once. Somehow, ten dollars impacts your emotions less than $120, and it feels possible to save $10 a month even if saving up to $120 seems out of reach.

Open a separate bank account for your savings. Put a small amount in it each month. Don’t look at the balance every month (unlike your regular checking account that you should keep a close eye on). At the end of the year, your $10 a month stashed away will total over $120 because of interest it will have earned.

And you can even make savings fun by making your own decorated savings bank. If you are saving for a vacation, decorate a box to stash your “spare” coins in with images of the destination.

Looking at the pictures of the beach or the Eiffel Tower will be a useful motivation to spend less and save more. Those dimes and quarters will add to what you are saving in your bank account.

Don't Cut Out - Cut Back
If you have habits that impact your budget, such as buying fast food for lunch every day, ordering in pizza or Chinese a couple times a week, or eating out every weekend, or buying Starbucks every day on the way to work, or hitting the Red Box every other day, consider cutting back. Maybe packing a sack lunch on Mondays and Fridays, or limiting yourself to one night a week of takeout, or going to a restaurant only every other weekend, or skipping Starbucks on Tuesdays and Thursdays would be a reasonable compromise.

Talk yourself into it. “I’m not missing out on frappuccinos. I had one yesterday and I’ll have one tomorrow.”

Curb impulse buying. Do you spend a dollar for a can of pop because you go past the machine on the way back from the restroom? Opt for the water fountain instead. Do you plug a couple of quarters into the newspaper vendor you walk past on the way to the bus? You can read the same news online.

Try bargaining with yourself. If you buy a treat, put the same amount that you spent into your savings. You’ll be surprised that it’s easier than you thought to start cutting that expense down to a more reasonable size.

Find the Freebies/Cheapies
Do you often hit the Red Box for entertainment? Consider a free library card, then getting DVDs from the library.

Do you phone your distant family or friends regularly? Use Skype instead of your phone. It’s free if the other person also has Skype.

Love going out to the movies? Check matinee prices instead of going at more-expensive prime time.

Consider buying store brands at the grocery. Many are made at the same plants as the name brands, just have a different label on the can or box.

Plan a "stay-cation" and explore local free activities and venues.

Get Organized
Keep all your financial documents in order. How you do it does not matter as much as that you do it somehow.

When bills arrive, be sure they get opened immediately. File them all in one place, in the order you must pay them. If they are auto-paid, write the amount in your checkbook so that you can include it in your accounting.

If you prefer to mail payments in, write the mail-in date on the bill’s return envelope, right where the stamp will go. That way you’ll know when to insert the check and send it off. Be sure to mail payments at least 7 days, preferably 10, before the actual due date for proper credit.

Another quick trick to be sure you are paying all your bills: Write the name of bills to be paid each month above the transaction records, and cross each off as it gets paid (and recorded). That way if you have one or more remaining on the list at the end of the month, you’ll know you’ve forgotten (or lost) the bill, and can contact the company before it is too late.

Consider setting up a separate email account for your financial statements and bills, and it will be easier to keep track of everything. You can also set calendar alerts for key dates such as dates various bills are due, dates for benefits and insurance open enrollment periods, and tax preparation deadlines.

Understand Credit and Use It Wisely
Credit is great. Not all of us have saved enough for large necessary purchases or for emergencies. But we tend not to think of credit properly. When we buy something on credit, whether that means using a credit card or taking out a loan, we are spending tomorrow’s money today.

One way to think about credit is to be sure that the value of what you buy with credit will outlast the pay-off period.

If you buy fast food with a credit card and aren’t paying off that card monthly, is the value of the burger and fries really worth the added expense of the interest you are charged?

Another way to think about credit is to remember that credit companies make money from the services they extend to you. And they will hassle you to get that money back from you. However, if you are not able to meet all your bills some month, pay the necessities (utilities, rent, etc.) first and let the creditors wait. They will pressure you to pay up, but really it’s to their advantage if you are late, because you will just end up owing them more. Do try to pay minimum balances, though.

Drastic Steps May Be Needed
If you really can’t make ends meet, you may need to take more drastic steps.

• Consult a financial advisor.
• Get a second (or first) job, or do piece work or odd jobs.
• Get a roommate or find a cheaper place to live.
• Use public transportation.
• Quit using your credit cards… for anything… until you pay them off.

Control Your Cash Flow
Sooner is always better than later to start taking steps toward your financial well-being. Take the marketers’ hands out of your wallet. Spend less than you earn. Get your finances under control by watching your spending, increasing your saving, and using credit carefully.

The Importance of Financial Literacy for Persons with Disabilities

Contributing Author: Gentle Heron

Consider these frightening facts about people with disabilities in the US:

• 72% of individuals with disabilities are unemployed (Butterworth et al., 2011).
• More than one-third of people living in poverty (39%) are individuals with disabilities (U.S. Census, 2010).
• Overall, persons with disabilities are far more likely than nondisabled persons to live in poverty (26% compared to 9%) (National Organization on Disability & Harris, 2004).
• Of employed young individuals with disabilities who are four years or less past high school, more than half (54%) earn less than $5,000 per year. And only 11% earn $25,000 or more per year. (Newman et al., 2009).

Those of us with disabilities have to think carefully about our financial situations. Even if we are not living in poverty, we can always benefit from stretching our dollars a bit more.

April is Financial Literacy Month. Virtual Ability celebrates in April by providing blog posts and tips related to various aspects of financial literacy.

Here’s a tip to start things off. Check out the Thirty Steps to Financial Wellness from Money Management International. Steps include organizing your financial information, identifying needs and wants, paying off debts and staying motivated, among other topics. There are plenty of free tools and informational e-books on the site to assist you.

Make It Easier for Others When You Go

Contributing author: Ruby Vandyke

We spend our lives doing all we can for our families, but often at the end of our lives, we leave them with a great burden – having to settle our estates.

Everyone knows they should have a Will, Power of Attorney and other legal papers in order. But, there are a lot of other things you may not think about. Just having your Will in their hands doesn’t help your family to know what to do or whom to contact. Without a list of all your information, your family will have to pore over any paperwork they can find in your home and try to piece together whom they have to contact and notify about your death.

It’s important that you make a list of every company you have an account with, such as cable or satellite TV, electric, water, garbage collection, house and car insurance, etc. Include the names of the companies, their addresses, phone numbers and your customer account numbers. Also, list all bank accounts, investment accounts and your pension and Social Security information.

If you are collecting Social Security or other pensions, be sure your family knows these are the first ones that need to be notified immediately. Any payments sent or deposited into your account after your demise, will have to be re-paid from your estate.

You might want to consider adding a family member’s name to all your accounts, including your car title and especially your bank account. Each state has their own rules, but many banks will not just accept your executor’s word and a photocopy of your death certificate. Banks often require a ‘certified’ copy of the death certificate, which your family has to order through the funeral company and pay a fee for. This can take a week or more to receive. In the meantime, your family has to pay your bills and expenses out of their own pockets, if no one else’s name is on your bank account.

Check with your house and car insurance companies to find out their policy on what happens at your demise. Will they continue to insure your house and car until they are sold by your family? Talk to a financial adviser or lawyer if you have an IRA investment that you will be leaving to your children. An inherited IRA can be difficult to deal with. They cannot be simply cashed out by your children without paying approximately 25% in taxes. Other inherited money, pensions, stocks and bonds are tax-free, but not IRA’s.

If you have particular belongings that you want to go to certain family members, be sure to write it all down and have a copy stored with your will or your executor. Better yet, give copies to all your family members who will be inheriting. That way, they know your wishes and there are no surprises for them when the time comes. No matter how much you might think your children are sensible and will divide everything up between them, you wouldn’t believe how much people can change when it comes to settling an estate, especially while grieving.

Be sure your family knows your wishes when it comes to your burial arrangements. Do you want a traditional burial in the cemetery? Do you want to be cremated? If so, what do you want done with your ashes? It’s best to have it all down in writing, even better to have it written into your will. When my mother passed away, we went to the funeral home and we were surprised to find that she had already made all the arrangements for her cremation and ashes burial. She had ordered her headstone, and paid for everything. She had even written her own obituary! We didn’t have to agonize over making these types of decisions.

Take a few minutes to sit down and think about who you would want your family to notify – your friends? Doctors? Dentist? Magazine subscriptions? Email contacts? Make a list of all these for your family including names, addresses, phone numbers and emails.

This can be an uncomfortable subject to think about, but you will be doing your family a great favor by helping them to be prepared. You don’t want to be a burden to anyone now; why be a burden once you are gone?