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Tuesday, December 15th, 2009

Shakira: I Made It Because of Bankruptcy

In a recent report from CNNWorld, Columbian-born pop singer Shakira declares that her family’s bankruptcy when she was a child motivated her to become the successful, world-famous pop star she is today.

In addition to having recorded record-breaking number of worldwide hits and a wildly successful career as a musical entertainer, Shakira founded the Barefoot Foundation, a charity that helps promote and fund education for poor children in Columbia, where she grew up.

Bankruptcy as a New Beginning

In the article, Sharkia shares her family's experience with debt, including having to sell all of their furniture. However, her parents wanted their young daughter to know that bankruptcy wasn't the worst position to be in. Shakira’s experience provides one example about what bankruptcy can and cannot do.

  • It IS a chance to start over. Those of us who have or have had problems with debt don’t need to be shamed or scolded. We know we’ve messed up. Bankruptcy offers us a chance for to start from the beginning, without the onerous weight of debt holding us back.
  • It IS NOT a life ruiner. Bankruptcy doesn’t ruin people’s lives. It provides a solution to an overwhelming problem. Yes, your credit will be temporarily hurt by a bankruptcy filing. But it—and you—can recover, assuming you heed the advice in the financial management course and develop a new relationship with money and credit.
  • It IS a major step. Shakira tells of her parents' bankruptcy as a life-changing event. And for many people, it is. Filing bankruptcy means you have to admit you’re over your head in debt and you need help getting out. But it also means you’re ready to start again and learn from your mistakes.
  • It IS NOT a scarlet letter. As Shakira shows (as well as other celebs including Larry King, Cyndi Lauper, and Abraham Lincoln), bankruptcy does not brand you for life. In fact, if you’ve got the right attitude, it can provide motivation to improve your finances and strive to reach other goals, as well.

True, most of us won’t become Shakiras or Abe Lincolns. But the lesson here is valuable just the same: debt does not define us unless we let it. So, instead of looking at your financial difficulties as a dead end, see them as an opportunity to start over and reinvent yourself. I know it’s not easy, but it’s also not impossible.

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Posted in Setting the Record Straight about Bankruptcy | 2 Comments »

Friday, November 27th, 2009

True Bargains: What Makes a ‘Good Deal’

While looking for low prices is an important part of financial responsibility, it’s only one component: getting the value you need is the other half. For example, buying the cheapest brand of conditioner may seem frugal, but if you have to use twice as much as any other brand, it may end up costing just as much.

Value Vs. Price

The "value" of an item is subjective, while price is relatively fixed. Two people may see the same item as having different values even when the price is the same.

  • Value: How much an item is worth to a buyer/seller (usually determined by how much you need or want an item).
  • Price: How many dollars an item costs. Dollars are sort of a generic value unit we’ve all agreed upon.

In many cases, value and price line up pretty well, and merchants will try to keep the two in line. Value really shoots up when a seller is asking for less than you’re willing to pay.

Maximizing Value

So how can you make sure you spend your dollars to maximize their value? Here are some tips.

  • Buy second-hand: Thrift stores, flea markets and garage sales are all excellent places to find good values because they’re filled with items that haven’t declined in intrinsic worth but whose owners grew tired of them. Gently used items are often steeply discounted and still perfectly functional (but avoid super-cheap items that are simply junk).
  • Spread the word: Let your friends and family members know what you’re looking for – someone may be trying to “get rid of” exactly what you need. When you’re in a store, tell the sales associate what you’re looking for. Ask for advice and find out if any discounts might be available.
  • Shop ahead & behind: If you know you’ll need a new pair of sneakers once a year, keep your eyes peeled at all times for bargains – many staples won’t “go bad” from sitting around a while. Take advantage of end-of-season sales to stock up for the next year (think Halloween decorations on November 1st).
  • Use the Internet: Craigslist, eBay, Freecycling, Amazon and other websites often offer significant discounts from retail prices. But if you don’t want to buy online or don’t like to pay for shipping, you can still use the Internet to get an idea of what various vendors charge for the item in question (and use that knowledge to bargain).

If you start thinking in terms of value, you'll be able to save money while getting your true dollar's worth—particularly important if you're struggling with debt or rebuilding your finances after bankruptcy.

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Posted in Financial Literacy | 2 Comments »

Tuesday, July 7th, 2009

Choosing a Lender to Rebuild Credit After Filing Bankruptcy

If you’re trying to build or rebuild your credit after bankruptcy, you probably know that using credit responsibly is your primary goal.

Here’s how to set yourself up for success in borrowing.

Choose Affordable Payments: Before signing loan papers or credit card agreements, you’ll need to do a four-part math problem:

  1. Check your budget. Determine exactly how much money you have left over each month (no generalizing!).
  2. Calculate monthly payments for your loan. Again, make sure you know exactly what you can expect from the life of your loan – no assuming, no generalizing.
  3. Compare the two numbers. If your leftover money is less than the monthly payments, you cannot afford the loan. Assuming you’ll get a raise or a bonus is dangerous, especially in this economy.
  4. Leave a cushion. Remember: part of financial stability is saving money for unexpected emergencies, so if you’d have to spend all your income to cover the loan, you can’t afford it.

Beware of Hidden Costs: Make sure you read the entirety of a loan or credit card agreement before signing it.

If you’re not comfortable interpreting legalese, enlist the help of a bankruptcy attorney. Be on the lookout for the following.

  • Fees & costs associated with the account. Yearly charges, overdraft charges, late charges, early payment charges and others add up quickly and can cost more than you realize.
  • Fluctuating interest rates. Credit card issuers are infamous for advertising low interest rates, but not the fact that many such rates last for only a short period. Make sure you understand what events could lead to your paying more in interest (missed payments, going over your limit, etc.).

Avoid Common Predatory Practices: Unfortunately, some lenders will count on your ignorance about lending practices to trick you into paying more than you should.

Watch out for common schemes like the bait and switch, equity stripping, loan packing and loan flipping.

Bottom Line: There’s No Rush

Many people are eager to reestablish credit after a bankruptcy filing, but don’t let this drive to improve your finances lead to poor borrowing decisions.

Right after filing bankruptcy, you can expect to pay a bit more in interest rates and to qualify for lower loan amounts.

But, if the offers you receive seem too expensive, wait a while.

With a year or so of strong credit practices under your belt, you should be able to get more affordable loans – and improve your chances of improving your credit and staying debt-free.

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Posted in Post-Bankruptcy Debtor Education | No Comments »