We all take steps to lower our own personal debt. But what steps are you taking (or willing to take for that matter) to lower America’s debt?

A recent article from CNN Money reports on a rarely mentioned law passed in 1961 that allows individual citizens to make contributions toward lowering the national debt.

Here’s how it works.

National Debt Vs. National Deficit

As the web site for the Public Debt (www.publicdebt.treas.gov) explains, there is a difference between national deficit and national debt.

• Deficit refers to the annual difference between money the government collects in taxes (i.e. government revenue) and the amount it spends. In other words, the deficit is contained in yearly chunks.
• Debt refers to the accumulated deficits plus any surplus spending not mentioned in a year’s budget but spent by the government. In other words, debt builds up as the years go by (assuming the government is running a deficit).

Thanks to heavy government spending to help get the nation out of the current recession, our national debt and current deficit are both considerable – in fact, our country’s current debt level is $12 trillion – and it will get bigger before it gets smaller.

Giving to Uncle Sam

So, it seems, concerned citizens can make tax-deductible payments in any amount to help ease the nation’s debt. Currently, Americans have two options:

• Send it with your tax return: You can send a check when you next mail your tax returns.
• Send it today: Or you can mail it to the address provided on the aforementioned web site.

Do Citizens Actually Lower America’s Debt?

You may be wondering whether this program actually yields the government any earnings. Sources indicate that, in fact, it does – but very little.

Donations to date this year, for example, have reportedly totaled a little more than $3 million – hardly a drop in the debt bucket, really.

In fact, the best feature of this law may be its potential for stopping the complaints of citizens. While few of us are thrilled about the prospect of covering the government’s expenses in years to come, even fewer of us enjoy listening to others gripe about this phenomenon.

So bring up this law next time. Tell whiners to send a check.

Additional Resources

2009 Tax Code (Check out p. 91)

I took my car into the shop this week for what I thought was a minor problem and walked away with more than $1,200 in repairs. Luckily, I had emergency money to cover them, but the experience got me thinking: do other people have plans in place for when unexpected expenses arise?

If you don’t, here are some tips to help you develop one.

Step One: Imagine the Worst Case Scenario

I don’t mean that in a sinister, masochistic way – imagining the worst that could go wrong in the various areas of your life will allow you to prepare for such occurrences. It also helps to think of worst-case scenarios when you don’t actually have to deal with them, because you can reason more clearly.

Here’s the list I came up with, and initial steps to take if they happen:

• Major car repairs: Consult at least two mechanics. Consider ordering parts myself. Run everything by my dad (or an auto expert you know and trust).
• Job loss: Network (start doing this now). Sign up with career websites. Keep résumé up to date. Maintain positive relationship with boss (for recommendation letters).
• Serious illness or injury: Maintain medical insurance. Understand employer’s policies for paid and unpaid leave.
• House damage (from a storm, flood, fire, etc.): Update and understand insurance policies. Make sure I’m covered for disasters likely in my area.
• Car accident: Wear seatbelt. Maintain car’s safety with regular checkups. Review insurance policy.
• Serious theft: Install alarm system. Keep all credit card and bank numbers on file (along with phone numbers for issuers) to cancel them if necessary.
• Family member’s request for financial help: Be prepared to say no.

The Elephant (Not) on the List: Money

Naturally, every one of these emergencies would require at least a little financial investment. So that’s step two of the Emergency Plan: save money. If you aren’t much of a saver, read this page on why saving money important it is.

And, once you’ve been converted, take some time to estimate the costs each of your worst case scenarios. If you have a choice about how much you spend (could you live without a car? How much can you afford to give to a relative?), set a limit while you’re levelheaded. That way, if you’re ever forced to make a tough decision, you’ll have some numbers to look back on.

You may even want to open a separate savings account for emergencies, so that you’re never tempted by that money.

Additional Resources

Emergency Funds: Getting Started (PDF)

Savings Fitness (Personal Financial Planning Guide) (PDF)

While both men and women struggle with money and debt, some studies suggest that the ways in which the sexes deal with financial matters vary considerably. And understanding how we interact with money may help us improve our relationship.

Classic Financial Mistakes Women Make

A recent Forbes article outlines some financial behaviors many women engage in – without realizing how harmful they may be to us.

• Shopping away the stress: Whether it takes the form of hitting the mall to blow off steam or “treating yourself” to a small purchase after a difficult day, emotional spending can have disastrous effects on your budget (see the study below). Take notice of the reasons you shop – and see if you can’t replace a buying session with a good talk.
• Nurturing & nesting: Our emotional relationship to money goes beyond impulse buying – research suggests that, because women are often in charge of decorating the home, we tend to link buying “stuff” with taking care of our families. Plus, we may be more likely to lend money to friends and family as a way of nurturing them.
• Losing track of spending: At some income levels, you don’t have to worry about a lunch date here and a new sweater there – but for most of us, small purchases add up quickly. Your credit card bill should not be the first time you realize exactly how many “little things” you bought in a month.
• Not being a “money person”: While most women handle day-to-day household budgets with no problem, many of us fail to pay enough attention to long-term money matters, like investing and saving for retirement.
• Ignoring the wage gap: New numbers from the Census Bureau show that women earn just 77 percent of what their male counterparts do, but it seems many women don’t acknowledge this pay gap. You can begin to correct this shortfall by researching the average salary for work you do and approaching your boss if your salary doesn’t measure up.
• Thinking like a “princess”: Even if Cinderella and Snow White were your favorites as a child, it’s important to recognize now that no man will come along and “rescue” you from your current life – financially or in any other way. Aspiring to a fairytale life will leave you disappointed, could hamper your sense of self-worth as an earner and achiever, and leave you with so much debt you end up filing bankruptcy.

The good news is that none of these flaws has to be a permanent fixture of femininity. By understanding how we behave toward money, we can help ourselves improve our financial smarts and take steps toward better relationships with money.

Additional Resources

Study – Compulsive Buying: A Phenomenological Exploration (PDF)

One unsurprising effect of the recession, reported by a few weeks ago, is that 25 percent of American employers have eliminated matching contributions to 401(k) retirement plans for their employees.

Before money got so tight, many employers offered matching contributions to retirement accounts as a way to incentivize their workers to sock money away for the future.

But, in an effort to stay afloat in tough times, a quarter of such employers have apparently stopped that particular benefit.

Obama’s Plan to Help Us Save

According to CNNMoney, though, there may be relief for those of us who aren’t so good at planning for the future.

Here’s why the current administration thinks we need retirement reform:

• Though IRAs and 401(k) savings plans were introduced in the 1970s, only about 57.7 percent of American workers have a financial plan for retirement besides savings accounts and Social Security.
• Fifty percent of U.S. workers older than 55 have saved less than $50,000 for their golden years.
• Thanks to the current weakness in the stock market, the value of the average 401(k) account for those between 55 and 64 dropped between 10 and 20 percent.

These numbers are troubling, especially because Social Security is unlikely to sustain all the Baby Boomers and subsequent generations who may depend on it after they stop working.

Automatic Retirement Savings from Your Salary

Obama has proposed a plan that would affect employers who don’t currently offer a 401(k) or similar retirement plan to their workers.

Basically, the program works like this:

1. Employers open Individual Retirement Accounts for workers. Employers without a 401(k) plan would be required to automatically open an IRA for each employee.
2. Direct deposits from employee pay would contribute to the IRA. Without employees having to consciously decide whether or not to save for retirement, the program would allow direct deposits to build up retirement savings.
3. Employees who don’t want the benefit could opt out. Any worker who preferred not to save money for retirement in an IRA could opt out of the program.

The thinking behind this program is that more people will save if the process is automatic, which will mean fewer Americans will need to depend on federally-funded Social Security when they retire.

Praise and Criticism

Naturally, not everyone is on board with this plan.

Critics believe the move would be too paternalistic, amounting to a “nanny state.”

But supporters see the proposal as an excellent way to encourage more widespread retirement savings for a nation that struggles with putting away money for any purpose. It may not be as fun, but saving can help you stay out of bankruptcy.

In these tough economic times, everyone can use a little financial advice.

I scoured the Web looking for blogs that offered solid, helpful financial advice and tools. I received submissions from readers and bloggers across the country.

Below is my careful selection of the “Debtress’ Best,” 100 financial blogs to help you live debt free.

The blogs are broken down into five categories:

• Advice and Insight
• News & Analysis
• Share the Journey
• Start Investing
• Ways to Save

Use these choice blogs to help you on your personal journey to get out of debt, stay out of debt and live a financially independent life!

(more…)

When gas prices plummeted last fall nobody wanted to believe they’d creep up again, but last time I fueled up, I couldn’t help but notice the increase.

Luckily, there are ways to stretch your gas dollars and help the environment – without trading in your minivan for a Prius (because who can afford that right now?!).

Here’s a compilation of tips I’ve scoured from the Web that will help you get the most mileage out of your summer dollar without filing bankruptcy:

• Plan before leaving home. Restarting your car to run several short errands can use up twice as much gas as taking care of business in one run. So plot out what needs to get done and do it all at once.
• Consider the alternatives. Got a neighbor who needs stamps too? Try carpooling to the post office – some cities even have Web sites devoted to this fuel-saving technique. And why not combine shorter errands with a workout? Walk or bike when possible (and use NO fuel!).
• Drive like Gramps. I used to be a fast driver, but I started expressway driving between 55 and 65 when I heard how much gas (and money) it saves.
• Go gentle into that good night. And day. Braking and accelerating “gently” can improve city gas mileage by up to five percent.
• Take advantage of cruise control. If you’re on the highway, cruise control can improve gas efficiency. And if you’re in a major backup or waiting for someone, turn your car off – it’ll save money and lower pollution.
• Put air in your tires. This is so easy to do and can improve your gas mileage by about three percent. If you don’t have a tire pressure gauge, ask a gas station attendant for help.
• Know thy tank. Check out your car’s owner manual for details on fueling up: many cars get no mileage benefits from using more expensive, higher-octane gasoline. And avoid gadgets that promise to improve your mileage. The EPA has found that most are shams.
• Take a load off. Or rather, take a load out. Remove any extra weight from your back seat, trunk and roof. Extra weight in a car can decrease fuel efficiency.
• Don’t skimp on maintenance. Regular oil changes and filter replacements are essential to your car’s fuel efficiency and longevity. Clean filters can improve gas mileage by up to ten percent.
• Buy efficient. If you are in the market for a new car, consider fuel-efficient models. Two birds: these cars will save you money in the long run and help our planet.

Safe summer travels, folks!

The collapse of the housing market and the subsequent recession have left many experts hollering for improvements in financial literacy among Americans.

As many of us know, it’s never too early to introduce our children to healthy financial habits – but that doesn’t mean we know how.

Saving Activities for the Whole Family

A recent article on msnbc.com discussed the benefits of cashing in coins for “real” money – and it suggested getting children involved.

Here are some tips for getting your kids interested in – and knowledgeable about – saving money.

Gather loose change. Encourage children to collect any coins they see on the ground or get from transactions. Designate a place at home where everyone can throw this change.

Coin saving can be fun because many people consider change to be “throwaway” money and never total it to see how much they have.

You may even want to incentivize your childrens’ savings by matching any coin amount they deposit in their accounts.

Be careful, though, about using automated coin machines, because some charge significant fees (as much as nine percent) to transfer your money to paper.

Count and roll. Every so often, work as a family to roll coins together. This can help your kids learn about counting and discover how little amounts add up over time.

Head to the bank. This lesson might be most effective if you let your kids open their own savings accounts. That way, they have a personal stake in what and how they save. You can encourage your kids to save up for major purchases or even suggest putting the money toward college.

Other Recession-Friendly Change Games

Even if you choose not to open a change-based savings account, you and your family can make the most of metal money lying around the house.

• Have a grocery store challenge: Set a limit for one night’s dinner (or one week’s groceries, depending on how much change you have around): restrict yourself to the amount of change you have in the house. Encourage your kids to comparison shop and try new foods to meet the financial limit.
• Start penny wars: Choose two (or more) charities and label jars with their names. Collect coins in the jars. At the end of the month, see whose jar has more – and donate all the money to that organization.
• Make a “luxury” change budget: Collect household change as a family and decide on a goal (ice cream treat, night at the movies, etc.).

When you save enough money, celebrate by treating yourself. This helps your kids learn that certain activities are for special occasions and cost money. Hopefully, these lessons will stick and no one in your family will need to bankruptcy.

Hello fellow financial bloggers!

I’m now accepting submissions for my 100 First-Class Financial Blogs list.

We blog for the people and for their finances, right? Well, I’m compiling this list so folks can find quality financial info in a flash.

This top 100 list will be promoted throughout the social media sphere so you can extend your blog’s reach.

For consideration to be named as a top 100 First-Class Financial Blog, please e-mail me (thedebtress at totalattorneys.com) the following details by Friday, May 29, 2009 at 5 p.m. CST:

• The name of your blog & a link to it
• A description of your blog (200 words or less)
• Why you rock in 12 words or less

Together, we can help folks rise out of this recession before they file bankruptcy.

NOTICE: Any entrants chosen will be listed at the discretion of TotalBankruptcy, Inc. and its affiliates. Those listed (i) agree to be bound by the decisions of the judges and/or TotalBankruptcy, Inc., (ii) represent and warrant that they are the sole creator and owner of the blogs submitted by them, (iii) agree that The Debtress/ TotalBankruptcy, Inc. may publish the names of their blogs without further compensation to the entrant, and (iv) agree that no claim relating to damages or losses shall be asserted against TotalBankruptcy, Inc. or any of its affiliates. TotalBankruptcy, Inc. makes no warranty, guaranty or representation of any kind concerning this contest in general.

Once upon a time, when we overdrew an account, our banks would charge a small Not Sufficient Funds (NSF) fee to deter us from repeat episodes.

But a study from the Center for Responsible Lending found that today, 69 percent of overdraft charges fall into the category of “abusive overdraft loans.”

This article explains the problem in detail, but here’s the short version of why this makes me so mad.

Excessive Costs

Most banks label abusive overdraft loans (A.O.L.s) as “fees,” meaning they don’t explain the charges in terms of interest. But…

• On average, every dollar you spend that leads to an A.O.L. costs $1.26 in charges – that translates to a 126 percent interest rate!
• Most banks reserve the right to manipulate the order in which they calculate your expenditures. So, if you make several small purchases throughout the day and one big one that puts you over your limit, they can calculate the big one first and charge you an overdraft fee for every other transaction that day.
• In 2004, new banking regulations allowed for checks you write to clear faster, meaning that money can fly out of your account more rapidly than ever.
• Banks are legally allowed several days to process any deposits you make to your account, even though that time is usually not needed nowadays, when most transactions are digital. This can mean that money leaves your account much faster than it enters.
• Many debit cards do not alert you at the time of purchase if you’re about to go over your limit – the bank will “cover” you and then charge you an A.O.L. rather than give you the chance to cancel a transaction.

Protect Your Money

So what’s a money-savvy lady supposed to do?

Ask for quicker deposits. Sometimes, just calling your bank to request faster deposits will get the job done – many banks wait the maximum amount of time allowed unless you speak up.

Link checking & savings accounts. Many banks offer connected accounts so if you go over your limit, your own money can cover you.

Read the fine print. Make sure you know what your bank account agreement says, and question anything you don’t think is right (like processing charges in an order other than the one you made them in).

Ask for alerts. Some banks will let you know if you’re about to overdraw account – ask yours for a service like this!

I can think of much better ways to spend my hard-earned money than abusive overdraft loans, and I’m sure you can, too. Hopefully, this will help you avoid them.

It’s important to minimize the amount you spend on fees and penalties. These are the financial equivalent of burning money. Keeping these in check can help you avoid getting caught in a dangerous cycle that can lead to filing bankruptcy.

Are you living paycheck to paycheck or just struggling to make it each month?

Don’t make risky moves when you’re finances are vulnerable. Below are some common mistakes people make when they’re scrunched for cash:

Tapping your retirement account: Although that big chunk of money may be tempting, resist the urge to take money out. Many withdrawals from retirement accounts are heavily taxed, which means you’ll lose serious long-term money.

Ending retirement account contributions to “save” money: If your employer matches your contributions, failing to put money away in a retirement account means you’re essentially giving yourself a pay cut. Not pretty, huh?

Taking out a payday loan: The promise of instant cash may seem appealing, but think twice before walking into a payday lender or a cash advance store. These short-term loans typically come with sky-high interest rates and can lead to devastating cycles of debt .

Getting a credit card cash advance: Like payday loans, these can come with obscene interest rates and many cash advance offers come with your regular bill. Often, interest rate and fee information appear in tiny print, so you’re unlikely to realize how much a few extra dollars is costing you.

So What Should You Do if You Need Cash to Pay Bills?

Consider borrowing from a friend. If you’re in need of emergency cash, a friend or family member may be able to lend you cash to get by.

But be careful—if you’re experiencing a more serious financial situation, like you owe a lot of debt or you’ve recently lost your job, it can be dangerous to your relationships to borrow if you can’t pay them back or will have to keep asking them for help.

Consider filing bankruptcy. If you’re truly unable to make ends meet, bankruptcy may offer you the breathing room you need.

If you file for bankruptcy, you may be able to protect your retirement account while getting the rest of your finances back on track. A bankruptcy lawyer can help you better consider this option.