PT Money

Not My Debt. What Do I Do?

What should you do when you have unpaid debt in your name that’s not exactly your debt? I recieved this email from a reader and thought I’d share with you guys (my emphasis added):

“I went to work for a man 5 years ago and he wanted me to have a credit card but the bank couldn’t set it up so that he was on the card and have me, a non-relative, as the secondary on the card, so I got the card in my own name and he was supposed to pay it off each month. He did not do so. It now has a balance of $4800 even though I have not worked for him for 2 years. He rarely makes a payment. I have never made a personal charge or personal payment on this account as this was not to be a personal card, only for doing business in his name. I was the nanny for his three girls for three years.

Before I left his employ we did get him added to the account as someone with equal responsibility but then Bank of America would not release me from the account because I have excellent credit and he has bad credit.

The account goes to collections at the end of November. Bank of America says that they will reduce the account to $2400 if someone pays it off before it goes to collections.

I have all the paperwork and his signatures and copies of letters to and from Bank of America showing his taking responsibility for the debt and letters showing that they won’t release me from the debt because of his credit. My desire if for my husband and I to get a home equity loan on our house (which will be paid off in 6 years) in order to redo the kitchen and the bathrooms.

Will the paperwork I have to back up my story allow someone to loan us the home equity money or will it be a detriment to our attempts to get the loan?

If my husband should unexpectedly pass away will my personal credit be so bad that I will be unable to get a credit card or home equity loan under my name?

Do I: A. Continue to ignore it and ignore the collections calls that may come my way? Suffer with a big ding on my credit for 7 years until it is discharged? or B. Make the deal and pay it off myself to save what is left of my credit even though it is not my debt?”

I’m not a legal expert. But I can tell you that if my company (I work for a large software corporation) didn’t reimburse me for my approved business expenses, I’d file suit immediately. This is their debt that I incurred ONLY because I’m trying to do my job.

So obviously, my first thought is to take the former employer to small claims court. The paperwork you have, types of charges incurred, along with the employer/employee relationship will show that he is responsible. I can’t see a reason that a court wouldn’t hold him solely responsible for the debt.

But court will take some time. And BOA has given you until the end of November to settle. It seems like a good deal to me. I’d go ahead and pay them the $2,400 and then take your former employer to small claims court. Sue him for the charges, damage to your credit, and headache. Then, once you’re awarded the judgement. Send that paperwork to the credit bureaus to clean up the dings to your credit. Then you should be able to get that home equity loan, no problems. 

UPDATE: I recieved some more info from the reader. This may help clear up some of the questions in the comments.

Thanks for letting me know you answered my question on your blog. I have not paid on the debt yet. I think I’ll call BOA again next week. A few weeks ago I spoke to the man I worked for and he told me again that he would take care of it. Empty words.

While I worked for this man he was sued numerous times. He ignores them. He knows this is his debt. He would just not show up in court. So if he would not show up then what happens?

My understanding from your blog is that if I take him to court, I would have legal, court ordered, proof of my story which I would use to fix my credit.

And if he doesn’t show up to court, what happens to the suit? Do I automatically win? Or is it rescheduled and rescheduled?

Fixing my credit would be a good thing. Paying on the debt just makes me mad.

Right now I am in limbo, leaning toward paying the reduced debt. I don’t want to sue him if it is going to be a long drawn out thing because he will not show up to court.

Thanks so much for taking the time to put this on your blog and send me an email. I really appreciate your time.

I advised her to contact her State’s labor board and pick their brains about moving forward. I told her that they’d likely award her the suit if he didn’t show and she had the proof it was his expenses.

What do you guys think? Do you think the court would award her the money? Should she pay the debt using the deal BOA is giving her prior to going to court? Will she ever improve her credit? Should she expect to do so, given that it was her who actually used her own personal credit card?

12 Comments | Posted in » Credit Cards and Credit

The Money Map by Crown Financial Ministries

Below is my interview with Jason Price from One Money Design about the Money Map:

What is the Money Map?

The Money Map is a tool which helps guide your financial journey to a destination where retirement is funded and you’re in a position to be more generous with time and money. It has 6 destinations before the final destination of financial freedom.

For me, the Money Map served as the answer to financial disorganization for our family. We were trying to accomplish a little bit of everything (emergency savings, retirement investing, getting out of debt, saving for kids’ colleges, etc.). The Money Map ha helped us prioritize and focus where we could finally gain forward momentum in obtaining our goals.

How do they compare to Dave Ramsey’s Baby Steps?

Both approaches are similar and are excellent tools. I actually came across the Money Map before the Baby Steps. One notable difference is the approach for building the emergency savings.

After saving $1000 for emergencies, the Baby Steps recommend paying off all debt (except the home mortgage). The Money Map recommends paying off credit card debt first and then saving one month’s living expenses before paying off remaining debts (except the home mortgage).

The Money Map is based on practical advice as are the Baby Steps, but also provides a Biblical foundation to each destination using Bible verses.

For more information, I recently wrote a series of posts comparing both the Baby Steps and Money Map.

Is the Money Map only for Christians?

Crown Financial Ministries is a Christian Ministry, but the ministry and its tools aren’t just for Christians. The practical tools can be applied to anyone’s financial situation. As a Money Map Coach, I’ve had the pleasure of working with people who are and are not Christians.

Have you seen people have success using the Money Map?

Yes, absolutely. I visit with a lot of people who are overwhelmed by debt and don’t know where their money is going each month. The Money Map has helped them focus on the most important priorities of first saving a $1000 for emergencies and then focusing on paying off credit cards. I think what makes it a successful tool is the ability to keep the destinations and goals visible. We have a mini version hanging on our refrigerator.

How did you get involved with Crown Ministries and the Money Map?

Several years ago I decided to become a volunteer budget counselor to help people organize their finances, get out of debt and learn more about what the Bible has to say about money. My wife and I have taken a Crown small group study and were also leaders for a group. A few years ago I decided to go through the Crown Money Map coach training program and extend my reach of helping people with their finances.

How can my readers get their Money Map?

You can purchase a map for $3 from the Crown resource store. You can also search for a free in-person Money Map coach or online coach.

Jason Price is a volunteer financial coach and personal finance blogger at One Money Design. He helps people manage money wisely for everyday life using practical ideas and Biblical financial principles. If you want to get his free money management tips and put your personal finances in order, follow him by Email, Twitter, Facebook, or RSS

7 Comments | Posted in » Organize Your Finances

15 Surprising Places You Can Trim Your Budget

When it’s time to take a serious look at your budget and find places to save and downgrade, you probably already know that all the fun stuff like extra shopping, the good beer and wine, and dinners out are the first to get slashed. But when you’ve already cut back on entertainment and are looking for more ways to save, you’ve got to really analyze every tiny aspect of your bills and spending habits. To keep you from going absolutely insane during this process, just continue reading below to find 15 surprising places you can trim your budget without having to experience a jolting lifestyle change.

1. Interest rates: You might be surprised to learn that banks are sometimes willing to lower your interest rates on loans and credit cards if you just call them up and ask. Don’t ask for something completely unrealistic. Just explain your situation and ask for a lower rate that will make it easier for you to pay them back all their money.

2. Dining out: You don’t have to stop eating out altogether. Just choose one night out a week for enjoying a restaurant meal and choose a couple of appetizers instead of entrees to save money. Order water or sodas instead of alcohol, or if it’s a special occasion, head to a BYOB restaurant that lets you drink your own bottle of wine.

3. Groceries: Buy generic groceries and dry goods, and you can save more than a few dollars, depending on how long your list is. Limit your grocery shopping to one trip per week to avoid overspending and buying things just because you’re craving them.

4. Medicine: Buy generic brand drugs, too for major savings on medicine.

5. Pets: Your pet will be happier just playing with you in the yard than eating snacks or getting a new to every day, so limit how much you spoil your pet.

6. Transportation: Ride your bike, carpool, walk or take the bus a few times a week in place of regular commutes or errand running to save on gas.

7. Bar tab: Order domestic beers on tap and bottom shelf liquor at neighborhood hangouts if you’re just dying to get out. A better option is to buy your own bottle at a liquor store and mix drinks at home.

8. Electricity: Unplug your computer every night and turn up the A/C when you leave your house for major electricity savings that don’t affect your comfort or convenience. Open blinds during the day for natural light.

9. Phone bill: Get on the same plan as your family and cancel any phone lines you don’t need, like a landline. Editor note: I use Skype for my long distance. It’s free for computer to computer calls.

10. Clothing: Buy what you need and try to buy on sale or with an online discount or coupon.

11. Gifts: The next time you see a “buy two get one free” sale, scoop up all three and save them for gifts. Send cards if you just can’t afford to buy a gift for every friend or family member’s birthday – there’s no shame in it.

12. Rent: Negotiate with your landlord, especially if you live in a single family home or a duplex, if he or she raises the rent or you want it lowered because of long running maintenance issues, security problems or a bad economy.

13. Food: Buy items in bulk that you can freeze, and follow portion guides to make food last longer.

14. Exercise: Give up your gym membership and find cheaper ways to exercise: organize an intramural football team, go for a run, or buy a couple of workout DVDs that you can use over and over.

15. Laundry: Hand wash delicate items to lighten your regular loads and hang up clothes to dry instead of wasting electricity or quarters on a dryer.

This post was contributed by Rose Jensen, who writes about online courses. She welcomes your feedback at Rose.Jensen28@yahoo.com.

15 Comments | Posted in » Frugal Living

Writing My First E-book: Saving to Give

This week I’m busy writing my first e-book. I’m really excited about finishing it soon and sharing it with you guys. It’s going to focus around the idea of saving more of your income, so that you can do more giving. The working title is:

Saving to Give: Learn the 4 steps to improve your finances so you can improve the lives of others.

It will be geared toward those of us with an income and a desire to make a positive impact on the world. The book will hopefully be a quick, easy read full of specific action steps you can follow to help you save more and give more. It will also be free.

Get an advanced copy of Saving to Give. I recently soft-launched the PT Money Newsletter. I’m not done setting it all up, but it will one day include exclusive content and giveaways, video tutorials, access to other projects, and more. If you join the free newsletter now, you’ll be the first to check out the e-book, which I’m hoping to launch within a week.

What are your thoughts about the e-book idea? Do you have any interest in reading it? What do you think of the title? The cover art? I’d love to get your feedback this week as I’m finalizing the draft.

Carnivals from last week…

debt redux, taxes, twenties, hacks, pecuniary, frugality, economy

9 Comments | Posted in » Blog, Give Money, How To Save Money

$50 TradeKing Account Opening Bonus

TradeKing is giving $50 to new account holders who open their accounts in October with at least $2,500. Are you into taxable investing? If you’ve ever thought about it, this might be an excuse to get into it.

I’m not necessarily at that point in my life. I have lot’s of tax advantaged investing to do. That being the case, I don’t spend much time researching the best brokerages. But I do see the value in it. And I’m hoping to present some of the best online brokers to you soon. TradeKing will definitely be a part of that list.

Earn the $50 Bonus

To get the $50 bonus, here are the steps you’ll need to make:

1. Open a New TradeKing Account (using the link below) by October 31st, 2009.
2. Fund the account with $2,500 within 30 days of opening.
3. Make a trade within 180 days of the account opening.
4. Get paid $50.

More About TradeKing

• For four years running (2006 – 2009), SmartMoney (the Wall Street Journal Magazine) rated TradeKing one of the top brokers in its annual Broker Survey of US brokers.
• TradeKing was awarded the highest ranking of 4 stars in Barron’s 12th Annual Survey of Best Browser-Based Online Brokers. The survey ranked TradeKing second (out of 15 Web-based brokers) for both “Usability” and “Cost”.

1 Comment | Posted in » Investing and Retirement

Relying Too Much on “Future You”

Your future self just called. They want their money back.

We all have to rely on others from time to time. What are friends and family for, right? So, is relying on your future self the same as asking for a handout from someone else?

I say there’s nothing wrong with doing that occasionally. But when you do it over and over again, you sort of wear out your welcome, don’t you?

The “future you” I’m referring to is of course your future earning capacity. When you go into debt, you are relying on future earnings to pay for things that you want now. And, because of the associated interest payments, you’re asking your future self to pay more than they should.

For things like a home, a car, an education, asking the “future you” for a little help isn’t that bad of an idea. After all, they will all either increase / maintain value or provide some other source of income over time.

Where you get into trouble is when you go into debt to pay for things that don’t maintain value or help produce income. The future you ends up paying money (in the form of high interest) for something that isn’t there anymore, or is outdated and long replaced.

Action step for today: Write your “future self” an email. Say that you’ve started a debt reduction plan and you’ll quit relying on his or her earnings so much.

7 Comments | Posted in » Debt Reduction

Low Score Got You Down? How to Establish or Rebuild Your Credit

I’m no credit expert, but I know there are plenty of wrong ways to go about trying to establish or rebuild your credit. We hear advertisements for these services on the radio all the time. You may even see ads for their services here on my blog (not my choice). With the help of the NFCC though, today I’d like to share some of the best (scam-free) tips for establishing or rebuilding your credit.

There are many good reasons to have a positive credit history. Scoring a good deal on a mortgage or auto loan are the first two that come to mind. Beyond that, it’s nice to have positive credit when applying for a job, an apartment, auto insurance, even cell phone service. It’s hard to escape the need for good credit in our lives. That being the case, you’ll want to put your best foot forward.

Keep in mind, the following advice isn’t meant for those who find themselves stuck making poor choices with their credit. If you are totally clueless about credit and have trouble reeling in your spending, consider reading some Dave Ramsey.

Establish or Rebuild Your Credit

Here are some things you can do to establish or rebuild your credit:

Get Your Credit Report – You can get your credit report from many different places, but only one, annualcreditreport.com, is truly free.

Open Checking and Savings Account – While not tracked on your credit report, lenders may ask about any checking or savings accounts you may have and use it to help your cause in lending decisions.

Aim for a Mix of Credit Account – Establishing different types of credit accounts, both installment (car loans) and revolving (credit card), can improve your credit score.

Consider Using a Co-Signer

“Obtaining a loan in the absence of any credit history can be difficult, sometimes requiring a co-signer to guarantee payment. The loan is usually structured where the primary borrower is expected to make the payment, with the pay history reported in both names. If the borrower defaults, the lender will approach the co-signer, and missed payments will be reflected on both credit files. There is somewhat of a risk to the co-signer, but if handled responsibly, co-signing can be an effective way to help another person obtain and build credit.”

Consider a Secure Credit Card – This is a credit card that is tied to a deposit you’ve made to the bank or credit union.

Take Out a Small Personal Loan – Hook up with a local credit union and open a small personal loan. Pay it off responsibly and look for your score to improve.

What Not to Do

As a bonus, here are some credit fixes that are no-no’s according to the NFCC:

• Don’t Apply for Too Much Credit
• Don’t Fall for the Credit Repair Schemes – Building your credit takes time and is hard work. There are no shortcuts.
• Don’t Pay to Piggyback

The information in this post was provided by the NFCC. If you need financial advice, consider reaching out to an NFCC Member Agency at www.DebtAdvice.org

Carnivals (blog carnivals from last week)

Personal Finance, Money Hacks, Pecuniary Delights, Money Stories

More Personal Finance Links

Is it Possible to Save too Much Money?
My Interview at Automatic Finances
101 Ways to Reduce Your Food Budget
So What If You Make Fun of My Frugality
Creating a Completely Automated Financial Household

9 Comments | Posted in » Credit Cards and Credit

Why I Bought a $500k 20-Year Term Life Insurance Policy and You Should Too

A good term life insurance policy is something most people should have.

I’m sitting here writing a check for my life insurance premium. I’m so glad to have this process over with. As most of my regular readers know I’ve been talking about getting life insurance since the birth of our first child, seven months ago. The process has been a long one. But I’m finally done. The receipt of this payment will seal the deal on a $500,000 20-year term life insurance policy.

When I first started this blog I was clueless about life insurance. It’s just one of those products no one wants to talk about. I started caring about it about the time I found out we were having a baby. Over the past year or so I’ve picked up a lot of good information and formed an opinion about what type and how much life insurance product works best for me. I actually have a small policy through work, but it’s only for a small amount. I knew I needed more.

Why Term Life Insurance?

I decided term life insurance was the way to go (vs whole life insurance or some other product) for the following reasons:

1. I plan to self-insure in the future. Twenty years from now I won’t need life insurance. I’m planning on having at least $500,000 of my own at that point. I’m taking serious steps with my retirement and short-term savings so that as soon as I’m able I can drop life insurance and rely on my own stash.

2. I’m of the opinion that investing and life insurance are two separate things. Why the heck did investing and life insurance ever get involved? Insurance products that promise investing returns are just an expensive waste. Keep investing simple, inexpensive, and separate from your insurance goals.

3. It’s inexpensive now. I was able to get my term life, 20 year, $500k policy for around $45 a month. For what it’s worth, I’m in my mid 30s, a non-smoker, and in good health. My weight was the only thing that took me down from the elite to the standard rates.

4. I don’t have a special needs child. People with special needs children should consider a whole life insurance policy since they may have a dependent for the rest of their lives.

Why 20 Years?

I decided on 20 years vs 25 or 30 because, again, I plan to be self-insured in 20 years. And, I expect all my kids to be close to adulthood by that point. They are why I’m getting life insurance, so it makes sense that I drop the insurance about the time they don’t need me anymore.

Why $500k?

I decided on $500k because that would be enough to replace a good portion of my income. If I passed, my wife would still have to work (which she plans to do anyway), but the extra income would allow her to breath easy and not put our home, her retirement, or our kid’s education at risk. Life insurance is all about replacement of income. But no one says it needs to be 100%. Especially for a couple that already lives well below their means.

Editor’s note: I realize my choice to go without life insurance on my stay-at-home wife is not the best answer for most people.

You Should Buy Life Insurance

As you can tell from my thoughts above, I’m of the belief that purchasing life insurance is a good thing for those who need it. If you aren’t self-insured and you have someone other than yourself dependent on your income (and they will be for some time), then it’s probably wise to get yourself some life insurance. A good term policy can be had for the price of Internet service each month. So if you are reading this blog post, you can likely afford it.

Later this week I’ll share my experience with actually getting the insurance. This includes getting quotes, selecting a company, taking exams, filling out applications, and a lot of waiting…

14 Comments | Posted in » Insurance