Without naming the specific sites (no need to start a flame war!), here are some bits of bad advice we’ve seen around the internet:

1. “Don’t use automatic bill pay.“
The author’s rationale is that you won’t always know about your budget shortfalls if the bills are being paid automatically. Better advice would be to use a financial institution with online banking and be sure to check in monthly or bi-weekly to make sure your bills are getting paid. That way you get the benefit of automatic bill pay and you still are up-to-date on what you’re spending. Automatic bill pay is one of the best tools available to help you improve your credit rating, and shutting it off is a bad overreaction to a minor potential problem.

2. “Don’t pay down your debts, focus instead on saving.“
Long-term debt is always going to be more costly than the earnings from savings. The best advice is to always focus on both paying down debt and contributing to your savings fund. If you must focus on one over the other, aggressively pay down those debts to free up more income for savings. It’s bad advice to do it the other way around.

3. “Don’t buy a house, rent instead.“
The recent housing crisis has turned many financial experts off from homeownership, and that’s too bad. The problem was with using homeownership as a “get-rich-quick” investment. The typical consumer should still think of homeownership as good advice for the long term and an essential part of one’s retirement strategy. If you spend your entire working life paying your landlord’s mortgage payment, then get to retirement and still have to pay rent, you’ll be well behind the retirees who chose homeownership.

4. “Don’t use coupons, don’t follow retailers on Facebook, etc.“
There have always been experts who think coupons do more harm than good. They think coupons lead people to buy products they don’t need (indeed, the whole reason manufacturers and retailers offer them is to get you to try new products). They also complain that using coupons is time consuming, leads to waste, and doesn’t really save money. None of these things is necessarily true. Using coupons wisely will indeed save you money, you just have use some good judgment to know when your coupon purchase is worthwhile. Similarly, following a retailer on Facebook or Twitter can help you know when things go on sale, saving you a lot of money. Not every message they send will be designed to save you money, but if you’re sophisticated enough to follow companies on social networking sites, you should be able to resist messages that urge you to spend recklessly.

There’s plenty of bad advice floating around on the internet, so you should approach everything you hear with healthy skepticism. Here at Springboard, we’ve been helping people pay down their debts and better manage their personal finances for over 38 years. That legacy of trust continues to this day, through this blog and all of our other services.

Photo: magictrax

Springboard wants to educate consumers regarding their borrowing options, and we’d like to highlight three areas they might want to avoid:

• Payday Loans – On the surface, getting the cash you need may seem worth it at any cost. But it’s that cost that can become financially back-breaking. To obtain a payday loan, you write a post-dated check for the amount of the loan plus any fees the lender tacks on. You then receive the amount of money you initially needed to borrow, promising to pay back that amount plus the fees. The term of the typical payday loan is one to two weeks, at which point the lender cashes your post-dated check. Most payday lenders will charge a certain dollar amount per $100 borrowed. For example, they may charge $15 for every $100 you borrow. Thus, if you needed $300 for two weeks until your next paycheck came in; your post-dated check would be for $345. What’s $45 when you desperately need $300? Here’s the catch: that $45 represents an Annual Percentage Rate of 390 percent. You wouldn’t dream of taking out any other type of loan with triple-digit interest. And, if this isn’t bad enough, many consumers cannot repay the loan at term, and end up rolling it over, thus adding on more fees and interest.
• Pawn Shops – People can do several things at pawn shops. They can borrow money by putting up something of value as collateral, they can sell their merchandise outright, or they can buy the merchandise that is for sale at the shop. There are bargains at pawn shops, but only for those buying the merchandise, not for the sellers. Typically, the person pawning the merchandise receives a sum of money (usually nowhere near the true value of the item) which he or she agrees to repay with interest. If the loan is repaid by the end of the term, the merchandise is returned to the owner. If the loan is not repaid, the consumer can renew the loan, or the merchandise is forfeited. What’s the problem? Again, it’s the interest and fees, with APRs typically in the triple-digit range once everything is added in. Further, some studies show that only 60 percent of pawners end up reclaiming their merchandise, thus they have essentially sold an item for cents on the dollar, something they wouldn’t otherwise do.
• Rent-to-Own – A quick trip to the furniture or electronics store could confirm that a new living room set or flat panel TV is out of your price range. Then you notice an ad for similar items with affordable monthly payments. It seems too good to be true, and it is. The problem once again lies in the interest and fees. For instance, if you bought a $200 item and agreed to make weekly payments of $15 for 78 weeks (basically one and one-half years), you’d end up paying $1,170 for that $200 item at an APR of 388 percent. Adding insult to injury, it is likely that you could have purchased the same item at a traditional store for a fraction of the overall cost.

People wonder why anyone would agree to the terms imposed by payday loan companies, pawn shops and rent-to-own businesses. The answer is that consumers who utilize such concerns typically do not qualify for loans from banks or credit unions, and would not be approved for in-store lines of credit. Nonetheless, people need to understand that even though there is always a cost to credit, when that cost becomes unreasonable, the consumer is better off considering other options or doing without.

For help with budgeting or managing your personal finances, check out our free courses right here in the FIT Academy, or talk to a counselor online at no charge.

photo: Thomas Hawk via flickr cc

If you’re not as far along as you’d hoped to be as Financial Literacy month progresses, don’t be discouraged. There’s still time to make a positive difference in your finances and start 2013 in a much better place.

At Springboard, we believe that small changes can yield huge results. As a matter of fact, putting $20 to work for you can improve your entire financial picture. Consider the following and see how you can best utilize $20:

• Debt—Find an extra $20 per week for the remainder of the year, and put it toward debt reduction. Not worth the trouble? Consider this: If you currently owe $1,000 on a credit card, have an Annual Percentage Rate of 18 percent, and are making a minimum monthly payment of 2 percent of balance, even if you never add further charges to the account, you won’t have that $1,000 paid off for 12 years. You don’t want to still be paying for 2012 charges in 2024. Adding that extra $20 per week to your minimum payment cuts your debt in half by the end of this year.
• Saving—If your savings account is low or non-existent, do something about it. After all, it’s not a matter of if the financial emergency will occur, but when. Prepare for the inevitable by socking away $20 per week until the end of the year. When December 31 rolls around, you’ll have $700 in your savings account, a cushion that should see you through most everyday emergencies.
• Holiday Expenses— Remember the old Holiday Accounts where everyone methodically deposited money throughout the year and then drew it out during December to pay cash for their purchases? That idea is due for a comeback. Now is the time to establish your own personal Holiday Account. Find an extra $20 per week and start making out your gift list, as you’ll have $700 to spend. And the best gift of all will be the one that you give to yourself…a debt-free holiday.

Imagine starting off 2013 with debt paid down, savings built up, and no holiday bills in the mailbox. This could be a reality, but it all starts with a commitment from you. If you can’t tackle all three areas, address the one that troubles you most. Odds are that you’ll enjoy moving toward financial stability so much that you’ll make your good habits a permanent part of your life.

If you need help finding an extra $20 per week, creating a realistic budget you can live with, or tackling overwhelming debt, call Springboard at 1-800-431-8157.

Photo: redjar via flickr cc

1. Failure to Prioritize Expenses
2. Failure to Create a Realistic Budget
3. Failure to Plan for the Unexpected
4. Failure to Include Quarterly or Annual Expenses
5. Spending More Money Than You Make

These are crucial elements of a healthy financial life.
Read the whole article at at PersonalFinanceMastery.com, then check out our free online courses like the Power of Paycheck Planning, Budgeting 101, or Budget 911.

Photo: 76657755@N04 via Flickr

1. Pay off high-cost debt
   Chances are your debt is costing you more in interest than a savings account would earn. So the best step you can take toward creating a positive cash flow into savings is to pay off that debt. To see what your debt might really be costing you, check out our minimum payment calculator or the cost of credit calculator.
   To get started on paying off your debt today, talk to one of our certified credit counselors for free.
2. Save for emergencies
   Create an emergency savings fund and contribute to it faithfully. Having a fully funded emergency account could save you from tremendous financial hardship should anything unexpected happen.
3. Participate in a work-related retirement program
   If your employer offers a 401(k) or other retirement program, you should always take full advantage of it. If your employer matches your contributions and you don’t participate, then you’re leaving money on the table that could be accruing interest for years until you retire.
4. Use an automatic transfer from checking to savings
   Using automatic payments from your checking account is a great way to ensure that all of your bills are paid on time and in full. You should include savings in that equation; you may have heard the phrase “pay yourself first,” and an automatic transfer is a good way to do it. If the funds are moved automatically from checking to savings, you are less likely to miss them.
5. Buy a home and pay off the mortgage before you retire
   When we stress homeownership, this is what we’re talking about. Plan for your retirement by working toward full homeownership. Buying a house shouldn’t be an investment that leads to quick profits, but rather a long-term strategy that leaves you mortgage-payment free in your retirement years.

Photo: Newton

This year, February 19-26 is America Saves Week. Springboard is proud to once again be a partner organization in this effort.

What is America Saves Week?
America Saves week is a social media campaign that occurs annually to encourage better saving habits among all Americans. America Saves Week started in 2007 and is organized through the national campaign America Saves. Springboard joins around 2,000 organizations that participate in the Week, in turn reaching millions of people.

Why participate in the Week?
Most Americans today are not saving adequately for retirement, and most lower-income households do not have adequate emergency savings for unexpected expenditures. Our culture sends a message that saving is unimportant, and even undesirable. We have to work together to block out those bad messages and reinforce the idea that saving is vital.

This year’s theme-
This year America Saves Week is encouraging everyone to Set a Goal, Make a Plan, Save Automatically. America Saves provides helpful tips for successful saving, because not everything is always easy done alone.

How do I participate?
Come back here to the FIT Academy every day this week for tips and advice to make your savings goals successful. Also, visit the America Saves website and join; you will receive free subscriptions to the American Saver Newsletter, monthly email newsletters with more savings advice, and access to America Saves’ “Savers Tracking Tool.”

Social Media-
While you’re at it, “like” America Saves on Facebook and tell all your friends about the Week, and follow America Saves on Twitter.

The National Retail Federation estimates that consumers will spend $17.6 billion during this one holiday, or $126 per person, up 8.5 percent from 2011.  “This spending will certainly be a nice boost to the economy,” said Melinda Opperman, senior vice president for Springboard Nonprofit Consumer Credit Management. “Consumers who are already in financial distress, or on the cusp, should not feel compelled to spend, putting their own economic well-being at further risk,” added Opperman.

Springboard suggests that consumers consider the following list of what love is not as they shop for their Valentine:

• Love is not spending more than you can afford on a gift.  Regardless of the motive, being overly generous when money is tight is really no gift at all, to the recipient or the giver.
• Love is not being a pretender.  Honesty, including financial honesty, is key to any relationship.  Don’t pretend that you have money you don’t by playing the big-spender role.
• Love is not making financial decisions with the heart.  Even though emotional spending can give a temporary high, it can also lead to guilt and buyer’s remorse.
• Love is not avoiding the financial realities.  Burying your head in the financial sand and living as if there were no money problems only digs the financial hole deeper.
• Love is not giving a gift that will soon be forgotten.  Most people cannot remember what they received last Valentine’s Day.  Making a purchase simply to have a gift in hand will be equally forgettable and a waste of money.

“Spending irresponsibly is no way to say ‘I love you.’  However, showing that you are financially reliable is a tangible expression of that sentiment. It’s a gift that’s meaningful, always in style, won’t wilt or add pounds,” continued Opperman.

If you need help finding extra money in your budget, consider reaching out to Springboard and asking to speak with a certified financial counselor.  Across the nation, Springboard offers personal financial education and assistance with credit counseling, housing counseling, debt and money management through educational programs and confidential counseling.  Springboard offers financial workbooks, calculators and other helpful resources, which may be accessed and downloaded for free at http://credit.org/.

Photo: pixieclipx

For readers under 30 who didn’t grow up with layaway, it typically means you pick out goods 8-12 weeks before you need them and make regular payments toward their purchase price. The retailer holds the goods for you until they are fully paid for, and then you can take them home. You’ll have to pay a small fee to cover the retailer’s costs, and if you stop making payments or cancel your purchases, there may be an additional cancellation fee.

Is this a good idea? Here are some pros and cons:

Pro: your “loan” is associated with specific goods.

Layaway is like a secured loan; you “borrow” the product you want, and the retailer keeps it while you make payments. If you fail to pay, the retailer has only missed out on the opportunity to sell the product to another buyer. The fees you’ll pay for not following through with layaway will typically be $5-$25.

The products in question are usually holiday gifts, so you know what you’re paying toward and usually have a strong incentive to pay. With credit cards, many purchases, interest charges, and fees are blended together to calculate your total balance. It’s more painful to pay toward a credit card balance than to pay toward the goal of having a happy holiday season.

Con: Minimum purchase sizes mean you might spend more than you needed to.

Retailers have to do a lot of extra work to help you buy things on layaway, so they can’t be expected to offer layaway on for inexpensive purchases. To make the practice worthwhile, there is usually a minimum amount required to make a layaway purchase. That means if you want to purchase a $40 item and the minimum purchase required is $50, you have to find more merchandise to make your total purchase qualify for layaway. (Minimum purchase sizes vary from store to store.)

Pro: It encourages planning ahead.

The very nature of layaway means that the purchaser is planning ahead. This is far preferable to credit card shopping with no thought to how to pay off the balance. You’ll know exactly how much you need to pay toward your total purchase and how long you’ll be paying. All of your financial decisions should be so well thought-out.

Con: Missing payments or cancelling a layaway order can carry fees.

If you back out on a layaway purchase halfway through, you should get most of the money you paid back. You will be responsible for an initial fee, which is usually $5 to $10. Some stores will charge a re-stocking fee as well. Typically the total cancellation costs are $15-$25. Many states cap the total amount a retailer can charge.

Pro: Only certain items can be purchased with layaway.

Layaway is often available only for specific purchases, like holiday-specific goods or big-ticket items. There’s no danger that layaway will become as widespread as credit card debt, and it is less likely to lead you to make unnecessary purchases the way credit cards do.

Con: May be less convenient than traditional shopping.

You have to plan ahead for layaway, so you don’t have the convenience of grabbing gifts at the last minute. And depending on the store, you may not have the convenience of picking up your purchases right away. If the retailer stores goods off-site, you’ll have to give them a few days’ notice before you pick up your purchases.

Pro: Your goods are fully paid for before you get them.

Anything you buy with layaway is fully owned by you before you get it. This stands in stark contrast to credit cards, where you get the goods up front and then make payments. The incentive to pay is much less, which is one reason why credit card balances last so long and run up so much in interest charges.

Con: Buying early means missing out on holiday sales prices.

If you put something on layaway at the beginning of the holiday season, it may go on sale as the holidays draw near. Many retailers will price match your layaway purchases and give you the new, lower price, but you need to read the fine print and know the retailer’s policy in these circumstance.

Photo: nateone

Identity Theft Prevention Guide

Uncovering Identity Theft

Our focus in this series is preventing ID theft, not recovering after the fact (that’s a topic for our next series). However, sometimes ID theft prevention means preventing more damage after a thief has struck.

Of course, you’ll have to know that you’ve been victimized in order to take action, and today we’re going to talk about how to determine whether your ID has been compromised.

The most important thing you can do in this regard is to order your free annual credit reports regularly. You’re entitled to a copy of all three annually, but you don’t have to get them all at once. That means you can spread out your requests and get a different free credit report every four months.

NOTE: don’t fall for any free credit report scams. Monthly monitoring services are an unnecessary expense for most people. Simply visit https://www.annualcreditreport.com and use their online form to get access to your free credit report. Do NOT buy your credit score at this site, as you won’t be sold your true FICO Score, but a worthless alternative.

Look over your credit report for any accounts that are unfamiliar. You may also see if your Social Security Number is being used illegally for employment purposes.

Another important step to take is to take advantage of online banking. Chances are your financial institution has a web site that will let you log in and see all of your transactions. If you haven’t done so yet, set up a login with a secure password with your bank and all of your credit card accounts. Get in the habit of checking in regularly to make sure no strange activity is going on. If you make this process part of your routine, you’ll be able to log in quickly and see what’s happening with all your accounts. It doesn’t have to be any more time consuming or complicated than checking your email.

You can also get a copy of your ChexSystems report (www.chexhelp.com) to make sure no one has opened a fraudulent bank account in your name.

If you are in the habit of checking your account statements, credit reports, and online account activity regularly, you should be able to spot suspicious activity very quickly. This will help you take action before too much damage is done to your good name.

For more information, download our free eBook, “ID Theft: Protecting and Restoring Your Good Name,” or check out our online course on Identity Theft Prevention, available here in our FIT Academy. For more information about National Protect Your Identity Week (NPYIW) or to find a local PYIW event near you, visit ProtectYourIDNow.org.

Identity Theft Prevention Guide

Protecting your personal data

Identity Theft is a broad category, including all kinds of crime that involve a thief using your personal data in a deceptive way. This can include using your credit card, your checking account, or even providing your identity for non-monetary reasons.

So when we talk about preventing Identity Theft, we start with protecting your identity. It’s not just a question of your credit cards or blank checks; you must safeguard all the data a thief could use to compromise your identity.

In this series on Identity Theft Prevention, we’ll talk about different ways thieves operate, and how to thwart them. There’s no way to be 100% safe, since an identity thief could strike at a business or financial institution and gain access to your information there. The best you can do is to be secure in your own person, residence, and workplace. We’ll help you make sure your identity is as protected as you can make it.

To start, understand the different ways criminals gain access to your data. Many people still think online hacking is where most identities are stolen, but in reality, thieves are more likely to steal your identity from your mailbox or your trash. They can also get access to your info by simply standing in the right place at the right time and watching you enter a PIN or password into a computer or your cell phone.

The main information you need to protect is your Social Security Number and any account numbers you may have with credit cards or financial institutions. That may sound like an easy task, but there is a lot of additional data that can lead a thief to more sensitive info. If they can get your cell phone or laptop computer, they may be able to get to those important account numbers. So protecting your identity means protecting any avenue a thief might use to get to your ID numbers or financial accounts.

Even things like your resume might contain enough information for a thief to use to compromise your identity. Don’t share anything you don’t have to, whether it’s online or in a store or restaurant. We’ll talk about some specific steps to take to protect yourself, but it’s important that your general mindset be one of caution when dealing with your personal information.

For more information, download our free eBook, “ID Theft: Protecting and Restoring Your Good Name,” or check out our online course on Identity Theft Prevention, available here in our FIT Academy. For more information about National Protect Your Identity Week (NPYIW) or to find a local PYIW event near you, visit ProtectYourIDNow.org.