This is only half true.  Banks tend to turn people away based on their credit score alone so, if you claim bankruptcy, many banks will not want to help you.  Many Credit Unions will still lend to those that have claimed bankruptcy.  So first lets start with a little background information on credit unions:

Credit Unions are non profit.  This means that they do not make any profit for themselves, and instead give all profits back to the members in the form of lower interest rates on loans and higher interest rates on accounts.  Credit unions care about their members, and do not base whether or not to help the member on the credit score alone.  They realize that bad things happen to good people and want to fully understand the situation in order to make a more informed decision. 

Though bankruptcy is never a good option, sometimes it is the only option.  If you have filed BK like so many others right now start by off obtaining a pledged visa or share secured loan.  The pledged visa is where you give the credit union the dollar amount of the limit you want, plus one hundred dollars, and put it on hold in a savings in your own name.  For instance, if Kelly is coming in to get a pledge visa with a 300 dollar limit she would put 400 dollars into a savings account and the credit union would give her a visa. This lowers the risk for the credit union but allows her to increase her credit!!  

The share secured loan works the  same way only minus the extra 100 dollars. In this instance if Kelly wanted a 300 dollar share secured loan she would put 300 in an account for her while she paid down the loan. 

Both of these options will help you to bring up your credit score to prove to your credit union that you want to pay them.  By doing loans and visas like these you are building a great relationship with your credit union and will be able to obtain more loans and a visa without the money pledged in the future.

So the moral of the story:  Go to credit unions first because they care.  They care about your situation, and they care about what happens to you.

“I was setting up my budget the other day and came up with a negative balance. This does not include any groceries or household items we may need. What do you do when the money you get in is not enough to cover the bills?”

This is a difficult situation.  Whether you are a college student or living on your own or have a family, it’s hard when you are struggling just to make ends meet.  It is an obvious fact that we have to eat to survive, and if you don’t have enough to cover the bills and feed yourself, then things have to go. When I was younger and told my parents I needed something at the store, my mom would always say “Do you need it, or do you just want it?” Try saying this to yourself when you put your budget together. You can try dropping unnecessary bills, such as cable, internet, phone, etc. These are considered privileges, and are not necessary for your survival.  If you have already gotten rid of these I would say you have a couple options.

Option one is to get a second job to bring in more income. Working a night job just a couple days a week can really help bring in that necessary cash for the bills and food.

Option two is to choose what bills need to be paid and pay those. Bills such as your car and house should be the first to be paid. Below are some tips to cut down on some spending.

1. Shop at Goodwill.  Shopping at Goodwill for clothes can really cut down as well. Especially with the new Goodwill stores, they sell great clothes for cheap!  If you don’t look Goodwill, you can also try Meijers or Walmart.

2. Visit Angel Food Ministries for food.   Angel Food Ministries is a fantastic organization made to provide food to those who are struggling financially. Here you can get an entire box of food for around $25.00. They are great prices and are a great way to cut down some money.  Find a location near you at angelfoodministries.com. 

3. Grow your own garden.  This can really help to cut down on your grocery costs. The garden takes a little money to start, but then you have fresh fruit and veggies all summer long with no cost to you. If you don’t have money for groceries why not make a nice garden salad for dinner?

4. Go to the resource center in Flint.  This is a great place to find any information you may need.  For instance, this is where you would go if you need to find some food giveaways or help with prescriptions!

5. Visit Medco for ordering prescriptions.  Medco is a company where you can order your prescriptions online at a cheaper rate and they will be sent right to your home. Try getting generic prescriptions as well to help cut the costs.

6. Visit craigslist for most anything.  Here you can find a ton of free things that people want to just get rid of. If you pick them up, you get them for free!

7.  This last one most college students are well known for! Eat cheap.  Eat things like Ramon Noodles and Macaroni and Cheese to try to lower those grocery bills!  You can also try using coupons; If you have the time, these are a great way to save money on your food.

Most of this is just self discipline, but there are a few ways to get around this.  At ELGA we have a fairly new account called the save to win account!  This is a great way to put the money away because it’s like a CD, in that you cannot touch your money for a year without facing penalty charges.  This is a great way to earn a little more interest and save up your money.  Try putting on an automatic transfer, and you can save your money right when your paycheck comes in before you even get a chance to spend it!  Another great account to use is our Christmas club.  The way this account works, is you put money in the account all year long and then on November 1^st the money is transferred into your checking account to go Christmas shopping.  I know for myself every year Christmas time is the hardest time because I am horrible about putting money away for this!  This is another account where you can’t touch your money, but it sure is nice to get around Christmas time and have all your Christmas money already saved up to buy your presents. 

Another great way is to use an online savings account such as ING.  This is an online savings account that you can transfer money into and out of.  It does however take a couple days to get your money transferred back to ELGA, which will not allow you to use the money for those spontaneous events. 

Using the envelope method is good for saving money.  Make envelopes for all of your expenses like gas, grocery shopping, pocket money, and so on.  The envelope for pocket money will be all you’re allowed to have for that paycheck, so when it’s gone, it’s gone. This gets you away from using your debit card and transferring money from your savings to your checking to cover your expenses!  When the envelope is gone, you’re out of money.

So I put out a challenge to my readers:  Try saying no to one money costing event or item this week.  Tell someone the truth, that you simply do not want to spend the money right now.  No excuses, just the truth.   What did he/she say in reply?

This will be difficult, but it will be worth it.  Maybe you have someone over for dinner at the house instead of going out or get a movie from the library instead of going to the movies.

One thing I realized lately:  Everybody is in the same position right now.  In this economy the majority of people are not affluent and everybody is striving to save money.  By standing up and saying you want to do something cost free you may find this even to be a relief to your friend!

Honesty really is the best policy, and many times by standing up and being a leader and saying no, you will find that others will stand with you with relief, no judgement, and no embarrassment.  This does not only help you, but it helps many people in the same position that are scared to say they do not want to spend money.  I encourage you to be a leader.

Question:  ”I’ve heard about “secured” credit cards – where you basically pre-pay the amount of your “credit card” limit – surely your use of this type of card is evident on your credit report, and the advantage of having made your payments wouldn’t carry the same weight as it would had you kept up with monthly payments on a regular credit card?”

“What are the advantages? Do these types of cards exist?”

Answer:  Yes these absolutely do exist and in many cases are a VERY good way to help your credit score! The way these cards work is you decide on the balance of the card and give that to the bank/credit union. They then put this money on hold in a savings account in your name and give you a credit card to use. Some places require you to put a little extra for credit cards in case you go over the limit.

You still pay interest on these credit cards and must make your own payments, but this way makes it much less risky to the credit union/bank. These are very simple to get approved for, and especially with kids just turning 18 and are just starting to earn their credit.

Also, these cards do affect your credit card the same as any other credit card. I always suggest paying regularly on this card from 12-18 months and then going back to the credit union/bank to ask to take the hold money off hold.

Question:  ”What percent of salary should go towards retirement vs. emergency savings? Should some be set aside each and every pay for emergencies?”

Answer:  Though I do think it is important to have a diversified portfolio for your retirement, I also think it’s more important to make sure you are at no point touching this money until you retire. Taking money out of your retirement early is a sure fire way to get in a bad habit of spending this money when you need a little help. Here’s a tip: If you consider this money gone, you will find another way to figure out your situation.

With that said, I also would rather not put a percentage on this. Start by building your emergency fund. You’ll want to treat this like a bill and make a monthly payment to your savings account each month or paycheck. When you have a good nine times your monthly income in here, stop contributing to this fund. Instead start putting the same amount into your IRA instead. At this point you should no longer have to add to your emergency fund unless there is a true emergency and you are replacing that money. Keep in mind that the amount of money in your emergency fund changes significantly in each situation. Sit down with your bills and think about how much money you would need in the event you lost your job. How long would you be out of work? How many bills do you have each month that would need to be covered?

2.  Credit card companies are no longer allowed to solicit their credit cards within 1000 feet of a college campus or school.  In addition to this, they are no longer allowed to give out free prizes to entice college students to get their first credit cards within that area.

3.  Rules for people under the age of 21 getting their first credit cards also got much more strict.  As a general rule people under the age of 21 are not able to get credit cards unless they are able to bring written proof they can make the minimum payments.  This includes showing pay stubs, taxes, w-2′s, and so on.  If they are unable to prove their income they must have a co-signer over the age of 21 to guarantee the credit card will get paid.

4.  You can now opt – out to the credit card changes!  If you have a previous balance on a credit card and are informed of a change of terms you may now opt-out.  By opting out you are agreeing to close out the card and continue the payments under the old terms.  You have five years to pay off that balance or transfer it elsewhere.

5.  Interest rates must be fixed rates for the first year of your credit card.  Though they can raise this rate if you are 60 or more days late paying your bill or if you have a teaser rate, they cannot raise your rate for any other reason during this time.  After the first year they are able to increase your rate based on those factors as well as a few others, but it can only apply to future purchases made with the card.

Here’s a tip:  Check out your credit union’s credit cards before going elsewhere!  ELGA has no over the limit fees and only has fixed rate cards.

Income – Expenses = Bottom Line

Start with your income. This income will include any income that is definite.  Any side jobs or money given to you that is not regular should not be added in these calculations, and should just be considered extra money that goes into your savings account.  If your paycheck changes constantly, try taking the average of your last 6 months to accurately calculate your income.  Remember it is always better to calculate this on the lower side if you are not sure.  Again, any extra money can be put into your savings.

Once you have your income calculated, move on to your expenses.  Typically there are two separate areas for this.  The first section is for the day-to-day living expenses.  This includes anything from your rent and utilities to your food.  The second area is the one people tend to get stuck on because they forget to add in purchases that do not happen all the time.  These are items such as gifts, school tuition, books, clothes, and medical expenses.  Though you do not need these items every month, it is helpful to put away a little bit each month for these expenses so that when they do come around you have the money already saved and in an account to use.  Try to also include a spot in your budget for pocket money.  This is the money you will keep on you to pay for things like beverages, snacks, and those items that were forgotten in your normal grocery shopping trips. 

 The last section is your monthly debts.  These are your mortgages, loans, and credit cards.  Having these in a separate section helps to allow you to see those debts more clearly and separate them out to help understand where you are.  These are the debts you should continually work on to pay off each month.  If you have a positive bottom line, try adding a little more to your monthly payments!

Once you have clearly identified your income and expenses you finally have your bottom line.  Contrary to popular belief, this number should be zero.  The only time you should have excess in the budget is if your paycheck was more than originally calculated, or if you were given money.  In this case put the extras in your savings or pay down some of your debt.  Keeping this number as close to zero as possible will allow you to be able to use your money as efficiently as possible! 

 Here’s a tip!  Use budgetsketch.com to map out your bills!  Though the paper budget is excellent as well, this site allows you to work with your budget and change it constantly to match your paychecks.  It works on a week-by-week basis, rather than a monthly basis, and is completely free!

The first and most important thing about savings is to start with an emergency savings.  This will help you to be able to use your own money in an emergency rather than pulling out the credit card or having to go to the bank for a loan.  Start putting a set amount into a savings each paycheck.  In this account, you need to have three times your monthly income.  This will help you in the event that you lose your job, have an accident, have car problems, and so on.  This money is meant to be taken out ONLY in an emergency!

After you’ve established the emergency savings, it is important to establish a long term savings.  This money is NOT meant to be taken out.  This is simply your money for your future, and for your retirement.

Lastly, try saving up for larger purchases.  Instead of being the norm and getting a car loan, why not save up and pay for that car in cash?  This will dramatically decrease the amount you pay for your vehicle, because of the interest you will no longer have to pay.  At ELGA Credit Union you can have as many savings accounts as you would like.  We suggest making a savings for each goal you have, such as Christmas, Vacation, and Cars.  Open a savings and have the money automatically moved into these accounts and be worry-free about your savings.

Wait for next week to learn how to create a budget!  Do you have trouble deciding where to start your budget?  This will help go step by step through the process to help you start your own.

 First, write down your goals!  The best part of making goals is writing them down so you can track your progress.   The nice thing about goals is you can choose a long term, medium term, or long term goal.  For instance, a short-term goal might be Christmas, a medium-term goal may be purchasing a new car, and a long-term goal may be purchasing a home.

 From there you want to make sure you it passes the SMART Test.  Ask yourself:  Is it Specific?  You don’t want to just say, “I want to buy a vehicle;” instead you want to say, “I want to buy a 2007 Cobalt for $10,000.”

 Next ask yourself if it’s Measurable.  Again, you want to make sure you have a specific amount for your purchase so you can decide how much you want to save each month.  So if this is a medium-term goal for me, and I want to buy a new car in 5 years I would say $10,000.00 / 60 months = $166.67.  This is how much I would need to put away each month in order to get a car in 5 years.

  Then ask yourself, is it Attainable/Adjustable?  One of the easiest ways to fail is to give up because you messed up once.  It is important to remember everyone makes mistakes.  If you mess up and spend too much, or you don’t put enough away, just adjust your goal instead of giving up.  Make sure to change your goal if it is not a goal that can be adjusted if necessary.

 How about Realistic?  Is this really an amount that you can put away each month and make your goal? Or is it so far out of reach that you will end up not making your goal and give up quickly?  I always suggest going on the lower side if you are unsure.  Savings is always something you can add to, but you do not want to get in the habit of taking money out of your savings.

 Time-bound is the last and final test.  It is not an adequate goal if you cannot see results and know if you have made your goal!  Write down your goal and keep it in front of you, so it is a constant reminder of what you are striving for on a daily basis.