The beginning of all this that we are facing today is that at some point in the past bankers turned money into debt. For most people, this statement is confusing. How can money be turned into debt? To understand that statement above, you have to look at the world of money from a bankers point of view. This point of view is something that bankers hate for you to understand.

On your balance sheet, your savings in the bank is asset. It is something that generates you money – the savings interest. However, in the bankers point of view, your savings is a liability. This is because for all the money that you save with them, they will have to pay you interest every month.

In order to be able to afford to pay people interest for their savings at -say- 5% annually, bankers at some point in the past had to come up with a game plan to generate profit from somewhere. So that is how they invented the “loan” game.

So what happens next is simple. In order for the bank to make money, they have to use your savings, and then loan it to somebody else who would pay it back with a higher interest than what the bank owes you.

If your interest on your savings is for example 5% annually, the bank needs to find somebody who would want to borrow money from them with the interest rate at 10% or maybe even more. If nobody wants to borrow, it will cost the bank their own money to pay you your savings interest.

However, what eventually makes this whole “harmless” game deadly for a nation (as it is now happening to the US) is the deadly system which is called the fractional reserve system. This kind of system is nothing but a legal way for banks to rob you off your money. Unlike robbers like Jesse James or others who rob banks from the outside, these kind of robbers do it from the inside and… legally too. Robbers like these are for example the Federal Reserve.

Here is how the fractional reserve system works:

The Federal Reserve decides on the fractional reserve number which would then multiplied by the amount of savings people deposited into the banks. If for example the fractional reserve is 10 and your savings in the bank is $1,000, then the amount of money that the bank will use to loan it at a higher interest than the saving interest will be $1,000 x 10 which is $10,000. So if somebody is willing to borrow, they are able to borrow more than what the bank actually has.

The problem is, the bank does not have $10,000. It has only $1,000 which was deposited by you. This is where the inflation comes in. What they do to come up with the $10,000 is just print more money. They can legally do it not backed by gold because in 1971, President Nixon took the US dollar off the gold standard. So what the banks are doing is just printing money out of thin air. They need $10,000, fine, let’s print and make up $10,000.

This way the bank actually robs you of your wealth because your $100 no longer has the same value as before there was this $10,000 new money. Your $100 savings has lost its purchasing power. If now your $100 bill can buy you (for example) nice designer clothes, because of the fractional reserve system, it takes 10 more bills like that to buy the same clothes. This is what this system is doing to you and your money – inflation.

So let’s get back to the question. Why do banks not want America to save money?

As we have discussed above, it is because American’s savings is a liability to the bank. If they can not find any borrower wwho would  pay interest higher than they pay you, they will eventually go bankrupt as they will have to pay you your interest out of their own pocket.

Imagine 300 million Americans saving all their money and none of them borrow anything from the bank. They will have to pay all that interest every month.

Back in 1973 after the Arab world stopped their oil supply to the world, oil price rose from $2.82 per barrel to $10.10 per barrel in 1974. The US should have slowed down on buying oil at the time but they were already in the mindset of printing money out of thin air and that was what they did. All of the sudden, the Arab world was overwhelmed with all that money and were unable to handle them. So they saved the money in US banks outside the country, mainly in Europe and America.

Now the American banks are overwhelmed because lots of savings means lots of interest to pay and that is how easy credit started.

All of the sudden, Latin America and even the American people themselves find it so easy to get credit and borrow money. The government even encouraged them to borrow money and get into “good debt” such as student loans. (This good debt now of course turned out to be toxic debt and not good debt at all.) Hot money was flowing into the economy.

American banks didn’t want Americans to save money adding to all that Arab money sitting in them. What they wanted (and still do) are big debtors. When the real estate boom started, so many Americans are gullible enough to get caught in this bankers game of money. This was what the banks didn’t want Americans to know. Ironically, the education system, either deliberately or not, kept the people in the dark by not teaching anybody about the money game that banks and the government with the Federal Reserve were playing.

Now the credit crunch has left Americans miserable with their debt.

One option for those who want to attend college is to skip the four year school and head to the local community college for general education classes. By doing this you will be saving 75% on tuition costs. Additionally, because you are going to a school that is nearby your home, you won’t have to rent a room to stay or pay any board fee. After finishing general education classes, it is easy to transfer to a four year school and complete your degree.

Tip #1

There are several options out there for those who want to attend college but are finding it difficult to find a way to pay for it. One major way to save money is to skip the four year school and head to your local community college for your general education classes. You could save 75% on tuition costs and since you would be attending a school nearby there would be no room and board fee. Once you have completed your general education classes you could easily transfer to a four year school to complete your degree.

Tip #2

Find a school that is within commuting distant from your home. By doing this you can still live in your home instead of paying insane high dorm rate. Universities or colleges in metropolitan area usually provide their commuting students with free bus and train passes also credits toward travel expenses.

Tip #3

Another emerging option for college or universities is the online program. The past few years, online degrees have gained momentum and does no longer carry the negative stigma it once bore in the past. Major universities and colleges are now offering certain degrees online as an alternative. By studying online your diploma still carry the name of the reputable top-notch school without paying all those top-notch cost of gaining education. Usually schools offer a great reduction in tuition fees for online students.

Tip #4

Another option for you is to go to a vocational school. Education is important, but when it comes to financial success, a degree or going to college is not “do or die”. What is important is to get the skills that are required for a specific job. Going to a vocational or trade school will help you get that. If for example you are interested in culinary or automotive repair, going straight to vocational schools will help you save lots of money and at the same time become specifically specialized for a job.

Generally, trade school programs or vocational school programs last two years but in some fields it can last longer. However, compared to a four-year college or university, education from these schools is more specific to a certain job.

Tip #5

One of the most obvious alternatives to attending college is to go into a branch of the military. You can choose one of the five military branches: The Army, Air Force, Coast Guard, Marine Corps, and the Navy. When you join the military, you receive room and board and a salary in exchange for your service. This way you don’t only save money but earn money after high school.

Additionally, after joining the military, you will be offered education benefits to go to college at a later time. Some (if not all) of it can be paid through the military.

Tip #6

If you need to buy a computer for your education, you can save money by shopping the student specials, discounts, rebates and back to school specials. In some states you are able to have a tax-free shopping week. Also consider buying Apple Computer as they offer student discounts not only for students but also for teachers. They always advertise important education incentives and rebates. Sometimes Apple laptop is bundled with a free Nano iPod or a free photo printer, copier or scanner. You will be able to save hundreds of dollars by these rebates items.

Tip #7

Starting a business is often seen as something that involves “big whigs”, suits, type-a personalities and plenty of money to invest with. But that’s not how all businesses start.

If you have a few thousand saved up, then you should seriously consider starting your own business. Business has changed drastically in the last few decades with the advent of the computer and the Internet. Aside from just being an “alternative” to going to college, starting a business can also provide you with an extremely different lifestyle than that of someone “with a job.”

As the credit crunch is putting many families in the US in financial strain because of their mortgages and credit card debts, premiums for several types of insurance have also increased significantly, causing even more worries for the already distressed families. The premiums in long-term care insurance in Dallas for example has increased greatly to about 70% more than before.

Long-term care insurance is indeed designed to be stable in price despite any economical situation. However, many insurers have raised their premiums sometimes even by double-digit percentages. This has greatly squezed policyholders who have a fixed income.

While some of the policyholders still have to worry about losing their homes to foreclosure or getting out of credit card debt, now they have an additional problem to worry about that they won’t be able to afford the premiums for their future long-term care. Premiums on individuals’ long-term care policies are not raised based on someone’s age or declining health but on current policies by the insurers if they see that claims have substantially exceed beyond expectations.

The Texas Department of Insurance recently reviewed rate increase filings ranging from 10-48% from 9 companies. These companies include the industry’s largest companies such as Genworth Financial, John Hancock and MetLife. One of the reasons for the increase is the financial crisis.

There are a lot of people who pay premiums for many years, some even for longer than 20 years, before they are frail enough to file their first claim. Of course it is understandable that policyholders worry their premiums will one day become more and more unaffordable.

One of the most common suggestion by insurers brokers for clients who have tight budgets and can not handle a premium increase is to not simply drop their policies but scaling back benefits to keep the monthly payments about the same. However, there is also a suggestion to not cut the daily or monthly benefit or dropping the inflation protection because those kinds of reduction may leave the policyholder short of what they will need in their future care. This is because senior care is already expensive. According to Genworth’s 2009 price survey, the average national nursing home costs is about $203 daily and it is $150 in Dallas. The national average cost for assisted living is about $2,825 a month while in Dallas it averages about $2,788 per month.

Switching insurers will also not save money, especially if the policyholders have had their coverage for many years. As you get older, replacing your old policy with a newer one will mean higher rates. One thing that you can do if you are battered by premium increases is to check whether you are eligible for “contingent nonforfeiture benefits”. This way you can at least get the benefits equal to what you have already put into the policy which is obviously better than walking away.

If you are looking for a long-term care insurance, make sure that you look at the insurer’s history of premium increases. You can get a summary of Texas rate increases by calling the Department of Insurance at this number +18002523439.

A great recommendation that I received for senior care Houston is Home Care Source of Texas. If you are going to buy some peace of mind for your future, you might as well make sure that the people that are going to take care of you are caregivers that you would want to take care of you. Home Care of Texas claims to only hire caregivers who are chosen based on their character and experience first. They are also hired based on their communication skills, decision-making abilities, keen sense of awareness and sensitivity to the needs of others. The caregivers in this home are mostly Certified Nurse Aide’s with the Texas Nurse Aide Registry.

Most people in Pennsylvania buy more than just the minimum coverage because of the minimum requirements above. Failing to meet the requirements will result in a $300+ fee for driving without insurance, a 3-month registration and driver’s license suspension, a $50 fee for registration reinstatement and another $50 for reinstating your driver license. If you add up all the money that will cost you after an accident, getting an auto insurance that meets the PA requirements would make perfect sense.

There are many options of cheap auto insurance in pa that you can easily find online. Do your little research first and compare the prices before making any decisions.

The first step is to know how the bad the situation is and the only way to do that will be to get a copy of your credit report. You can get this for free by getting in touch with one of the three credit agencies namely Equifax, Experian, and Trans Union.

If it just so happens that there is a discrepancy in your credit report to which you know has already been resolved, sending a letter and the supporting documents is all you need to fix credit.

But if the credit report is correct, credit repair can only be done by paying it off. It will be a good idea to talk to your creditors and ask if you can strike a deal which will allow you to pay the said amount in staggered terms.

If they agree to this, make sure that this is written on paper so you have something to hold on to if ever they decide to change their minds.

Should you have problems talking to your creditor, don’t give up and instead hire a credit repair company to act as the mediator. Talking to professionals has a lot of benefits and two of them happen to be lower payment and interest terms.

Credit repair takes time and since money is always the issue, be ready to make certain sacrifices and reduce your expenses. If what you are earning is not enough, you may have to sell off some valuables and assets.

People who have outstanding loans must still be able to pay for other things like mortgage and other bills. The scenario itself is like fighting a campaign in many fronts but you have no choice because failure to miss other payments will only make matter worse.

No one said that when you repair credit, you cannot use your credit card. In fact, you can still use it just make sure you do not max it like before because your total debt compared to your total credit makes up 30% of your credit score.

Once you are able to improve your credit score, keep up the good work. At the same time, apply for either a department store credit card or a secured credit card.

Filing for bankruptcy is never an option with regards to credit repair. This is because it is like taking a nose dive when your record will be kept on file for 10 years and during this time, interest rates will continue to pile up and the amount of money that you owe only grows.

The credit repair tips mentioned are easy for anyone to follow. Once you start paying off your debt, make sure you are able to do it so you can once again be in the green.

Is credit repair easy? Not really because it really depends how much you owe the creditors. Some individuals owe a thousand or two while for others it is quite bigger and that is really a problem.

So analyze your situation, take the appropriate steps in credit repair and make sure this does not happen again.

Financial firms have an enormous marketing budget to create emotionally provocative marketing campaigns with flashy signs on buildings, striking logos and catchy slogans. They place advertisement on popular trade magazines, TV and radio and give their sales people a fancy label such as “Financial Consultant” or “Vice President of Investments”. The truth is, the flashy signs and fancy labels does not mean anything.

What you need to check in order to choose the right financial advisor for your family is the level of experience these people have in serving client’s needs and helping them to accomplish their financial goals. Here are the right questions to ask potential financial advisor. Make sure they answer each question thoroughly.

How long have you been:
1.) working directly with clients as their primary financial advisor?
2.) recommending investment and insurance products?
3.) actively and consistently creating financial plans for clients to help them achieve their financial goals?

How many:
4.) years did you spend training for your position as a financial advisor?
5.) written financial plans have you created for clients?

What:
6.) is your training background and where did you learn how to diagnose, manage, and solve your clients financial problems?
7.) firms have you worked for in the capacity of a financial advisor?

Now that you know the questions to ask them, you should also know the accepteble answer the questions:

Find only those who have a minimum of 3 years of experience. You may meet financial advisors who are still interns but are working close with a more experienced financial professionals who are working with clients directly themselves. These interns are required to do so for at least 3 years before they can be your primary financial advisor.

The NAPFA (National Association of Personal Financial Advisors) are now requiring that registered financial advisors have at least a college degree.

A financial advisor should have at least one credential of these two: a CERTIFIED FINANCIAL PLANNER™ (CFP®) or Chartered Financial Consultant® (ChFC®) designation. These two credentials shows the dedication to being among the best in the financial services field. Note that both credentials are difficult to achieve so if your financial advisor has one of the two, you can be certain that they have the experience and training which are vital for your financial success.

You need to understand also that many of the financial advisors do not actually write financial plans. Most of them are only “financial advisors” in title but in reality they are only salespeople in practice. Even though you do not think you would need a written financial plan, your financial advisor has to understand how to create one and they should also have experience to do so.

Before you decide to work with any financial advisor, take your time and ask questions in interviews. Expect reasonable answers. When you have done all that, you will find the confidence that you have found the right financial advisor to help you achieve your financial success.

The day that he came to me, he had not touched the $200 at all. I suggested to put aside $60 to pay for his bills and urged him to just pay them that same day. The sooner the better. This would leave him $140 to live for 14 days until the end of the month. My friend is single and therefore can easily live on $10 a day for 14 days.

But the same day, later in the evening we met again. All happy, smiling and proud he shared with me how he bought a suite, a pair of shoes and sunglasses to “look cool”. He spent $27 on those and had not paid his bills that was $60 all together. So I asked him to sit down with me and think about the financial consequences of his action. As I had suggested to him earlier, he put the money into the bank so he would not carry a lot of cash with him everyday. If he did carry all that money with him, I was sure that he would easily blow it in a few hours. He had $160 in the bank and carried with him $13. The remaining spendible income he had now after he went shopping was only $113. Because he had to live only on $113 for 16 days until the end of the month, his daily budget was now down to only about $7 per day.

When we came up with this number, it was as if the heavens opened and a fresh new revelation was just given to him. He asked whether that was including internet costs at the internet cafe and meals. Of course it was. It simply included all expenses for one day. So we agreed that the $13 was to last until Saturday, which was two days from then. He could not use any money in the bank except the $60 that was meant to pay his bills.

He thought for a while and wondered if he could live only on $13 until Saturday. He said, “But I need to buy a new pillow and a bed sheet tomorrow. That would be about $6.” I said, that would be fine but then that means he will have to live on $7 only until Saturday. Of course he could use the money in the bank too but he will have to face the consequence of being without any money before the end of the month. I told him to live within (if not below) his means. He had no credit card (thank God for that) and he had no choice to just live on $7 until Saturday. So he agreed.

While I was still talking with him, he asked, “Can I get just a can of beer?” I was amused to see that he thought that the way he saw this consultation was that  I was restricting him from doing what he wants, which was not the case. I said of course that he could buy beer or do what he wanted with the $13 he had left until Saturday if he thought he could afford it but if he couldn’t, he would have to consider whether he could live with the consequence of buying that can of beer.

I said, “Ask yourself this:  does a can of beer fit in your $13 budget? You have to live only on $13 until tomorrow night and you said you needed to buy a new pillow and a bed sheet.”

My friend said, “I never tried that before.”

Not sure what he was talking about I asked, “Never tried what?”

His response was interesting, “Never tried thinking before spending.”

He thought for a while and then decided, “I will get one can.”

I asked, “Are you sure you can afford that and at the same time not sacrifice your pillow and sheet and food for tomorrow and also not sacrifice transport to go to the meeting you have in your schedule?”

His eyes grew bigger and he only said, “Oh! Hmmm…”

This is probably the major problem in our society today. People receive their paycheck and just live from one day to the next without thinking and planning their expenses. Even before they reach the end of the month, they’re out of money and start using their credit card or take up a personal loan or one of those high interest cash advance loans.

The case with my friend involves only a little bit of money compared to the huge transactions that first world countries have everyday. In the case of my friend it was only about managing $200 for 14 days. Most average people in the western world have bigger responsibilities to themselves and their families by having to handle probably 5 times or even 7 times as much in monthly income. Imagine how much money is lost if they don’t think before spending.

The key to living within (if not below) your means lies in the process “thinking before spending”. As soon as you get paid, before you even spend one dime of your monthly income, sit down with your family and “think”. Plan your monthly budget. Plan what you are going to buy that month. Plan how you and your family are going to survive that month.

Here is a great tool for you to plan your monthly budget. Download this spreadsheet for free here.

In my next post I will be showing you how to use the spreadsheet to budget your monthly spending.

As modern cars usually last longer than older cars from previous decades, it does make sense for people to keep the cars for several more years. But due to depreciation, old cars lose their value rapidly and a lot of car owners don’t realise that their old cars are overinsured. Generally, car owners easily lose track on the value of their cars which increases the possibility of buying more coverage than they actually need.

If you have an old car and its value has now dropped to only a few thousand dollars, you should consider cutting back on collision and comprehensive coverage in your car insurance. Collision coverage pays for damages resulting from road accidents. Comprehensive coverage pays for theft and damages that are not caused by another car.

But car owners should not reduce liability coverage, which covers damages that you and your car are causing to other people or property. The reason to carry plenty of liability insurance is to be covered if you should have a collision with an uninsured motorist. According to an Insurance Research Council report, one in seven drivers in the US was uninsured in 2007. They also expect that in 2010 the figure will reach one in six drivers.

If you are not sure what your vehicle is worth now, you can do so at websites such as Edmunds.com or Nadaguides.com.

There are also other ways to cut back on car insurance or online car insurance cost. One is by using a pay-as-you-drive car insurance. This insurance will let you pay only for the miles that you drive. The more you drive, the more expensive the premiums.

The shaky employment situation and financial pressures have kept people away from new-car dealerships. If you can keep your current car longer and cut back on car insurance, that will definitely help your difficult financial situation.

If you have a teenager that actually shows some responsibility, there are many ways to get the auto insurance premiums lowered. Here are 5 tips that can help you do so.

1. A lot of auto insurance agents can provide discounts for teenagers that maintain a grade point average above 3.0. But they need to participate in driver safety courses and other qualified programs to be eligible for the discounts.

2. Explain to your teenager that it only takes one count of drunk driving or hit-and-run or speeding to change the premium rates to thousands more per year! Keeping a clean driving record will count towards lowering the policy rates and your child should also be informed about this to involve them in the family’s finance management.

3. Cars like a Camero or something else that are fast will actually double the auto insurance rates. Providing your teenager with a safe car, such as Nissan Sentra or Honda, can save you half of the auto insurance cost. Besides that, the safety features in a newer car such as airbags or antilock brakes and others will also count towards a cheaper rate.

4. Auto insurance companies consider teenagers that are active and are members of programs such as Boy Scouts or others as responsible. They are considered to be helping the community and less likely to drive irresponsibly. This will help you save more money on auto insurance rates.

5. Add-on safety features will help lower the risk of an accident. Auto insurance companies ‘love’ seatbelts that automatically lock, side impact airbags, traction devices and so on. Just install plenty of these safety features and you will be rewarded with a lower auto insurance rate.

The key is to figure out how to cooperate with your teen to drive responsibly and safely. This will help you save money hundreds of dollars per month on premiums.

1. Total Housing Payments. Your total expenses on housing payments, such as mortgage, insurance, rents and so on, should not exceed 28% of your gross income. As housing prices soared in the past years, too many home buyers broke this old rule.

2. Total Debt Payment. Your total debt payment (including mortgages, loan payments, credit card debt and all other kinds of debt that you might be paying for now) should not exceed 36% of your gross income.

3. Emergency Fund. Too many people are neglecting this one. You should keep three month’s worth of living expenses in a bank savings account or a high-yield money-market fund for emergencies. If you have kids or rely on one income, make it six months’.

4. Portfolio in Stocks. Stocks can provide good growth, but pose plenty of risks in the short-term. Bonds offer more stability. If you’re saving for retirement and want a quick idea of what percentage of your portfolio should be in stocks, subtract your age from 120.

5. Don’t put all your eggs in the same basket. In a bear market, it’s tough to find a safe-haven. A lot of stocks in your portfolio will be sinking too. But don’t compound the risk by holding too much in any one stock. Best to keep it below 10%.

6. Care for your family’s future when you’re gone. You need enough life insurance to replace at least 5 years of your salary – as much as 10 years if you have several young children or significant debts. But you might not need it at all if you have no dependents.

7. Saving for your retirement. How much you should be saving for retirement depends on a lot of things, like how much of your pre-retirement income you expect to draw each year after you quit working, how much your nest egg will continue to grow and how long you’ll live. If you are in your 20’s and you just started saving for retirement, you should be saving 10-15% of your income. People starting to save in their 30% should be saving 15-25%. Starting at 40 -45 years old to save for retirement, save 25-35%. If you are older than 45 see the table below:

The sooner you start saving for retirement, the better.