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January 19th, 2012
Over this past month, Changing Gears teamed with authors and CNN anchors Ali Velshi and Christine Romans to collect your questions on the personal finance issues that you’re facing because of the recession.
Here’s a digest of your questions and their answers. Copies of How To Speak Money will soon be on their way to our five questioners. Thanks to Ali, Christine, and all of you for making Midwest Money a success.
- How Can I Improve My Credit Score? from Imran Kahn in Chicago.
- What Do I Do With My Retirement Accounts? from Chris Borrensen of Sugar Grove, Ill.
- Is It A Good Idea To Go Back To School? from Regina Baldwin of Bowling Green, Ohio.
- Where Do I Invest Now? from Ishtiaq Burcha, of Aurora, Col.
- How Can I Refinance My House? from Anjana Kapoor, of Sterling Heights, Mich.
Here’s the final question in our series of Midwest Money answers from Ali and Christine, based on their new book, How To Speak Money: The Language and Knowledge You Need Now. (Each person whose question was used will receive a copy of the book.)
Imran Kahn of Chicago writes,
My father was a realtor. So, during the housing boom, I purchased two homes and rented them. Then the housing bubble blew up. My property was worth a quarter of what I paid for it. I stopped making payments. The banks harassed me and then eventually disappeared.
Now, a couple years later, I am trying to build my damaged credit score back up. I got a credit card that was sent to me in the mail. I am paying on time. Why is my score still so low? How can I get this score up fast? I need to move on.
Ali and Christine reply,
Imran, we all need to move on from the housing crisis. But sadly, it is still with us. There is no fixing it fast, and there is no fixing your credit score fast. We’re not going to pass judgment on your foray into speculative real estate or on deciding to walk away. That’s a conversation for another place. But in the eyes of the banks, you are a terrible credit risk. That’s why your credit score is so low.
According to Greg McBride of Bankrate.com, 35% of your credit score is based on your pattern of paying bills. “Regardless of whether it is a rental property or a primary residence, defaulting on a mortgage (or two, in this case) will torpedo your credit score,” McBride says.
You say you want “to get this score up fast.” That’s probably not going to happen. In the credit score business, a mistake will nail you quickly, but it takes time to heal the wounds once inflicted.
“He’s got a long way to go before his credit score gets back to the point where he can secure a low credit card rate or much higher credit limit,” McBride says. “And he could be locked out of the mortgage market altogether for anywhere from 3-7 years.”
(It will stay on your credit report for many years longer than that.)
Still, the credit agencies and the lenders are probably eying you not as a permanent risk, but as a strategic defaulter. In their eyes, there is a difference. That’s why you got a credit card offer in the mail. They are working hard to find new customers who are able to pay their bills again and they are testing the waters with you.
You are doing the right thing to use the card. Pay your bills on time and don’t fall for the misconception that you should carry a balance. In your case, you want to look solid as a rock. Every month you pay on time, is another month in the “time heals all wounds” world of the credit scoring business.
You say “the banks harassed me and then eventually disappeared.” We’re not so sure they are just going to go away. Ryan Mack of Optimum Capital Management says the banks you borrowed from “can still sue you over your two delinquent homes, so long as it is within the statute of limitations for suits in your state.” In New York, Mack says, suits are limited to within 6 years.
But he agrees you are doing the right thing trying to build up a credit history again. Here are Mack’s tips for doing what you can — outside of the housing mess — to look responsible in the eyes of lenders:
- Keep using your new credit card.
- Do a thorough cleaning of your credit. (Go to www.annualcreditreport.com)
- Resolve disputes
- Correct erroneous entries on your credit reports
- Pay down additional debt; the more you pay, the better.
- Pay bills on time
- Keep up activity on accounts-even pay for your groceries on your card, and then pay down the bill at the end of the month
You can read all of our Midwest Money questions and answers here.
January 10th, 2012
Here’s the next-to-last question in our series of Midwest Money answers from Ali and Christine, based on their new book, How To Speak Money: The Language and Knowledge You Need Now. (Each person whose question is used will receive a copy of the book.)
Chris Borrensen from Sugar Grove, IL asks,
I have two 401(k) accounts and a Roth IRA. The IRA continues on, steadily. The 401(k) accounts are with different brokers, and while my strategy is similar with both, the older one outperforms the one I have through my current job. Is there benefit or more risk in combining these accounts in some way?
Ali and Christine respond,
Chris, we think you should combine those two 401(k) accounts, for simplicity and for better investing. For this question, we turned to Ryan Mack from Optimum Capital Management for a gut-check, since he advises clients every day on issues just like this one.
“Combine the two accounts,” says Mack. “Regardless of performance differences between them, the older account (with your previous employer) is sitting stagnant, dead in the water.”
Why? Because your older account is not taking advantage of market fluctuations now. Rolling the old account into the new one will allow you to dollar cost-average effectively and take advantage of those fluctuations. As you combine these accounts, it’s a great time to make sure your investments match your age, time horizon and risk tolerance.
This quiz from “How To Speak Money” will generate a pie chart to help you make sure this money is working for you the right way. Good luck!
Read our other Midwest Money questions here.
January 5th, 2012
Today, we’re bringing you the next in our series of Midwest Money answers from Ali and Christine, based on their new book, How To Speak Money: The Language and Knowledge You Need Now. (Each person whose question is used will receive a copy of the book.)
Today’s question comes from Regina Baldwin of Bowling Green, Ohio.
I am returning to school, while continuing to work full-time, to try to expand on my experience and enhance my ability to get a better job with a degree. I’m concerned that I am on the correct path as I am over 40. I am keeping my student loan debt at a minimum by attending a community college. I am worried that I will not get a better paying job by the time I finish. (If it makes a difference, I am pursing a BS in Business Administration-Computer Information Sciences with a focus on Accounting, and I currently work in healthcare.)
Ali and Christine answer,
If we were writing another book, we’d highlight you as an example of someone with exactly the right attitude and initiative in a new, more difficult jobs market. You are making exactly the right investment in yourself with this education and retraining, and the student debt you are taking on is what we consider “good debt.”
It’s even smarter since you are pursuing your studies at a community college. Bottom line, people are living longer and working longer, so the degree, the education and the work experience together are critical for many years of earnings.
At the same time, we hear you on your concerns that you might not end up with a higher-paying job in the end. Ali thinks your accounting focus is key. Accounting jobs are expected to grow 22% between 2008 and 2018, according to the Bureau of Labor Statistics. That’s much higher than the average of all professional occupations (17%) and translates to almost 280,000 new jobs.
(Click here for a gallery of the 20 highest paying jobs.)
Christine is enthusiastic about anything STEM (that’s the acronym for Science, Technology, Engineering and Math) and certainly computer fields are in there. In fact, more than half of all job hires forecast in the first months of this year are expected to be in tech. According to the Labor Department, median weekly earnings for computer scientists and systems analysts earn last year was $1,220 a week.
(Note: Changing Gears plans to report on STEM this year.)
It’s very important to be confident in your decision, build self-confidence and be aggressive: maximize your work experience as you pursue your degree. Network, volunteer for positions and new projects, and apply for internships in your new field. That’s tough while working full-time, we know, but short term pain will mean long-term gain.
Click to read Ali and Christine’s previous answers.
Today, we’re bringing you the next in our series of Midwest Money answers from Ali and Christine, based on their new book,How To Speak Money: The Language and Knowledge You Need Now. (Each person whose question is used will receive a copy of the book.)
Ishtiaq Bercha, of Aurora, Colorado, writes with a common concern.
“What should I do with my savings? Should I keep cash in the banks, invest in stocks and bonds — or gold? What is the best prospect from a retirement perspective?
Ali and Christine respond,
“The answer, Ishtiaq, is easy. You want to be investing in all of these things! Cash in the bank, stocks, bonds, golds/metals (10 percent of your portfolio or a bit more if you have a higher risk tolerance), real estate and even businesses.
When do you start? And how much? After you pay off credit card debt and build a liquid savings of 6 months of living expenses, then you invest for the long term.
And that means knowing what your risk tolerance is. For that, we suggest taking our risk quiz first, to understand what proportion of stocks, bonds, cash and alternative investments you need. You can click on that here.
Next, don’t chase fads and trends, says Ryan Mack, of Optimum Capital Management, and make sure to follow a strategy of dollar-cost averaging. That means routinely buying into the market. When stocks, bonds, gold, oil, or real estate funds go up and down, you are buying into these at different prices and spreading out your risk and rewards.
Also, you should balance and weight your portfolio based on your risk tolerance, age, and market conditions. Specifically, you need to ask yourself when you need the use of the money you are investing.
If you need it in the next year, you shouldn’t pile it into the market. If there’s a downturn you will cement in your losses and not have as much as you might need. If your time frame is longer, you have more breathing room and can be more creative with your portfolio.
From a retirement perspective, the closer you are to retirement, the more conservative you should play it. But if you have a long time horizon, you should spread your investments around.
Have fun. You are asking the right questions. So many people are playing defense with their money right now and are living paycheck to paycheck trying to pay off credit card debt. The be free of that and building toward the future is a wonderful feeling. Enjoy it!
January 3rd, 2012
Today, we’re bringing you the first in a series of
Midwest Money answers from Ali and Christine, based on their new book, How To Speak Money: The Language and Knowledge You Need Now. (Each person whose question is used will receive a copy of the book.)
Our first question is from Anjana Kapoor of Sterling Heights, Mich. She writes:
I have a underwater mortgage that I am trying to get refinanced, but have been unable to so far. I have been punctual in my payments so far for 8 years, and I still have to pay PMI (personal mortgage insurance). Please let me know how I can get rid of it and refinance my house.
Ali and Christine respond:
Anjana, you are smart to try to tackle the biggest hurdle to growing your wealth — that underwater mortgage. It will take many hours of hard work and false starts to get it done. No one, and we repeat, no one, has told us this was an easy or fair process.
One successful refinancer told us it took her more than 100 hours of paper work and phone calls. But it is worth it if you qualify. How do you know if you can do it?
The first question you need to ask is how much equity do you have in your home? You need more than 20 percent equity to adjust or remove the PMI. The more you pay down the more equity you build. Bottom line, keep building your equity.
The next question you need to ask is, what kind of mortgage do you have?
If it’s a federal home loan, then there is government-supported assistance to refinance and/or adjust your loan. Take advantage.
Start by going to recovery.gov and other sites with information about your loan.
If it’s a private loan, there are fewer options, and you may want to explore a short-sale option. A really diligent real-estate broker can help you with this.
Ryan Mack, a certified financial planner with Optimum Capital Management (and University of Michigan graduate) says to keep at it, even if you have failed before. With private bank loans, timing is an issue; you may need to press the same banks periodically.
Your loan may look unattractive to a bank in the fall, and the same bank may look on it favorably after the New Year. You need to be persistent shopping your loan with banks.
Remember to keep your FICA credit score high throughout this; that’s really important. Even one missed credit card payment can stay on your credit history for as long as seven years. For a loan officer on the lookout for any unusual or risky behavior, this may well disqualify you.
Don’t max out the cards either, even if you them off in full at the of the month. That, too, makes you look risky to the banks.
Micki Maynard · Last Chance for Midwest Money Advice: Send Your Questions for Ali Velshi & Christine Romans
December 12th, 2011
Retirement, debt, going back to school, and mortgages are all issues that are magnified by the recession. Where can you get Midwest Money advice?
Here. But you’d better hurry up. Through the end of today, CNN anchors and authors Ali Velshi and Christine Romans are taking Midwest Money questions from the Changing Gears audience.
We’ll be posting their answers next week. If Ali and Christine select your question, you’ll win a copy of their new book, “How To Speak Money.”
Send your questions by the end of today for Ali and Christine, then come back for the answers all next week.
Micki Maynard · Mortgages, Job Search, Debt, Retirement — Advice (And A Chance to Win a Book) from Ali Velshi and Christine Romans
December 9th, 2011
Nobody has had an easy time getting through the recession. It’s made personal finance planning a nightmare — whether it’s paying for school, looking for a new job, figuring out retirement, or getting rid of credit cards. But Changing Gears is offering you the chance to get some advice.
Network anchors and authors Ali Velshi and Christine Romans are taking Midwest Money questions from the Changing Gears audience.
We’ll be posting their answers during the week of Dec. 19. And if they pick your question, you’ll win a copy of their new book, “How To Speak Money.”
Submit your Midwest Money questions by Monday Dec. 12.
Micki Maynard · Should I Borrow Money To Go Back To School? Ask Personal Finance Experts Velshi and Romans
December 6th, 2011
People all over our region are deciding whether they should go back to school to learn new skills, and possibly begin a new career. But for some, there’s a big obstacle: how to pay for it. Should you use your savings — or borrow money? What’s the best place for returning students to find scholarships?
Authors Ali Velshi and Christine Romans want to help. All this week, they’re taking Midwest Money questions from our Changing Gears audience.
We’ll be posting their answers during the week of Dec. 19. If Ali and Christine pick your question, you’ll win a copy of their new book, How to Speak Money.
Click here and ask your Midwest Money questions about financing your education, or any other topic.
December 5th, 2011
The recession has played havoc with a lot of peoples’ job plans here in the Midwest. Buyouts are tempting, but what lies on the other side? Retirement at age 65 may have been a goal — now, is it too risky to leave? And, how long does it make sense to keep working?
Changing Gears wants to help you get some advice. We’ve asked CNN’s Ali Velshi and Christine Romans, authors and host of the weekly show Your Money, to take your questions on retirement, and any other personal finance topic that’s on your mind.
Write in this week. Ali and Christine will answer your Midwest Money questions later this month. And if they pick your question, you’ll get a copy of their new book, How to Speak Money.