In This Issue

From The Budget Coach
Featured Tips & Information:
   -- The Upcoming Financial Perfect Storm – Are You Ready?
Inspiration For The Month
Your Question for the Month
Special Offer of the Month
Recommended Resources
Contact/General & Unsubscribe Information

Welcome to my "Common Cents Budgeting Tips" Newsletter.

If you are receiving this newsletter for the first time, please note that all previous newsletters are now available on the website for your convenient viewing. Visit www.moneytracker.com/articles.htm

I'm delighted to have the opportunity to share these tips with you. Remember, you are a vital part of this whole exchange and if you ever have questions or some valuable experience or resource you want to share with others, please don't hesitate to let me know.

Many of the new sections that were added to The Budget Kit workbook over the various revisions these last many years, came from insightful readers and clients like you who wanted to help make a difference.

Remember to email me at judy@moneytracker.com with any tips, resources or comments you would like to share as well as any questions. Working together is how we can all make a difference in our financial lives.

Have a fulfilling and prosperous day!

To Your Success,

Tips & Information

The Upcoming Financial Perfect Storm – Are You Ready?

Even if you did not see the movie “Perfect Storm”, the term is a perfect way to describe what happens when a number of different seemingly unrelated events all converge at the exact same time and cause a major event. This doesn’t always have to be a negative experience. It can apply in wonderful positive events as well.

This Fall, however, I see the brewing of a perfect storm that could have a major negative effect on your finances, and am suggesting you stay very alert and prepared to make changes as you move forward with the remainder of 2005.

The 4 converging events that could play havoc on your budget this fall include:

1. New bankruptcy law going into effect on October 17, 2005
2. Doubling of credit card minimum payments now being phased in
3. Increased gasoline and energy costs this fall as a result of Katrina
4. Upcoming holidays

Unless you specifically read a number of financial publications, and online columns, or listen to a lot of financial news you may not even be aware of these first two major events which are about to collide around the same time. I’ve been reading and hearing rumblings of both the new bankruptcy law and the increased minimum credit card payments for months, and have been appalled by the lack of major consumer news coverage for this upcoming double whammy.

For this month’s newsletter I want to give you a brief heads up on both topics. There are a number of new factors involved with the new bankruptcy law which I will not be able to cover here, so do check out the Resource links where you can continue your research on both topics.

Now before you dismiss this topic and believe that the majority of people who file bankruptcy are simply not being responsible about their spending, consider the following notes from various studies:

• The average person filing for bankruptcy earns just $22,000 per year and the majority had a long period of unemployment before filing for bankruptcy
• 85% of elderly debtors cite medical or job problems as the reason for bankruptcy
• Single, divorced mothers with children struggling to survive make up a large percentage of bankruptcies
• Half of all bankruptcies are triggered by sudden uninsured medical expenses

1 ) The New Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 – October 17, 2005

• First of all this is a bankruptcy overhaul bill that is intended to curb abuses of the bankruptcy system. With Chapter 7, too many people, with the ability to repay at least a portion of the money they owe, were walking away from all their debts and starting again fresh.
• Now, before filing, filers will be required to enroll in court-supervised financial counseling programs.
• There will be stiffer legal requirements for filing Chapter 7 bankruptcy (erasing most of the debts) if the household income is greater than the median household income in their state. This will make it much harder to get out of repaying all debts, such as credit card charges, medical bills and other obligations under a court-ordered bankruptcy plan.
• Also, filers can only keep assets allowed under their state's laws if they have lived there at least two years.
• In Chapter 13 bankruptcy, a repayment plan is designed, basing payments on income and expenses. Under the new law, only allowed monthly living expenses can be claimed regardless of individual circumstances. The amounts are set each year by the IRS collections department and no longer based on a case-by-case basis. That means actual expenses for many things, like housing, will not be considered.. You will only be able to keep enough income to pay the allowed amount for various expenses like housing and other allowable expenses – not the actual expenses.
• If you wish to keep your car, or other collateral, you will have to pay the full loan amount, rather than just the current value, as is currently done in Chapter 13 plans. The new rule applies to all car loans less than two and a half years old as of the date you file. Similar new rules apply to all other property purchased within the last year prior to filing.

The impact of the above few points is huge. As you can probably guess, I have only scratched the surface of what is all involved and what the impact will be. If you are still considering bankruptcy at this time for yourself, as your only option left, or for helping someone you know, please review the Resource links, continue your due diligence research and start the process immediately. There is so little time left.

2) Doubling Credit Card Minimum Payments

• The OCC is concerned that many people have credit card balances that will take virtually forever to pay back. The Office of the Comptroller of the Currency (OCC), a bureau of the U.S. Treasury Department as well as a watchdog to protect consumers from abusive and deceptive credit card practices, regulates national banks.

• Consequently, the OCC wants the credit card monthly payment requirements to cover all fees and interest and pay down at least some portion of the principal.

• This means most national banks and credit-card issuers over the next twelve months are increasing their monthly minimum payment requirements (many currently at 2% of the total balance due) and some will actually double the amounts (to 4%).

• Those of you who have my Budget Kit workbook may recall the sample I show on page 72, where a credit card balance of $2,000 with a 19.8% finance charge, will take 42 years to pay off if paying only the 2% minimum payment.

• Currently, the average credit card debt per person is estimated at $8,652. A minimum 2% payment used to be $432.60 ... the new minimum payment will be $865.20. That’s on one card. How many cards do you have that could be affected?

• Read all the fine print. All actions the credit card company is entitled to take will be spelled out in fine print. Pay special attention to wording around interest rates, late fees and payment dates. Additionally, if there are sections or clauses you do not understand, highlight them and call your credit card company for clarification before using the card.

• If there's just not enough money to pay increased monthly minimums, contact your credit card company. They would rather work out an affordable payment plan than have you declare bankruptcy or totally default and not pay.

Numbers 3 and 4 – I don’t think I need to add anything to clarify these two conditions of the upcoming “perfect storm”.

Just know that the combination of these four financial conditions could be devastating for many households this fall.

I recently heard on the WSJR news that energy bills are expected to go up 24% from last year. Start making your budget adjustments now!

As I finish, I just want to say how frustrated I do get with the overall assumption that most consumers could pay off much of their debt and are choosing not to, and paying only minimums instead. From my perspective, many consumers are paying minimums because they can barely keep their heads above water.

My heart goes out to the many people I do talk to and hear from who are being squeezed in the middle and affected by the years of unemployment, depressed economy, high health insurance costs and now the high energy costs and other increasing expenses.

On the other hand, if you have been using your credit cards to supplement your income for living beyond your means, the game is over. This is your wake up call. The “house of cards” may crash in soon as more and more options and loopholes disappear. Take measures immediately to adjust your mindset, your habits and your spending accordingly.

And by all means be sure you get yourself on a solid budget (spending plan). Make the minimal investment and purchase a copy of the Budget Kit workbook. Carve out some time to go through it and actually use it.

Watch my website and future emails for my upcoming teleseminars in October on “Setting Up a Budget That Works” - http://www.moneytracker.com/budget/

Please call me for some budget coaching and counseling help. I’m here to help you.

As always, I appreciate the email feedback. Please keep it up! It’s always exciting to hear your comments.

Remember you are always welcome to contact me with your budget questions and concerns. Be sure to check out my 30 minute coaching offer in the Special Offer section.

Thank you so much for being part of my online “family”.

Have a very abundant and fulfilling 2005.

For more information, feel free to contact me at
judy@moneytracker.com

Judy Lawrence's Common Cents Budgeting Tips (c) Copyright 2004-2005,

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March, 2005

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