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As if you needed a study to tell you this: a new study finds that debt is a major threat to people saving up for retirement. 52% of retirees admit to being in debt when they enter retirement. Honestly, this seems low to me. I would imagine that the majority of retirees are in some kind of debt. The problem isn’t necessarily debt itself, but the size of debt.
Could you enter retirement with $2000 in low-interest credit card debt? Sure, it’s not advisable to be in any sort of debt when you enter retirement, but that type of debt is certainly manageable. The problem arises for retirees who have amassed a large amount of high-interest credit card debt. Even a $2000 debt with high interest (in the high teens or twenties) will take years to pay off with minimum payments.
I don’t want to suggest, however, that you can get by with debt in retirement. Your main goal should be to get out from debt if at all possible. This does not mean you should devote all of your resources towards debt. If putting money in a 401(k) account or other type of investment means that your debt is going to last a little longer, this is fine. But you must chip away at that debt – it’s just not necessarily wise to pay off debt while not saving or investing.
This is one of the major reasons that studies like this come out. Retirees just have a lot on their plate: debt payment, investing, and saving. It can be difficult to strike a balance. Just remember, the worse your debt is, the more aggressive you’re going to have to be with it. It would be a real mistake to become too reckless with investing as a way to pay off debt because that can seriously backfire.
The sooner you get out of debt, the better. The less debt you have, the more money can go into a high-yield savings account and responsible investments. Take a lesson from this survey: debt is something that affect a majority of retirees and must be addressed.
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Have you been listening to the radio and heard about Lifelock? It’s a pretty persuasive ad. The CEO gives out his Social Security number, claiming that he’s so certain that Lifelock works that he’s willing to freely give out his number. With all the hysteria about identity theft, people think that they need to guard their Social Security number with their life, so this is a good tactic. But what exactly does Lifelock do? Here’s a checklist.
- They set up fraud alerts. This is good, but given that fraud alerts are free, you could very well do this yourself.
- They remove your name from pre-approved credit card lists. Again, you could do this yourself.
- They order credit reports for you. Again…
- Their Walletlock program will contact all your credit card issuers if your wallet is lost or stolen.
- Finally, if you identity is stolen while in the Lifelock program, you will not be liable for legal fees, as they’ll foot the bill.
Of all of those, number 5 makes the most sense. If you really want a hands-off approach to protecting against identity theft, then Lifelock is a good way to go. But this system is not all that different from other credit monitoring services out there, such as Experian Direct. Personally, I’d recommend Experian Direct because they provide daily monitoring of your credit report, rather than just ordering a credit report once a year, long after an identity theft problem could have taken affect. Also, while fraud alerts are helpful, they’re not foolproof, as there are certain types of fraud that an alert will not recognize.
Lifelock does offer a better guarantee than a credit monitoring service like Experian Direct, but for my money, I think daily credit report monitoring is far more important and effective than the services that Lifelock offers. It's half as expensive and the main idea with credit monitoring is to never reach a point where you’ll have to cash in on a guarantee.
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One thing people might not realize is that there are a lot of issues that determine a credit rating besides paying off credit card bills and other loans. Your utility bills can also raise or lower your credit rating, depending on whether or not you’re responsible with paying bills. I’ve seen countless roommate situations where one person has her name on the phone bill, for example. It’s that person’s responsibility to get a household’s or apartmenthold’s worth of people to pony up. It can be pretty frustrating and it can be very damaging if one roommate is far from responsible with making payment. Maybe the bill will default, or maybe the account-holder will have to foot the bill. Either case is not very desirable.
This can affect a credit rating or at the very least affect the ability to get utility service in the future. Let’s look at your credit rating. Suppose you’re on your own and you want your utility bills to count towards your credit rating? Don’t necessarily assume that utility bill payments will be reported to credit bureaus in the same way as credit card payments. The online bill payment firm Billeo, for example, has a program that reports all bills to an alternative credit bureau.
The word “alternative” should be a bit of a red flag. If the bills get reported to an alternative bureau, this could potentially mean that these bills, and ensuing credit history, will not be recognized by the major bureaus of Experian, Equifax, and TransUnion. So it’s important that your bills payments are recognized by the big three.
Generally this is the case, so you will not necessarily have to lay any extra groundwork. Remember, it’s important to pay all your bills on time, not just those that require interest payments. If you’re concerned about building a credit rating, or repairing a damaged rating, there are credit cards that report to all the credit bureaus after every payment, ensuring that your responsible payments will elevate your rating as quickly as possible.
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Among the odder tales of financial woes in the news this week include a woman who had to file for bankruptcy after battling a lawsuit brought on by the people who purchased her home- and then claimed it was haunted.
According to the Telegraph Herald newspaper in Dubuque, Iowa, Rita Russow was forced to file for bankruptcy after being sued by Chad and Michelle Miller. The Millers brought suit for a number of issues related to the home they bought from Russow, including roof leaks, structural defects and the 1992 suicide of Russow’s husband. The Miller’s realtor, Dominic Goodman, and his real estate company were also named in the suit for charges including misrepresentation, statutory nondisclosure and negligence.
Russow contends that the Millers are claiming her house is haunted simply to get out of the debts that they owe. In addition to suing for money lost in the transaction (the property didn’t appreciate in the time that they owned the property), the couple also sued for punitive damages and attempted to get the sale rescinded. The Telegraph reports that the couple is still living in the haunted house.
If you’re looking for an eerily good deal on a home loan, check out LowerMyBills.com. LowerMyBills.com lets you compare rates from multiple lenders so you know you’re getting a deal that’s so good, it’s scary. |
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