If a minor makes such a contract it can be reneged without penalty.  In Iowa a minor can only be bound to contracts for necessities like apartment, clothing, food, etc.  However if such a contract was made and the minor kept, for example a car, past their 18th birthday then they would be liable under the terms of the contract.  If it is a contract for a necessity then the terms of the contract must be fair.  For example if a minor gets an apartment for $450 when similar apartments in the building are rented to other tenants for $400 then the minor will be liable for the contract but only for $400.

Bankrate.com provides current interest rates by state for home, auto, CD's, checking, and many other rates.

Important records (those difficult to replace) should be protected in a safe deposit box or a home safe.  Financial institutions usually have boxes of various sizes for rent.  If you choose to use a home safe, it should protect against both fire and theft.  Costs vary depending on the size of the safe and amount of protection.  Check with your insurance company about coverage of the contents of your safe deposit box or safe.  Note that your safe deposit box is not FDIC insured.

The most important aspect of setting up a budget is to have a plan.  The basic parts of your plan are to list all sources of income, all your expenses, any occasional expenses you have throughout the year, and then compare your income and expenses to see where you stand.

Use worksheets, such as those listed below, to set up your spending plan.

List income- List all sources and amounts of income available for spending and saving each month (take-home amount after taxes and other deductions).   Include only income you know for sure you will be receiving. If your income changes from month to month, use past income amounts to get an average.  Sources of income include:  wages and salaries, bonuses and commissions, interest/dividends, alimony & child support, disability, workers compensation, unemployment compensation, tax refunds, pensions/annuities, scholarships/fellowships, Social Security, Earned Income Credit, FIP.

List monthly expenses- Use past bills, canceled checks, and receipts to determine how much you spend each month.  List all of your expenses, especially small amounts.

List occasional expenses- List expenses not paid on a monthly basis such as car registration, Christmas and birthday gifts, insurance, school supplies, club dues, subscriptions, taxes, etc.  Total the amount of these expenses and divide by 12.  Set aside this amount each month to cover these expenses.

Balance income and expenses- Add up your expenses and compare to your income.  If your expenses are more than your income, review to find places to spend less. 

The United States Department of Agriculture prepares an annual report called “Expenditures on Children by Families.”   The report gives estimates on the cost of raising children of several ages in both two-parent and one-parent families.

The 2001 report can be found at http://www.cnpp.usda.gov/Crc/crc2001.pdf

You can do a cost of living comparison of hundreds of U.S. cities at this site:

http://www.homefair.com/homefair/calc/salcalc.html

Tracking your spending can be done in several ways. You may choose to use one method or a combination of methods.

Receipt- Save all receipts and put in one location.  If you don’t have a receipt for a purchase (i.e. vending machine) write the amount on a piece of paper and add to your other receipts.  Each week organize the receipts in general categories such as food, clothing, personal care, etc.  Add up the totals in each category and record the amounts for each in a notebook, account book, etc. 

Calendar- Write income on the calendar when you receive it.  Record purchases regularly.  Write when bills are due on your calendar and mark them off when they are paid.  NOTE:  You may want to write “pay credit card bill” on your calendar at least 7-10 days prior to the due date to make sure you do not pay a late payment fee in case it does not arrive at the creditor on time. 

Envelope- If you primarily use cash to pay for expenses, the envelope system may work well for you.  Write a budget category on each envelope and the amount you plan to spend. Divide your money into envelopes for each budget category.  As you need to pay for something, use the money in the envelope for that category.  Write the amount spent on the envelope.  Review your spending and make adjustments as needed in the amount in each envelope for next month’s expenditures.

Checkbook- Record each check you write in your checkbook register.  Be sure to include a description of what was purchased.  Keep a running total with each check written.  Balance your checkbook each month.  Compare the checkbook register with your bank statement each month to be sure neither you nor the bank has made an error.

Computer programs-  Use spreadsheets or financial software to track your spending on the computer.  Benefits of computer programs include the ability to keep track of tax deductible items, write checks, and create reports. 

Other resources on tracking your spending are available at these sites:

“Using a Check Register to Track Your Expenses,” Montana State University Extension,

http://www.montana.edu/wwwpb/pubs/mt8703.pdf

“Tracking Your Spending,” University of Wisconsin Extension,

http://www1.uwex.edu/ces/pubs/pdf/B3709_3.PDF

“Money Management Calendar 2002,” Alabama Cooperative Extension,

http://www.aces.edu/department/extcomm/publications/he/HE-0493/he-0493-2002.pdf

The key to having money for occasional expenses is to develop and follow a spending plan that includes these occasional expenses. Use the “Schedule of Non-Monthly Expenses” in the link below to help you estimate these expenses for the year. You can then calculate how much you need to save each month so you can pay for these expenses when they come up. 

You may be able to change the due dates for some of the bills.  Contact each and ask about the possibility of shifting the due date to a time that works better in your budget.  It is also important to set aside money each month for these expenses so you have the money available when the payments need to be made.

Take a good look at where your money is really going.  Figure out where you can cut back, e.g., reduce trips to fast food restaurants, take sandwiches to work to save money, avoid convenience stores and vending machines, drink water instead of expensive soda, and buy bread in bulk at the discount bread stores.  Hold a garage sale and sell items you do not need or use, and put profits in an emergency fund.  Buy all goods with paper money and save all your change in a change jar, and then take that to the bank and deposit it in your designated emergency account.

Start by keeping track of where you spend your money.  Be sure to record all spending,  especially for small items that can add up such as fast food meals, vending machine snacks, video rentals, etc.  The worksheet, “So What’s 65 Cents?” lets you calculate how much you are spending on these items.  Review your spending to determine areas where you may be overspending and can reduce costs.  The links below give suggestions on ways to reduce costs in specific areas of your budget. 

Divide your files into two major sections—current and permanent records.  Use file folders for categories that work best for your family.  Current records could include files for bills to be paid, important papers to file, etc.  Your permanent files might include summary records of important information, spending plan, bank accounts, charge accounts, insurance policies, keys, net worth statement, tax records, etc.  Use the publications listed below for more details on setting up a filing system.

Tax returns are audited by the Internal Revenue Service within 3 years. Keep records that document tax deductions for this time period.  However, some experts recommend you keep records that document tax deductions for up to 7 years.   In some situations such as under-reporting of more than 25% of income, the IRS can collect for up to 6 years.  If fraud is involved or a return is not filed, there is no limit on when a return may be audited.  Keep records related to property values, home improvements, etc. until the property is sold.

There are both reputable and nonreputable sources of help, so be careful.  If you see an advertisement that says, “You can erase your bad credit history!” don’t “bite.”  You cannot erase history.  But you can get back on track, with the help of an accredited counseling agency

Check the yellow pages of your telephone book under “Credit and Debt Counseling Services.”  Make sure the agency you deal with is accredited and preferably a member of the National Foundation for Credit Counseling (NFCC).  To find the NFCC-accredited agency nearest you, call 1-800-388-2227 or visit their web site at www.nfcc.org.  These are typically called Consumer Credit Counseling Service offices, and they work with creditors on your behalf to negotiate restructured payments.  They also examine your income, your expenses, and help you establish a spending plan that is right for you.

The best way is to pay your bills on time – starting now!  Your bill-paying history may be reported to a credit reporting agency (e.g., Equifax, Experian or Trans Union … or one of hundreds of affiliates and smaller agencies) and this history can be reviewed by credit grantors, insurance companies, potential landlords, and potential employers.  Another way to build a good credit history is to get a secured credit card that is backed by money you deposit and keep in a bank account.  This deposit account serves as security for the credit card in case you do not pay off your credit card bill.  Shop around, though, because costs and fees vary widely.

First, is your family secure?  Is the mortgage or rent paid?  Is there adequate food for your family?  Have the utilities (gas, electricity, water) insurance, auto loan been paid?  Once these basic family living type bills are paid, then consider the second level priorities which may include:  telephone bill, finance company debts and credit card payments.  Third priority would be retailers, doctors, dentists and hospitals.

Are there services that you can discontinue?  Telephone, cable TV, cell phone, some types of insurance to name a few.  Looking over your list of creditors, which are most likely to repossess items, attach your wages or savings account for non-payment of bills?

Note:  Above all, don’t ignore bills and past-due notices.  Call creditors and make arrangements to pay your debts.  Make sure those arrangements are realistic given your financial situation, because if you over-promise, those creditors will not work with you in the future.  Some creditors may reduce the overall size of your debt (this is especially true of doctors and hospitals).  However, if you ignore creditors altogether, your debt will be sold to a collection agent. 

If you have not paid your bill, service may be disconnected – either temporarily or permanently – if you are considered a risk.  It is best to let the utility company know your problem because most companies do not want to cut off your service, and they are willing to work out a plan to pay your bills.  However, you can expect quick action by the utility company if:

·        You have a poor record of paying bills with the local company.

·        Your bill is much larger than usual.

·        You have lived in the area a short time.

·        Their efforts to reach you by mail or phone have failed.

Once service is cut off, you must pay the entire bill, pay a substantial deposit (sometimes twice the amount of your average bill), and in the case of the phone, reapply and pay installation charges after a permanent disconnection.

For more information, contact the Iowa Utilities board at 877-565-4450 or visit their website at: http://www.state.ia.us/government/com/util/util.htm

For information on low-income telephone assistance programs, go to: http://www.state.ia.us/government/com/util/forms/CustServ/lifelinelinkup.pdf

Bankrate.com provides current interest rates by state for home, auto, CD's, checking, and many other rates.

Most likely, yes.  Your credit history is a record of your bill-paying history.  So if you have ever paid on a car loan, paid on a student loan or home mortgage, you have a credit history. 

Simply call this toll-free number and follow the instructions:  1-888-5opt-out.  You will have to give your Social Security number.

You can reduce the number of unsolicited credit card offers you get in the mail by doing the following:

·        Call this toll-free number and follow the instructions:  1-888-5opt-out.  You will get a recording that asks if you want off prescreened credit card lists for 2 years, for 5 years, or forever;  if you choose “forever,” you will receive a notice in the mail requesting your signature. When you call, you will be asked for your Social Security number, and it is OK to give it in this instance.  This toll-free number is affiliated with the “big 3” credit reporting agencies (Equifax, TransUnion, and Experian).  Note that you will still receive some offers from companies not affiliated with the “big 3” but you will receive fewer offers as a result of calling this toll-free number. 

·        When a telemarketer affiliated with a credit card company calls, say, “Please put me on your do-not-call list.”  By law, they have to take you off their direct marketing list affiliated with that product.  If they call you again, you can sue them in small claims court (also put your request in writing and keep a copy as evidence of your request).

·        Beware contest entry forms or other “freebie” offers.  Once you give someone your name and address, it could go on their direct marketing list, and your name could be sold and resold  resulting in even more “junk mail” and prescreened credit card offers.

For more information, go to http://www.extension.iastate.edu/pubs/co2.htm and scroll to Pm 1726.

Credit card rates and fees vary widely and change frequently.  For an updated listing of lost-cost credit card rates, visit these websites:

 http://www.bankrate.com/brm/rate/brm_ccsearch_lowrate.asp

A secured credit card is for individuals who have never had a credit history, or who have had a poor history and want to reestablish credit.  It is a bank credit card backed by money you deposit and keep in a bank account.  The amount of deposit varies, but could be as little as $100 to $500.  This deposit account serves as security for the credit card in case you do not pay off your credit card bill.  Your deposit will earn interest in a regular savings, money market or certificate of deposit account.

Most secured cards have annual fees, late fees and cash advance fees, so you need to “shop around” for the best deal.

This is a good opportunity for people with bad credit – or even a past bankruptcy – to start building a healthy credit record.  After you have charged and paid balances for at least one year, your chances of getting a regular unsecured card may be good. 

Consumer Action, a nonprofit consumer agency, recommends you ask the following questions when shopping for a secured credit card:

·        Do you accept people with bad credit, or just those with no credit?

·        Can I qualify for your card if I have declared bankruptcy in the past?

·        Will you report my payment history to credit bureaus? (you want them to!)

·        What interest rate is paid on my deposit?

·        How long must I leave funds on deposit in order to earn that interest rate?

·        Will my line of credit on the card be equal to, less than, or more than my deposit?

·        How long will it take for me to become eligible for an unsecured card?

Most likely, yes.  Your credit history is a record of your bill-paying history.  So if you have ever paid on a car loan, paid on a student loan or home mortgage, you have a credit history. 

There are four types of information in a credit report:

·        Identifying information:  name, current and previous addresses, Social Security number, year of birth, current and previous employers, and possibly your spouse’s name.

·        Credit information about each account:  date opened, credit limit, loan amount, balance, monthly payment, payment pattern during the past several years, and whether anyone else (spouse or co-signer) is responsible for paying on the account.

·        Public record information:  federal district bankruptcy records, tax liens, monetary judgments, and overdue child support in some states.

·        Inquiries:  the names of businesses that obtained a copy of your credit report for any reason.

Your credit report does not include information on race, religious preference, medical history, personal lifestyle, political preference, friends, criminal record or any other information not related to credit.  Nor is there information about checking or savings accounts. 

Positive information stays on your credit report indefinitely.  Negative (but accurate) information can stay on your credit report for up to seven years.  After that, it must be erased.  This includes late payments, accounts that the credit grantor turned over to a collection agency and judgments filed against you in court – even if you later paid the account in full.  Bankruptcy can remain on your credit report for seven to ten years.  Unpaid tax liens can remain for fifteen years.

Only someone with a legitimate business reason can look at your report.  Potential lenders (banks, stores and finance companies), landlords, employers, and insurance companies want to determine if you are a good credit risk.  Your ability to get credit all boils down to whether you pay your bills on time.

Late payments, charge-offs and collection accounts have the most significant and negative impact.  If you have had a credit card for several years and always paid your bills on time, that will have a significant and positive impact.

True identity theft – someone pretending to be you who has used your personal financial information to set up fraudulent accounts in your name – is the fastest growing type of financial fraud.  Be careful who has access to your personal information (i.e. Social Security number, bank account, and credit card numbers).  An individual could use these numbers to get credit in your name and ring up huge amounts of debt.  This could ruin your good credit before you are even aware that the “theft” has occurred.

Contact the credit bureau (as instructed on your credit report) and indicate why you think the information is incorrect (take good notes and follow up all phone calls with a letter documenting the discussion). The credit bureau will then check with the source of the information and notify you of the results. Unless your dispute is frivolous or irrelevant, the credit bureau must investigate the matter and correct mistakes.  If they cannot verify information, it must be deleted from your file.  If you disagree with the results of the credit bureau’s investigation, you may file a brief dispute statement explaining your side of the story.  At your request, the credit bureau will note your dispute in future credit bureau reports.

Call one of the “big three” credit reporting agencies below to find out what information you need to provide, then write to the agency and send the appropriate fee.  It is a good idea to request a copy of your credit report at least once a year to check for inaccuracies.

Equifax (800) 685-1111   www.equifax.com

Experian (888) 397-3742  www.experian.com

Trans Union (800) 916-8800  www.transunion.com

If you are a victim of true identity theft or other types of fraud, contact the following fraud departments: 

Equifax (800) 525-6285    

Experian  (888) 397-3742    

Trans Union  (800) 680-7289

The best way is to pay your bills on time – starting now!  Your bill-paying history may be reported to a credit reporting agency (e.g., Equifax, Experian or Trans Union … or one of hundreds of affiliates and smaller agencies) and this history can be reviewed by credit grantors, insurance companies, potential landlords, and potential employers.  Another way to build a good credit history is to get a secured credit card that is backed by money you deposit and keep in a bank account.  This deposit account serves as security for the credit card in case you do not pay off your credit card bill.  Shop around, though, because costs and fees vary widely.

A credit score is a number roughly between 300 and 850 (some may be higher or lower) that lenders use to determine whether to grant you credit, or what to charge you in interest.  If your score is roughly below 700, you may still get credit, but at a higher rate.  If your score is too low, given the lender’s criteria, you may not get credit at all. 

There are both reputable and nonreputable sources of help, so be careful.  If you see an advertisement that says, “You can erase your bad credit history!” don’t “bite.”  You cannot erase history.  But you can get back on track, with the help of an accredited counseling agency

Check the yellow pages of your telephone book under “Credit and Debt Counseling Services.”  Make sure the agency you deal with is accredited and preferably a member of the National Foundation for Credit Counseling (NFCC).  To find the NFCC-accredited agency nearest you, call 1-800-388-2227 or visit their web site at www.nfcc.org.  These are typically called Consumer Credit Counseling Service offices, and they work with creditors on your behalf to negotiate restructured payments.  They also examine your income, your expenses, and help you establish a spending plan that is right for you.

It is a restructuring of your current debt(s).  You negotiate new terms and in most cases, your total monthly payment is reduced, and interest rates may be reduced or even eliminated.  Make sure, though, that the debt consolidation loan’s interest rate is lower than the original interest rate, or you will end up paying more in the long term, even if your monthly payments are lower.  For more information, go to:

http://www.profina.org/channels/debt/default.asp?TID=28

A payday loan is a short-term loan against your next paycheck.  Usually a borrower writes a check for the amount needed -- plus a fee – and takes the cash.  The lender holds your check until you take in your paycheck. 

Pros:  For some people, small short-term loans “get them by” until the next paycheck so they can keep food on the table and bills paid.  However, this is a very expensive form of credit, and often  leads to greater long-term debt.

Cons:  The cost of a payday loan is deceiving.  For example, if you write a personal check for $115 to borrow $100 for 2 weeks, the $15 fee actually represents an annualized percentage rate (APR) of 391%.  The average APR for payday lenders is around 390%, with some charging as much as 1,000% or more APR if the borrower keeps “rolling over” these expensive short-term loans. 

For more information, go to this Federal Trade Commission website for an “FTC Consumer Alert” on payday loans:  http://www.ftc.gov/bcp/conline/pubs/alerts/pdayalrt.pdf

Options for repayment are located on this Sallie Mae website:  http://www.usagroup.com/repaying/borrowers/repaying.htm

It is always a good idea to contact your creditors to try to work out a repayment plan.  If you ignore your bills, they could be sent to a collection agency.  If you are not comfortable negotiating with a creditor, or the creditor is not willing to work with you, then contact the nearest Consumer Credit Counseling Service by calling 1-800-388-2227;  these counseling services are affiliated with the National Foundation for Credit Counseling and work with creditors on your behalf.  Contact them at:  www.nfcc.org

It depends.  You need to consider several factors, such as how long you will stay in your home after you would refinance.  If you can save money on interest rates that were considerably higher than they are now, then do the refinance to lower your monthly payments as long as you can stay in your home for a reasonably long time.  If you will be moving in a few years, the month-to-month savings from refinancing may never add up to the costs that are involved within that short timeframe.

Refinancing also depends on how much the refinancing will cost you.  With new, low-cost refinancing packages, it might make financial sense to refinance at even a half percent difference.  Have your lender “run the numbers” given your particular situation and payment, and include the closing costs of refinancing to see whether you will come out ahead.

Another reason to refinance is to convert an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.  The ARM might have been a good rate when you first got the loan, but if current rates are around the same as they were back then, you might want a predictable monthly payment on a fixed-rate mortgage.

Also, some people are refinancing to a shorter term, say from a 30-year mortgage to a 15-year mortgage.  Your monthly payments will be a little higher, but your overall interest costs will be substantially lower.  If current interest rates are lower than what you are paying on your existing mortgage, your new monthly payments might not go up much at all.  Refinancing to a shorter term is a good idea if you are close to retirement because a shorter term loan means you will probably own your home before you retire.

Bankrate.com provides current interest rates by state for home, auto, CD's, checking, and many other rates.

The Department of Housing and Urban Development has developed a list of questions and answers about the home buying process.  Click on the links below for more information.

Generally, an FHA lender will want your monthly mortgage payment to total no more than 29% of your monthly gross income (before taxes and other paycheck deductions are taken out.)  With a conventional loan, this qualifying ratio may allow only 28% toward housing and 36% towards housing and other debt.

The lender also considers your debt-to-income ratio, which is a comparison of your gross income to housing and non-housing expenses.  Non-housing expenses include long-term debts such as car or student loan payments, alimony, or child support.  The mortgage payment, combined with non-housing expenses, should total no more than 41% of income.  The lender also considers cash available for down payment and closing costs, credit history, etc. when figuring your maximum loan amount.

The Iowa State University Department of Human Development and Family Studies has a list of funding sources available at:

www.extension.iastate.edu/housing/financial/fundingSources.html

Points are a type of fee that lenders charge.  They are additional monies you pay the lender at closing to get a lower interest rate on your mortgage.  One point equals one percent of the loan amount.  So if you and your lender agree to a $100,000 mortgage, one point would equal $1,000.  Typically, each point you pay on a 30-year loan lowers your interest rate by .125 of a percentage point.  If the current interest rate on a 30-year mortgage is 7.75 percent, one point would lower the interest rate to 7.625.  It makes more sense to pay points if you plan to stay in your home for a long time. Points are tax deductible when you purchase a home and you may be able to negotiate with the seller to pay for some of them. 

You are required to give your Social Security number when you fill out your income tax records, on medical records, to get your credit report, on college records, to apply for a loan, when you register your vehicle and when you sign up for social services.  You can and may want to refuse to give your Social Security number over the phone, as a club membership number, on address labels, as identification for store purchases and refunds, as general identification, and as your driver’s license number (unless the state requires it). 

When a store clerk asks for identification when you write a check, if your Social Security number is your driver’s license, the clerk will want to write that on your check.  Also, if your driver’s license is stolen, an individual can easily use your Social Security number and one other piece of identifying information (e.g., your name or address) and commit true identity theft.  The more your Social Security number is “out there,” the greater the chances of you becoming a victim of true identity theft.

If you are not comfortable carrying your medical card with your Social Security number on it, some health insurance companies will assign you a card with a different number on it.  Call them and ask.  Explain you are trying to protect yourself from true identity theft.

It is not prudent to carry your Social Security card in your billfold unless you need it that particular day.  If your billfold is stolen, an individual can easily use your Social Security number and one other piece of identifying information to commit true identity theft.

As soon as you realize your credit card is lost or stolen, contact the card issuer (banks issue MasterCard and Visa, American Express issues American Express) to report the loss. 

Then contact the fraud units of Equifax, Experian and Trans Union and request that a “fraud alert” be placed in your file:

• Equifax:  (800) 525-6285     www.equifax.com 
• Experian:  (888) 397-3742    www.experian.com
• Trans Union:  (800) 680-7289    www.transunion.com

Also ask them for a free copy of your credit report to check for fraudulent accounts opened in your name. 

Then call utility companies, Social Security Administration, financial institutions and other lenders to notify them of the fraud.  Follow up each conversation with a letter. 

Finally, report the theft to law enforcement and insist on receiving a copy of the police report.

If someone uses your credit card before you have a chance to call and cancel it, your liability is $50 per card, regardless of how much is charged.  However, if you call to cancel the card before the individual has a chance to use it, your liability is zero.  So call and cancel as soon as you discover the loss.

Your liability is different with debit cards.  If your debit card is used fraudulently, your liability is $50 for the first two business days.  If you wait until the third day to report the loss, your liability jumps to $500.  If you do not report the loss within 60 days of receiving a statement indicating fraudulent use, your liability is unlimited.  However, many issuers are waiving the liability as long as you were not negligent, or do not have a history of negligence.  Call your issuer and ask about their policy.

Your name is “out there” on many lists (e.g., phone directories, warranty cards, public records, purchases, membership lists).  To reduce the likelihood that your name will go on more lists, do the following:

• Register your name with the Direct Marketing Association (DMA).  DMA has business members and consumer members.  If you register as a consumer member (free for mail and phone lists), their business members will be told not to contact you.  Be aware, though, that not all businesses are members of DMA, so you will still get some offers.  To register, write to:
  

A federal law gives you the right to “opt out” of having some of your personal information shared with or sold to other companies.  That is the good news. The bad news is that the burden is on you to notify your financial institution if you want to opt out. 

To exercise your rights, read all your billing statements and inserts for information on how to notify them.  This could include filling out a form, calling a toll-free number, or responding to an e-mail address if you do business with them over the internet.

For more information visit the Privacy Rights Clearinghouse website at: www.privacyrights.org.  This site has more information on the federal laws that affect you, as well as addresses for major financial institutions across the country. 

Identify theft is when someone steals your identity and “becomes you” on paper.  The crime often begins with your Social Security number and one other identifying piece of information that the individual uses to establish false accounts in your name.

If you are a victim of true identity theft or other types of fraud, contact the following fraud departments: 

Equifax (800) 525-6285    

Experian  (888) 397-3742    

Trans Union  (800) 680-7289