US Finance World

Question: I have a small business, and unfortunately I have encountered debts that were sent to a collection agency. Can they go after my business and myself personally? I have explained my hardship with this economy, and would like to set up a payment plan to pay them off. Will my credit still be affected by this? And, if so, what is the upside on paying this debt?

Answer: My answer assumes your business was organized as a sole proprietorship. I reach this conclusion because your question does not mention any business partners, which would imply your business was organized as a partnership. If you had organized your business as a corporation the attorney who set up the corporation would have explained that corporate officers and stockholders enjoy limited liability when a corporation is organized and financed properly. There are also variations on partnerships and corporations that combine the characteristics of both, but those are irrelevant for the purposes of this question.

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For years, I struggled to help people answer a fundamental budgeting question: “How much should I be spending?”

Most who asked were looking for specific answers about what they should devote to various categories such as housing, food, transportation, utilities and so on.

The answer I used to give — that there’s no one-size-fits-all solution — was really unsatisfying. It’s true, of course, because people’s circumstances vary so widely. But it wasn’t very helpful to people trying to create a workable budget.

Then Harvard bankruptcy professor Elizabeth Warren and her daughter Amelia Warren Tyagi wrote a terrific book called “All Your Worth: The Ultimate Lifetime Money Plan,” and I finally have an answer that works.

It’s simple, if not easy. It’s designed to work for any income.

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According to a report by Lloyds Banking Group, multi-generational households are becoming more common. That’s in part due to the recession, but also because the number of elderly people is “rising sharply”, says Ali Hussain in The Times. But families should be aware of the financial pitfalls.

Say you build a granny annexe. To avoid capital gains tax on a proportion of your main home when you sell it, you need to prove that the annexe was not a “separate unit”. You can usually do this by having an internal connecting door. This may be better than selling your home and your parents’ to buy a bigger one because anything they contribute may be subject to inheritance tax.

Moving into your parents’ house may not be the answer either. If a parent later moves to a care home, the council can put a charge on the house allowing them to sell it and recover care costs after death.

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From the San Diego Union: Calif. officials concerned about new budget woes

“It’s entirely likely we will ultimately see further declines in revenue, which will almost certainly require further budget action,” said Assembly Minority Leader Sam Blakeslee, a Republican from San Luis Obispo.
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Officials will also be watching monthly revenue reports from the Department of Finance and the controller’s office to look for signs of new trouble in the months ahead.

Of course, one of the key elements of the new California budget is to have the state use money that is normally allocated to cities. So I expect layoffs at the local level in addition to the possibility of further state revenue declines.

The recession might be ending soon, depending upon which economists and other financial forecasters you believe.  But, that doesn’t mean that people aren’t still looking to save money.  In fact, if one good thing comes out of this recession it will be that people have been reminded that money isn’t free, credit isn’t always easy to get, and saving for emergencies and opportunities is more important than remodeling the kitchen.

That being said, it isn’t always easy to find ways to save money.  Many family expenses seem pretty fixed and finding ways to make cuts can be hard.  The savings tips and saving tricks found in most money magazines, newspaper financial sections, and finance websites have been around the block a few times.  Many have lost their effectiveness, others were just never very helpful in the first place.

Saving Tips and Tricks Section

I’m happy to announce that today the Finance Gourmet website will begin building a new money saving tips section for our readers.  We’ll repeat some of the oldies but goodies (there is, after all, a reason that they are oldies but goodies).  However, we’ll also tell you about money saving tips that you might not already know about.  Some of them are easy, and some of them are harder, but they will all be worthwhile tools to add to your financial knowledge arsenal.

And, I guarantee that it won’t be the same old, “Make a budget, and cut back,” advice you’ve seen a thousand times before.

Keep an eye out for our first money saving tips later today!  Or, do yourself a favor and grab the Finance Gourmet Feed instead.  That way, you won’t have to remember to get your tips, they’ll come automatically to you.

Your credit score is important for everything in life.  From getting a great mortgage rate, to getting a perfect car loan.  If you don’t have a credit score, or your score is pretty lousy, there are many things that you can do in order to raise your credit score in no time.  Don’t let anyone fool you when it comes down to saying that you don’t need a credit score, because that’s ridiculous!

Here are some tips that you can follow in order to raise your credit score by 100 points within months ahead –

Clean up your report: Many people out there don’t check out their credit reports on a yearly basis.  If you don’t, you may find out that you’re going to see inaccuracies.  If you find that your report has something like that, you’re going to notice that it’s going to hurt your score.  Make sure that you always get these errors fixed by contacting the three major credit bureaus.

Lay back on the accounts: In the next 6 months to a year, I want you to make a deal that you won’t open up any accounts.  The more financing accounts you open, the more credit you’re going to open yourself to.  If you have too much credit available, this is going to hurt you.  Plus, even if you don’t get approved for a loan, you’ll find that every time they make an inquiry, it’s going to hurt your score as well.

Simply pay your bills: If you have a lot of debt, and you’re behind on your payments, start paying those off as soon as you can.  If you need another job, get it.  The more you can bring your debt down, the better this is going to look on your credit report.

Pay the minimums at least: Your goal from here on out is to make sure that you at least pay the minimums.  Just by doing this, you’ll be able to not be late on your payments.  Every time that you’re late with your payments, this is going to put a ding on your credit report, so make sure that you’re always on time, even if you have to pay the minimums.

Raising your credit score is easy.  Just make sure that you know that this won’t happen overnight.  It’s going to take at least 6 months to a year, as long as you follow the tips above.  If you can do this alone, you can be rest assured that your credit score is going to rise.

This week, I’m happy to present these articles from some of my favorite financial sites.

Personal Finance Reads

• The Wallet: The WSJ blog reports that starting salaries are slightly lower for graduating college students this year, compared to last year. And though it’s normal to see this type of dip during a recession, it’s a bit concerning for graduating seniors to start off this way, since research shows that entering the job market during a downturn hampers one’s career growth.
• Taking Charge: Ugh! Sounds like several spammers have found their way to Craigslist! I am familiar with the credit score companies that are being hawked by online spammers, but disappointed to read about how aggressive the marketing has been for these companies.
• Credit Shout: Divorce is one of those events that will seriously affect your finances. Randal

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Question: I have 2 credit card accounts that were opened in 1999 and 2000. Isn’t it supposed to drop off my credit report? New report date is 3/09. Does this new date matter when it’s dropped off my credit?

Answer: The rules dictating when listings must be removed from your credit report apply only to derogatory items; positive credit items, such as credit card debts which you have kept current, canremain on your credit reports indefinitely. For derogatory items, the date on which an account falls off of your credit report is calculated as seven years from the date the debt was charged-off by the lender; the date on which you opened the account is irrelevant. For example, if you opened an account in 1985, and stopped making payments in 2003, then the account should fall off your credit report sometime in 2010.

The new “reported date” should

not affect the date on which the account will be removed from your credit report.

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