For a lot of people personal debt can’t be avoided. Even some of the wealthiest people on the planet struggle with their finances. The important thing to understand is the difference between good and bad debt. This post will help you understand how to manage money and ease your way into becoming free from debt.

Some interesting facts about debt that are just downright scary:
Around 50% of every American spends more than they earn each year.
The typical household has more than $10,000 in credit card debt.
In the past decade, personal bankruptcies have doubled.

How do you define Good Debt?

Good debt is an investment. Good debt such as home mortgages, student or business loans are usually a smart choice. Why? Because they normally do not lose money. obviously the housing market crash in the U.S. doesn’t back up that statement, but if you think about it, most of those affected were head over heels into ‘bad debt’ before the economic downslide and could no longer afford their ‘good debt’. Without question, in five years almost all property’s will go way up in value.

College or Business loans are another type of good debt. They are an investment on your future and if properly researched they should pay for themselves over and over. Knowing good debt and bad debt will help you learn how to manage money.

Good debt also includes things that you NEED but are unable to afford up front. In these cases be certain you can make the monthly payments prior to taking on this type of debt.

What is Bad Debt?

Bad debt is buying depreciates or may cost you more money in the future.
“When you buy something that goes down in value right away, that’s bad debt. If it has no potential to grow in value, that’s bad debt.” (Eric Gelb, CEO of Gateway Financial Advisors and author of “Getting Started in Asset Allocation”).

Other ways to accumulate bad debt would be to buy things aren’t necessary and can’t afford. To make matters worse, plenty of people buy these things on their credit cards and end up not being able to pay off the balance in full. If you borrow cash to pay for items such as trips, clothing or entertainment and can’t pay the balance of the credit card you will probably pay A LOT more for that item than it is actually worth.

How Do I Remove Debt?

Good debt and bad debt should not co-exist when you know how to manage money. There is a pretty simple way to eliminate bad debt fast so you can start to chip away at the good debt. This may seem like it’s against all logic but try this: get rid of debt of lowest value first. This is an excellent way to set goals, see the your successes and start to be more motivated to eliminating your bigger debts. Remember to maintain the minimum payments on everything else. You will witness the results and be that much closer to becoming free of debt.

Something we all say is: ‘I wish I could become debt free.” For most that statement is just a wish. For some it feels like an unachievable dream. For everyone, becoming debt free is a reality. You can be debt free! Remember what causes debt, what solutions exists in handling debt as well as knowing good debt and bad debt. There is a way to start making that debt free wish into a debt free reality.

Almost everyone (financial planners, accountants and financial gurus) agrees that one of the most important personal finance budgeting steps that you can take to insure your financial success is to put aside money for an emergency fund. This not only insures that you have money when you need it, but it also allows you to get out of debt and STAY out of debt (as you never have to reborrow for an emergency).

What should you do first?

The first thing you have to do is decide how much money should you keep. Although the topic of exactly how much money is needed for your emergency fund is open to debate, the minimum amount should be enough to cover your minimum monthly expenses for at least three months. Normally a good number to start off with is $1,000. It is also wiser to save for six months and some financial advisors agree on a full year worth of cash.

Your own personal situation will dictate the amount of money you will need for your emergency fund. Now, if for instance, you have well-off relatives who you know you can count on in a financial crisis, then an emergency fund for three months may be sufficient (that is, if you don’t feel bad about burdening someone else). On the other hand, if you had reach for you credit card for help and end up paying 15% in interest on the debt, you would be better off saving enough money for your expenses that would last for at least six months. You can also learn how to improve your credit score to get lower interest rates.

Where should you keep your emergency fund?

Keep your money somewhere that is both easily accessible and safe because you might be required to get the cash in a hurry if an emergency comes up. Remember not to put your cash under your mattress but don’t put it in a stock either because that money may not be there when you need it most.

The best option you have is to open a money market account. However, don’t forget do research on their offer with regards to the minimum balance, interest rate and other terms.

What is the best order?

Now if you are thinking about where to place your money first, emergency fund, paying off the credit card debt or funding your 401(k), your emergency fund comes first. Then you can attack your debt and then fund your 401(k). This way you never have to borrow money from your 401(k).

Method of Action

So, you can begin by setting aside a monthly amount, like for instance, 5% of your paycheck or other amount that allows you to build up your emergency fund steadily. It may also be a good thing to make this automatic. You can do this by asking your bank to do an automatic program for deduction from your checking account to your money market or savings account.

You will also want to be frugal and find areas that you can free up more money. If by any chance you receive a promotion, bonuses, or other unexpected windfalls, always think about including them to your emergency fund.

When you’ve accumulated enough money, you will be able to sleep easier knowing you are on the way to financial freedom.

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Once you are in a sort of financial crisis and decide to get a payday loan, you have to choose a payday lender for you which suits your needs. Internet is the efficient source for comparing among available payday lenders. While choosing among lenders, many people are unaware about the parameters to look for. You have to evaluate the terms and conditions and other features as well to find the best quality lender. A complete comparison requires several parameters. Some of them are as follows:

Many people first search for the APR (Annual premium Rate) of payday lenders. But truly speaking it does not matter a lot as the nature of the payday loans is such that the interest rate calculated on an annual mode does not matter at all. These are short term loans and are meant only for short duration. So first of all decide the duration for which you have to apply the loan. Then look for the repayment amount for that duration of all the lenders. This is a more precise option as compared to APR method.

Another important point is that some lenders charge for filling the application form. This charge is sometimes deducted from the sanctioned loan amount. Try to go through the terms and conditions of the lender to find a one with no such charges. Also the repayment policy differs from lender to lender. Some lenders allow you to repay the entire loan amount before the due date. But some payday loan lenders would not allow that. Some lenders give some flexibility in the repayment like you can pay in installments. So it would be better to choose a lender with a flexible repayment policy.

Try to look for the contact details of the lender. A good and transparent payday lender will provide all the details like contact address, phone number, email id etc. in his website. This will help a consumer if he wants to alter the repayment policy or if he has any doubt and wants to clarify it. Also while reading the terms and conditions sections, if you have any doubt try to clarify it using the lenders help desk. You can mail or call the lender immediately and clarify it before applying. Before applying for a payday loan, think whether you can repay the full amount on the agreed repayment date. If you cannot repay the amount then the finance charges imposed by payday loan companies will increase. As a result, you have to pay more than the amount you borrowed. So try to repay the payday loan as soon as possible.

It is always advisable not to go directly to a particular payday lender as you never really know if you are getting the best rate and features available in the market. The best way to find a lender for you is to look for a payday loan lenders comparison website. They will provide you with all the stats you need when you shop for a payday loan.

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Lots of folks don’t think about the capitalization of a bank. However, it is a good signal of distress and if not corrected early and quickly, many under capitalized banks fail. Under capitalized banks are able to use a rate listing service to find certificate of deposits (CDs). As it appears that no one is policing the rate listing services, banks are able to offer interest rates significantly above the new Rate Cap that the FDIC has put into place. Although, the law doesn’t go into effect until January 1, 2010, the FDIC has encouraged voluntary cooperation. From what I can tell, under capitalized banks aren’t cooperating. I have a serious problem with the law that allows banks (under or well capitalized) through a rate listing service to solicit deposits and classify them as a core deposit. Anybody with any sense and logic can see that clearly, certificates of deposits placed through a rate listing service are not core.

This poses a few problems. First, rate listing services and companies such as ours are basically doing the same thing. We help banks, often times community banks, attract direct cDs to meet their funding needs. For various reasons, deposits such as ours are more attractive than local deposits. Ours may be less expensive, easier to work with, faster to obtain, etc. Those reasons aren’t really part of this article. If Credit Union A buys a direct CD from me to go into Bank B, they are brokered deposits. If Credit Union A purchases a direct CD from the rate listing service to go into Bank B, it is not a brokered CD. It is the same money, the same bank. Everything is the same except for the middle man (or middle listing service). This leads to the second problem. Banks are now using rate listing services to avoid paying the new FDIC assessment on brokered deposits. I can’t really blame the banks for doing this. After all, the law allows them to. But if the FDIC’s concern is that out-of-area deposits pose more of a risk to the bank, then all out-of-area deposits should be properly supervised, managed, and assessed if appropriate.

Another problem (the meat of this post) is under capitalized banks are not allowed to take brokered deposits without a waiver from the FDIC. This is supposed to prevent unhealthy banks from running up their deposits and causing the FDIC to pay out even more deposits. These deposits also can cause a bank to be less valuable to potential acquirers and thus increasing the cost to the FDIC. An under capitalized bank is able to take non-core deposits from rate listing service without a second glance. The rates they are offering are supposed to be at or below the rate cap that the FDIC has published. It appears that no one is policing this. At a minimum, rate listing services should have to build into their programs rate restrictions on under capitalized banks. Below are a couple of examples of current under capitalized banks offering high rates on a rate listing service and attracting deposits.

I’m not going to circulate the banks because I don’t really want to cause problems for the banks. Bank A is currently under capitalized with a Total Risk Based Capital Ratio (RR) of around 5.5%. This needs to be 10% to be thought of as well capitalized. Their capital ratio is just over 2%. Generally, regulators like to see a 7% or above. The numbers reported on the June Call report are even worse. This bank is currently accepting deposits through a rate listing service with some of the best interest rates in the US. The rate cap established by the FDIC is 3.00% for a 5-year CD. They were recently offering around a 3.40%.

Bank B is also currently under capitalized. They have a RR of 6.9%. The capital ratio is 4.6%. These are beyond low. This bank is also currently accepting deposits through a rate listing service. Their 1-year CD was around 2.00%. That is higher than many internet specials. The rate cap in place by the FDIC is 1.85%. I could give numerous other examples.

I realize my opinion probably won’t be very popular with banks, especially those on the rate listing services. But, I ask you, do you want to have to compete with the high CD rates being offered by banks such as those listed above? I also ask you to consider what is the intent of the law when it comes to accepting such deposits. The intent of the law is that banks do their due diligence when accepting out-of-area/non-core deposits. Rate listing services currently make it easy for banks to ignore that step.

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Successful fund-raisers requiere following several basic steps. Here are two things you have to do with every fundraiser:

1) Increase community alertness of your need

2) Increase community awareness of your offering

Everybody reading this right away thinks, “Yep, we’ve got that covered. Everyone in our group knows what we’re doing.”

Let’s take a closer look and see, shall we?

Creating alertness Of Your fundraising necessity:
1) Can your necessity be expressed in a single sentence?
2) Has everyone in your group memorized that sentence?
3) Is expressing your need a part of your approach to all supporters?

Test your group from top to bottom.

At random ask individuals to tell you why your group is raising money.

I absolutely assure you that you’ll be astonished at how weak the various answers are.

In many groups, more than 50% of persons involved with the fundraiser will not be able to tell you in a single sentence the specific reasons why they are raising money.

What about beyond your group?

Can you honestly say that you’ve exhausted every possible approach in spreading the word out to the neighborhood about your fundraiser?

Does everybody know why you require money?

Have you done each of these?

Flyers
Posters
Press release
Roadside signs
Newspaper coverage
Public service radio announcements
Pre-kickoff letter, postcard, or email campaigns

Or, are you assuming that all you have to do is tell someone that you’re doing a fundraiser and that they’ll be glad to help?

Two problems with that approach. One is that most of your group can’t effectively convey your need.

The second is that you are already assuming that your group has more than enough prospective supporters to meet your goal.

Both these problems limit your potential results.

Consider these three points:

One, if your need isn’t communicated clearly and concisely, it will not be understood and internalized as a deserving cause by your prospective supporters.

Two, if your sellers don’t really understand your group’s need, then they won’t push as hard to meet that need.

Three, if your need isn’t general knowledge in your community, then your fundraising job will be that much harder.

Think of “getting the word out” as being similar to softening up the beachhead during the Normandy invasion. If you don’t do the advance prep work, you’re much more likely to meet a hostile response.

Creating awareness Of Your fund-raisers Offering
The second fund-raisers fundamental goes hand-in-hand with creating an alertness of your need.

Creating an alertness of your offering is just as important as telling people why your group needs money.

Your fund-raisers need and your fundraising offering should be closely linked in all your communications.

At the same time you are getting the word out, you need to make sure the message gets through on exactly what your group is doing to raise funds.

Just as with expressing your need, everyone in your group should be able to sum up your fund-raisers offering in a single sentence.

That sentence should also reinforce the emotional foundation that is derived from recognition of your need.

So what in the heck does all that mean?

Put simply, if someone believes your necessity is real and agrees with the value proposition of your offering, they will help you.

And what’s your fund-raisers value proposition?

It’s a summation of your offering, combined with a reminder of your need, that’s expressed in a way that informs each prospective supporter of what’s in it for them.

In other words, your prospect needs to:

1 - Be aware of your necessity
2 - Be linked to it on an emotional level
3 - Be in agreement that your offer has true value in it for them

Getting your need and your offering across to as many potential supporters as possible is the essence of fundraising.

Take the time to expand single sentence statements for your fundraiser covering both of these fund-raisers fundamentals.

Teach everyone in your group how to convey these basic value statements when they talk to prospective supporters.

Conclusion

Executing well on these fund-raisers fundamentals — communicating your need and communicating your offering — ensures that your fundraiser will be a smashing success.