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Are You Concerned About the Very Poor?

This article was written by Flexo in Society. 72 comments.

Whether you agree with it or not, the reason this country has supported programs like welfare, Social Security, the GI Bill, food stamps, Medicare, government-backed mortgages, FEMA insurance, and other social programs is because a modern society benefits when as many citizens as possible have opportunities to succeed financially. Social programs aren’t perfect and don’t always provide what they promise, and there’s always a small percentage who take advantage of the system.

The push-and-pull between the focus on the society and the focus on the individual existed even before the founding of the nation, and this particular Weeble that wobbles between left and right without falling down (yet) has allowed the United States to become the biggest economy in the world in a relatively short period of time, and that’s a good thing.

From an individual perspective, it might not be that intuitive that one needs to be concerned about the “very poor.” After all, with social safety nets, one might think that the “very poor” have little to worry about. Regardless of the existence of programs — both public and private — poverty is still an issue in this country, even if you don’t see it in your daily life as you shuffle in an office building from meeting to meeting or shuttle from city to city on business trips. It’s hard to be concerned about something if you aren’t faced with it every day.

If, however, you are concerned about the “very poor,” there are ways to help, even if you don’t believe that handouts are effective. The most popular rationalization for not caring about poverty is the idea that helping another individual teaches complacency rather than responsibility, interdependence rather than independence. The incorrect assumption is that families in destitute situations have no desire to work for their money like those who have built wealth for themselves and have earned the right to let their money do the work for them and receive income from dividends and interest rather than working in the middle-class and working-middle-class sense of the word.

The real problem is tied into that psychology 101 concept I turn to repeatedly, Maslow’s hierarchy of needs. If most waking minutes in your day are spent worrying about your shelter, your food, and having a safe place to sleep, “income mobility” is a fantasy. You’re a victim of “class warfare,” but in your reality, you don’t have time or energy for political arguments about class warfare.

If you are concerned about the very poor, there are options. Helping bring attention to poverty can form provide opportunities to those without them without much sacrifice from those with opportunities.

Give money directly to organizations that run programs focusing on providing opportunities. The top-rated charities focusing on poverty according to Charity Navigator are Direct Relief International (although International is in the name, they also work to eliminate domestic poverty, particularly in disaster-stricken areas), SOME (So Others Might Eat, focusing on the D.C. area), and the People’s Resource Center (based in Chicago). If you prefer to give a hand-up rather than a hand-out, focus on organizations that provide job training and placement, programs that expand the reach of educational opportunities, and programs that present positive financial role models.
Volunteer with the organizations that run these programs. Build houses. Build schools. Help at a food bank. When you are actively involved, you get to experience the results of your work much more closely than if you were to send a check every month. No, you won’t get a tax deduction for volunteer work, but that’s not the point.
Become a community leader. When people from poor communities manage to succeed financially, they often don’t return to be the role model their community needs. This is the reason financial illiteracy is a problem that will continue from generation to generation, keeping low socio-economic status communities from thriving.

Are you concerned about the very poor? Does paying your taxes and being satisfied with existing social safety nets relieve you from any other possible responsibilities for how the country fares as a whole? Do we even have any responsibilities to anyone other than ourselves and our families?

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How Student Loans Affect Your Credit Scores

This article was written by Gerri Detweiler in Credit. 11 comments.

This is an article by Gerri Detweiler. For the past twenty years, Gerri has been an advocate helping consumers find reliable answers to their credit questions.

Just as student loans can be “good debt” or “bad debt” depending on how they are used, they can be good or bad for your credit scores, depending on how you handle them. Obviously, they can help your credit scores when you’re able to pay them on time, and hurt them when you can’t. But there are important nuances that can make the difference between earning a great score and a mediocre one.

When student loans = good credit

Student loan debt A student loan can provide a student’s first credit reference. That’s especially true now that the Credit CARD Act makes it more difficult to load up on credit cards before you turn 21. Student loans differ from credit cards in an important way, though; they are installment loans, not revolving loans like credit cards. That’s a plus when it comes to building a well-rounded credit file. “Our research has shown that (all things being equal) consumers with a wider range of credit experiences tend to be better credit risks than those with only limited credit experience,” says Anthony Sprauve, public relations director for FICO.

What about the fact that many students graduate with not one, but many, student loans? Unlike maxing out a bunch of credit cards, the fact that your report lists multiple student loans is not necessarily harmful. That’s true even if the balances are high. “While having many revolving type accounts with high balances can hurt your score — even when paid on time — the FICO scoring formula doesn’t place nearly as much importance on the debt amount and the number of loans when considering installment loans,” says Sprauve.

But, of course, it can be hard to keep track of due dates on multiple loans, so the greater the number of loans, the greater your risk that you’ll miss a payment. If you consolidate some or all of your loans it will be easier to keep track of your due dates, but don’t expect a boost to your credit scores. “Typically (consolidation) wouldn’t have a major impact on the score because it’s installment credit and the amount you owe is still the same,” says credit scoring expert Tom Quinn.

When student loans = bad credit

Missing payments on your student loans hurts your credit scores. If you pay a few days late, say on the 5th of the month when the loan is due on the 1st, it’s unlikely the loan will be reported as late. But once a payment is thirty days late, it will likely be reported to the credit reporting agencies, and your scores will suffer as a result.

If you can’t make your payments, check out flexible repayment options, such as the Income Based Repayment Program (now dubbed “Pay As You Earn” by President Obama), graduated repayment, or income-contingent repayment. Or find out if you are eligible to put your loans in deferment or forbearance. Repaying your loans through one of these programs is not likely to hurt your scores, says Quinn.

But be careful. Some students who apply for deferment or forbearance think it’s a done deal and stop paying, only to discover it was not finalized and they are considered delinquent on their loans. Make sure you have something in writing from your lender before you reduce or stop making payments.

Quinn also warns about a common misconception that loans in deferment or forbearance are ignored when credit scores are calculated. “It’s still considered because you are obligated to pay it,” he says, adding that, “Delinquencies are reported even if the loan is deferred.”

What if damage has already been done? Late payments can stay on your credit reports for up to seven years and simply paying the past due amount won’t remove those late payments. But if your federal loan goes into default, you may be able to improve your credit by rehabilitating your student loan. You’ll have to make nine monthly payments on time over a nine to ten month period, depending on your type of loan. Once you do, you can apply for rehabilitation and, if successful, the notation that your loan was in default will be removed from your credit reports.

More student loan and credit scores tips

Feel free to prepay. Pay off your student loans early and you’ll save money on interest. Doing so shouldn’t hurt your credit scores, though, Sprauve warns that without other installment loans you could see your scores drop slightly.
Keep meticulous records. From the time you take out your first student loan, you should start a file and keep copies of loan documents, statements, etc. This documentation may prove to be invaluable if you experience payment problems.
Pay on time. This can’t be emphasized enough. If you move, notify your lenders of your new address. A statement that goes missing does not let you off the hook for a payment. Never heard from a lender about a loan you took out? Track down the lender and find out when payments are due.

Photo: a_mina
Department of Education

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More Homeowners Can Refinance

This article was written by Flexo in Real Estate and Home. 4 comments.

Thanks to some changes to the federal Home Affordable Refinance Program (HARP), more homeowners can qualify for government-endorsed refinancing. Previously, the program only offered refinancing options for households where the mortgage value was up to 97% through 125% of the home’s market value. This did help families who have become underwater, having more left to pay on their loans than their houses are worth. Given the continued depressed real estate market in much of the country, this hasn’t been enough. HARP 2, the expanded program, will allow a family who owes more than 125% of its home’s value to qualify for refinancing.

This program is different than the Home Affordable Modification Program (HAMP), which encourages lenders to change loans to restructure monthly payments. Each program has different requirements for qualification.

Many people are in financial trouble due to the combined effects of unemployment, increasing expenses, and accepting a mortgage that carried too much risk for a family. Some are ready to walk away from the house and the mortgage, accepting the consequences such as destroyed credit. Others want to take every option available to stay in the house and pay the mortgage in some form. Programs like HARP can now reach more people who want to keep their homes.

In order to qualify, the mortgage must be owned by Fannie Mae or Freddie Mac, the mortgage must have originated on or before May 31, 2009, you must be current with your mortgage payments, you must have had no more than one late payment in the last year, and your loan most be at least 80% of the value of the house.

In the past two years, fewer than 450,000 homeowners have taken advantage of HARP each year. With this adjustment to allow households deeper underwater to qualify, the number of families taking advantage of the program could increase to one million in each of the next two years.

HARP and HAMP are sponsored by the Department of the Treasury and the Department of Housing and Urban Development. The programs come from generally good policies designed to help homeowners when mortgage lenders have been more apt to take advantage of consumers. Just this weekend, I spoke with a firmer loan officer who left the business due to the shady ethics in the industry; her large corporation was issuing mortgages with the full knowledge that the borrowers would eventually default. There’s more to the story — the bank was selling the mortgages, so they had no inclination to worry about what would happen to the borrower in the future, and the government was subsidizing and encouraging risky mortgages, and every lender was taking advantage of this “free” money.

Nevertheless, HARP and HAMP can help correct these problems from a systemic perspective as well as a homeowner’s perspective.

Would you take advantage of the new and improved Home Affordable Modification Program?

New York Times

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Working From Home Can Benefit You and Your Company

This article was written by Flexo in Career and Work. 25 comments.

In my old corporate job, upper-level management stressed the importance of work/life balance and flexible working arrangements. The idea of work/life balance stems from the idea that most corporate employees recognize that working in a cubicle is not all there is to life, and despite pressure from supervisors and bosses, family life is important, too. Ignoring unemployment, most households are two-income families, and in order for a family to survive, there must be some consideration for a family’s needs during the day. Often, the message of work/life balance doesn’t survive as it is passed down the ranks from the upper-level executives to the mid-level managers, whose job is to put business needs ahead of just about everything else.

That was the case in my old company when I was there. Upper management saw the benefit of allowing people to work from home occasionally. This flexibility increases productivity and morale, and there’s a new study that proves this assumption, as I’ll describe below. Nevertheless, some responsibilities in that environment could not be done from a location other than the office. That’s an understandable reason for limiting the availability of telecommuting options, but many managers do not trust either the studies or their employees.

I’ve had managers who believe that without a line of sight, employees would simply not work. They follow corporate guidelines and allow employees to occasionally work from home, but they’re grumpy about it, and those who do opt to take advantage of flexible working arrangements like telecommuting or alternate hours are viewed as less dedicated to the company and more likely to miss out on rewards like raises and bonuses regardless of performance.

Researchers at Stanford University developed a method of testing theories about working from home to determine, in a controlled environment rather than through anecdotal evidence or less-rigorous testing, whether telecommuting and other working arrangements such as flexible hours are beneficial to a company. The researchers, in a presentation labeled “very preliminary,” note that although work/life balance is used in recruiting, prior to the study there has been no evidence showing a cause and effect relationship between flexible policies and employees or employers. Most of what we “know” about work/life balance today relies on case studies (anecdotal evidence) and human resource surveys. This Stanford experiment set out to change that.

In this experiment, the researchers used a Chinese travel agency with 12,000 employees and a corporate culture modeled after American companies. The sample included call center workers, some who would be allowed to work four out of five shifts from home and others who were not. From a statistical perspective, those who worked from home were significantly more productive. Both quantitatively (number of calls) and qualitatively (judged by call quality assessments), working from home benefited the company. The quieter environment of the home increased concentration and the healthier environment resulted in fewer missed workdays.

From the employee’s perspective, they are more satisfied with their working experience at the company. The firm involved with the test has been so impressed with the results of the study that they are rolling out the plan to the rest of the company.

The next time you have the opportunity to discuss working from home with your manager, be sure to share the positive data.

Do you work from home? If so, are you more productive than you would be in an office?

Photo: C G-K
Stanford University [pdf]

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Why Americans Take Fewer Vacation Days

by Flexo

In most workplaces throughout the United States, employees receive vacation days to use every year as a benefit, and in some cases, unused vacation days expire at the end of the year. According to the latest survey by Expedia, on average, Americans earned 14 vacation days this year but used only 12. While the survey ... Continue reading this article…

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Record-Setting Cyber Monday

by Flexo

Consumers in the United States spent more money online in one day, this past Monday, than they spent in any other one day in history. Online browsing and shopping resulted in $1.25 billion in sales on Cyber Monday, up 22 percent from the previous one-day record, last year’s Cyber Monday. The $1.25 billion in sales ... Continue reading this article…

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Construction Revolutionized My Finances

by Flexo

This is a guest article by Jon the Saver, a personal finance blogger at Free Money Wisdom. His mission is to spread financial wisdom and help people get their financial lives under control. In his down time he loves a mean game of Scrabble and spending quality time with his fiancee. I’m probably the only ... Continue reading this article…

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The Entrepreneurial Trend: Personality Traits

by Flexo

I’m an accidental entrepreneur. I never quite fit in with big hierarchical systems, like public education (as a teacher) and corporations. Getting things done, particularly accomplishing various things the way I wanted to accomplish them, has always been a struggle for me in these structures. I knew from the day I started working at a ... Continue reading this article…

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