Q. How scared should I
be?

I’m not sure scared is the right
term. Concerned, yes. Aware, yes. Taking precautionary measures, yes. Scared,
well no.

Our economy, our financial system, is
certainly in disarray. We have a falling dollar, and a slowing economy… but
we’ve had these before.

The recent actions of the Federal
Reserve Board may have been necessary to restore equilibrium to the financial
system. Hopefully, this is not a precedent, but a learning experience.

Instead of reacting in fear, realize
that there are things that you do control. These are the actions that
will change your outlook completely.

Go back to the drawing board.

Here are eight steps to take
back control.

1. Review your budget.
   Add up your basic monthly expenses. Rent or mortgage payment, utilities, phone
   and cable services, loan repayments, food budget. All the basics.
   

2. Establish your emergency
fund. Make sure that you have sufficient emergency cash in a savings
account at your local bank to carry you for 6 months. Step one to feeling more
in control.

3. Be aggressive with your
spending and saving. One way to offset declining investments is to save
more money. The dry cleaner becomes your enemy. You’ll find that what you have
in mini-storage could easily fit in the attic. Cancel the health club
membership; get outside for a run instead. Take your lunch. Subways, not cabs.

4. Secure your excess
cash. If you’ve got substantial cash in a money market account, you may
want to move it to a short-term CD. You may think your money market account is
FDIC Insured. It’s not.

5. Take a defensive
position. In your IRA and 401K accounts, you may want to take a more
conservative position for now. Have a financial professional look at your
allocation and suggest changes for you to consider (Our office can do this for
you.).

6. Roll out that second
job. If you’ve got a potential second source of income, now would be the
time to get that going.

7. Service. Each of us
knows someone who’s in worse shape than we are. Offer to help. I will guarantee
that this will end any pity party you’re having.

There are a million expressions
that apply…you fill in the blanks

When the going gets
tough….._________________________.

Winners never quit, and
_____________________________.

Cream
rises…_________________.

You get the
idea.

Q. About my
credit……

Q. What is a credit score
anyway?

If you went to the doctor to get
your annual physical, and you found out found that your cholesterol was high,
that you were borderline diabetic, that you failed a stress test or that you had
the beginnings of osteoporosis, what would you do?

Well, your credit score (FICO
score) is like a financial physicial. Developed by Fair Isaac & Company (
hence the acronym), FICO credit scoring is a method of determining the
likelihood that you will pay your bills.

Like it or not, (fair or not)
FICO scoring has become widely accepted by lenders as a reliable means of credit
evaluation. A credit score attempts to simplify an individual’s financial
profile into a single number. Although it is not revealed how these scores are
computed, The Federal Trade Commission has ruled that the process is
acceptable.

Numerous factors affect your score
such as:

• The amount of time your credit
  has been established
• Total credit line versus credit
  balance
• How often you’ve applied for
  credit
• Whether you own or
  rent
• Length of time at current
  residence
• How often you’ve moved
• Employment history
• How long you’ve worked at your
  current job
• Late payments on charge
  accounts
• Negative credit information such
  as bankruptcies, charge-offs, collections, etc.

There are really three FICO scores
computed by data provided by each of the three bureaus––Experian, Trans Union
and Equifax. Some lenders use one of these three scores, while other lenders may
use the middle score.

Q. How can I improve my
score?

• Pay your bills on time.
  Delinquent payments and collections can have a major negative impact on a
  score.
• Keep balances low on credit cards
  and other "revolving credit." High outstanding debt can affect a score.
  
• Apply for and open new credit
  accounts only as needed. Don't open accounts just to have a better credit mix --
  it probably won't raise your score.
• Pay off debt rather than moving
  it around. Also don't close unused cards as a short-term strategy to raise your
  score. Owing the same amount but having fewer open accounts may lower your
  score.
• Make sure the information in your
  credit report is correct. It won't affect your score to request and check your
  own credit report. If you find errors, contact the credit reporting agency and
  your lender.

Q. I regularly receive offers
from credit repair agencies. Is this a good idea?

A consumer credit counseling
service will help you get out from under credit card debt, but it's your money,
and effort that gets the job done.

A credit counseling service will
negotiate with your creditors. They’ll arrange a repayment schedule, they might
even be able to lower the interest rate on your credit cards. Important:
Using a credit counseling service can affect your credit rating. Your creditors
will note that your bills are not being paid according to the original credit
terms.

However, the consequences related
to credit counseling are far less severe than a bankruptcy.

Remember that even though most
credit counseling services are nonprofit organizations, they still charge a fee
for their services. Most agencies get at least part of their compensation in
payments from your creditors.

If you're considering using a
credit-counseling firm, you should interview at least two different firms. This
FTC
site gives advice
on the questions to ask in the interview.

The National Foundation for Credit
Counseling can
help you find agencies in your area, or even counsel you online. There is also a
professional certification process that turns out Certified Consumer Credit
Counselors.

Ask the firms that you interview
about whether their counselors have this certification, and if you can be
assigned to a certified counselor.

• 1. From paycheck to
     paycheck….

How can this be? We’re both
professionals. Combined we earn over $ 225,000 annually. We’re strangled by our
mortgage payment @ $4,000 per month. We could downsize, but we don’t want to
sell into this market.

What do we do?

The message:

My guess is that your mortgage
payment is not the real problem, and you’re in good company. We’ve seen clients
with substantial six-figure incomes with nothing of substance to show for
it.

Savings is down the list of
priorities.

If the joint after tax income is
$150,000, then your mortgage is less than a third of your net income. That’s not
outrageous. If everything else were managed properly, the mortgage would not
feel like a burden.

So, go back to
basics.

Do a Cash Flow analysis

Analyze all your expenditures over
the past 3 months. Everything. All the charges, debit cards, checking accounts.
and ATM cash withdrawals.

Separate them into
categories

1. Debts, Insurance, Basic Expenses
   
2. College Funding, Retirement Plan
   Contributions other Savings
3. Vacation, hobbies,
   miscellaneous

We find that people with a
problem don’t complete this process. That would be a bad
sign.

Fight through it. Once you’ve
finished be rigorous about priorities. You’ll probably find there’s a lot you
can do without. You may want to close some of the credit accounts if they appear
to pose a problem.

It may still be a good idea to
downsize your residence, even if you find you can ultimately afford it. Living
within your means is the new opulence. You’re better off putting the excess cash
into savings.

That home equity is not the
sure bet it used to be is clearly an understatement.