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September 30, 2010

JP Morgan Chase halts foreclosures

The Miami Herald reports that JP Morgan Chase has suspended "certain" foreclosures until it "reviews the legitimacy of certain affidavits in those cases."

I've called Chase to find out what's going on. Here are a few of my questions:

Did they fail to announce that they’re stopping foreclosures because they wanted to keep it quiet?

Is this something they’ve told the courts, all courts, only courts in Dade, in Florida, in other states?

Did they not want to make a big splash like GMAC?

How many borrowers do they have in Florida anyway? Tens of thousands? Did they tell them
that they may be experiencing the same problems as GMAC?

Last week, GMAC Mortgage, a unit of Ally Financial, announced that in 23 states including Florida, it was suspending evictions from homes in foreclosure and suspending sales of lender-owned homes while it reviewed its procedures. The company acknowledged that an employee did not personally verify documents in foreclosure cases.

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September 29, 2010

How much has the recession cost you? Try $5,000

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What has the recession cost you? On an inflation-adjusted basis, about $5,000. That, in round numbers, is how much the median household income dropped between 2006 and 2009 in Broward and Palm Beach counties, according to the Census Bureau’s report on local communities.

J. Antonio Villamil, the economist and head of St. Thomas University’s business school, said he couldn’t think of a time when that had happened before. When our standard of living dropped and by so much. He pointed out that the net worth of households, too, is down by $12 trillion.

The price of this recession has been great. In expectations, too. People are going to have to work longer. Save more. Spend less on credit.

What recession lessons have you learned?

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Need help with a money problem?

Call us Tuesday at lunchtime to speak live with a volunteer from the Financial Planning Association of Broward. The Your Money Personal Finance hotline.will be open Tuesday Oct. 5 from 11 a.m. to 1 p.m. You can call or you can submit your questions now online at SunSentinel.com/moneyquestion or leave a voice mail at 954-356-4628.

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Personal finance hotline next week

Need help with a money problem?

Call us Tuesday at lunchtime to speak live with a volunteer from the Financial Planning Association of Broward. The Your Money Personal Finance hotline.will be open Tuesday Oct. 5 from 11 a.m. to 1 p.m. You can call or you can submit your questions now online at SunSentinel.com/moneyquestion or leave a voice mail at 954-356-4628.

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September 28, 2010

Poorer and uninsured: South Florida household income plummets to less than 2006

(I wrote this story with my colleagues Dana Williams and John Maines.)

South Florida household incomes fell in 2009 to the lowest level in at least three years, according to a new U.S. Census Bureau report. In addition, far more Floridians are living without health insurance than the national average and the number of Palm Beach County families with young children living in poverty skyrocketed to nearly one in five, the report said.

South Floridian’s median household income – half had more and half had less – plummeted by more than 10 percent in both Broward and Palm Beach counties between 2007 and 2009, the Census said. That left South Floridians with a smaller median income than in 2006.

The figures, adjusted for inflation, show a far steeper decline in the standard of living in South Florida than the nation, where real median household income over the same two years fell only 4.1 percent. Consumer spending in Florida is down. And economists say fallout from the recession crisis in Florida continues to pose remains a huge challenges for tens many
Floridians despite the official end of the nationwide recession one year ago.

“This is a look backward at the carnage wrought by the financial crisis and recession,” said economist Sean Snaith of the University of Central Florida. When this year’s data comes out, it “will likely not show a great deal of improvement unfortunately, but we are beginning a long slow climb out of a deep hole.”

The data collected during 2009 are part of the American Community Survey. The ongoing survey provides cities, counties and states with annual information about housing, economics and demographics. Results from the larger, 10-year Census, will start coming out at the end of this year.

Florida families are having to make tough choices in the face of declining incomes. One seems to be continuing to avoid paying for health insurance. The Census report shows almost 21 percent of Floridians had no health insurance in 2009. While that represents only a slight increase over 2008, Florida's ranks of the uninsured dwarf the national average by almost two and a half times.

Here is a closer look at the data:

Household income
For the second straight year, median household income dropped in Broward and Palm Beach counties.

In Broward County, the median household income was $48,844 in 2009, down from $50,657 in 2008 and $54,420 in 2007. That's a 10.2 percent drop in two years. In 2006, the median income was $53,405. The Census Bureau did not provide figures for local income in earlier years. Palm Beach County also had a 10.1 percent drop from 2007 to 2009. Median household income was $49,580 in 2009; $52,399 in 2008 and $55,175 in 2007. In 2006, it was $54,672.

Statewide, Floridians’ median household income dropped 9.6 percent in two years.

Health insurance coverage

While the nation had fewer uninsured residents than before, Florida's proportion of uninsured residents went up between 2007 and 2009.

Florida had 20.9 percent of its population without health insurance in 2009. The national figure is 8.6 percent. Florida's figure was up from 20.2 percent in 2008. The national figure was down from 9.3 percent.

Only about half of all Floridians have private insurance, according to the Census.

Poverty

In Palm Beach County, more than one in five families with children under the age of 5 had income below the poverty level in 2009 -- $10,830 for an individual, $22,050 for a family of four. The 20.9 percent figure is a huge jump from 2008, when it was 13.8 percent.

“We’ve been getting a tremendous number of calls from people about basic needs and about requests for financial assistance,” said Diane Huff, director of community services at 211 Palm Beach and The Treasure Coast. That is the county's central hotline for referrals to social service and welfare agencies and groups.

In the first nine months of this year, she said 211 Palm Beach alone logged a 17 percent jump in calls from families with children younger than 18 who needed help with shelter, rent or subsidized housing.

Broward’s poverty rate for families with young children, on the other hand, was almost flat. It grew to 12.5 percent from 11.5 percent. That was not considered to be statistically significant.
Statewide, Florida saw poverty among families with young children grow to 17.5 percent of the population, up from 15.3 percent.

Nationally, the poverty rate of 16.6 percent was the highest in 16 years. It rose from 15.2 percent in 2008.

“Nobody should be surprised by this trend,” said retired money manager Gene Inger, who lives in Fort Lauderdale and publishes a daily financial website. “Actually it's amazing it's not worse as no new growth engines (for the economy) have developed in South Florida.”

The nationwide recession was the deepest since the Great Depression, with a 4.1 percent decline in economic output from the peak to the bottom. The hit was even harder on Floridians’ standard of living, said Economist J. Antonio Villamil, who is also the business dean for St. Thomas University in Miami. “This deep decline is going to take years to work out.”

Health Insurance Coverage in Florida, South Florida

County national rank, no health insuranceGeographyNo health insurance 2008No health insurance 2009Private health insurance 2008Private health insurance 2009Public health insurance 2008Public health insurance 2009
9thMiami-Dade 27.5%29.5%51.6%46.6%26.8%28.7%
23rdMonroe 23.8%24.0%65.4%60.8%22.3%26.8%
26thBroward 21.3%23.5%62.8%58.7%24.8%25.7%
69thPalm Beach 18.7%20.9%67.1%63.0%30.4%31.7%
        
        
 Florida20.2%20.9%63.8%60.8%29.1%31.0%
 United States9.3%8.6%69.6%67.4%27.3%28.5%

Median Household Income in Florida, South Florida

 income 2009income 2008change 08-09income 2007change 07-09income 2006Change 06-09
Broward County, Florida$48,844 $ 50,657-4%$54,420-10%$53,405-9%
Miami-Dade County, Florida$41,533$44,163-6%$45,069-8% $ 43,790-5%
Palm Beach County, Florida $49,580$52,399-5%$55,175-10%$54,672-9%
All Florida$44,736$47,452-6%$49,465-10% $48,289-7%
All U.S.$50,221 $51,726-3%$52,384-4%$51,530-3%


Source: U.S. Census Bureau, American Community Survey


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Foreclosure: Fannie Mae asked to explain

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Here's my story from today, about Fannie Mae being asked by three members of Congress to explain why it uses foreclosure law firms that are the target of a Florida Attorney General investigation for fraud.

UPDATE: Supreme Court in Florida declines to issue a foreclosure moratorium. My colleage Diane Lade reports.
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Need help with a money problem?
South Florida financial advisors have volunteered to chat with Sun Sentinel readers next week.

Members of the Financial Planning Association of Broward, in recognition of Financial Planning Week Oct. 4 through 10, will answer your questions on the telephone and live online during the Your Money Personal Finance hotline.Submit your questions now online. Or call in Tuesday, Oct. 5, between 11 a.m. and 1 p.m., to speak to an advisor. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA

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September 27, 2010

Your Money Q&A: Pay down the mortgage with extra cash?

Need help with a money problem?
South Florida financial advisors will answer your questions live online next week during the Your Money Personal Finance hotline.Submit your questions now online. Or call in Tuesday, Oct. 5, between 11 a.m. and 1 p.m., to speak to an advisor. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
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I am 57 and married. Our income is $66,000. We have $75,000 saved for retirement. We also have $6,000 in credit card debt. And we’d like to sell our home, but we owe about $190,000 on our mortgage and the house is probably worth $150,000 now.
I am about to receive a large sum from a personal injury award. After paying off the credit card debt, I feel we should put most of it toward the mortgage. Because the 4.5 percent interest we’re paying on our mortgage
is more than we could get in any investment that I know. What do you think?
Mary

The cash award is a bonus, but don’t spend it without doing some comprehensive planning, said Blair Shein of Compass Financial Group in Deerfield Beach.

First, it makes sense to pay off the credit card debt, because the interest rate is high for most cards.

With the rest, Shein does not recommend that you use most of the rest toward the mortgage until you first look at your overall financial picture. If you were to sell the house, you’d have to bring $40,000 to the closing to pay off the balance of the home loan. And, you should have at least three months’ living expenses set aside in an emergency fund. Shein figures that should be around $15,000. Those two items will put a big dent in the award that you’re expecting.

While the award will improve your financial situation, you still have more work to do. The retirement savings you have now won’t be enough to provide for your current lifestyle once you stop working.. Unless you want to cut way back on spending in retirement, you should save as much as you can now. Take a very close look at your expenses and see what you can do to reduce them.

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September 24, 2010

Taxes: Are you unsure what to do?

The Senate looks unlikely to take up, until after the Nov. 2 elections, the question of what to do about the Bush tax cuts that expire at the end of this year. 87643667.jpg

Which leaves taxpayers with a lot of uncertainty. If you're trying to figure out what to do, I'd like to hear from you. I'm looking for South Floridians who are working on their tax plans, not knowing what the tax law will be next year.

Other items of note. The IRS is open this weekend, for people to walk in and ask their tax questions. To learn more, go here.

And, coming up soon is Financial Planning Day Oct. 2 in Miami, in which consumers can get free financial advice from a host of professionals. For more information, go here.

Finally, don't forget the Sun Sentinel is hosting a live, call-in financial planning day Tuesday Oct. 5. You can ask financial advisors any question you want by calling in that day or you can submit your question in advance. Just go here.

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September 23, 2010

Foreclosure: Reaction

There's been much, much reaction today to my story about the fellow who bought a house for cash and then was foreclosed upon.

Much of the reaction has been from South Floridians who are going through foreclosure and feel they, too, have been the victims of unscrupulous lenders, attorneys or both.

One story I can share, but without names. These property owners own more than a dozen South Florida homes. Due to the downturn in their business, they've been going through short sale after short sale. They said twice in recent months, after the short sale has been completed, they've gotten a notice that the foreclosure is continuing. "They make so many errors," one of the owners said. They were trying to decide whether it's worth their time to point them out.


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Foreclosure: Mistake claims man's home

And now this story, which I found extraordinary. With luck, the mistaken foreclosure will be reversed shortly.

Here's the previous story I wrote this week with colleague Diane Lade. It ties the GMAC decision to halt evictions due to foreclosures nationwide to a case in South Florida.

And here's a link to the first story, on the GMAC announcemnt.

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Foreclosure: South Florida case is at the center of GMAC halt

This ever-expanding story of troubled in foreclosure court continues. Here's the second story I wrote this week with colleague Diane Lade. It ties the GMAC decision to halt evictions related to a case in South Florida.

Here's a link to that first story, too.

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September 22, 2010

Credit score: Check out the map

There’s a nifty interactive way to see how you stand today with Experian’s release of credit scores by city. (Surprise: South Florida doesn’t have the lowest scores.)

Experian is one of the three major credit bureaus. A credit score is a number that is based on how you pay your bills, what your experience has been with loans and credit cards and other financial transactions. The lower your score, the riskier you look to any lender who is considering doing business with you.

One type of credit score is the VantageScore, which ranges from 501 to 990 . The report says two of South and Central Florida’s major metro areas are somewhere near or in the lower rungs, while the folks in West Palm Beach are just below the upper ranges.

Nationwide, the highest average credit score can be found in Minneapolis with 787. The lowest is Harlingen, Texas, with 684.

Miami-Fort Lauderdale’s average score is 719. Orlando’s is 734 and West Palm Beach is 753.

If you want to check out a map and other cities, go to www.livecreditsmart.com.

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September 20, 2010

Foreclosure: GMAC halts sales, evictions.

With hundreds of South Florida foreclosures now caught in uncertainty, GMAC Mortgage stops evictions and temporarily halts sales of properties that it has taken back from homeowners in Florida and 22 other states.

Here's a link to the full story.


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Your Money Q&A: How do I get old debts off my credit report?

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
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How do I go about clearing up old charge-offs from my credit report?
-Bonita McKenzie, Fort Lauderdale.

A charge-off is an old debt that a creditor has written off as uncollectible. Generally, this happens after six months of non-payment. But that’s not the important number you should remember here. The most important one is this: A charge-off can stay on your credit report – and bring down your credit score – for seven years.

“If the charge-offs were valid, then it is my opinion that she would have to wait the required period – seven years – for it to disappear,” said Certified Financial Planner Richard Russo of KR Financial Services in Hollywood.

How then can some companies promise to wipe out old debts or charge-offs or other negative marks on your credit? They can’t. “There is no magic cure for negative information in credit reports,” says Gerri Detweiler, personal financial advisor for Credit.com and an expert on debt.

But you, on your own, can improve the report. You do this by making sure your credit report is absolutely accurate. And by handling credit well now.

A credit report changes over the years. You said the charge-offs were in the past, which is good. Because the older a negative mark is, the less impact it has on your credit score. If you have built a positive credit record since then, that takes the sting out of the old charge off until it finally drops off your record.

You should make sure your credit report is completely accurate, too. Here’s how to do that:

-Get a copy of each of your credit reports.

You can make this request online at www.annualcreditreport.com or on the telephone at 877-322-8228.

Ask for all three – from TransUnion, Equifax and Experian. They can be different and you want to clean them all up.

-Look them over carefully.

Detweiler points out that a charge-off should show a zero balance. (If it does not and a collection agency is trying to get you to pay that old debt, the collection agency may put the same balance on your report a second time. That makes it look like you have more bad debt than you actually do, which would bring down your credit score. So look for the zero.)

Perhaps, the seven years have already gone by and the charge-off is still there.. You can ask the credit bureau to remove those old items. The clock on those seven years starts on the date of last action on the account – most likely, the date of the charge-off.

Or maybe there’s an error as to when the debt was incurred. Remember, older items have less impact on your credit, so you want to have the right date there.

Florida law gives creditors up to five years to try to collect a consumer debt. After that, the creditor cannot sue you for the debt.

But, the creditor can sell the debt to a third party collector – who can try to collect for as long as he or she wants to try. Several years ago, debt collectors would report old debts to the credit bureaus with a new date – a practice known as “re-aging.” This has been prohibited by federal law since 2003, but the practice used to be quite widespread. If the age of your debt is incorrect, you can challenge it and get it removed.

-If you find something in error or that you do not recognize as your own, you notify the credit bureau.

You can do this in a letter or online. There’s usually an address on the report itself or on the website for each of the bureaus. At TransUnion, for example, it’s a “request for investigation” and you download the from online.

Under the Fair Credit Reporting Act, the credit bureau must investigate the issue. If it finds the information is inaccurate, incomplete or it cannot be verified, then it has to be removed, usually within 30 days. If you notify the bureau that the item is too old to be on your record, if that is correct, it has to be removed.

If all this doesn’t happen, you have to right to sue and seek damages.

If you want to know more about your federal rights, the Federal Trade Commission has a good site explaining them at www.ftc.gov/credit.

It may surprise you that on an old debt, one that is beyond the time limit for being collected, a debt collector may call you anyway. This happens because debts get resold.

What you should do: Ask the collector for his or her address. Send a letter saying that you don’t want to be contacted and that you don’t owe the debt and it is beyond the statute of limitations, Detweiler suggests. Once you send the letter, federal law says the collector must stop contacting you.

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September 17, 2010

Tame inflation in South Florida

South Florida’s consumer prices were rising at a modest 0.7 percent annual pace in August, the federal Bureau of Labor Statistics reported Friday. Nationally, the consumer price index rose at a 1.1 percent annual pace last month.

If this trend continues, consumer prices in the Miami-Fort Lauderdale metropolitan area are on track to grow at a slower pace than in 2009, when the local CPI went up 1.3 percent.

Last year at this time, consumer prices were actually falling and the region was experiencing deflation. Two years ago, the local CPI was racing upward at an almost 6 percent annual pace.

The BLS releases the national CPI figures monthly and a similar index for selected cities every other month. It does not measure prices in Palm Beach County, but trends there are similar to Miami and Fort Lauderdale.

For the twelve months ended in August, the local index shows that the cost of housing fell 1 percent. The prime force driving consumer prices up was transportation, including the cost of gasoline, which rose 5.3 percent, followed by prices for apparel, which increased 4.7 percent.

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September 16, 2010

South Florida cuts its debt

South Floridians really are mending their ways with money. Residents of Miami, Broward and Palm Beach Counties paid down about 6 percent of credit card debt between January and August. Miami lead the way, with a 10 percent debt haircut.

That’s according to figures from CreditKarma.com, which combed through records of 134,700 of the site’s users. CreditKarma provides credit research and information.

On the flip side, the survey showed credit scores – that all-important number that measure the credit-worthiness of borrowers – somehow declined slightly nationwide. CEO Ken Lin said prolonged unemployment and the still-stumbling housing market are offsetting consumers’ good financial behavior. He called it “a strange mix of economic conditions.”

You can benchmark your own financial situation by taking a look at a few results from the survey: The average consumer in Miami, Broward and Palm Beach Counties had $7,619 in credit card debt in August, down from $8,112 in January. The average person’s mortgage debt was $198,154, auto loan, $15,400 and student loans, $30,178.

Are you average? Above average?


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September 15, 2010

Taxes: Do you have a plan?

The Bush tax cuts are set to expire at the end of this year. The battle is raging on Capitol Hill over whether to extend them or to overhaul the income tax code altogether.

I want to find some real stories of South Floridians who are making plans to deal with major changes in the tax code.

If you have a strategy for possible increase in dividend taxes or income tax rates, let me know. If you're trying to plan an estate amid all this uncertainty, let's talk.

I’m looking for working people, investors, retirees……

Hjbrackey@sunsentinel.com

And, on a helpful note, the Internal Revenue Service is hosting a nationwide open house Saturday Sept. 25, including two offices in South Florida, to help veterans and the disabled solve their tax problems. Anyone can go to the open house and discuss a tax notice or other issue. The IRS has partnered with a number of veterans groups and advocates for the disabled to try to offer additional help to those groups.

If you go: IRS offices at 7850 SW Sixth Court, Plantation, and 51 SW First Ave., Miami, will be open from 9 a.m. to 2 p.m.


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September 13, 2010

Women investors still perplex Wall Street advisors

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Over the years, there has been an array of pitches, products, strategies and studies all aimed at figuring out what women should do, want to do, don't do or don't know about their money.

Now, we get some real information. A new survey from The Boston Consulting Group shows women to be a very unhappy group when it comes to managing their investments.

It says that women feel overlooked and under-served by their financial advisors. It says the strategies that advisors use to reach women are superficial, can backfire and can harm their financial prospects. It says advisors don't tailor their strategies to who women are and what they want.

Here's a link to the Boston Consulting Group's report....

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Slow-growth for Florida's economy

In case you missed this storey, too......The economy is growing slowly and people are adjusting. But it's not easy. With careers stalled, people are finding that their wages are not rising. People have to work more hours. Save more money. Deal with lower interest rates.

Anytime you'd like to comment on our economy or be a part of my stories, just send me your details at hjbrackey@sunsentinel.com

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Social Security: No raise next year


In case you missed it, here is my column from Sunday about Social Security.

The fact is, Social Security is not likely to raise benefits for 2011. A lot of people don't accept the reason for that: There is little to no inflation in the index used to calculate the cost-of-living adjustments for benefits. This will be the second year in a row in which benefits are not going up.

If you'd like to comment on this -- and many people do -- I'm collecting names of interested beneficiaries. I'll be writing about this again. So send me your email, name, city and phone number at hjbrackey@sunsentinel.com

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Your Money Q&A: Is debt consolidation a good idea?

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
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What do you think about debt consolidation companies? I’d like to make one payment every month, rather than multiple payments - Darla Layton, Southwest Ranches

Their ads about cutting your debt in half or government “bailouts” for credit card holders are enticing, but there have been plenty of consumer problems with debt consolidation companies. Consider it an option, but only as a last resort before bankruptcy.

There are other ways to tackle debt. One is for you to try negotiating a reduction in what you owe on your own. Credit card companies have been hit with a huge wave of defaults and apparently are more willing than in the past to cut deals.

Another option is to find a credit counselor and get into a debt management plan. This can last for up to five years. All your credit cards will be closed and you will make payments to the counseling agency, which then pays the creditors. The payments can be lower than what you paid on cards before you started.

If you do go to a debt consolidator, hold off for a little while. Starting Oct. 27, under a new Federal Trade Commission rule, debt consolidators won’t be able to charge advance fees for their services. They will only be able to collect money after they have renegotiated or settled or reduced at least one of the consumer’s debt. Previously, some companies collected hefty fees upfront and not all debt settlement companies are successful at lowering the consumer’s debt.

Another new rule requires debt consolidators to hold the consumer’s funds in a dedicated account at an insured financial institution. The consumer controls that money. Previously, consumers had no control over payments they made into accounts that were supposed to be used to cover their debts.

The FTC starting later this month also is forcing debt consolidators to make better disclosures, to let consumers know that debt consolidation can severely harm your credit score – by as much as 125 points.

A debt-management plan through a consumer credit counseling program will be reported to the credit bureaus, but it will not affect your credit score so long as you and the agency pay on time.

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September 10, 2010

Investing: Misplaced trust

For your reading pleasure, this is one interesting story about a Jacksonville-area Ponzi schemer who cheated IRS, FBI and law enforcement folks for decades.

How could that happen? The story, from Bloomberg BusinessWeek, talks about "cops trust cops." Once a person is inside law enforcement circles, he or she is, well, inside.

Another interesting tidbit is this one about who is most likely to get taken by investment fraud.

"Research has shown that males between the ages of 55 and 64 -- the bulk of McLeod's client list -- are the most typical investment-fraud victims, according to Lori Schock, the head of investor education at the SEC. As a group they are financially more literate than most, yet are willing to take bigger risks while doing less due diligence," the story says.

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September 9, 2010

Consumer Debt: Digging our way out

For 17 out of the last 18 months, consumer borrowing has been declining, the Federal Reserve Board reported yesterday.

Credit card use has been declining for 23 months.

Digging our way out.

Which, to someone concerned with the personal finances of the nation, is a good thing.

We’re no longer in this oblivion where spending never ends. The most recent peak in our amount of revolving debt came in 2008, when, stocks were doing well and housing values had fallen but not nearly as much as now. The year before, total consumer borrowing was growing at an annual rate of almost 6 percent.

But super-low levels of spending can make the economy contract even more. For someone concerned with the economy, that’s a worry.

Economists will be discussing the paradox. My take: Consumers are going to do what's best for them, especially when the outlook for jobs is uncertain. The economy will have to adjust. It'll have to step back from too much consumption.

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September 8, 2010

Stocks: One way to avoid trouble

This interview caught my eye, from the current Journal of Financial Planning. My favorite part:

Also, when the (stock market) fluctuations were extreme in 2008, as a self-control mechanism, I decided to enter the wrong password three times for accessing my portfolio online to lock myself out for a few weeks. I would still call my financial adviser from time to time to talk about what to do, but I didn’t want the ability to go in and see what was happening every day because it was so miserable. There is a principle called loss aversion, where losing is about twice as painful as gaining. I was really miserable.

That's from Daniel Ariely, the James B. Duke Professor of Behavioral Economics at Duke University’s Fuqua School of Business, author of the bestseller Predictably Irrational and The Upside of Irrationality.

Ariely explained that when times get rough, he looks to his financial advisor to be a sounding board. His goal, he said, is to keep looking forward, rather than react to short-term events. Then, of course, tricks help, too.

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September 7, 2010

Social Security: No increase likely next year, either

I'd like to hear from any South Florida seniors who want to comment on the prospect of not receiving any increase in Social Security retirement benefits next year.

There was no cost-of-living adjustment in 2010, either.

Two years, no raise, what do you think I'll be hearing?

I'm ready.

I'm just not so sure the South Florida economy is ready to have its seniors limited even more in their spending.

Seniors' retirement benefits usually get a boost because they are pegged to increases in consumer prices. In 2008-9, when prices, according to the Consumer Price Index for Urban Wage Earners, went down, seniors' benefits stayed the same for 2010.

This year, that's likely to happen again, for 2011.

The official announcement should be made in October. It's pegged to what happens to prices through the end of September.

Before you start the argument, please remember, it's federal law that sets it up this way. Not me.

If you'd like to be interviewed for publication online or in the paper, drop me a line at hjbrackey@sunsentinel.com.


POSTED IN: Retirement (9)

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September 6, 2010

Your Money Q&A: Credit card debt vs. retirement

Need help with a money problem? Columnist Harriet Johnson Brackey is working with certified financial planners to get answers. Submit your questions at SunSentinel.com/moneyquestion or call 954-356-4628. To see previous questions, visit SunSentinel.com/PersonalFinanceQandA
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2642382.thl.jpgI have $25,000 of credit card debt after a recent divorce. My salary is $80,000 per year. I have a very good credit score, pay all my debts on time, and pay more than the minimum. My interest rates are around 13.99 percent and the credit companies won't lower them any more. I am 56 and have barely any retirement money saved, though I have just recently started contributing to a 401K. My question is, how do I pay off my credit card debt and still save for retirement? I'm really concerned about retirement and whether I can live off of Social Security, if it exists by then. Please help. - Doris


Doris, you earn a nice salary but you need a spending plan, says Certified Financial Planner Luana Mobley Corral of Fort Lauderdale.

A general rule of thumb is to think in terms of dividing your money into three pots:

-10 percent to invest for the long term, which is retirement
-20 percent to save to spend. This is your emergency fund. It’s what you can spend so you can pay cash instead of using credit card debt.
-70 percent to live on

If we all did that when we started our first job out of high school or college, debt would rarely become an issue and most retirement goals could probably be achieved.

Because you have so little saved for retirement, you probably want to put away more than 10 percent toward that long-term goal.

Because you have so much debt, you have compounded your problem.

This is where you can start: Write down everything you spend money on and if you haven’t already, stop using your credit cards. You need an emergency fund and you need a plan to pay down your debt.

You have a 401(k) at work. Your initial retirement saving goal should probably be to put enough money in your 401(k) so that you get the full employer match. The employer match is free money that you don’t want to leave on the table.

Next, you need to segregate the expenses into needs and wants. I’m not suggesting that you eliminate all the “wants” from your spending plan, but for a season, at least some of the money you currently spend on “wants” may need to be redirected to paying down debt or retirement savings.

Look for less expensive ways to satisfy your “wants,” but ways that still satisfy you. Be creative about ways to reduce your “need” expenses. Such as:

-Have FPL do an analysis to see if there are things you can do to cut your light bill.
-Ask your cell phone carrier to evaluate if you are on the most cost effective plan.
-Review your insurance policies with your property casualty agent review to look for ways to lower your premium without substantially increasing your risk.
-Consider refinancing your home, if you plan on staying there a while.
-Brown bag your lunch a few days a week.

You get the idea.

The $25,000 of debt could be paid off in 5 years with payments of about $582 per month, figuring in your card’s 13.99 percent interest rate. That is less than 10 percent of your salary.

But let’s think about how to do this. First, make a list of all your credit cards, the balances you owe and the minimum payments for each one. You should pay the minimum payment on all the cards but one, the one with the lowest balance. For that card, pay as much as you can afford to pay. Let's say you have made a commitment to pay $600 a month toward debt and those minimums add up to $300. You pay them all and devote the extra $300 to the card with the lowest balance. When you get that card paid off, you apply the same strategy to the card that had the next lowest balance. You pay the same amount, in total, every month, but you stack it up so that you’re eliminating one card at a time.

Bottom line, if you start this plan in October, every single month you will be paying $600 toward all your debt until the last credit card is paid off. In February 2016, you should be celebrating the fact that you are debt free.

Why October? Because first I want you to put $1,000 into a savings account to establish your emergency/opportunity fund before you go on to the debt elimination plan.

Once you have paid off the debt, you will add the entire $600 per month into the emergency/opportunity fund until you have enough there to cover three to six months of expenses.

Once you have your emergency/opportunity fund up to that amount, you can begin to put that $600 a month toward your retirement savings. You should already be putting enough in your 401(k) to get your full Employer match. Now you are going to add the entire $600 per month to what you are saving already.

I suggest that you do your 401(k) deferral as a percentage of pay instead of a flat dollar amount. That way, you will automatically save part of your pay raises. When your paycheck goes up, so will the amount going into the 401(k).

Since you are newly divorced, I also encourage you to check all your beneficiary arrangements –you’re your will, any trusts, life insurance, retirement plans -- to be sure you have made all the changes that are appropriate for your new life as a single woman.

POSTED IN: Personal finance questions and answers (36)

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September 2, 2010

Jobs, economy: This isn't the usual recovery

The economic recovery? It makes me want a return to normal.1194989155693659407aiga_stairs_up_.svg.thumb.png

Here’s what I mean. Bart van Ark, chief economist of The Conference Board, issued a statement this morning about the weak jobs report: “While this expansion might seem similar to recent post-recession periods, it is in fact much different.”

What he and others have been pointing out is that following recessions – and this one is firmly over – the economy usually revs back up and has strong growth. T. Rowe Price Chief Economist wrote during the summer that “the 10 economic cycles since World War II suggested that a growth surge in real gross domestic product (GDP) on the order of 7 percent was in store over the first year of recovery.”

Yeah, right. That would be nice. In the first three months of this year, the nation had had 3.7 percent growth in real GDP, then 1.6 percent growth in the second quarter.

Weak growth isn't doing much for jobs. The result of all this weak growth is an extraordinary amount of long-lasting unemployment in Florida.

Florida was also supposed to be making a strong bounce back. University of Florida economist David Denslow said he was thinking that Florida would have one percentage point more growth in the state’s GDP than the rate of growth in national GDP.

That’s what he used to think, for this year and next.

This week, Denslow said he’s figuring Florida might only be able to match the nation’s GDP growth or exceed it by maybe half a percentage point at best.

We've got a recovery but it's stuck in first gear.

POSTED IN: Economy (42)

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September 1, 2010

Foreclosure: It's about work

There was a big difference between the Neighborhood Assistance Corp. of America mortgage modification event that just ended and the one NACA held earlier this year.

This time around, people talked about jobs they had lost. Work they could not find.

While they were waiting, people did not talk about bad loans, mortgage payments that rose suddenly, or strange ways in which their loans never let them pay off any of the principal. This wasn’t an event in which exotic subprime mortgage were the problem. Even the housing bust, the dramatically lower home values, wasn’t much of a topic.

This time, the soft chatter in the huge Palm Beach County Convention Center crowd was about staying afloat. It was about people who can’t keep their homes but who, I fear, wouldn’t be able to keep anything going for much longer. Because they need jobs.

POSTED IN: Your Money (256)

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About the author
You've got the job of managing your money. No one in school taught you how. But you and I, we can teach each other, how to handle it, how to save for retirement, how to make money last, how to educate the kids, how to make a budget work. The conversations I have with my readers are fun. Money's important, but discussing it does not have to be boring.

Harriet Johnson Brackey Harriet Johnson Brackey, the personal finance columnist for the Sun Sentinel, is an award-winning business reporter. Her columns for 2008 were named "The Best in the Business," a national award chosen by her colleagues at the Society of American Business Editors and Writers.

Brackey has worked at Business Week magazine and at USA TODAY, where she was a founder and part of the original staff of the Money section at the country's first national newspaper. After nearly 11 years there - spent covering the 1980s bull market, the insider trading scandals, the 1987 crash - Brackey left Washington, D.C., and came to The Miami Herald. She spent the next decade writing a column about personal finance that chronicled the stock market's Internet boom and bust, as well as the popular Money Makeover features.

Brackey also has done commentaries for Marketplace Money, which airs on National Public Radio and The Nightly Business Report which is broadcast on more than 250 PBS television stations nationwide. She also has been a radio guest on WLRN’s Miami Herald News.
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