Articles by Miranda Marquit

Loan Application Rejected? Get a Free Copy of Your Credit Score

For years, you have been able to access your credit report for free after being turned down for credit. Indeed, if you are turned down for a loan, the lender is required to let you know which credit reporting agency was used in making the decision to decline your application. Then, you have the right to request a copy of your credit report, in writing, from that credit agency (as long as you do it within 60 days of the rejection). Up until now, though, you only had the right to see your credit report. As of July 21, 2011, though, you will now have the right to see the credit score that resulted in your rejection.

Getting Access to Your Free Credit Score

There are companies like Credit Sesame that can help you see a more general credit score. However, the score you see on a site like Credit Sesame, Quizzle and Credit Karma may not be the exact score used by a lender to make a decision about whether or not to lend you money. Thanks to this particular provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act, you now have the right to see which credit score was used, and you will be notified of this by mail in most cases.

Earlier this year, lenders were required to let you know if you didn't get the best terms, including the best interest rate, or a requirement to have a co-signer for approval. Credit scores didn't need to be included, though. Now, credit scores will be added to the equation. All of the information that the lender used when making the decision will be included on the notification, along with date of the inquiry, as well as which credit reporting agency was used to gather the information. Only those who didn't get the best terms, or were declined, will receive the notice (usually by mail). If you are approved, at the best terms, then you won't receive anything — unless the lender decides to provide the information or credit score to you.

Some lenders actually use their own credit scoring models, and this will be disclosed in any letter informing you of rejection, or of the reception of less than favorable terms. Lenders have to let you know that they aren't using a scoring model based on FICO, and then provide you with the scoring range that is used. You can also call the financial institution to get more information about the credit scoring model so that you better understand why you were rejected.

Bottom Line

For years, consumers and consumer advocates have been complaining about credit reporting practices that keep borrowers in the dark about what information is being used to make decisions about their financial futures. The ability to see your credit score for free when you are declined is a step toward better understanding your total credit history. It also provides you with some of the information you need to make more informed decisions, as well as target financial habits that could use improvement.

Will The U.S. Default On Its Debt?

By Miranda Marquit 4 Comments

President Obama and lawmakers are in discussions right now, trying to come to an agreement about what to do about the debt ceiling. If the debt ceiling isn't raised, the United States begins defaulting on its debt.

Of course, we won't default on it all at once, and there are ways that the debt could, perhaps, be restructured. As August 2, the date that has been designated as the point at which we begin defaulting, approaches, many wonder what could happen if the U.S. cannot meet its obligations.

Should The U.S. Declare Bankruptcy?

US Debt Default

Some think that the best course of action is to just announce that we're bankrupt, default on everything, and start over — hopefully with better money habits as a nation going forward. Others, though, point out that such a course of action would result in difficulties for us getting the revenue to start over. Borrowing at least some of our capital has been a reality since before the U.S. was a country. Our Founders didn't pay for the Revolutionary War entirely with money they had in hand; some of the funds were borrowed. Just like businesses rely on borrowing to get immediate capital for immediate needs, and then pay it back, the government operates on a similar principle. If we default now, we would pay a much higher interest rate on future debt. Our credit rating as a nation would tank.

However, just as a person — or an individual — can get in too deep, the U.S. government has done just that; we have spent beyond our means, and the current deficit level is unsustainable. Avoiding a default by raising the debt ceiling is probably necessary right now, to avoid default. Once that is done, though, it's time for America to wake up and realize that the same money habits cannot be followed in the future. Serious, and painful, changes have to be made.

Cutting Spending AND Raising Taxes

No one wants to be the bearer of bad news, least of all politicians. No politician wants to say that spending cuts need to be made, and that taxes will need to be raised. Some would like to think that doing one thing or the other will result in fixing the deficit. Sadly, we're far beyond that point at this juncture.

Someone who is badly in debt, and who is serious about getting out of debt, knows that there is a point at which only so many cuts can be made. The U.S. is probably at this point. The deficit problem is so big that no amount of cutting can fix the problem. We need to figure out our spending priorities as a nation, and make cuts to various budget items that don't fit the priorities.

But we also need to raise revenue. An individual serious about paying down debt will find ways to raise more money, including taking on a distasteful second job. The U.S. is in that position. More money needs to be raised, and that means that taxes need to be raised. Fixing our current debt problem as quickly as possible means combining expense cutting with revenue raising — even if no one wants to acknowledge that with an election year coming up.

If we do manage to get out of this mess, we will have to hope that, as a nation, we have learned a valuable lesson.

Improve Your Retirement Savings As A Couple: Spousal IRA

By Miranda Marquit 1 Comment

One of the things I love about contributing to my Roth IRA is that my earnings will grow tax-free, since contributions are made with after-tax income. One thing I dislike about my Roth IRA is that I am limited in the amount I can contribute. (There are the same contribution limits on a Traditional IRA.) For years, I have just contributed to my Roth IRA, and decided that, when my husband finished school and got a job, we'd open a 401k through whatever organization he was working with. However, what I should have been doing the last few years was contributing to a spousal IRA for my husband, so that we could be that much ahead for retirement.

What is a Spousal IRA?

Spousal IRA

In reality, a spousal IRA is just a “regular” IRA. Technically, what you are doing is making a spousal contribution to an IRA for a non-working spouse. This ability was created in recognition of the fact that there are a number of single-income households. What if a non-working spouse wanted a retirement account? The rules of the IRA require that contributions be made from earned income. However, in a single-income household, the staty-at-home partner does not have earned income. He or she is contributing in a meaningful way to the family, but the contribution isn't recognized by monetary compensation.

In order to provide a way for a non-working spouse to grow a nest egg, it is allowable for a working spouse to contribute some of his or her earned income to an IRA. It is important to note that a spousal IRA must be set up in the non-working partner's name. This means that the assets in it belong to that person. Once the working partner contributes the money, it is no longer in his or her control. For the most part, this doesn't matter, since you will presumably be together for the rest of your lives. But it is something you need to be aware of in the event of a divorce.

Advantages of the Spousal IRA

Clearly, one of the greatest advantages to the spousal IRA is that your partner can build up a retirement account. This provides your spouse with a measure of financial security that he or she deserves — especially since some of his or her financial potential is reduced due to the decision to take care of home and children.

The other advantage is that, as a couple, your ability to contribute to an IRA is doubled. If you like the Roth IRA idea, this can be especially beneficial. You are provided with a way to make twice the amount in contributions that will grow tax-free to your mutual benefit. When considering long-term retirement planning, a spousal IRA can be a smart decision. Instead of being limited to $5,000 in contributions for 2011, your household could contribute $10,000: $5,000 for you, and $5,000 for your spouse. This is a big improvement, and one that could make a huge difference when it comes time to retire.

Carefully consider your options and retirement goals, and then decide if you could benefit from a spousal IRA.

Saving Money On Health Care: Health Savings Accounts (HSA)

By Miranda Marquit 2 Comments

It's health plan renewal time for me. Every year, we go through this. In the last six years, my family's monthly insurance premium has nearly tripled — and our benefits have decreased. Have we had major health challenges? Nope. Each individual in my three-person family has only one or two doctor visits a year. We don't have new prescriptions. We don't have any pre-existing health conditions. We live a relatively healthy lifestyle. But the premiums keep going up.

Apparently, “administrative costs” are rising faster than anything else in the world of health care. (Maybe that's just my frustration talking.)

At any rate, this year I'm doing something about it. I've sent in a change of plan form, switching to a high deductible health plan that costs half as much as what I'm paying now. No, my current premium isn't a budget buster. But I am frustrated that so much money goes, with no benefit to me, into the pockets of insurance company execs. I figured out how much it would cost to pay everything out of pocket, and it's a fairly small fraction of what I've been paying in premiums for the last three years. The only reason I have health insurance is because of the worry that something expensive could happen. The new high deductible plan would help me keep more of my money for me, while at the same time making sure that my family is protected against unexpected health issues.

Health Savings Account

HSA: Saving Money On Health Care

There are a number of things you can do to save money on health care, from asking for discounts at hospitals and doctor offices, to joining a prescription plan. A Health Savings Account can help you put your money work to you. When you have a high deductible plan, you pay a lower monthly premium. I plan to put the amount that I save in premiums in the HSA. I'll still be paying the same amount, so it won't change my spending plan, but the money will be to my benefit. Here are some of the ways that a HSA can be of benefit:

Contributions are tax-deductible.
You can withdraw for medical expenses without tax liability.
Money rolls over year-to-year.
The HSA can act as a back-up IRA. It has the same rules as an IRA, so if you don't use the money for qualified medical expenses, you are subject to the same penalties if you aren't 59 1/2 (and to taxes if you are).
You can use the money in the account to pay out of pocket medical expenses, including co-pays.

It's important to realize, though, that a HSA isn't for everyone. It works best for those who are reasonably healthy, without chronic conditions. Because the high deductible means you will be responsible for more costs for longer, expensive chronic conditions can be even more expensive with this arrangement. So, carefully consider your options, and what would work best for your financial situation. In some cases, you might find that a high deductible plan, paired with a HSA, could help you control more of the money in your budget.

Look For Ways To Earn More Money

By Miranda Marquit 6 Comments

While I like feeling like I'm getting a good deal, it has always bothered me a little bit that a lot of emphasis is placed on spending less.

While I certainly don't think that you should let your tendencies to spend control you, I'm not convinced that the best way to create the lifestyle you want is to simply cut back on your spending.

To me, frugality is more like a lifestyle choice that involves getting the best value for my money and time, rather than a collection of actions that involve pinching pennies and “sacrificing” for the future.

Yes, you need to get out of debt, and yes, you need to spend your money wisely. But why all the focus on cutting back? What if you looked for ways to earn more money?

Ways To Earn More Money

Cultivating Income Streams

I'm not saying you have to run out and get a second, part-time job in order to earn more money. What would be the point of that? It would detract from time you could spend with your family. Instead, you could consider cultivating income streams that would eventually lead to you receiving a reliable source of income. If you have a couple hours a night, you can do this. I recently read a post on My Journey To Millions that encouraged you to ask yourself what you could be doing instead of watching TV. Cultivating extra income streams, that's what!

You can even get your spouse and other family members involved. Some of the things you can do to help cultivate extra income streams in your spare time include:

Starting a blog, and working toward monetizing it.
Getting involved in a worthwhile affiliate program.
Taking a hobby and trying to monetize it (this works especially well if you are a “crafty” person).
Freelancing or consulting (my husband did a statistical analysis as a consultant recently).
Researching solid dividend stocks and bonds, and building an income portfolio.

With the right plan, you could be well on your way to making more money. You could be taking your wasted time, and turning it into extra income — and you can do it as a family. A little creativity can win you some breathing room in your budget, so you won't have to worry so much about cutting back all the time.

Reality: Building Income Streams Takes Time And Effort

Of course, it is important to acknowledge the reality of income cultivation. Your income portfolio isn't going to suddenly manifest itself as a way for you to quit your day job. A successful blog requires that you take some time and effort to provide content, as well as use different tools to market your blog, and build networking connections with other bloggers. A freelancer or consultant needs to have some knowledge or expertise. It can take time to build these extra income streams, so you might have to continue pinching pennies for a while if that's what your budget demands. However, the idea is to work toward more creative ways to pay for the lifestyle you want.

Later on, your income streams can help you in retirement, and you will be well-placed to have a “working” retirement if that's what you want.

Is It Bad To Be A Spender?

By Miranda Marquit 2 Comments

It can be tempting to lump spenders into the “bad” category. When we talk about money personalities, the spender always comes up. Those who like to spend can be vilified in some circles. Even if it is unintentional, the focus that is so often placed on saving money, cutting spending, and being frugal can really put the pressure on spenders.

But is being a spender really so bad? Since I am, in fact, a spender, I'd like to think that it's not a bad thing at all. Like so many other things, it's in how you do it.

Spending Doesn't Have To Be A Dirty Word

In my mind, having a spender personality isn't a bad thing — unless your love of spending leads you into debt. Additionally, spending doesn't have to mean that you are using the money only for yourself. My husband is a spender as well, and he loves spending on other people. He likes buying gifts for others, and we both feel it is important to give to charity, and to our church.

Even spending on yourself doesn't have to be a bad thing. However, you have to draw the line when it comes to getting into debt to pay for your spending ways. As a college student, I often took my spending too far. I took out student loans — even though I had a full-tuition scholarship and a part-time on-campus job. I also got credit cards, and promptly proceed to max them out. Even though I had a number of advantages that should have made it easy for me to live within my means, I overspent every chance I had. I ended my undergraduate career with a great deal of debt.

I learned my lesson. My spending wasn't a bad thing; spending beyond my means was the problem. Now, I make sure that I live within my means. I have spending priorities, and make sure that I spend on those things first. If I run out of money, the spending stops. As long as my enjoyment of spending doesn't put my finances at risk, I think that my habits can be a way to help others, provide my son with valuable experiences, and help me find a little extra pleasure in life.

Preparing For The Future

Just because your spending is kept within your means, though, it doesn't mean that it's ok to put your future at risk. Before you spend on the “fun” things, it's a good idea to make sure your future is provided for. You should have an emergency fund, and you should be saving for retirement. If you have long-term goals, such as homeownership or sending your child to college, you need to plan for those things as well. You can use your love of spending to direct your resources into specific goals that can provide you with a more secure future.

In the end, being a spender doesn't doom you to a life of financial ruin. As with any other money personality, being a successful spender is about harnessing your impulses and desires so that you can use them to your advantage. Figure out what you want, and create a spending plan that helps you achieve your goals.

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