Bankruptcy is a federal court process that places you under the protection of the bankruptcy court while you attempt to repay your debts ( Chapter 13 Bankruptcy ) or removes the debts altogether ( Chapter 7 bankruptcy ). In a bankruptcy, assets in excess of your allowed personal exemption, or non exempt assets such as, real estate, automobiles and boats will be liquidated by the trustee. When you file for bankruptcy, an automatic stay goes into effect. The stay prohibits your creditors from trying to collect any debt without the approval of the court.

Think long and hard before going into bankruptcy. Once you file, it will severely affect your ability to obtain credit, buy a house, buy life insurance and even get a job. There are other factors that might make one type of bankruptcy better for you than another.

Chapter 13 Bankruptcy – Reorganization. Chapter 13 bankruptcy, which applies to most people, involves reorganization of your debts. You’ll need to file a proposal with the bankruptcy court detailing your plan for repayment and include a detailed budget, which could be challenged by the court if the judge or a creditor feels you’ve added a lot of nonessential items. Some debts can be erased altogether, others must be partially repaid, and others must be repaid in full. If your proposal is accepted, your wages will most likely be garnished during the repayment period, which generally lasts three to six years. In Chapter 13 bankruptcy, you can prevent the loss of your home by immediately starting to make your regular mortgage payments and any catch up payments required by your repayment plan.

Is Chapter 13 bankruptcy for you?

Due to that fact that repayment of some of your debts is the basis for chapter 13 bankruptcy, you have to have regular income in order to qualify. Aside from employment or self-employment, regular income can include social security benefits, child care or alimony, and rental income. You also have to have enough disposable income after your basic needs like housing, utilities, and food to use for debt repayment. In addition, your secured debts ( those with collateral, like a car or a house) cannot exceed $872,000 and your unsecured debts ( those with no collateral, like credit card debt, student loans, and medical bills ) cannot exceed $270,000.

Chapter 7 Bankruptcy – Liquidation. In Chapter 7 Bankruptcy, you turn most of your personal property over to the court, which appoints a trustee to sell the property and use the proceeds to pay off all or some of your debts. As in Chapter 13 bankruptcy, you’re allowed to keep certain exempt property, but to keep secured property such as your house, car, or furniture you’re buying on credit, you have to sign a Reaffirmation Statement stating that you agree to be responsible for those debts. Once you’ve signed the Reaffirmation Statement, these debts can’t be discharged for at least six years. In other words, you can’t change your mind two – three years down the road and decide you don’t want those assets and don’t want to be responsible for paying for them.

Is Chapter 7 bankruptcy for you?

Chapter 7 is typically the bankruptcy type of choice for people who have large credit card or other unsecured debt and few assets. If there’s a risk that you might lose your home or car under Chapter 7, your lawyer may recommend that you file Chapter 13 instead. If you have more equity in your car or home than the exempt amount allowed by your state, the chance of being forced to relinquish these assets to be sold to pay your creditors is pretty high.

Filing for bankruptcy is not going to help you in the long run if you got there by irresponsible spending habits that you haven’t changed. However, if job loss, high medical bills, disability, death, divorce, or other circumstances not entirely in your control have produced the financial burden, bankruptcy may be the only way you can get a fresh start. The court will help place restrictions on how you can spend money and will not allow you to buy what it considers non essentials.

On Preventing Bankruptcies

Many bankruptcies can be avoided by practicing good money management. Some simple points listed below:

• Avoid impulse spending.
• Don’t use a credit card unless you have the cash to pay it off.
• Tear up credit card offers you receive in mail.
• Create and stick to a realistic budget.
• Don’t buy a house or a car you can’t afford.
• Protect yourself by having medical, homeowner’s and auto insurance.
• Don’t make speculative or high risk investments.

If you do find yourself falling behind on your bills, call your creditors immediately. Most companies will work with you if certain circumstances (job loss, divorce, illness, etc.) have made it difficult for you to meet your financial responsibilities. Suggest a temporary reduction in your payment, a waiver of late fees or penalities, skipping several payments now and increasing future payments to make up for it, or skipping several payments and adding them to the end of the loan.

• How much are you gonna save up for a down payment and closing costs?
• How do you know how high a mortgage you will qualify for?
• How much can you really afford based on your lifestyle?
• How much will you really save in taxes?

The key point here is home ownership is not for everyone and there is nothing wrong with that. If your lifestyle requires you to change jobs often and move or get transferred every year or so then it makes perfect sense not to buy. Typically, it takes 4-6 years to recoup the money you pay in up-front costs and the cost and fees.

You may also be happier renting if you’re not comfortable with performing your own repairs and maintenance and you can’t afford to hire someone else to do it for you. There are plenty of people who enjoys the benefits from living in apartments, benefits such as like swimming pools, recreational features and the flexibility of being able to move without too much trouble. You want to think about whats important to you, there is nothing wrong with renting if it suits your lifestyle.

For those who do want to own a home, you want to make sure to avoid being house poor. You don’t want to put your self in a situation where you have such high house payments that your a prisoner to your own house and cant afford much of anything else. You may think at first that buying your dream house is worth the sacrifice but years of doing without the enjoyment of vacations, new furniture, new cars, eating out and just other simple life pleasures can make your dream house into your worst nightmare. Becoming house poor can also affect your relationship with your spouse or partner.

The general rule of thumb you want to stick to is to buy a house that costs less than two and a half times your income. For example, if you and your spouse make $100,000 together, then you want to try to keep your home price under $250,000.

When you ask anyone to save a certain amount of their pay check, they will most likely agree that it is a great idea but they claim they can’t because they’re already pushing their limit within their budget. To save money from your current income will mean reducing your standard of living and that may be moving into a smaller place, not driving a fancy car, eating cheaper foods, or not able to enjoy your daily morning Starbucks. But because peoples lifestyles are all built on habits, even if they can agree that saving may be a great idea, the actual thought of reducing ones lifestyle is so unacceptable that they are not able to discipline themselves to take the first step.

Believe it or not, saving has always been a part of your life. When we were all growing up, we were given allowances and also were encouraged to save our money. Back then, we looked upon money as a tool to buy happiness whether it be in forms of toys, candy, ice cream, or cookies. Therefore as a result, we also naturally begin to look upon saving a way of punishment, which means depriving ourselves from the toys, candy, etc. At an early age, people begin to associate savings with pain, sacrifice, loss of pleasure, satisfaction and happiness. Now as adults, this habit is manifested in our desire to want to spend money as soon as we receive our checks.

Well instead of telling you how you can overcome this habit or cutting back on your current lifestyle, heres a different route. From this day forward, you need to save 75% of every increase in pay you receive from work.

How does this work?

This is something that you can do because it does not require you to lower your current standard of living, in other words, you don’t yet have the money built into your daily lifestyle. It is easier for people to commit to saving money that they don’t have than for people to agree on saving by cutting down on their current lifestyle. In order to become wealthy, you need to develop these habits.

So starting today, commit to save at least 75% of future raises in income. The earlier you start, and the rate at which your income grows, saving 75% of your future increases in years to come will allow you to acquire an enormous amount of money. Developing this habit will eventually make you financially independent.

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• Taking off slowly from stops
• Keeping your tires inflated at its recommend pressure
• Changing your air filters from time to time
• and driving at a consistent speed

are all good tips but it wasn’t enough for me. I still wanted to know more. A while back a good friend of mine told me that premium gas gets you better gas millage. He said that although it costs a little more, in the end he gets 80-90 miles more than using premium and it out weights the cost. So just out of curiosity, I did the math just to see what he was talking about.

If premium is running at $2.99 and his tank fills up at 12 gallons, then it would cost him $35.88 to fill his tank. If regular is going at $2.69 per gallon, a full tank would cost him $32.28. So it only costs him $3.60 to go from regular to premium and getting an additional 80-90 miles. I was thinking, wow thats awesome. I need to start buying premium! At this point I was really excited.

So I decided to give it a try. My car usually gets somewhere around 350-375 miles per tank(I drive mostly highway) using regular. After a month of using premium, which is about 4 full tanks, I was done with my experiment. I have to say I was quite disappointed, my car did not have any effect what so ever using premium. I was still getting my usual 350-375 miles each time before having to fill up.

I told my friend about my little experiment and how it had no effect on my car going from regular to premium. We were both puzzled at first but then we came to the conclusion that maybe it was because he was driving an older car. He drives the same make and model as me but 11 years older(1992 Honda Civic).

Although my experiment didn’t necessary help me any, I thought I share it with my readers. If you drive an older vehicle and want to do a little experiment go for it, it only costs you about 4 bucks to see if you can possibly get an extra 80-90 miles in your car. I think its definitely worth trying. Even if you drive a newer vehicle, still doesn’t hurt to give it a try. Go ahead and try it the next time you go to the gas station and let me know how it goes. You can email me your results at moneywalks(at)gmail(dot)com, I’d love to hear your story. Also make sure before you try this that your car can take premium, I’ve ran into some cars that can only take regular.

Happy driving

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Remember that you cannot deduct expenses that are for personal purposes, but you can deduct travel expenses that are the ordinary and necessary expenses of traveling away from home for your business or job.You may also deduct travel expenses, including meals and lodging, you had in looking for a new job in your present trade or business. You may not deduct these expenses if you had them while looking for work in a new trade or business or while looking for work for the first time. If you are unemployed and there is a substantial break between the time of your past work and your looking for new work, you may not deduct these expenses, even if the new work is in the same trade or business as your previous work.

With that being said, here are some tips to maximize tax deductions for travel:

• Do not prorate travel costs of getting to and from your business destination.
• Allocate travel expenses between business and non-business. Prorate your business and non-business expenses to identify the business expenses that are tax-deductible.
• Deduct costs associated with travel outside the United States. If you did not want to spend your entire time on business, you can still deduct the entire cost of your travel outside the United States.
• Deduct travel expenses for another individual. Yes, you can deduct the travel expenses for another individual who travels with you as long as its a business trip and he/she is an employee of your business.
• Deduct the cost of travel associated with your attending a business convention. You can deduct your travel expenses when you attend a convention as long as you can show that your attendance benefits your business.
• Deduct up to $2,000 each year for attending cruise ship conventions that are directly related to your business. As long as you meet the following conditions: The ship must be registered in the US, All ports must be in the US, You must submit two supporting statements with your tax return, and you must spend at least 51 percent of your time attending the seminar.
• Qualify a day as a business day. You can do this if your primary activity was business. A good rule of thumb is that your business activity be at least four hours in length during normal working hours.

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I have a friend who has been keeping his receipts for as long as I can remember. I guess you can say that he’s a receipt freak. He keeps them to enter into his money tracking system to keep track of his budget.

This is all very understandable and some what commendable for being so organized but I asked him, “why not just use your debt card like I do and keep track of your spending that way”. He replied ” because I like paper and I like to organize them!”

Apparently, he keep them filed away in a very organized folder on a monthly basis. I was amazed.

What did I learn? I guess there are people who just likes to keep their receipts and hold on to them.

So for all you receipt lovers out there, here are some tips I want to share with you on proper receipts handling skills:

1. Establish a simple routine for dealing with your receipts as soon as it comes into your hands and stay consistent. You can for example leave a space in your wallet or purse just for receipts and every time you purchase something. When you get back home, immediately put the receipts into an organized folder. This way, you don’t have to think about where you put your receipt and don’t have to waste time looking for them.
2. As soon as you receive your receipt, look for missing or faded information and fill in that spot immediately. There’s nothing more frustrating then trying to read the receipts’ date or price long after the fact when you’ve finally gotten around to putting into your data entry.
3. For those of you who likes to fold your receipts, fold it so that the printed side is uppermost. This way, it will be easier to find the receipt if you ever have to look for it. When you fold a receipt so that the printed side is hidden, all receipts look alike and you’ll have to unfold them all to find what you’re looking for.
4. Don’t let the data entry pile up. It’s a good habit to schedule a time every week to do the necessary data entry and make sure to stick to that schedule. If you don’t, you’ll find your self just putting it off and your piles of receipts will become even more ugly.

I hope these tips can help you out some way or another. Keeping track of your receipts is really nice and handy, but the trick is to being able to keep them organized. Good luck, I think I’ll stay with the online statements

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Yes, I’m really excited to announce that I have completely paid off my credit card as of this past weekend. I have wrote many posts about my credit card situation and it has been an ultimate goal for a while now. I am finally glad to announce that my long journey has finally reached an end.

For those who do not know, I originally had a credit card debt of about $9,000.00 as of last year May. Over this past year I have been trying really hard to fight temptation to not buy anything that I don’t need and only worrying about paying off this debt.

So now that it’s finally paid off, what’s my next goal? What am I now going to do since my debt has finally been paid off? It’s simple. Save, save and save. Invest, invest, and invest. That is going to be my next goal. Over this past year, paying off my debt has definitely been a great learning experience and through the process I’ve learned to budget effectively and to live frugally.

Now my main goal is to save up for my down payment for my first home. I plan on purchasing my first home in about 3-4 years from now, so I have plenty of time to start saving. I live in Maryland and houses here are quite expensive. If I want to save for a 20% down payment, I’m going to need about $70,000. That’s going to be my next 4 year goal.

Having this credit card debt paid off has relieved a lot of stress off my back and now I’m ready to continue my financial journey.

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Here are some Benefits of the account:

• The interest rate for this money market account is currently going for 5.30 %, which is fairly high.
• The minimum opening deposit is only $50.00
• FDIC-insured up to $100,000
• I get my atm fees reimbursed up to $6.00.
• Just like a checkings account, I get a check card and a check book.
• No monthly fee as long as the monthly average balance is over $500.00.
• Interests are compounded daily.

Some of the negatives:

• It’s an online banking firm so that means I can’t go into a physical branch for assistance.
• I’m limited to only 6 electronic transactions per statement cycle (ATM withdraws and electronic transfers.
• Along with many other money market accounts, the interest rates are not fixed.

Those are the main negatives I can think of at the top of my head. If you know of any other, please feel free to comment.

So I’m really excited about this account. It’s neat to think that I can move all my money from my checkings account and savings account and now make interest on it. My old savings account was going for something like %1 – %2 percent so its an upgrade from it. For my first deposit amount, I tranfered $1,000 from my savings account to this account and eventually I will move all my money from checkings and savings to here. I’m hoping to have $5,000 – $6,000 in this account by the end of the summer.

1. Big Awareness. Through budgeting, it keeps me aware of how much I spend on the daily basis.
2. Saves me money. By knowing whats coming ahead and being able to plan, it helps me to spend less and less every month.
3. Smart planning. Knowing how much money I have allocated, daily budgeting keeps me financially aware of my situation.
4. Puts me in the right direction. Helps me to reach my financial goals.
5. Helps me Prioritize. By keeping a nice balanced budget, I don’t have room to always buy things that I want. Instead, I need to make sure that I am able to buy the things that I need first before being able to buy anything else.
6. It just feels good. The satisfaction of spending within my allocated funds is a great feeling and an accomplishment.
7. Helps reduce debt. Financial planning and strict budgeting is a great way to help reduce debt.
8. Keeps me in a positive financial mind set. When I’m consistently around numbers and percentages, I’m always being reminded to keep going.
9. I love numbers. I love to calculate and to see how I’m improving from month to month.
10. Organized. Being able to plan my budget has definitely helped me to be more of an organized person.
11. (Extra)I’m ready for those emergencies. Life is unpredictable and you never know what’s heading your way. Being on a budget prepares me for those emergency times when I need those extra few bucks.

Budgeting is a very nice way to keep track of all your expenses and it also helps you stay organized. The best thing is it only takes about 20 minutes per week. I recomend using this program called pear budget. Its an excel spreadsheet that keeps track of how much you spend on the daily casis. If you want to give it a try, you can download it for free here.

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So then you ask, “should I put my money in a CD or a Money Market”?

Good question. In order to make the right decision, you have to define your goals and needs. Getting it wrong the first time is all it takes for it to cost you the big bucks so you want to make sure that you do your homework first.

For those who do not know, Certificate of Deposit or simply CD, are debt instruments issued by banks and other financial institutions to investors. In exchange for lending the institution money for a predetermined length of time, the investor is paid a set rate of interest.

While on the other hand, Money Market offers many of the same benefits as CD’s but with the added features of a checking account. As far as the interest rates go, they are fairly close. Last I checked, CD’s were running at 4.90% and Money Market at 4.80%.

Here are a short Pros and Cons of Money Market and CD’s.

Money Market:

Pros: Depositing money in a money market is as easy as depositing cash into a savings or checking account. Cash is immediately available for alternative investments so you’re a lot more flexible with Money Market.

Cons: Money Market’s interest rate is not fixed. The rate of interest is directly proportional to the investor’s level of deposited assets, not to maturity as is the case with certificates of deposit. Hence, money markets are disproportionately beneficial to wealthier investors.

Certificate of Deposit (CD):

Pros: The investor can calculate his expected earnings at the outset of the investment since the interest rate is fixed. Certificates of deposited are FDIC insured for up to $100,000 and offer an easy solution for the elderly who desire only to maintain their capital for the remainder of their life.

Cons: Not as flexible as Money Market and will be penalized for withdrawing before it reaches maturity. If the investor opts for a longer maturity and, thus, higher rate of interest, he will lose access to his funds and forgo alternative uses of his capital.

Final Analysis: So if you are absolutely certain that you will not be needing that $10,000 for the next year or so, then I say go for the CD, but if you are not sure, then Money Market is the way to go.

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