Tag Archives: credit

6 Comments

worst financial mistakesAnyone can make a mistake. They're part of everyday life. Financial mistakes, however, can lead to problems for years to come if not corrected soon.

After talking to financial experts and others who have either experienced or seen other people make the worst financial mistakes of their lives, we compiled the following list of 25 of them. Many are common after graduating from college and starting a financial life on your own, but they can still happen to anyone at any age.

We should also note that these worst financial mistakes aren't listed in any order. We'll leave measuring their importance to you:

25 Worst Financial Mistakes

1. Not going to college

The average starting salary for a high school graduate is about $28,000. That figure almost doubles to $48,127 for college graduates in the class of 2014 with bachelor's degrees, according to a salary survey by National Association of Colleges and Employers. Starting your working life by being that far behind in pay is one of the worst financial mistakes you can make.

2. Not paying off student loans fast

The average student loan debt for a college graduate is $28,400, according to the Institute for College Access and Success.

For a college grad who is earning some real money after four or more years of living like a student, it can be tempting to spend much of their new income before paying off debt. That's one of the worst financial mistakes a graduate can make, says Alfred Poor, a college speaker and author of books about problems young people are having in the workplace.

"If college graduates tighten their belts and lower their expectations, and live like they only have the high school diploma, they will rapidly pay off their average $27,000 in student loans," Poor says. "If they spend their whole salary on a more comfortable lifestyle, they could be struggling to pay off that debt for decades, and end up paying much more in interest."

3. Paying off student loans too quickly

Paying off student loans quickly can also have a downside, says Steven Fox, a financial planner in San Diego with NextGenFinancialPlanning.com. If they use all of their extra income paying off student loans, they could be in financial trouble if they don't put some in an emergency fund and lose their job or get in a car accident and have unexpected medical expenses, Fox says.

"They should really think about whether they should pay off their student loans as fast as they possibly can once they get their first job if it means that they're doing so at the expense of not saving or investing anything," he says. "Ending up with zero debt is good, but ending up with zero savings is very bad."

An emergency could lead to borrowing money at a higher rate than what they were paying on student loans, says Fox, who reminds graduates that student loan interest is tax deductible for up to $2,500 for individuals making $80,000 or less without having to itemize.

4. Using max credit card limit

"Just because a bank offers you a credit card that allows you to spend money doesn't mean you should," Fox says.

This goes for all debt, he says. Being approved for a $20,000 auto loan doesn't mean your budget for a car is $20,000. ...continue reading

image1Discovering that a parent has stolen your identity is one of the most crushing financial betrayals imaginable. Putting the financial pieces back together will be easier than repairing the damage to your relationship.

Your parents should never deliberately hurt you, and you’re not wrong to feel angry and betrayed. B  ut let’s first talk about how to rebuild your credit. Then, we’ll discuss how to re-establish trust with your parents — if that’s something you can realistically do.

How the Betrayal Gets Uncovered

According to research by the federal government, adult children often discover their parents’ identify theft when:

  • Applying for a driver’s license. You might apply for a driver’s license only to discover that one of your parents has used your Social Security number to get a license. Some parents even accumulate traffic citations and DUIs using a child’s identity.
  • Trying to open a bank account or credit card. You try to open a credit card or bank account only to discover that your credit is ruined.
  • Receiving unexplained collections calls. You might receive a letter from a collections agency or phone calls about a charge you never made.
  • Buying or renting a home. You can’t get a mortgage, or a potential landlord turns you down, because your credit is a disaster.
  • Being threatened with arrest. In some cases, many of today’s law enforcement careers involve the investigation and prosecution of financial crime. An officer might issue a warrant for a financial crime that you never committed.

In some cases, parents try to re-establish their own lousy credit or get a driver’s license using their child’s identity. In many cases, kids with divorced parents discover that the non-custodial parent misused their Social Security numbers.

Fixing Your Credit

image2If you’re under 18 when you discover identity theft, the parent who didn’t betray you or another trusted family member will need to work on your behalf. Once you’re over 18, you’re responsible for sorting out your credit problems. Start by writing to each of the three credit bureaus (Experian, Equifax, and TransUnion) to report the ID theft and to put a freeze on future requests for credit. Also, call the police — even though it’s emotionally difficult — and file a report about what happened.

Once you’ve talked to the credit bureaus and the police, obtain a free credit report and see what accounts have been opened in your name. It’s tough to look at a report and see how much damage your parent did, but it’s important to know the truth. Then, contact each of the creditors and collection agencies to let them know about what happened. Ask the creditor to close or block your accounts while you work to resolve the problem. Many creditors will ask for a copy of your birth certificate to verify your age, so scan a copy so that you can email it, or make copies to mail or fax to your creditors. If you were under 18 when the credit account was opened, then you weren’t legally able to enter into a financial contract with the creditor.

When you talk to the credit bureaus and your creditors, keep a log including the name of the company you called, the name of the person you spoke to, the person’s title, and what was said during the call. Also, try to speak to people who have the title of fraud investigator or who work in the fraud department. If you’re completely overwhelmed, find an attorney through the National Association of Consumer Advocates.

Repairing the Relationship

image3If you had a good relationship with the parent who stole your identity, ask what happened and why. Listen to their story, and tell your mom or dad how much all of this has hurt or angered you. Go to a therapist together and try to work out your differences, and make it clear that such a betrayal can never happen again.

For most kids like you, the parent who steals your identity is a parent who’s hurt you before. It’s natural for you to feel like you have to be nice — it’s your parent, after all — but it’s OK for you to cut off contact until you’re ready to talk. If you’re never ready to talk to an unsafe parent, it’s okay to make that choice. Worry less about being nice and more about protecting yourself and your financial future.