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Money Management International Improving Lives Through Financial Education
SUCESS NewsletterFinancial Education Newsletter
Mounting debt and a fixed retirement income may make bankruptcy your last, best choice.

The Debt Advisor

by Steve Bucci
Bankrate.com

Dear Debt Adviser,

My husband was in assisted living facilities for nine years, and recently passed away at age 73. I've spent all of our IRA funds, cashed in all of our stocks, took out a line of credit on our house that we owned free and clear, and maxed out my credit cards to pay for his care.

I am in a financial crisis, and can no longer pay my credit card debt. I talked with a credit counselor and was told that my best option was to file for bankruptcy. The creditors require at least 3 percent of the total amount owed as a monthly payment. I only have Social Security and three pensions as my monthly income. I am 69 years old. Please give me your best advice as to how to proceed. Thank you.
-- Mary

Dear Mary,

I'm sorry to hear about your husband. I would like to think that I'd do the same for my wife. Your letter may serve as an example to others who are on the fence about the merits of long-term care insurance. Many financial planners now recommend that their clients consider including adequate insurance coverage as an important element for financial well-being. Permanent life insurance or long-term care insurance may have prevented you from ending up in this financial dilemma and provided you with peace of mind during your husband's illness. I can only imagine that you were likely doubly stressed dealing with your husband's care and worrying how you would pay for it.

I hope you don't mind me going off on a tangent from your question to assist others who may be facing a similar situation down the road. Now, on to determining what your best options may be to deal with your credit card debt. You mention that you visited with a credit counselor. Assuming that your counselor did a thorough review of your financial situation and that neither of you could come up with a workable repayment scenario acceptable to your lenders, it seems that you are a candidate for bankruptcy.

Because you chose to write seeking advice from me, I am assuming that bankruptcy is something you would prefer to avoid. However, bankruptcy is a legitimate and sometimes even a preferable option for folks who do not have the income to pay their debts. Bankruptcy protection is allowed by law and for good reason. In this country, everyone deserves a fresh start if they become hopelessly overwhelmed by debts. To fully understand the pluses and minuses of filing bankruptcy, you will need to speak to an attorney. This is a legal process and only an attorney can give you competent legal advice.

If your sole income is from pensions and Social Security, you may also have the option of doing nothing. Your types of income usually cannot be levied by a creditor to pay for debts. Here again, I suggest you consult with an attorney to be sure and discuss having the attorney draft a letter to the creditors explaining your situation, your chosen course of action and that all future contacts go through your lawyer.

From what you have told me, the most important thing now is to resolve this situation so it doesn't continue to interfere with you as you get on with your life. The best advice I can give you is to fully understand your options, make a choice and don't look back. At 69, you have a long life to look forward to and the sooner you begin to move in a positive direction, the better.

Good luck!

The Debt Adviser, Steve Bucci, is the president of Money Management International Financial Education Foundation and the author of "Credit Repair Kit for Dummies."


New Beginnings

The MMI Guide to getting your fianances in order for the New Year

As a new year approaches, we look to the past and forward to the coming year and reflect on the changes we want to make in our lives. With January 1st as an easy starting point, we resolve to follow through on those changes we decide are the most important to us.

Frequently we hear about people's resolutions to lose weight, clear clutter, get organized or get out of debt. In fact, these resolutions do not need to be separate commitments, but might be more easily achieved in combination. For example, losing weight and trimming the fat off your budget might be accomplished with the same starting philosophy. A resolution of clearing clutter might include a component of reducing financial clutter as well, thereby helping you achieve your goal of getting out of debt.

We are also used to hearing the old story of a resolution that didn’t make it past the month of January. Most often the reason for a resolution’s failure was that the resolution was not realistic: it was either too broad, too aggressive or there were too many of them competing for your attention at the same time.

In this guide to getting a grip on your financial life for the New Year, we hope to present you with viable ways to clear financial clutter, set up systems to accurately track your finances, set realistic financial priorities and goals, and be successful in moving toward a healthy financial life in the New Year.

Download the New Beginnings eBook


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2010:

20 ways to save $10

by Kim McGrigg

MMI Community Manager

In honor of the New Year, I offer you 20 quick and easy to save $10 or more. ( And I did it without suggesting that you skip the Starbucks!)

  1. Park in the boondocks. In many situations, you pay a premium for a premium parking spot. Next time you are heading somewhere where you pay to park, leave a few minutes early and opt for the farther and cheaper lot. The exercise you get hiking to your designation is a bonus.
  2. Don't be a package snob. There's a funny commercial running right now promoting bag cereal that gently chides people for being box snobs. I like this commercial because I have to admit that I have chosen items simply based on their packaging. Focusing on the content, rather than the container, is a smart money move.
  3. Practice patience. Love to go to the movies? If you can stand to wait a few weeks, your favorite flicks will be playing on the big screen at the discount theatres. If you can't wait to watch your favorite flick, choose a less expensive matinee.
  4. Dust off your negotiation skills. Most service providers are willing to negotiate on price, especially on slow business days. I recently got a great deal on a radio install simply because the shop had immediate openings.
  5. Skip dessert. Or if you are a chocoholic, skip the appetizer. Skipping one course when dining out is a simple sacrifice that can benefit your wallet and your waistline.
  6. Don’t leave without the leftovers. Portion sizes have become so huge that a restaurant dinner can easily double as the next day's lunch. If you purchase a bottle of wine that goes unfinished, ask if you can take the rest home. Many states, including Colorado and Massachusetts, allow you to cork and carry.
  7. DIY. Need your car washed, your dog walked or your lawn mowed? Do it yourself! This also works for snow shoveling, house cleaning, doing laundry, and getting your nails done. (I will leave it up to you if you want to try and cut your own hair; I sure wouldn'!)
  8. Pack your lunch. This is a commonly offered financial tip for one reason—it makes perfect sense. Packing your lunch one or two days a week can quickly save you $10 or more. In addition to saving you money, bringing, rather than buying, your lunch saves you calories and time.
  9. Try before you buy. Think twice before buying expensive equipment to support a hobby that may or may not hold your interest. Instead, borrow equipment from friends or family for a while and buy your own only when you are ready commit.
  10. Cancel a costly card. Review the terms of your credit card agreements carefully and consider canceling the card with the highest cost of credit. The cost of credit includes the amount you pay in fees and interest.
  11. Jump on the coupon bandwagon. Coupon clippers know that it is easy to save $10 during a trip to the grocery store. If you can't commit to couponing, invest in an entertainment or “eBook” typically sold as school fundraisers. The eBook I just purchased for $10 has (among many other things) four $5 off coupons to my local grocery store.
  12. Be late (or early).  We all learned about supply and demand in school, yet most of us still tend to follow the pack.  Instead, travel during off-peak months, dine at odd hours, and celebrate a holiday (Valentine's Day is right around the corner!) a day or week late to get the best deals.
  13. Try free service before fee-for-service. A lot of software companies offer programs for low or no cost. The idea is to lure you into liking their products so much that you will be willing to pay for more features. But before you do, ask yourself if you really need more. You might find that the service adequately and affordably serves your needs.
  14. Buy generic. Look for generic brands or store brands of items where it really doesn’t make a difference. For example, some products have the same taste and texture, regardless of whether it's a name brand or the store brand. The difference in price, however, can amount to as much as a 50 percent.
  15. Save your energy. A 50 percent increase in energy costs during the colder months is not uncommon, depending on how cold it actually gets. Setting your thermostat at a reasonable temperature, sealing leaky windows, and insulating your water heater can result in substantial savings.
  16. Buy in bulk. Buying large sizes can often save money. Usually, the unit price is less for larger containers. It is also a good idea to stock up on items you will need when they are on sale. But before you buy in bulk, be sure you will actually use a bulk of the item.
  17. Comparison shop. Do not assume that all supermarkets have the same prices. If you have a few chains in your area and you do not know which ones are least expensive, check them all out. Make a list of the ten or so products you buy most often, and do some comparison shopping. Often you will find a huge difference between chains, and, if you can save just five percent, it adds up to hundreds of dollars over the long run.
  18. Shop at the thrift store. Before you head to the mall, stop by your local thrift store. This is especially smart for an item you need only once. For example, I found black dress pants my son needed for a school concert for $2.99 (they were J Crew and in perfect condition!)
  19. Visit your local library. The library is a treasure trove of books, movies, games, and CDs. Borrowing books and other media can quickly and easily save $10 or more (just be sure to return items on time!) You might also consider turning in books you no longer want to second hand book store that gives you credit to read more.
  20. Consider the cost of convenience. Limit or eliminate shopping at the corner convenience store for items that could be purchased less expensively on your weekly supermarket trips. Along those same lines, don’t assume that the grocery store is the best place to buy non-grocery items such as batteries and laundry detergent.

Have something to add to the list? Please share your quick and easy money saving secrets so we can all enjoy a happy and prosperous New Year

Comment on this article.


MMI Debt Management Plan Client Corner
Tips for Success

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Update your account balances online. When you receive your monthly statement from your creditors, login to your MMI account and update your balances. It is important that we have the most accurate balance information possible on file. 

If you would like more information about signing up for a Debt Management Plan through Money Management International, visit MoneyManagement.org.


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About Money Management International

Money Management International (MMI) is a nonprofit, full-service credit counseling agency, providing confidential financial guidance, financial education, counseling and debt management assistance to consumers since 1958. MMI helps consumers trim their expenses, develop a spending plan and repay debts. Counseling is available by appointment in branch offices and 24/7 by telephone and Internet. Services are available in English or Spanish. To learn more, call
800-762-2271 or visit moneymanagement.org.


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