Dr Boyce Financial Challenge

The Dr. Boyce Challenge for this month is simple: Create a budget which includes the steady elimination of credit card debt. That means you should list every single expense you have for the entire month on one piece of paper or a spreadsheet.

Don’t leave anything out. Count the money you want to use for getting your hair done, your nails, paying your mortgage, car note, whatever. Count everything. That will be your first step toward obtaining financial fitness.  

As you create the budget, allocate at least 10% of your monthly income toward reducing credit card debt. So, if you earn $3,000 per month after taxes,$300 per month should be allocated toward removing credit card debt, not including interest. So, if you owe $5,000 in credit card debt, you can remove this debt in a year and a half. It’s easier to negotiate with creditors if you don’t need them so much. Take small steps toward finding your financial freedom.

Could the Economic Downturn possibly be a GOOD thing?

By Dr. Boyce Watkins

www.BoyceWatkins.com

I hate being the doctor who has to tell the patient he has cancer, but the truth usually sets you free (or so my mother told me): We are in the midst of an economic bloodbath. It’s tough to argue that an economy which shrinks by an annualized rate of 5% is still healthy. It’s hard to tell someone that 7.2% unemployment, with the most job losses since 1945, is a good thing. A 4,000 point drop in the Dow is nothing to sneeze at, even if you have plenty of tissue. Times are tough, we know that.

But if we focus hard enough, we might be able to find a few bright sides to all this. With hopes that no one chooses to kill the messenger, I am going to give it a shot.

1) It could always be much worse.

The United States has, according to some, the strongest economy in the world. Our economy could shrink like Rush Limbaugh’s body on drugs and still be disgustingly rich compared to the rest of the world. Don’t believe me? Consider the “fast-growing” Chinese economy, the one that everyone thinks is going to outpace the United States in the next few years. Our annual tax revenues are nearly 4 times greater than China’s ($2.5 Trillion vs. $670 Billion) and they have over 4 times more people than we do (300 million vs. 1.3 Billion). In other words, our per capita tax receipts are over 16 times greater than China’s. So, we’re far better off than most of the world, even when we’re broke.

2) If there were ever an argument for getting out of Iraq, this might be it.

It’s hard to declare war on random countries if you don’t have the money to do it. War is big business and attacking other countries is a huge financial investment. If you don’t think war is about money, then you may want to take a couple of Political Science and History classes. Perhaps these troubles at home will keep us from creating trouble abroad, since Americans have lost patience with irresponsible, arrogant war-mongering. The Obama stimulus plan is asking for over $800 Billion dollars to boost our economy. We’ve already spent nearly $600 Billion in Iraq. Rather than declaring War on Terror, President Obama has declared War on the Recession, which seems to be a far better investment.

3) If you want to buy cheap stocks or real estate, this is the time to do it.

When the market rises, everyone wants to buy stocks. People forget that you shouldn’t buy stocks when prices are high, you buy when the prices are low. Companies with plenty of cash are grabbing investment and real estate bargains that were hardly available a year ago. You should be doing the same if you can afford to do it. Investors who purchase stocks after major market declines tend to do much better than those who buy during booms. You hear me Warren Buffet?

4) Struggle makes us FOCUSED.

Although I tend to be a hardcore capitalist, a part of me misses the activism of the 1960s, when people cared about more than making a dollar. OK, I wasn’t around in the 1960s, but I’ve watched enough old movies. Going through tough times not only teaches one to pursue a higher purpose in life, it also leads individuals to more carefully scrutinize the state of affairs in our government. In fact, I dare to argue that the financial crisis was just what Barack Obama needed to secure his election over John McCain. Economic prosperity allows us the luxury of choosing our politicians based on silly issues, like gay marriage (as we did in 2004). When we are worried about putting food on the table, we look beyond the silliness and choose the most qualified and most intelligent person for the job (after ensuring that he knows Africa really is a continent). Finally, tough economic times make you more responsible in your own money management, as the threat of financial insecurity keeps us all on high alert.

Those are my points, so again, please don’t kill the messenger. I certainly do not celebrate a weak economy, but I am a firm believer that focusing too much on the door that shuts keeps us from appreciating the ones that just opened. There’s always light at the end of the tunnel, a pot of gold at the end of every rainbow, and….well, you get the point. It’s the toughness of tough times that make the good times good. Keep hanging in there, it’ll be ok.

Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of “Financial Lovemaking 101: Merging Assets with Your Partner in ways that Feel Good.” For more information, please visit www.BoyceWatkins.com.

What is Consumer confidence? Black Wealth implications

Black Financial Speaker Boyce Watkins on Managing Credit

Dr Boyce Black Money: Credit Bureaus Part 1

By Dr. Boyce Watkins

www.DrBoyceFinance.com

Where do Credit Scores come from?

Unlike babies, credit scores do not come from a financial stork. There are 3 major credit bureaus in the United States: Experian, Trans Union and Equifax. Companies subscribe to their services to obtain information about you to decide if you are credit worthy or not. Under the old system, the credit scores ranged from 375 to 900. Under the new VantageScore system, they range from 501 to 990. The new system is more consistent among various credit bureaus, so you don’t end up with scores that go all over the place.

How can I get a copy of my report?

I personally go to a site called Myfico.com, where you can order reports from all 3 bureaus or just one. You can also go to freecreditreport.com (you know, the site with the really funny commercials). The law says that you are entitled to at least one free credit report every year. Also, if you are denied credit for any reason, you can write the bureaus, sending along a copy of the rejection letter, and request a copy of your credit report. If you choose to pay for your report, it will likely cost you about $8 dollars.

What factors go into calculating a credit score?

The factors that go into calculating a credit score are a little vague and it’s protected like the recipe for KFC chicken. While the formula is well-guarded, we do have some guidelines on what factors are theoretically used to determine whether or not someone should loan money to you.

The factors are broken into what they call “The Four C’s of Credit”: Character, collateral, capacity, capital and conditions.

Character is their way of trying to decide if you are a good person or not. I don’t agree with this, since having bad credit does not make you a bad person. It just makes you a person who does not have a good track record when it comes to borrowing money.

Capacity is represented mostly by your income level and how much money you’re expected to earn in the future.

Capital is noted by the amount of cash you have in reserves and other liquid assets at your disposal. If you have capital, that means you can withstand a short-term decline in income and still make payments.

Conditions are reflected by the environment in which you live. It might include the state of the economy, your line of work and other external factors that might impact your credit report. For example, during the liquidity crisis in America, conditions for lending are very, very bad.

Now you know where credit scores come from. You probably have more questions, since there is a lot of ground to cover. To get more information, please feel free to learn along with me and my students by visiting www.DrBoyceFinance.com.

Dr. Boyce Watkins is a Finance Professor at Syracuse University. He does regular commentary in national media, including CNN, ESPN, BET and CBS. For more information, please visit www.BoyceWatkins.com.

Dr Boyce Black Money: Credit Bureaus Part 2

Dr. Boyce Watkins

www.BoyceWatkins.com

As part of our series on understanding credit scores, we can now move into more of the nitty gritty. Understanding credit is an important part of financial planning, and there are even more ways for you to be informed, empowered and financially independent. Below, I continue with my Q&A about credit scores. Hopefully, empowered with this new information, you can work your way to the wealth and financial security you deserve.

How are all of the factors weighted when determining your credit score?

As I mentioned in the prior article, there is no publicly released, verifiable formula for how the various factors in your profile go into defining your credit score. However, there are researchers like myself who spend all of our time learning how these things work. So, based on the existing data, here is one estimate of how aspects of your credit history go into determining your credit score.

35% - Your history of payment on debts from the past

30% - The amount of debt you have

15% - Length and depth of your credit history

10% - The amount of new credit you’ve applied for recently

10% - The type of credit you use (credit cards, student loans, etc.)

Again, while these numbers are not precise, the truth of the matter is that they are probably accurate in a general sense. Reducing your current debt and paying bills on time have been shown to be an important way to improve your credit score.

How do I correct an error on my credit report?

The law protects consumers who feel that their credit report has errors on it. Anything you believe to be inaccurate on your credit report can and should be disputed. You should dispute the information in a formal letter to the credit bureau, not in a phone call or even email. You want formal documentation of your challenge.

The Fair Credit Reporting Act states that any information disputed on your credit report must be verified by the credit bureau within 30 days. If they reach out to the company that claims you owe them money and don’t hear anything back, they must by law remove the negative information from your credit report. Use this vehicle to carefully check on any information in your credit report that you do not believe to be accurate.

When you write the letter, make sure you include the following information:

- Your full name

- Your social security number

- Your date of birth

- Your mailing address

- The name and account number for the debt you are disputing

- The reason you feel the debt is not accurate

- Your signature

Be sure to include all relevant information, because the law says that the bureaus do not have to respond to any disputes they consider to be frivolous (not without merit). You want them to take your dispute seriously.

Here are the addresses to the various credit bureaus:

Experian (formerly TRW)
http://www.experian.com
PO Box 2002
Allen, TX 75013-2002
888-397-3742

Equifax Credit Information Services
http://www.equifax.com
PO Box 105873
Atlanta, GA 30348
800-685-1111

Trans Union
http://www.transunion.com
Consumer Relations Center
PO Box 1000
Chester, PA 19022
800-888-4213 OR 440-779-7200

Dr. Boyce Watkins is a Finance Professor at Syracuse University. He does regular commentary in national media, including CNN, CBS Sports, BET and USA Today. For more information, please visit www.DrBoyceFinance.com.

Americans Addicted to Debt

A funny slideshow about the mortgage crisis

I am not completely sure I agree with everything that's being said on this slideshow, but I thought I would share it. One of my students sent it to me, and I it was pretty funny.

You can view the slideshow by clicking here.