Managing Your Money With Kids...

Each month we feature one article from our Resource Guide...

Some say having a child is priceless. Others say it costs up to $250,000 (to raise them from birth through age 17). In any event, having children is definitely a game-changer when it comes to managing your family’s finances.

What worked when it was just the two of you will have to be scrutinized or even scratched. Planning and managing your family’s finances now that junior has arrived will take some time—but is more important than ever.

Here are seven steps all young families should take to secure their finances..
Read More About: 7 Steps To Managing Your Money If You Have Kids...

Loan Modification Guide for Homeowners

Loan modification is a hot topic and getting a lot of "hype" in the news. Below we have detailed what a loan modification means and who qualifies for the Home Affordable Modification Program which was recently launched by the Obama administration.

What is Loan Modification?

Loan modification programs are typically designed for homeowners who are having difficulty making their mortgage payment, but who can't qualify to refinance their mortgage. A loan modification is different than a refinanced mortgage which trades in one mortgage for another one. It also differs dramatically from foreclosure, a short sale, or a deed in lieu.

A loan modification usually involves reducing the underlying interest rate and in many cases it means converting the mortgage from from an adjustable rate mortgage (ARM) to a fixed rate mortgage. Other modifications can also include extending the term of the loan (for example from 30 to 40 years) and/or adding missed payments to the loan balance. The bottom line is that a loan modification is intended to reduce the payments for the borrower, make it more affordable, and reduce the risk that the homeowner will default on the loan.

Obama Loan Modification Plan

President Obama recently announced a $75 billion initiative called the Homeowner Affordability and Stability Plan (HASP). One of the principal tenants of the plan is called the Making Home Affordable initiative and it is comprised of two parts.

The part of the plan that is focused on loan modification is called The Home Affordable Modification program and is designed to reduce monthly mortgage payments for people who are close to foreclosure by modifying their mortgages and lowering their monthly payments on their loans.

Requirements for The Home Affordable Modification Program

  • Mortgage balance must be no greater than $729,750.
  • Home cannot be vacant or condemned and must be a primary residence—not investor owned.
  • Have a loan that was originated on or before January 1, 2009
  • Have a mortgage payment (including taxes, insurance, and home owners association dues) that is more than 31% of your gross (pre-tax) monthly income
  • Have a mortgage payment that is not affordable, perhaps because of a significant change in income or expenses.

To find out if you are eligible, there is a simple online form at the website. Check it out here:

How does it all work?

Once it is determined that you qualify, service providers will be required to follow a sequence of steps that modify the loan in order to reduce the monthly loan payment to no more than 31% of gross monthly income. For example, the interest rate can be lowered to as low as 2 per cent and the term of the mortgage can be extended to a maximum of 40 years in order to maximize the reduction in loan payment.

Starting the process and required documentation

After you have determined that you are eligible, all you need to do to get the process going is call your loan servicer (the company you pay your mortgage to) and ask to be considered for a Home Affordable Modification. You should be able to find their phone number on your latest bill.

Below is a list of the documentation you will probably be required to provide to your loan servicer. To speed the processing of your application, you should probably get this together before calling them.

  • Most recent income tax return.
  • Information about assets.
  • Information about any second mortgage on the house.
  • Account balances and minimum monthly payments due on all credit cards.
  • Account balances and monthly payments on all other debts such as student loans and car loans.
  • A letter describing why your mortgage is unaffordable (i.e. what caused your income(s) to be reduced or expenses to be increased).

Beware of Loan Modification Scams

There should never be a fee for assistance with or information about the Making Home Affordable Program. If you would like credit counseling before applying for the loan modification program, HUD-approved housing counselors can help you evaluate your income and expenses and understand your options. This service is Free as well! You can find them here: or you can call them at 1-888-995-HOPE (4673).

  • Beware of any person or organization that asks you to pay an upfront fee in exchange for a counseling service or modification of a delinquent loan. Do not pay – walk away!
  • Beware of anyone who says they can “save” your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
  • Never make your mortgage payments to anyone other than your mortgage company without their approval.

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Saving and Managing Your Money During A Recession

During hard times such as a recession, everyone is focused on protecting, preserving, and saving money. Below we have outlined some essential things you can do to protect your money and make it easier to sleep at night when times are tough.

MYMoney.Gov—A Great Place to Start

The Financial Literacy and Education Commission was established by the Federal Government with the purpose of improving financial literacy and education in the United States. They have an excellent website with the title They also have a toll free phone number 1-888-MYMONEY.

The website is broken out into a number areas such as: Budgeting&Taxes, Credit, Financial Planning, Home Ownership, Paying for Education, and Retirement Planning. Probably the most useful section of the site is called Responding To Life Events. This section of the website deals with the financial impact of life changing events such as the birth of a child, death of a family member, disability, foreclosure, marriage and divorce and many other events like these. is an excellent place to start learning how to protect and preserve your finances during hard times.

Know and understand your Protection

Most people have their checking and or savings accounts in either a bank or credit union. The FDIC (Federal Deposit Insurance Company) and the NCUA (National Credit Union Administration) both insure all of your deposits to certain limits. It used to be that the limit was $100,000 for both the FDIC and NCUA, but in October of 2008 those limits were changed to $250,000 until December of 2009. To check whether your bank is federally insured, visit the FDIC or NCUA website.

If you have a brokerage account for your investments such as stocks and bonds or your 401K or IRA, brokerage firms also insure these accounts just like the Banks and Credit Unions. The current insurance limits are $500,000 for securities accounts and include $100,000 in cash claims when a securities or brokerage firm fails. To get more information about these protections, visit the US Securities and Exchange Commission and the Securities Investor Protection Corp websites.

Take Advantage of Federal Incentive Programs

In hard times such as a recession, the Federal Government typically creates many incentives for consumers to spend money and save on their taxes. For example, the 2009 Economic Stimulus plan authorized the first-time homebuyer tax credit, which expires on December 31, 2009. For first-time homebuyers, who do not have enough money saved (or gifted) to qualify for a loan, this newly enacted legislation, provides a tax credit of as much as $8,000. For more information, see this article: $8,000 Tax Credit for First Time Homebuyers or this article: A Guide for First Time Homebuyers

Another tax break that was changed in 2008 pertains to widows and widowers. In the past, a single person could only exclude up to $250,000 from capital gains tax after the sale of a primary residence. Effective in 2008, a surviving spouse can now exclude up to $500,000 after selling their primary residence (same as a couple), as long as the sale is within two years of the other spouse's death.

The above are just two examples of the kinds things that the Federal Government will provide and that you should take advantage of during hard times. The recently enacted 2009 Economic Stimulus Package provides many other tax credits and incentives. See this article for information on the Stimulus Plan 2009-What's In it For You.

Keep Track of Your Credit Score and Protect Against Identity Theft

There are lots of companies and websites that will help you keep track of your credit score and help you monitor credit activity on your accounts. Many of these websites advertise that their services are free, but most of them try to get you to pay for something.

There is however, one real free credit report service with no "gotchas" and it is actually provided by the Credit Reporting agencies (Experian, Equifax, and TransUnion). These credit reporting companies are required by law to provide you with at least one free credit report per year and they have setup a joint website for this purpose. You can get that free credit report by visiting:

Also, for information on how to improve your credit score, view these two articles 5 Tips For Improving Your Credit Score or this article How to Improve Your Credit Score. Finally, this article goes into detail about: What is s Credit Score?

Avoid Foreclosure

If you think you might have trouble making your mortgage or home equity loan payments contact a counselor at or by calling them directly at 888-995-4673. HopeNow is an alliance between counselors, servicers, investors, and other mortgage market participants to maximize outreach efforts to homeowners who are in financial trouble and help them stay in their homes. Also, for more information on avoiding foreclosure, see these articles: How to Avoid Foreclosure, Obama's Loan Modification Plan Explained, and Obama Mortgage Rescue Plan FAQ

Avoid Canceling Insurance to save Costs

Insurance is just that, it is designed to protect you against large medical expenses or from incurring losses on your personal property like your car or home. Canceling your insurance can just make a bad situation worse. Instead look for ways to save money on your insurance. To save on your homeowners insurance, take a look at these two articles: 12 Ways to Save on Your Homeowners Insurance and How to Shop for Homeowners and Flood Insurance

Avoid Easy Money Scams

During tough economic times its easy to succumb to easy money/get rich quick scams. One of the most prevalent scams these days is the "Work-At-Home" scam. One thing to watch out for is any work at home job offer that requires you to pay money upfront for training. Also, be wary of any offer that requires you to make a decision today-no legitimate company will work that way.

Always research the company that is offering the work and they should be happy to give you legitimate references. There are legitimate companies that do offer real work-at-home jobs, (typically cellphone and outsourced billing companies) however, they are few and far between.

Other typical scams regard referral fees for government jobs. Federal jobs are listed at and there are no "top secret" channels or referrals for these jobs. Thus, don't pay a fee for a job referral for a government job!

Finally, the old adage, "if it sounds too be good to be true then it is", holds true most often. For more tips on avoiding scams, see this article: How to Avoid Scams

Look for Ways to Save Money on Utility Bills

Saving money on your utility bills such as your Cable bill or your Cellphone bill is not as hard as you think. A quick call to your provider might save you money without changing your service. Most of the large Cable, Satellite, and Cellphone firms have trained customer services representatives to respond to the customer question "I'm looking to cut back my monthly expenses, how can you help?" They sometimes have surprising options that are not generally advertised that allow for excellent savings on monthly charges. For more information on saving money on your Cable or Satellite TV bill see this article: Saving Money On Your TV Bill and for saving money on your cellphone bill, see this article: Save Money on Your Cell Phone Bill.

Save Money on Your Home Technology

Just like a business, during tough times, a family should look at all their expenditures and see where they can save money. Most families can reduce what they spend on technology without giving up any of the technological benefits that they currently enjoy. All it takes is some good decision making, some phone calls, and a little planning. See this article to learn how to: Save Money On Your Family Technology Needs. Also, this article will show you how to: Renegotiate Your Technology Services in a Recession.

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What's In the Stimulus Package For You?

President Barack Obama has signed into law the $787 billion stimulus package. The plan, is aimed at lifting the economy out of recession and intends to create millions of jobs and boost consumer spending. Below we have summarized most of the benefits that pertain to individuals and homeowners.

First-Time Home Buyer Tax Credit

In 2008, the Federal Government through the Housing and Economic Recovery Act of 2008 authorized a first-time homebuyer tax credit of $7,500. The stimulus package of 2009 made some significant changes:

  • Increased the tax credit to $8,000.
  • No longer required to pay back the tax credit as long as you stay in your home for 3 years.
  • Tax credit phases out for individuals making more than $75,000 or couple earning more than $150,000.
  • Most types of primary residences qualify including mobile homes and house boats.
  • Tax credit will reduce your tax liability and/or refund you money if you don't owe any taxes.

Although the tax credit did not turn out to be as much as had been hoped for, it is still a great opportunity for first-time homebuyers. For the complete details see this article-$8,000 Tax Credit for First Time Homebuyers

Making Work Pay Credit

The making work pay credit is essentially a $400 tax credit for individuals or an $800 tax credit for couples. It is calculated by taking 6.2% of your earned income up to the amounts cited above. Many employers will probably begin adjusting their withholding sometime this year so that it will work out on average to about $15 per pay check if you are paid twice per month. Also, self-employed individuals can adjust their quarterly tax payments to reflect the credit. The credit begins to phase out to anyone making more than $75,000 per year and couples making more than $150,000 per year. As it stands now, the credit is for the years 2009 and 2010.

Finally, for retirees not eligible for the Making Work Pay credit, Congress created a one-time payment of $250. The checks are supposed to go out no later than June 17, 2009.

Car Buyer Tax Deduction

To stimulate auto buying, you will able to deduct state and local sales tax on new vehicles purchased on the day the legislation becomes law and throughout the rest of 2009. This applies to new cars, light trucks, recreational vehicles or motorcycles. This deduction is meant for everyone, thus you can take it regardless of whether you itemize other deductions on your tax return. This tax deduction phases out for single people with adjusted gross income over $125,000 or $250,000 for married couples. Finally the deduction does not apply on vehicles that cost more than $49,500.

Unemployment Benefits

In 2009 only, the first $2,400 of unemployment benefits will not be subject to income taxes. Workers losing their jobs from Sept. 1 2008 through the end of 2009 can get help with insurance premiums under COBRA, the federal law that allows you to keep coverage under an old employer's plan. The government will subsidize 65 percent of the premium cost while you will pay the remaining 35 percent of the premium cost. Your income in the year you receive the subsidy cannot be more than $125,000 for individuals or $250,000 for married couples.

Higher Education Tax Credit for Students

This is another "refundable tax credit" which means it is designed to help people who pay little or no taxes as well. This $2,500 tax credit covers the cost of college tuition and other related expenses in 2009 and 2010. You must spend at least $4,000 in a single year to get the full credit. Also, the credit phases out for individuals earning over $80,000 or $160,000 for married couples.

Tax Credits for Energy Efficient Home Improvements

Home improvement tax credits are now available for home improvements “placed in service” from January 1, 2009 through December 31, 2009. Home improvement tax credits up to $1,500 (raised from $500) are available for insulation, replacement windows, water heaters, certain high efficiency heating and cooling equipment, and biomass stoves. Also, the percent of the cost versus the project has been raised from 10% to 30%. For more information, see the Dept of Energy's Energy Star program

This article contains general information. Individual financial situations are unique; please, consult your financial advisor or tax attorney before utilizing any of the information contained in this article.

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