Myths & Common Misperceptions About Budgeting

Proper financial planning is the key to avoiding living from paycheck to paycheck. We are living in trying times, which greater emphasizes the importance of budgeting your money. In order for our economy to come out of the recession before it gets to deep and long, we must start with the individual. By instilling proper financial planning principles into the masses people will start realizing how and what people can do with their money. I see people all the time living from paycheck to paycheck often needing advances because they do not know how to manage their money. A very easy and efficient tool to learn and use is budgeting. Budgeting is ultimately a plan that allows you to allocate your funds anyway you wish. Budgeting allows you to tackle your goals from a financial perspective through awareness. In determining your budget you are deciding how much money goes where so that you can chalk up the rest to savings. Budgeting may get a bad rap for many people perceive being on a budget as being on a financial diet. However this is not true for your budget is customized to the way that you see fit.

There are some common myths and misperceptions about budgeting that are ultimately false and I want to take the time to clear up the air. Setting a budget means that you have is constantly sacrificing. This statement is only as true as people let it be, for every single budget is customized. Therefore a person who is trying to save up for something in a small amount of time, then yes some sacrifice will be involved. However most budgets are put in place to ensure that people are allocating their funds correctly and responsibly. If there is no financial plan that exists people will be much more susceptible to participate in impulse purchasing.

A common myth about budgeting is that it takes up too much time. Proper budgeting methods are not overly complicated or intricate that a 10 year old could compose one. Also, frankly people do not have time to not participate in budgeting. The way that you spend your money decides a lot about the type of life you are living therefore budgeting should be high on your priority list. You will be able to determine significant cost savings by just laying out your expenses versus your revenues. Things that seemed important in the short term now do no look as important.

Another misperception about budgeting is that it can cause a rift in your family. Living on a budget is not a new concept, and maybe at first your family might need some time to get used to it but overtime it will seem normal. A good way to deal with this is determine a budget on a family basis saving up for something fun for the whole family. Getting the family to bond together to achieve a common goal will not only save you money, but it will place importance on what really matters most.

Budgeting tips in thisfree series of personal finance video from our professional Certified Public Accountant (CPA). Expert: Tom Noah Bio: Tom Noah has been a Certified Public Accountant (CPA) for over 27 years. In that time he has held positions at several companies as an accountant and a director of financial planning. Filmmaker: Drew Noah

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Correcting the Common Misconceptions About Filing Bankruptcy

While no one wants to find themselves contemplating bankruptcy, sometimes factors beyond our control make it seem unavoidable. However, there are actually several options other than filing for bankruptcy. Bankruptcy is a huge, drastic step, and should only be considered as the last option. You should first investigate all your other options thoroughly.

Remember that if bankruptcy turns out to be the best or only option available to you, you still shouldn’t go it alone. It doesn’t matter whether it’s personal bankruptcy or business bankruptcy. The counsel of a good bankruptcy lawyer is vital to understanding the laws in your state, since the bankruptcy laws are different from state to state. This person will be familiar with the process of filing a claim and will be able to help you get through the sometimes bewildering heaps of paperwork involved.

Many people assume false things about bankruptcy. Here are some common misconceptions about the process, and the real truth.

Misconception #1: When you file for bankruptcy, you’ll lose everything

There are actually several different types of bankruptcy. A qualified lawyer can help you understand the difference between them. Depending on how you choose to file, you may not lose anything at all. Many people who file for bankruptcy are actually able to retain all their property, and even get caught up on their overdue payments. Bankruptcy is a way to help you deal with your debts when it becomes impossible to do anything else. Learn about your different options and choose the one that works best for you. You may be able to retain everything you own.

Misconception #2: My bankruptcy will become public knowledge

While bankruptcy is a matter of public record, no one goes looking for these records. Therefore, the only people who’ll know about your bankruptcy are the people you choose to tell. Only your creditors will know, unless you choose to tell someone else. Your creditors are prohibited from telling anyone else. This makes your bankruptcy as public or private a matter as you choose.

Misconception #3: I won’t be able to get credit ever again

Some people think that from the moment they file bankruptcy, all purchases are cash only. This isn’t true. Filing will put a mark on your credit report that stays for seven to ten years, it’s true. However, you’ll probably find yourself inundated with secure credit card offers, and other offers to help you get your credit score back up. Be careful with them, though. They charge very high interest rates and penalties. Careful use of these kinds of offers can help get you back on your feet, credit-wise, as long as you don’t get carried away.

Misconception #4: Filing for bankruptcy is very difficult or even impossible

While recent changes to the laws have made it a lot more difficult to file for bankruptcy than it used to be, that doesn’t mean you can’t do it. It’s a tedious and difficult process, and a knowledgeable lawyer certainly helps. However, if you’re educated and know your options, filing for bankruptcy doesn’t have to be a horrible experience. Remember that the more you know, the more power you have over your situation. The recent laws are in place to prevent abuse, but they don’t prevent people with legitimate needs to file bankruptcy from doing so. Consult with your lawyer about any concerns you may have.

Knowing when bankruptcy is the best solution to personal finance issues.

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But if bankruptcy is indeed your only or best option, it is not something you should do alone or by yourself, whether personal bankruptcy or business bankruptcy. The laws differ from state to state, and you really need the advice and counsel of a good bankruptcy lawyer. This bankruptcy attorney should be local to you, should be familiar with bankruptcy in your state, and can advise you as to what your real options are, as well as helping and advising with the mountain of paperwork and forms that will be required.

There are some common misconceptions about bankruptcy. It is totally different than declaring bankruptcy in the game of Monopoly, but some of the things that people assume about bankruptcy are totally false, and we will take a look at some of those things here.

Untruth #1: I will lose everything

There are different types of bankruptcy, and again, a qualified attorney can talk with you about this. But there is no guarantee or mandate that you will lose everything, or in fact, ANYTHING. You may be in a position to actually retain the things you have, and to be conscious to get caught up on overdue payments as well as making timely payments to your creditors in the future.

Untruth #2: Everybody will know about it

Basically, this is up to you and who you tell. Yes, bankruptcy is a matter of public record, but who will go into public records to search for it? Do you regularly go to the public records database to see if any of your friends or neighbors have declared bankruptcy? Only your creditors will know, and they are prohibited from making it public knowledge.

Untruth #3: I’ll never get credit again

Some people think that after declaring bankruptcy that they will never be able to buy anything again, even with cash. Nothing could be further from the truth. While it is a fact that filing bankruptcy will put a notable red mark on your credit report for the next 7 to 10 years, you will get credit again. In fact, you may even be inundated with offers for a secured credit card, which is not a bad idea to get your credit score built back up. Make sure you have learned something from your bankruptcy experience though, since these credit offers will probably come to you at exorbitant interest rates.

Untruth #4: It is difficult or impossible to file for bankruptcy

Bankruptcy laws have changed in recent years, and it is certainly not as easy as it once was. In fact, it is still a tedious and difficult process, and one that you would be well advised to work on with a bankruptcy lawyer to make sure you get all the forms right. But it is far from impossible.

Like anything else, you know to know the facts about something, and with bankruptcy, you need to know the law and your rights. Knowledge is power, and the more knowledge you have, the more options you have to exercise.

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Myth: Bankruptcy relief is no longer available.

Untrue.  Almost all of the relief formerly available through bankruptcy survives in today’s bankruptcy code. The bankruptcy filing process is a little more complicated – and it can therefore be more difficult to find a qualified attorney – but the end result of a discharge of debts (and with that discharge the hoped-for “fresh start”) is still entirely attainable.

 Myth: People who file for bankruptcy can’t get credit for 10 years.

Entirely untrue. Chapter 7 filers invariably receive unsolicited credit card offers after they get their discharge. The rates might not be quite as favorable as rates offered to others with perfect credit, but credit is undoubtedly available. The myth probably stems from the fact that the Fair Credit Reporting Act allows the reporting of a bankruptcy filing for 10 years. That much is true, but has no direct bearing on how quickly after bankruptcy one can obtain credit. Myth: Filing for bankruptcy is an embarrassment, or is somehow indicative of personal or moral failure. Untrue and unfair. The vast majority of bankruptcy filings stem from one or more of the following, all of which are beyond the debtor’s control : Loss of income resulting from layoff or failed self-employment business, large medical expenses resulting from injury or illness, divorce or separation, and high interest rates and/or penalties on credit cards resulting from the imposition of a ‘Universal default’ clause. (‘Universal default’ is the term for a practice in the financial services industry whereby a particular lender may change the terms of a loan from the normal terms to the ‘default terms’ when that lender learns that their customer has defaulted with  another lender, even though the customer has not  defaulted with the first lender.) This invariably means a drastic rate increase which, in combination with one of the other hardship factors, leads inevitably in turn to more late or insufficient payments, triggering a “snowball” effect. Bankruptcy laws were specifically designed to prevent honest debtors, who have been faced with these difficult or hardship circumstances, from being mercilessly harassed by creditors for accounts the debtor simply has no possible way of repaying. It should be no negative reflection on a person’s character for simply availing himself of laws that were written for these very reasons and situations.

Myth:  Even if I file for bankruptcy, creditors can still harsss me and my family.

Completely false. Bankruptcy law provides for ‘automatic stay’ protection; that is, as soon as you file for bankruptcy a hold is put on all your outstanding debts and any creditor attempts to collect those debts. The law prohibits any creditor attempt to collect on or even contact the debtor in regard to a debt. If a creditor does not follow the rules, the debtor may have a cause of action against the creditor for ‘punitive damages,’ whereby a bankruptcy judge could actually punish a creditor with stiff fines and penalties for not following the procedures set out in the bankruptcy code. Whether a debtor has a cause of action against a creditor should be left to an attorney to answer. What is certain, however, is that the moment you file for bankruptcy, creditors must leave you alone or suffer the consequences.

Myth: If I file for bankruptcy, I will have to forfeit some or all of my assets.

For the vast majority of filers, this is not the case. Under chapter 7, you may claim certain of your property as exempt under federal law (for example the $10,775 exemption limit for household goods, furnishings, and appliances, and the $1,350 exemption limit for jewelry). A trustee may have the right to take possession of and sell the remaining property that is not exempt and use the sale proceeds to pay your creditors. In the vast majority of cases, however, the debtor has no assets above these statutory exemption limits, meaning that the debtor may “exempt”, and therefore keep, all of his assets.

Myth: Filing for bankruptcy could cost you your job.

False.  Specifically, federal law (U.S.C. Sec. 525) prohibits any employer from discriminating against you because you filed bankruptcy. State laws may provide additional protection for filers, as often do union employment contract clauses.

Myth: Bankruptcy costs our society too much.

Credit card issuers are quite profitable and, industry-wide, boast some of the highest profit margins in the corporate sector. This is despite the relatively small percentage of loans discharged in bankruptcy, a percentage that is factored into their budgets and compensated for by the percentage rates they charge. Our economy has, overall, benefited enormously by the purchasing power facilitated by credit – one need only consider the widespread economists’ predictions of pervasive and lasting harm to the American economy should the ongoing subprime mortgage crisis be allowed to cause credit to ‘dry up’. And again, the pricing of credit takes into account that not everyone will be able to repay. The “$400 per family bankruptcy tax” bandied about in Congress was a number picked out of the air by a bank lobbyist – no surprise there – who made an arithmetic error in the process.

Myth: Filing bankruptcy causes family trouble and divorce. 

Wrong.  Bankruptcy eliminates debt, which in turn cannot help but eliminate financial stress. Filing bankruptcy is the solution to the problem, not an additional problem. Although making the decision to file bankruptcy might be a difficult one, the relief provided will lift a huge weight off of you and your spouse. The removal of financial stress will in all likelihood help  your relationship.

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