Debt ManageMent

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					ENgAgE iN thE PlAN:
Debt ManageMent
Engage in the Plan                                                                 Contents
We’ve selected some commonly asked questions from those submitted during           Dealing with credit card debt .....2
November’s Debt Management webinar. We are unable to answer several of
the more personal questions that we received because neither Prudential            Budgeting help ............................5
Financial nor any of its affiliates can provide investment, tax or legal advice.
Although this information can help you better understand general financial         Credit score / report issues ........9
and investing principles, you should consult your own financial advisor for
information about your specific situation.                                         Saving for retirement ................13


                                                                                   Loans .........................................17


                                                                                   General information ..................23



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ENgAgE iN thE PlAN:

Debt ManageMent


DEAliNg With
crEdit card dEbt


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Debt ManageMent

DeaLIng WItH CReDIt CaRD Debt
is it a good idea to transfer my credit card balance
from a higher interest rate to a new credit card with
an interest rate of 0% for a promotional time frame?
Depending on the particulars, a balance transfer from one high-interest-rate card to one that is considerably
lower can be a smart move. Be sure to review the rules, however, including how long the “low” rate is in effect
and how high that rate can climb in the future.




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Debt ManageMent

DeaLIng WItH CReDIt CaRD Debt
i was once told by a friend not to pay off a credit
card balance entirely and leave some balance. is this
accurate, or should i always pay off my balance every
month if i can?
Your credit score considers the ratio of your most     balance, and carrying a zero balance will not negatively
recent statement balance to your credit limit. it is   impact your credit score. it’s more important that
better to have a small balance rather than none in     you don’t use more than 25% of your available
this context. however, you do not have to carry a      credit. Using a large percentage of your available
balance from the previous month to have a statement    credit can negatively impact your credit score.




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Debt ManageMent


BUDgEtiNg
HELP                                                 EXPENSE a

                                                                 EXPENSE b




                                   EXPENSE E



                                                                    EXPENSE c
                                         EXPENSE d




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bUDgetIng HeLP
Once you have paid off all of your debt,
how do you KEEP the balance at ZErO?
Managing your monthly budget can be difficult and frustrating. One of the most important aspects
of controlling your budget is to determine where your money is going. the home Budget Analysis
calculator on PREP at http://www3.prudential.com/signature/calc-home-budget.html helps you do
just that. By entering your income and monthly expenditures, you can see how much you have left
to save and where your money is being spent. in addition, you can click the “View Report” button to
compare your budget breakdown to our targets, which can help identify areas for improvement.




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Debt ManageMent

bUDgetIng HeLP
do you have a tool that would allow me to input my
debts, inflexible expenses like rent and food, and then
savings goal and figure out how much money to put
where and when?
there’s a great tool on the PREP website that can      you’re currently on track to reach your retirement goals
help you with this. Click on the Retirement Planning   and get a personalized action plan if you need to make
Calculator and follow the instructions to complete     some changes to your strategy. For help deciding how
the worksheets. You can also use the Retirement        to choose your investments, take the online course
income Calculator in the Online Retirement Center      “how to Choose investments” on the PREP website.
at www.prudential.com/online/retirement to see if




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Debt ManageMent

bUDgetIng HeLP
do you have any exact guidelines of how people should
spend income (e.g., x% housing, y% food, etc.)? How
do i budget better without having to change my lifestyle?
the home Budget Analysis calculator on PREP at           But just because you’re cutting out luxury purchases
http://www3.prudential.com/signature/calc-home-          or spending money on things that aren’t absolute
budget.html can help. By entering your income and        necessities, doesn’t mean you have to change your
monthly expenditures, you can see how much you           whole lifestyle and live with a budget that is overly
have left to save and where your money is being spent.   restrictive. include something in your budget that
in addition, you can click the “View Report” button      you WANT to spend money on. it could be funds
to compare your budget breakdown to your targets,        you set aside for your yoga classes, money you
which can help identify areas for improvement. if        save monthly for your annual summer trip, or even
your expenses exceed your income, you’ll have to         cash you allocate for your photography hobby. the
cut back on areas that aren’t necessities. Stop going    key is simply to budget and plan ahead for these
out to dinner as often. Say goodbye (temporarily, at     expenses. this way, they won’t blow your budget.
least) to that premium cable tV package you have.        they’ll be incorporated into, and accounted for,
Forgo shopping trips to the mall. You get the point.     in your spending, and you won’t feel “deprived”
                                                         while living with—and sticking to—your budget.

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Debt ManageMent


CREDit SCORE/
CREDit REPORt
iSSUES                                    FrEE
                                          crEdit rEPOrt




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CReDIt sCoRe/CReDIt RePoRt IssUes
i want to know more about how to deal with cleaning up
my credit report. i have a good score, but too much info
is old or incorrect.
Your credit report can be ordered online at www.annualcreditreport.com. this is the government-mandated
website that the “Big 3” credit reporting agencies—Equifax, Experian and transUnion—are required
by federal law to maintain. Unlike many other credit report sites, Annualcreditreport.com is free. You’re
entitled to get one credit report from each credit bureau every 12 months. Once you have your credit
reports, check them carefully for inaccuracies. the credit bureaus are required to investigate and correct
any errors you report. Correcting inaccuracies can improve your credit score and your overall financial fitness.
Under the Fair Credit Reporting Act, once you dispute any information that is “outdated, inaccurate
or that can’t be verified,” the credit bureaus must address that information within 30 days.




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Debt ManageMent

CReDIt sCoRe/CReDIt RePoRt IssUes
if i co-signed for a family member on his auto loan,
and they have made late payments, does this affect
my credit score?
Most likely it does. A cosigned account will appear on both your credit report and your cosigner’s. All loans that
appear on your credit report have the potential to impact your credit score.




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Debt ManageMent

CReDIt sCoRe/CReDIt RePoRt IssUes
i am thinking about using a debt consolidation program
to clear up some credit card debt. Will these programs
impact my credit score?
Applying for a debt consolidation loan to pay off          You can adversely affect your credit rating if you
other accounts shouldn’t raise or lower your credit        turn to a debt management agency to negotiate
score significantly in the short term. While it does       a settlement with your creditors for less than you
mean you’ve taken on new debt, credit agencies look        owe. this appears on your record as a failure to
at your credit history as a whole and will note that       repay what you’ve promised. Some agencies may
your other accounts have been paid off. in the long        also allow your accounts to go unpaid for months
term, if you make the payments on the new loan             before they settle, which also hurts your score.
consistently for a year or two, it should ultimately
improve your credit score. Before considering the
option of consolidating multiple debts into a single
debt consolidation loan, be sure to verify that the new
single option is more cost effective over the long term.




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Debt ManageMent



SAViNg FOR
rEtirEMENt


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Debt ManageMent

saVIng FoR RetIReMent
Would you recommend forgoing putting money into
a 401(k) account in order to pay more on credit
card debt?
getting out from under your debt is a good idea, but getting into the habit of setting something aside for
retirement on a regular basis is critical to your future financial security. Make sure that you make your
future a priority. Do a little of both if you can afford it.




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saVIng FoR RetIReMent
How do i know if i’m contributing enough to my
retirement plan?
When possible, it’s good to try to max out your              expenses look like then? how much other savings will
retirement plan contributions. the iRS increased 401(k)      you have amassed in other vehicles like iRAs, personal
contribution limits by $500 in 2012 to $17,000 for           savings accounts and taxable funds? Your overall goal
workers under age 50, and to $22,500 for those age           should be to have a complete retirement portfolio that’s
50 and older. the benefits of 401(k) contributions are       sufficient to outlive you—instead of you outliving your
that you get to sock away money on a before-tax basis,       money. there are some good calculators online that
potentially lowering your annual federal income taxes.       can help you determine whether you’re saving enough,
You may also get some level of matching contribution         in your 401(k) and elsewhere. You can find several
from your employer. Matching contributions may be            interactive retirement planning tools by visiting the
subject to a vesting schedule. See your plan’s information   “calculators” section of Prudential’s PREP website,
for details. And you also get the potential for your money   www.prudential.com/prep/calculators. You can also
to grow if the underlying investments in your 401(k)         use the Retirement income Calculator in the Online
perform well. to know whether you’re saving enough in        Retirement Center at www.prudential.com/online/
your retirement plan requires a series of calculations and   retirement to estimate if you’re currently on track to
assumptions about the future. What tax bracket will you      reach your retirement goals and get a personalized action
likely be in upon retirement? What will your                 plan if you need to make some changes to your strategy.
                                                                the Retirement income Calculator is hypothetical and for illustrative purposes
                                                                only and is not intended to represent performance of any specific investment,
 Previous              Back to Contents     Next                which may fluctuate. there is no assurance that retirement income objectives     15
                                                                will be met. it is possible to lose money by investing in securities.
ENgAgE iN thE PlAN:

Debt ManageMent

saVIng FoR RetIReMent
i’m over 50 and only recently started contributing to my
retirement plan. What can i do to get back up to speed?
When it comes to saving for retirement, the more time     much you should save for your specific retirement goal.
your money has to potentially grow, the better off you    You’ll also find a wealth of useful retirement planning
may be. however, you can still make solid progress        information and tools on our website at www.prudential.
toward your financial goals if you make the effort now.   com/prep. Finally, since you’ve only recently started
Start by checking out our Retirement income Calculator    saving for retirement, you might consider consulting
at www.prudential.com/online/retirement. this             with a professional advisor to create a financial plan.
interactive tool can quickly help you determine how




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Debt ManageMent



LOaNS



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Loans
Should i borrow from my 401(k) to pay off my
high-interest loans?
Smart as it is to want to pay off high-interest loans,   compounding you could be realizing. Before you
borrowing from your 401(k) may not be the best plan.     borrow from your retirement plan, first consider
to avoid penalties, you’ll have to put the money back    other ways to reduce high-interest loans, including
in your plan, of course. And all the time the money      economizing or perhaps even taking on part-time work.
is out detracts from the potential tax-deferred




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Debt ManageMent

Loans
How do i know when and if it’s the right time to refinance
my mortgage?
generally, you want to remain in your house long          you can recoup the costs in three years, but you
enough to recoup refinancing costs, which of course       are sure to move in 3½ years. that said, if interest
will differ from situation to situation. Even then,       rates are low, it may be a good time to refinance.
however, you may not want to refinance if, for example,




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Debt ManageMent

Loans
if i pay more than the minimum payment on a mortgage
on a monthly basis, should i pay it toward the principal?
Additional payments to your mortgage should go against the principal. As the principal declines, so, too,
will the amount of interest you owe on the remaining loan.




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Loans
i’m 29 years old, and i graduated about a year ago with
my Mba, which means my student loans began demanding
repayment this summer. i wasn’t wise about borrowing money
and borrowed way more than i needed because it was easy.
Now, i’m regretting it and have large student loans to repay.
What can you suggest in paying these down faster?
to be sure, it’s important to pay off student loans. But you’ll find that many institutions offer relatively lenient
rules—including low rates and long payment schedules—for doing that.




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Debt ManageMent

Loans
is it smarter to consolidate student loans or pay them
off separately?
generally, student loans are low-interest debt with liberal payback rules. So it may be hard to consolidate
them into a better arrangement. then again, it depends on the loans, and the rates and conditions of the
consolidation you’re considering. Because the devil can be in the details, you may want to share your
particulars with a trusted financial advisor.




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Debt ManageMent


gENERAl
iNFOrMatiON


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geneRaL InFoRMatIon
How many months of “emergency savings” do i need?
having adequate emergency savings can make              can focus on how to best meet your family’s needs,
unforeseen unemployment, auto repairs, medical          rather than worrying about finding the money to handle
emergencies, property damage and even legal issues      these difficult situations. For help figuring out how
more manageable. Your emergency savings fund should     much you might need and how long it might take to
equal at least three months’ worth of your income.      accumulate that sum, use the Emergency Savings
these days, it’s not unusual, however, for emergency    Calculator on the Prudential Retirement Education &
funds to equal between four and eight months’ of your   Planning (PREP) website at http://www3.prudential.
annual income. With adequate emergency savings, you     com/signature/calc-emergency-savings-needs.html.




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geneRaL InFoRMatIon
What is the best way to manage entertainment costs without
staying home eating ramen noodles?
You can still have fun and enjoy yourself without feeling   Remember the good old days when a day at a public
like you’ve taken a vow of poverty. One tip: always         pool or local beach was memorable, or a stroll in
think about free or low-cost ways to do what you want       the park qualified as a fun way to spend a weekend
to do. Example: Do you like seeing movies or reading        afternoon? getting back to basic, simple forms of
books? Check out DVDs and books from the library, as        pleasure and entertainment can be rewarding—from
opposed to going to the movie theater or buying books.      a “fun” standpoint and a financial standpoint too!

Another idea: go for group activities where costs are       lastly, take advantage of freebies in your town:
shared. instead of throwing a big house party where         Museums, historical sites and other points of
you have to buy a lot of food for dozens of people,         interest that offer complimentary access or
have a pot luck bash where everyone brings a dish.          require a low-cost donation are worth visiting.

Also, get creative about what “entertainment” means
for you and be open to doing new, different and even
“old fashioned” things. these days, we all want
electronics and high-tech forms of entertainment.


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geneRaL InFoRMatIon
What was the name of the presenter’s book?
Our guest Speaker, lynette Khalfani-Cox, is the author of numerous books, including the New York times
bestseller Zero Debt: The Ultimate Guide to Financial Freedom.




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geneRaL InFoRMatIon
What’s the benefit of saving for college through a 529 plan
as opposed to a regular savings account?
the biggest advantage is that 529 savings have the potential to grow tax-deferred, and when withdrawn, are tax-free
if used for qualified education expenses. if the funds are not used for qualified education expenses, however, there
is a tax penalty in addition to income tax on the earnings.




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geneRaL InFoRMatIon
How much should i set aside today to cover my expenses
for medical care after retirement?
Because medical expenses can vary widely, and you don’t know in advance if, or when, you may be sick, medical
expenses can pose a budgeting challenge. One approach is to make sure your emergency fund is large enough to
cover unexpected medical costs, and to be diligent in building your emergency fund back up. Another approach
is to set up a savings account solely devoted to medical costs, should they arise.




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geneRaL InFoRMatIon
can you recommend some retirement or investment
planning software?
One good place to start is Prudential’s own website, www.prudential.com, where you’ll find not only retirement
calculators, but life insurance and higher education calculators as well, along with FAQs, investment guides
and a link to help you find a financial advisor, should you need one.




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geneRaL InFoRMatIon
Where can i see the webinar again?
You’ll find the Debt Management webinar on our education website (PREP) at www.prudential.com/prep/webinars,
along with the attachments that support this presentation. You can also view past webinars from this site.




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  If you have general questions about investing, call Prudential Retirement® at 1-877-PRU-2100
  (1-877-778-2100).

  For help with your specific retirement planning and investment needs, we suggest you contact your
  benefits or Human Resources office and/or speak with your personal financial and/or tax advisors.




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This material has been provided for informational purposes only and should not be considered investment advice or a product recommendation. Neither Prudential Financial nor any of its affiliates provide
tax or legal advice for which you should consult your qualified professional.
Prudential is not responsible for the information contained in the external website(s) and makes no representations about information contained therein. The sites are provided to you for informational
purposes only. Prudential is not a tax or legal advisor and encourages you to consult your individual legal or tax advisor with any specific questions.
Retirement products and services are provided by Prudential Retirement Insurance and Annuity Company, Hartford, CT, or its affiliates.
Prudential, the Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
0219808-00001-00                                                                                                                                                                                   FSDCFL025
                                                                                                                                                                                            Published 03/2012


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