AARP master your debt slash your monthly payments and become debt free

MAKING YOUR MONEY WORK FOR YOU Maybe you’re thinking it’s time to review your investment strategy and make the most of the money you have today Maybe you’ve already built a financially successful retirement egg and want to protect what you’ve built Or maybe you need to bulk up your earnings to ensure your family’s future Welcome to money for grown-ups Where you turn for credible information? Dedicated to helping you protect your assets, stretch your dollars, and bolster your longterm security, AARP can offer you powerful solutions Whatever your strategy for managing money, we’ve got suggestions that will help – from saving money on that next big purchase to planning your charitable giving If you’re taking your job to the next level or building up a second career, we’ve got strategies that will help you make your mark You may think your money — or your financial advisor — should be working harder for you You may be watching market trends and seeing new opportunities And, of course, you want to protect yourself and your loved ones from scams and data breaches We can give you the support you need And turn to us for fun, too (Is it time for that car, that trip, that weekend home you’ve always wanted?) Because that, too, is what this time of your life is about AARP is a nonprofit, nonpartisan membership organization that helps people 50 and older improve their lives For more than 50 years, AARP has been serving our members and society by creating positive social change AARP’s mission is to enhance the quality of life for all as we age; lead positive social change; and deliver value to members through information, service and advocacy This information in this book is for educational purposes and does not constitute financial advice Table of Contents Title Page Copyright Page Dedication Acknowledgements Introduction I Hear What You Are Saying You Have Power There Are New Answers for a New Era A Word about My Favorite Secret How to Approach This Book CHAPTER - How Did We Get Here? And Where Are We? A Long Time Coming A New Era Other Kinds of Loans CHAPTER - Find Out Where You Stand First, Determine Your Net Worth Analyze Your Cash Flow Do a Risk Test Analyze Your Debts Are You in Trouble? CHAPTER - Other People Are Grading You, Too How Credit Reports Work Check Your Credit Reports What to Look For It’s Your Score That Really Counts How to See Your Scores Do You Have a Good Grade? You Can Improve Your Credit Score CHAPTER - Avoiding a Modern-Day Identity Crisis Learn the Basics Then What? Prevention Is Easier Than Cleaning Up Later About Fraud Alerts and Credit Freezes You May Already Be a Victim CHAPTER - Win the New Mortgage Game How to Shop for a Mortgage The ArcLoan—One Variable-Rate Loan That I Like Should You Refinance? Home Equity Lines Reverse Mortgages Shared Equity Arrangements Paying Off Your Mortgage Early CHAPTER - Mortgage Free in Five to Seven Years Why It Works It’s Not for Everyone Do It Right Broaden Your Scope CHAPTER - Credit Cards: Just Because It’s Called MasterCard Doesn’t Mean It’s A Look at the Landscape Finding the Best Card(s) for You How Many Cards Should You Have? A Debit Card Is Not a Substitute for a Credit Card All That Fine Print The List of Shame And Now, On to the Good Stuff How to Wipe Out Your Balances Once and for All CHAPTER - Car Deals: Making Sure You’re in the Driver’s Seat But First, Do You Really Need a Car? Shop Before You Shop Make the Most of Incentives Should You Use a Buyer’s Agent, Broker, or Buying Service? How to Pay for Your Car Getting the Best Loan Fixing the Loan You’ve Got CHAPTER - An Education in College Costs Baby Steps: Save, Save, Save High School: Learn How the Financial Aid Game Works Senior Year of High School: Tough Decisions After College: The Bills Come Due New Options from Uncle Sam CHAPTER 10 - Don’t Let Bad Luck Derail Your Finances Doing Debt Triage: How Much Trouble Are You In? Prioritizing Your Bills Finding Cash: Desperate Times, Desperate Measures Working with Creditors Student Loan Troubles Call-In Credit Counseling How to Choose a Credit Counseling Agency The Debt Management Plan Those Pesky (or Worse) Collection Agents Saving Your Home by Fixing Your Loan Get the Right Kind of Help Foreclosure: The Last Resort Staying Healthy without Making Your Bank Account Sick CHAPTER 11 - Surviving Bankruptcy There Are Two Forms of Consumer Bankruptcy The Chapter Means Test Get Help Before You File What about Your House? What Happens When You File Life after Bankruptcy Rebuilding Your Credit Score CHAPTER 12 - Debt Strategies for Every Age In Your Teens and 20s: Clean Living The 30s and 40s: Building Wealth, Getting Squeezed In Your 50s: Countdown to Retirement The 60s and Beyond: Early Retirement Over 75: The Second Half of Retirement CHAPTER 13 - Permanent Mastery, Going Forward Attitude Is All Polish Your Skills Guiding Principles APPENDIX - Resources About the Author Index My favorite nonprofit debt counseling agency • U.S Trustee, Department of Justice www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm The federal government’s list of approved credit counselors • National Foundation for Credit Counseling www.nfcc.org (800) 388-2227 The first, most widely known, and most widely used nonprofit credit counseling network • Association of Independent Consumer Credit Counseling Agencies www.aiccca.org (866) 703-8787 A trade group of credit counseling firms, some for-profit and some nonprofit • American Association of Debt Management Organizations www.aadmo.org (281) 361-2325 A broad-based trade group, including credit counseling agencies and debt management firms Foreclosure • Making Home Affordable www.makinghomeaffordable.gov (888) 995-HOPE The starting point for anyone with questions about the new government programs designed to help troubled homeowners • Fannie Mae www.fanniemae.com (800) 7FANNIE • Freddie Mac www.freddiemac.com (800) FREDDIE • Homeownership Preservation Foundation www.995hope.org This is a nonprofit public/private partnership designed to help troubled homeowners • Homeowner Crisis Resource Center www.housinghelpnow.org Sponsored by the National Foundation for Credit Counseling, this is a good place for troubled homeowners to get help • Housing and Urban Development Foreclosure Avoidance www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm This site lists HUD-approved housing counseling agencies • The Foreclosure Survival Guide, by Stephen Elias (Nolo, 2008) A reassuring and smart guide by a consummate expert • More Mortgage Meltdown, by Whitney Tilson and Glenn Tongue (John Wiley & Sons, 2009) How to deal with mortgage problems Health Insurance, Expenses, and Debts • eHealthInsurance www.ehealthinsurance.com A good spot for comparison shopping health insurance plans if you must buy one for yourself • National Association of Insurance Commissioners www.naic.org This site, run by the regulators from all of the states, offers a comprehensive map of all the state-run risk pools for people who can’t get affordable health insurance on their own • Medical Repricing www.medicalrepricing.com (877) 642-5657 An alternative to traditional health insurance that gives you substantial discounts on everyday medical services and products, a limited medical benefit up to $10,000, and a highdeductible plan to cover major expenses over $10,000, for a far lower membership fee than traditional health insurance premiums would be You can also get medical repricing even if you have a preexisting medical condition that would make it impossible to qualify for regular health insurance • HealthCare Advocates 1420 Walnut Street, 9th Floor Philadelphia, PA 19102 www.healthcareadvocates.com (215) 735-7711 This company will help you find good, affordable doctors and negotiate medical bills down before you’ve incurred them, or after you are saddled with them • Patient Advocate Foundation 700 Thimble Shoals Boulevard Suite 200 Newport News, VA 23606 www.patientadvocate.org (800) 532-5274 There’s a state-by-state guide to financial resources for medical care on the web site of this nonprofit advocacy organization Debt Collectors • Stop Debt Collectors: How to Protect Your Rights and Resolve Your Debts, by Gerri Detweiler, Mary Reed, and John Ventura (Credit.com, 2008) A good overview of your legal rights and how to make sure you use them correctly • Stop Collection Harassment: www.stopcollectionharassment.com A web site established by consumer lawyer Robert Stempler, with sample letters for consumers who want to battle with their creditors and bill collectors Bankruptcy • The Bankruptcy Handbook, by John Ventura (Kaplan Publishing, 2008) A comprehensive guide by a seasoned bankruptcy attorney • The New Bankruptcy: Will It Work for You?, by Stephen R Elias (Nolo, 2009) An updated, detailed, yet simple guide by a consummate expert • Legal Consumer www.legalconsumer.com This is a comprehensive and very authoritative web site offering guidance to any consumer considering bankruptcy or going through it It is hosted by experienced lawyers • American Bankruptcy Institute http://probono.abiworld.org/ There’s an interactive map on the web site of this professional association listing attorneys and legal clinics offering free advice and filing assistance to consumers considering bankruptcy • Rocket Lawyer Bankruptcy Center www.rocketlawyer.com/bankruptcy Another self-help legal site offering free forms and letters consumers can use in filing for bankruptcy protection About the Author Jordan Elliot Goodman, frequently known as America’s Money Answers Man, has been helping Americans improve their personal finances since he graduated from Columbia University’s Graduate School of Journalism in 1977 He spent 18 years on the editorial staff at Money magazine, rising to become the magazine’s Wall Street correspondent He was a weekly financial commentator on NBC News at Sunrise for nine years and on Public Radio’s Marketplace Morning Report for six years, and did a daily financial report on the Mutual Broadcasting System’s America in the Morning show for eight years He is the author of several best-selling books, including Everyone’s Money Book, The Dictionary of Finance and Investment Terms, Barron’s Finance and Investment Handbook, Fast Profits in Hard Times, and Master Your Money Type Mr Goodman provides financial advice to millions of people each month through regular appearances on radio call-in shows on such stations as WLW in Cincinnati, KMOX in St Louis, WHYN in Springfield (Massachusetts), WFLA in Tampa, and many more He is a regular commentator on financial topics on national TV networks, including Fox, CNN, CNBC, and CBS, and many local and regional TV stations across the country, and gives frequent seminars to corporate, association, and university audiences He hosts the popular personal finance web site at www.moneyanswers.com, and is the host of the weekly Money Answers Show on the VoiceAmerica Business Channel radio network (www.voiceamerica.com) You can find out more about this book at www.masteryourdebt.com Index AARP Acceleration Adjustable-rate mortgages Affordability American Association of Debt Management Organizations American Automobile Association (AAA) American Bankruptcy Institute American Express Andrews, Edmund Annualcreditreport.com ArcLoan (automatic rate cut mortgage) Arcloan.com Arnold, Curtis Assets Association of Independent Credit Counseling Agencies Auto loans See Car loans Bait and switch Balance transfers Bankrate.com Bankruptcy Bankruptcy Handbook (Ventura) Bilker, Scott Bills, prioritizing Branson, Richard Brokers, auto Buxfer Buyer’s agent Buying services, cars Calculators Cambridge Credit Counseling Corporation Capital One Cardratings.com Cardtrak.com Carfax.com Car loans CarMax CarQ Cash, finding Cash flow analysis Chapter bankruptcy Chapter 13 bankruptcy Chatzky, Jean Checking accounts Closing.com Closing costs CNN Money COBRA coverage Collateral Collection agents Collegeboard.org College costs See also Student loans 529 college savings account Collegesavings.org Complete Idiot’s Guide to Improving Your Credit Score (Epstein) Complete Idiot’s Guide to Person-to-Person Lending Compound interest Consolidation loans Consumer debt Consumer Reports Consumers Direct Association of America Coverdell Education Savings Account Credit bureaus Credit Cardholders’ Bill of Rights Act of 2009 Credit cards balances balance transfers and bankruptcy credit lines being cut double-cycle billing fees finding the best card fine print how many to have interest rates late payments legislation minimum payments payment acceleration resources rewards programs secured and travel using to pay for college web sites wiping out balances Credit counseling agencies Credit freeze Credit history Creditkarma.com Credit lines Creditors, working with Credit Repair (Leonard) Creditreportabc.com Credit reports Credit scores access to improving and mortgages rebuilding after bankruptcy Credit unions Deal with Your Debt (Weston) Debit cards Debt management plan (DMP) Debtors Anonymous Debts: analysis and bad luck disputing paying problems restructuring plan strategies for all ages true cost of types of Debt settlement companies Debtsmart.com Deductions, tax Depreciation Detweiler, Gerri Difference, The (Chatzky) Dinkytown.net Direct Marketing Association Do Not Call Registry Double-cycle billing Edmunds.com EFC (expected family contribution) Ehealthinsurance.com Elias, Stephen Epstein, Lita Equifax Equity, home Equity acceleration Equity Key Exchange rates Expenses Experian FAFSA (Free Application for Federal Student Aid) Fannie Mae Fastweb.com Federal Trade Commission (FTC) Fees credit cards HELOCs mortgages FICO (Fair Isaac Corporation) scores Finaid.org Finances, mastering Financial aid, college Financial assessment, personal Financial calculators Financial management programs Fixed-rate mortgages Fixed-term loans Float Flynn, Kevin Foreclosures Foreclosure Survival Guide, The (Elias) 401(k) plans Fraud alerts Freddie Mac Freecreditreport.com Fueleconomy.gov Fynanz.com Get a Financial Life (Kobliner) Gill, Harj Goldberg, Linda Government, U.S college loan payment programs Grace period Grander Financial GreenNote Green Sherpa Harmony Loan Harzog, Beverly Blair HealthCare Advocates Health care coverage Helpwithmycredit.org Home equity line of credit (HELOC) and college bills and credit cards and mortgage acceleration using to finance car using to pay off debts Home loans See Mortgages Homeowner Crisis Resource Center Homeownership Preservation Foundation Home Retention Programs Homestead exemption Housing and Urban Development (HUD), Department of Housinghelpnow.org How You Can Profit from Credit Cards (Arnold) HSH Associates Hybrid cars Ibrinfo.org Identity Guard Identity theft Income Indexcreditcards.com Installment loans Institute for Highway Safety Insurance health Interest compounding Interest rates IRAs I Will Teach You to Be Rich (Sethi) Junk mail Justice Department, U.S Kantrowitz, Mark Kelly, Keith Kiplinger Washington Editors Kobliner, Beth Lamb, John Leaseguide.com LeaseTrader.com Leasing, car Legalconsumer.com Lendingclub.com Leonard, Robin Leverage Liabilities Life insurance Lifelock Liquidation bankruptcy Loanio.com Loans See also specific type, i.e Car loans, Student loans Lowcards.com Mailing lists Makinghomeaffordable.gov Managing Debt for Dummies (Ventura) Medical bills Medicalrepricing.com Medicare Microsoft Money Plus Mint Mitric, Scott Modifymymortgage.com Moneychimp.com Money Merge Account Money Strands More Mortgage Meltdown (Tilson) Morningstar.com Mortgage acceleration Mortgage-backed securities Mortgage Harmony Mortgages adjustable-rate fees impact of FICO scores on loan term modification plans paying off early relief programs resources shopping for types of upside down MSN Money Mutual funds, mortgage-backed Myfico.com National Association of Insurance Commissioners National Center for Home Equity Conversion National Foundation for Credit Counseling National Reverse Mortgage Lenders Association Net worth New Bankruptcy, The (Elias) Nolo Press No More Mortgage Optoutprescreen.com Overdrafts Own Your Home Years Sooner (Gill) Patient Advocate Foundation Payment history Peer-to-peer loans Perkins loans Personal loans Plunkett, Travis PLUS (Parent Loan for Undergraduate Student) loans Points Politicalcalculations.blogspot.com Probono.abiworld.org PROFILE Project on Student Debt Prosper.com Quicken Quinn, Jane Bryant Rebates, tax Reed, Mary Refinancing: car loans mortgages Reorganization bankruptcy Resources Retirement Retirement plans Reverse mortgages Revolving credit Rewards programs Rex Company Risk test Rocket Lawyer Bankruptcy Center Roth IRAs Sallie Mae Savingforcollege.com Savings Scholarships Schumer box Secured credit cards Secured loans Securities, mortgage-backed Sethi, Ramit Shared equity arrangements Short sales Sileo, John Simpletuition.com Smartcredit.com Smart Option loans SmartScore.com Social Security Software Spam Speed Equity Stafford loans Stempler, Robert Stolen Lives: Identity Theft Protection Made Simple (Sileo) Stopcollectionharrassment.com Stop Debt Collectors (Detweiler) Stopping Identity Theft (Mitric) Student loans Subprime loans Talk Your Way Out of Credit Card Debt! (Bilker) Tax credits Telemarketing Thinklikeaspy.com Tilson, Whitney Time Value Software Tongue, Glenn TransUnion Travel Truecar.com TrustedID Truth in Equity Unitedfirstfinancial.com Universal default VantageScore Variable-rate loans Ventura, John Viale, Christopher Virginmoneyus.com Wealth building Wesabe Weston, Liz Pulliam Westrom, Bill Wheelsdirect2u.com Youcanrefi.com Your Credit Score (Weston) Zag.com Zipcar Zombie debt ... Congress Cataloging-in-Publication Data: Goodman, Jordan Elliot Master your debt : slash your monthly payments and become debt free / Jordan E Goodman with Bill Westrom p cm “A Lynn Sonberg book.”... works Use your power Educate yourself about the new ways of the debt world, and your choices in it Demand satisfaction and decent treatment from your lenders, and use the new products and resources... to master your debt in this new era In it are the strategies, resources, and techniques that will make you a debt master It is replete with the latest rules and regulations out of Washington and