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Summer 2002 Newsletter
CCCS-OC welcomes summer with the call for "Independence from Debt!" This issue will show
you how to make extra cash, fix up your credit score, save money on vacations, and teach
your kids money skills.
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CCCS-OC's Graduate of the Year, Cecilia Garcia, tells how she overcame
divorce and business failure to repay over $36,000 in debt.
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You don't have to miss out on a vacation just because you're on a budget. Give yourself - and
your wallet - a break with minivacation day trips.
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How lenders calculate credit scores used to be one of the best-guarded secrets in the financial
community. But now you have the right to know your credit score and how to make it better.
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You've got 18 years - use them wisely! The key to teaching children good money skills
is to start young and set a good example.
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You've got 18 years - use them wisely! The key to teaching children good money skills
is to start young and set a good example.
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CCCS-OC's Graduate of the Year, Cecilia Garcia, tells how she overcame divorce and
business failure to repay over $36,000 in debt.
Initially, I had really good credit and diligently paid my bills on time. Then I
married an older man when I was 22 and, being kind of old-fashioned, turned all my
finances over to him. When the marriage fell apart two years later, I found that he had
charged over $10,000 to my credit cards. Going through the divorce was painful enough -
the $10,000 debt he left me with only made it worse. That's where my money problems
started.
Then, one day, without even applying for it I got a $10,000 business loan from a
large bank. I used it to help set up a skin care business, but the money was gone in
just two months. So I started signing up for other credit card offers that came in the
mail. Before I knew it, I owed over $36,000 to eleven different creditors.
Although my salon was making good money, the more I made, the faster it went out the
door. I felt like I was drowning. I had to keep getting more and more credit just to
stay afloat. I realized I was in big trouble the day I had to use my credit cards to pay
my employees. That was the breaking point: I knew I had to do something.
I didn't want to go bankrupt, so I went to CCCS for help. The counselor looked at my
situation and gave me hope that I could actually pay my bills. He warned me that it
wasn't going to be easy, and that it would take time, but he promised to do his best to
get the creditors to knock off interest and fees. Also, I wouldn't have to juggle the
creditors myself, CCCS would send them the payments for me. I just had to make one
payment a month to CCCS. Best of all, I felt that paying my bills would give me back my
credibility and integrity. I went to CCCS filled with shame and embarrassment. I came
out with hope and a plan to pay my bills.
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"I truly believe that every adversity has a positive side.
If you've overextended yourself and spent more than you
should, don't give up hope. Hang in there and stay true to
yourself. You can trust the people at CCCS to guide you in the
right direction. For the small cost, their help is priceless."
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Cecilia Garcia and CCCS-OC President Jim Frannea
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It took me over four years to pay it all back, but paying off my debt taught me a lot. I
have more self-respect because I paid my bills and did what I believed was the good and
right thing. And I learned to make choices that are good for me, not just for others.
Most importantly, I learned that I shouldn't spend money I don't have, and that trying
to keep up appearances just doesn't work.
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If money's short or you've been working hard to dig out of debt, it's time to give
yourself a break, says Jim Frannea, President and CEO of CCCS-OC.
"It's easy to fall into the trap of depriving ourselves when we're budgeting
carefully. But taking time off from work and the everyday routine is vital to
maintaining mental, physical, and financial health." So, keep vacation costs low by
planning a succession of minivacations instead of one longer vacation.
Day Trippers
Schedule your vacation days around your normal days off so that you'll have a series
of three or four-day long weekends. Then decide where you'd like to go, keeping the
radius within two travel hours. Take into account energy levels and attention spans.
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"The key to a successful day trip is to keep it simple
and limit your activities."
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Don't eat up your budget by buying restaurant food, either. Plan ahead and make
simple meals that travel well, and pack plenty of inexpensive snacks, ice, and
drinks.
City Slickers
Nearby cities offer plenty of day trip possibilities. Pretend you're a tourist and
research the places of interest in your area. Chambers of Commerce, auto clubs, and
libraries offer a wealth of free information about local sights and activities. Historic
districts, children's museums, botanical gardens, and out-of-the-way parks all offer
great ways to spend a relaxing day exploring new areas. If you have train service,
consider riding the rails to a new section of town and exploring the area on foot.
A Little Bit Country
If you love the outdoors, but don't love the cost of camping gear, spend a day at a
nearby state park. Hiking clubs, auto clubs, and state governments may provide free maps
and information on campgrounds and local services. Instead of backpacking, drive your
car to a beautiful location, set up camp near your car, and have a homemade picnic
lunch. Bring good walking shoes or bikes and tour the area like a local.
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"Vacations are all about relaxing and letting go of your everyday worries.
So be flexible and keep your expectations reasonable, and your
mini-vacations will be a great success."
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Get Lost
When you just want to hit the road and leave town, try this: Head out on the highway
and let your kids make impromptu decisions about exiting the freeway, which way to turn,
when to stop, and when to get out of the car. Let them be the navigators until they are
completely lost. Then drag out the maps and plot the route to the nearest city, or if
you're really lost, to home. You'll discover areas you didn't know existed and have fun
exploring without an agenda.
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Creditors use credit scores - three-digit numbers ranging from 300 to 850 - to help
determine how risky lending you money is.
Most credit-granting decisions are made too quickly to review your entire credit report,
so often your credit score alone determines the loan's terms. Insurers, employers, and
landlords may also use credit scores to evaluate your applications.
The Secret is Out
"How lenders calculate credit scores used to be one of the best-guarded secrets in the
financial community," says Jim Frannea, President and CEO of CCCS-OC. "But now consumers
have the right to know their credit scores and what they can do to make them
better."
Although hundreds of scoring systems exist, most use the
following factors to determine your score:
- How you pay your accounts
- How much money you currently owe
- How long your accounts have been open
- What different types of credit you use
- How much credit you use compared to the amount of credit you have available
- How often and how recently you have applied for credit
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Here are five steps you can take to improve your credit score:
STEP ONE
First, order your
credit reports from the three major agencies - Equifax, Experian, and Trans Union.
Review them carefully for errors, outdated information, or omissions, and write the
agencies to update and correct your information. Your credit report will also show you
what your current score is. Don't worry if your score isn't perfect. While scores range
from 300 to 850, more than 30 million Americans have scores under 620, while only about
11% score above 800.
STEP TWO
Paying your bills on time is probably the most important factor
in improving your credit score, since even one missed payment can lower a good score by
50 to 100 points. However, because credit scores give more weight to recent payment
histories, you can minimize past mistakes by establishing a pattern of consistent
on-time payments. You may want to check into automatic payments through your bank or
credit union to make sure you make at least the minimum payment on time each month.
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"Rumors aside, working with a credit counseling agency
probably won't hurt your credit score."
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If you're struggling to meet even the minimum payments on your accounts, talk to a CCCS-OC financial counselor. Rumors aside,
working with a credit counseling agency probably won't hurt your credit score. Most
lenders follow the lead of Fair Isaac, a major credit scoring company, in completely
ignoring participation in credit counseling or debt repayment programs in determining a
credit score. And once you've successfully completed a repayment plan, all references to
it are removed from your credit report.
STEP THREE
The wider the gap between how much you owe and your total
credit limit, the better. So make an effort to pay down your debt as much as possible.
Credit scorers don't note whether you pay off the balance each month, they note the
monthly average debt-to-credit ratio. So if you're planning on seeking a major loan in
the next year, start paying off your cards now. If you've been charging everything to
your cards, but paying them off each month, you may want to pay cash instead to help
keep the average ratio as wide as possible.
STEP FOUR
Don't close accounts you don't use unless you already have an
excellent credit score. Closing accounts lowers your total amount of available credit,
making your outstanding balances seem larger. Closing your oldest accounts can make your
credit history appear shorter, making you seem less credit-worthy. You should also think
twice about opening new accounts, since it might hurt your score
should you want to close them later.
STEP FIVE
Steer clear of bankruptcy. In one swoop, BK can lower a good
score by 200 points. Even if you started with a score of 800, bankruptcy will probably
push you below the 620 score, making it almost impossible to get credit with any
reasonable terms. If you are considering bankruptcy, talk to a CCCS-OC financial counselor first. They'll
review your situation and give you advice on how you can repay your bills.
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Kids love money. Or, rather, they love to spend it.
From the first handful of change plopped on a counter for a candy bar, money offers kids
independence and choice. Most adults learned about handling money through experience,
but now you can help your children learn money management skills before they leave
home.
The Early Years
Children watch how parents and siblings handle money, so use common spending
situations as a learning tool. You can help young children learn how much things cost,
how to spot a good deal, and where money comes from. ATMs, credit cards, and
check-writing make it look like money springs from an inexhaustible well, so be sure to
explain in simple terms about bank accounts and borrowing. Help kids in this age group
learn money skills by:
- Giving them a chance to make decisions about how they spend their money
- Teaching them to save for something they want in the future - like a bike or special toy
- Using your values as a guide - for example, teaching the money concept of "some
to spend, some to keep, some to share"
- Providing a sensible allowance, if you decide to give one
- Maintaining consistency in the system you set up
Pre-Teen and Teenagers
Nobody has the "wants" more than kids in these age groups. They know the power of
money and they've been inundated with the message to "spend, spend, spend," since they
were toddlers. It's vital to help kids at this age learn money management skills and how
to postpone immediate gratification. Some parents opt for allowances, but most teens can
begin earning extra money outside the home by babysitting, doing yard work, washing cars
or pet sitting. It's a good time to let them learn how money makes money by opening a
joint savings account. Here are some ways to further their financial knowledge:
- Reinforce the difference between wants and needs
- Allow them to participate in family budgeting and some spending choices
- Help them plan for medium-range goals, like saving for a new computer
- Decide if an allowance should be tied to chores, what expenses it covers, and whether it is reasonable
- Introduce the idea of simple record-keeping and a written budget
- Consider allowing them to open a joint checking account at 16
College Bound
High-school students should be prepared to handle finances on their own. Do this by
improving their budgeting, saving, and goal-setting skills. You may want to consider
opening a joint credit card while they're still at home so that they can learn about
paying bills on time and how not to overextend themselves. Credit When Credit is Due, a class offered
by CCCS- OC, helps people learn how to handle credit, and would be a wonderful way for
your child to learn the rights and responsibilities of credit.
You can help your teenagers increase their money management skills by:
- Giving them the freedom to pay more of their own expenses - and to make their own mistakes
- Allowing them to help you with the family's finances by paying bills, shopping within a budget,
and participating in record keeping
- Teaching them how to balance a checkbook and read a bank statement
- Helping them set long-term goals like saving for a car or college expenses
- Encouraging them to increase their own cash flow by taking a summer job, asking for cash
instead of gifts, or taking on large family projects like house painting
Remember, the key to helping your children learn money skills is to start young,
practice frequently, and make sure your own relationship with money offers a good example.
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Every Saturday morning garage sale signs blossom like spring flowers after a rain,
and early-bird buyers swarm like bees seeking nectar. But can you really make any money
selling off your old stuff?
"You bet," says CCCS-OC Education Director Sally Antwiler. "Especially if you plan
ahead, use free advertising, and do a bit of clean-up on the merchandise." Here are
Sally's tips to make the most of your garage sale:
Organizing the Sale and Setup
- Keep the sale area clean and organized, and place merchandise between knee and eye level.
- Display items neatly, arranged as they might be in a store.
- Have just one exit area so that there's no confusion as to whether someone has paid or not.
- Have a mirror available by the clothing area.
- Enlist the help of friends and family and make sure there are always at least two people
helping on the day of the sale
- Get the kids in on the sale. Make cookies, cupcakes, popcorn, and lemonade they can sell
on the side, and let them keep half the profit for working the booth.
- Keep plenty of change handy.
Advertising and Marketing
- Try to get your neighbors to join your sale. The bigger the event, the more attention you'll attract.
- Advertise your sale at least two weeks early.
- Look for free advertising in local papers and on the Internet, and list some of the more
popular items you'll be selling.
- Use balloons and signs to attract attention to your location.
- Tell your family, friends, neighbors, and coworkers.
- Post flyers at your church or any other public bulletin board.
- Choose a theme for your sale. For example, if it's around the 4th of July, use red, white,
and blue in your signs, and use flags to decorate. Or hold a "Christmas in July" theme and use
holiday decorations.
Product Preparation
- Clean up items, wrap cords neatly, and display any original packaging or paperwork.
- Fix buttons and zippers, and make sure clothing is clean and unwrinkled.
- Hang clothing neatly on racks, separated by size, gender, or age group.
The Most Popular Sellers
- Children's clothing and toys
- Furniture
- Power tools
- Sports Equipment
- Bicycles
- Electronics
- Houshold Appliances
- Books, CDs, and DVDs
- Garden Equipment
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Negotiating the Price
- Garage sale hunters are the sharpest bargainers around, so be prepared to negotiate.
- Most items will sell for 10-20% of the original retail price, more if they are in great shape.
- Mark prices clearly, and slightly higher than you really want.
- Be willing to make good deals for multiple purchases.
- Consider throwing in a "free" gift (something small, like their choice of a paperback,
or a mug) if they buy more than three items.
Be sure to give yourself plenty of planning time, and have back-up plans for weather and
illness. But most of all, have a great time getting rid of the clutter, meeting your
neighbors, and making some extra cash!
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