The recent $75 billion mortgage modification plan, captained by President Barack Obama has created a frenzy of scams and fraud now targeting the people the program was originally designed to help.

According to Moody’s, of the 52 million homeowners in the U.S., nearly 13.8 million, or just under 27 percent, owe more money on their mortgage than their property is worth. Credit Suisse estimates the U.S. could see nearly six million new foreclosures in 2009-2012 if continued at the current pace.

President Obama’s mortgage modification program was designed to rescue up to 9 million of those homes from falling into foreclosure, however, the messages received by consumers are not always aligned with this goal.

In a recent warning by the U. S. Treasury Department, Federal and State officials are now targeting scams and fraud related to mortgage modification loans and the Obama administration’s efforts to revitalize the mortgage lending industry. The Justice Department and the Federal Trades Commission are also stepping in by alerting banks and questioning possible scam artists in connection to illegal loan modification programs.

Below are a few simple rules to help avoid scams and fraud.

When evaluating a product or service and before signing anything, find out a little information about the company. Check out how long they have been in business, do they have a clean record with the Better Business Bureau, do they have any complaints or pending lawsuits? After researching the company, its owners and a sample of past clients, find out how much money you have to spend to evaluate whether the solution is right for your specific needs.

Make sure that you can afford the initial investment to get started and find out what additional fees will be charged if you decide to move forward. Last, make sure that you actually qualify for the product or service if it requires lending or government assistance.

Author: Chad Sunyich

Many consumers are wondering what to do with their money during a down economy.  Should you invest the extra money or use it to pay off something you owe?  It’s a decision that many of us face without a great deal of consideration even though the results may have far reaching consequences!  The three factors that ultimately determine the return on any investment are time, interest rate, and amount invested.  If you could increase any single factor, which would it be and which would be second and third?

Would you rather invest $100 per month at 6 % interest for 30 years or $1,000 per month at 6 % interest for 10 years? If you chose $100 for 30 years you just made a $63,427 mistake.

Now, before you decide whether you should use your extra cash flow for the elimination of debt or wealth creation, let’s take a look at Time, Interest Rate and Amount Invested to see how each will truly affect your financial future. 

We will begin by comparing each of the three factors and then double each factor independent of the other two factors.  Our starting interest rate will be 1 %, the monthly amount invested is $100 and the time is 1 year.  Now let’s see what happens if we times each factor by a multiple of 8, so time moves from 1-year to 8-years, the interest rate moves up from 1 % to 8 % and the payment from $100 to $800.  And remember; only one factor is multiplied, the other two remain constant.  By increasing each factor by a multiple of 8, we would have slightly more than our initial investment with an increase of the interest rate, nearly $10,000 by increasing the payment amount and nearly $16,000 from the increase of time.  Which factor would you choose to double if this were your extra cash?  As you can see, TIME is by far the dominating factor and its growth is exponential.

Now that you understand the logic behind this powerful concept, let’s look at these factors realistically to see how they apply to everyday life, and how you can use this information to maximize your returns.  The example above shows that you can make a significant impact on the factor of time by investing now, starting today versus later, but you only have so much time, and time is not a factor easily doubled.  So, what about the interest rates, the least effective factor on our chart?  You can have some control over your interest rate but as a general rule, the higher the interest rate the riskier the investment.  So, we see that interest rates, or rate of return, are somewhat of a moving target, unless it is fixed, but no high-return investment is fixed.  By today’s standards, a fixed 6-8% return would be considered quite an accomplishment.

The amount of money you can contribute is the only factor that can be significantly changed, without taking on uncontrolled risks.  I know what you are thinking, “What if I don’t have that kind of extra cash flow to invest?  The answer to this question is:  How much do you spend per month to service your debt?  How much do you pay each month for your home mortgage and consumer debts (i.e. credit cards, line of credit, etc)?  And what about auto loans, don’t forget to include your spouse’s car or truck too? 

The average American family spends around $2,000 per month servicing their existing liabilities, or debts, and if they don’t add any additional debt they are likely 25 to 30 years away from being debt free.  Now think about the amount of money that you pay each month?  What if you didn’t have debt payments each month?  What if you were completely debt free?  Now how much money would you be able to invest?  If the average person were to really stretch their finances, they could afford to invest about 1/10 of what they pay each month towards debt elimination.  For example, if you were paying $2,000 each month towards debt elimination, then a $200 monthly investment would be about all you could afford.  Now consider if you have $2,000 in debt payments per month and an average interest rate of 15 % plus working against you for the next 25 to 30 years?  And how can you even hope to outpace that kind of leverage with a $150-$200 investment at 6, 8 or even 12 %? The answer; YOU CAN’T! 

There is hope!  If you use the wealth knowledge you’ve just gained then watch what you can do.  The average household spends approximately $2,000 per month in debt elimination and we will assume that this family is currently investing $200 per month.  Now, follow along on the graph above and keep this in mind as our starting point: $200 per month at 6 percent interest for 30 years is about $200,000.  Not a bad return.  But what if you first eliminated your debt in 15 years and invested the full $2,200 for the remaining 15years? That’s over $640,000.  That’s a difference of $440,000!  Now, what if you eliminated your debt in 10 years and invested the $2,200 for 20 years?  That’s over one million dollars and a difference of $800,000!  Now you can invest with confidence, security and substantial leverage.

There are other advantages to eliminating debt before investing that will put you on the path to guaranteed financial freedom.  When investing for retirement, or for any long-term investment, your money is often tied up or is only accessible by paying early withdrawal fees, broker fees, taxes or some combination of the three.  Or, you might be forced to cash out while the market is down.  If you are investing in yourself by paying off your debt first; then you control your money.  If you need to slow your debt reduction plan down one or two months to take care of an emergency or unplanned expense, no problem, you can do it without a hit.  In addition, as you accelerate the elimination of debt, you are freeing up available credit on your credit cards giving you access to more money in the case of an emergency.  Also, by paying down debt you are improving your debt-to-income ratio making you more qualified for additional credit and cash from lenders at better interest rates, creating additional opportunities to expand your investment base. 

Probably the most important outcome of debt elimination is the peace of mind that comes when all of your finances are under control.  An Associated Press poll found that one-half of Americans say they worry about the money they owe, while 20 % of all adults in the poll said they worry about their debts most of the time.

Until you are out of debt you really have no business trying to invest.  Now please know that what we are talking about is different than an emergency savings account or life insurance, which make up the base of your investment portfolio.  Those tools are critical for every family to have in place in amounts sufficient to cover their needs.  In fact, we recommend that you have a full 3 months worth of expenses put away for emergencies. What I am talking about is investing for your retirement or as a source income or any other reason.  Pay off your debt first and then leverage your full income earning potential to reach your goals with much less effort. This is the key to leveraging TIME. Maximize TIME by maximizing your contribution.

Author: Chad Sunyich

Establishing a home-based business entitles you to dozens of business tax deductions that are not available to the individual tax payer and can make a big different in your monthly cash flow.  Most experts estimate that tax savings for home-based business owners average $2,000 to $10,000 per year and that many of these deductions are for items on which you already spend money such as internet, phone, gas and rent.

Below are a few key bullet points to consider when determining which home-based business is right for you:

·         COST, COST, COST! – Watch for hidden costs when starting a business.  When starting out, we recommend that your total monthly costs, including start up costs and monthly autoship/product fees, should be less than $100 per month.

·         Main Goal – Don’t spend all of the money you make in deductions.

·         Absolute integrity of the Company, Leaders and its Founders

·         Proven track record of average people building real wealth

·         Very large and well defined target market

·         Something you enjoy discussing and learning about

Another common question is how much money you need to make to qualify for business deductions and the answer is nothing.  That’s right, you do not need to make a profit to qualify for business deductions, however, you must prove your intent to make a profit and work the business actively and regularly.  If you legitimately do not intend to make a profit, then your business expenses cannot exceed your income.

The key to success with business deductions is DOCUMENTATION.  I cannot stress this enough.  KEEP EVERYTHING!  Find a shoe box and keep every business receipt and, if possible, include a written description of whom you were with and the business purpose of the meeting.  Keep logbooks detailing your business activities on a daily basis and label each deduction according to the type of expense.  For example, label recurring expenses such as rent and cell phones as an MRD or monthly recurring deduction and Label random deductions such as meals as an RD or random deduction.  This makes it very easy to track at the end of the year.  If you require a more detailed tracking system for your business, we recommend the red book at the stationary store called the Ideal Bookkeeping System.

Author: Chad Sunyich

The recent growth in families who are unable to make their mortgage payments has caused many analysts to question the security of other debt vehicles, especially high interest consumer debt.  According to the Federal Reserve, bank charge-offs grew by approximately $500 million in the second quarter of 2008 alone, bringing the total to $4.75 billion in bad credit card debt, which is up from $3.1 billion over the same period a year before. 

Many credit card companies have also recognized this trend and are bracing for a long-term credit and liquidity crisis.  American Express has increased its loan-loss reserves to $2.6 billion in the second quarter compared with $1.4 billion in the same period last year and Capital One’s provisions for loan losses almost doubled to $1.1 billion compared with $535 million in the second quarter a year ago.

With a growing number of borrowers unable to get access to the equity in their homes, more consumers are forced to use high interest credit card debt just to make ends meet.  According to the Federal Reserve, the annual growth rate of revolving credit card debt is over 7% with total outstanding consumer debt over $938 billon.

It is time that Wall Street recognizes the severe financial issues that face the average American family before they infect the entire economy and cause exponential growth to the current financial crisis.  The average family is now spending more than it earns and nearly one-third of all consumers have less than $50,000 in total retirement savings, including the equity in their home. 

Below are a few tips for a down economy:

·         Review spending habits and separate needs vs. wants

·         Ensure adequate emergency savings

·         Make sure budget and savings are in line with long-term goals

·         Automate your cash flow to guarantee success!

Author: Chad Sunyich

There are two unique aspects of wealth that will ultimately define your relationship with money – how you view or label money and how you intend to use it to achieve your desires.  Below are several commonly used labels or statements pertaining to money that may be holding you back from achieving your wealth creation goals.  A few examples might include:

“Money is the root of all evil”

“Money doesn’t grow on trees”

“He who has the GOLD makes the rules”

“More money equals more happiness or success”

“It is easier for a Camel to fit through the eye of a needle than for a rich man to enter heaven.”

The second part of your relationship with money deals with how you intend to use it in accomplishing the things that are important to you; or in other words, setting and achieving financial goals.  Your short and long-term financial goals will become your roadmap for achieving all of your wealth and retirement dreams, and will lay a solid foundation for a successful relationship with your money long into the future. 

Author: Chad Sunyich

When it comes to reaching your wealth creation and retirement goals, how much you keep is oftentimes more important than how much you make.  There are two basic tax systems in the U.S., one system for the employee or individual and a completely separate tax system for businesses or employers.  They are two entirely different systems and will have a significant impact on the amount of taxes you will ultimately pay. 

The tax system for individuals is very limited in what they can deduct whereas businesses are entitled to a wide variety of deductible business expenses.  For example, the common list of deductible items for individuals is limited to mortgage interest and real estate taxes, standard deductions for dependants, gifts to church or charity and limited contributions to a retirement plan.  Deductions for businesses include everything from gas, rent, phone bills, travel, meals, repairs and many, many more.  With individual taxation, you earn a wage for working and taxes are immediately removed from your paycheck, and then you are required to live on the rest.  With business taxation, you earn revenue in your business and spend whatever money you need to operate your business, and then you pay taxes on whatever is left over.

Why such big ‘breaks’ for businesses?  Congress passed legislation to give thousands of dollars in tax refunds and deductions to ANYONE operating a small or home-based business with intent to make a profit – even a part time business.  According to the U.S. Small Business Administration, firms with less than 500 employees created 88% of new jobs in the US between 1990 and 2003.  Congress is simply encouraging the fastest growing segment of the United States economy and hoping that a certain percent of business owners will strike it rich and pay even MORE taxes.

Again, there are two entirely different tax systems in America today.  As a business owner, you can increase your cash flow and take advantage of business deductions for items on which you are already spending money such as internet, phone, gas and even rent.

Author: Chad Sunyich

We all have a unique relationship to money that we developed over time and stems from a variety of personal experiences such as did your family have more or less than the others in the neighborhood or at school, was money a source of family fun or family tension, do you have enough for your needs and wants today, have you ever been injured by someone using financial advantage, and so on.  Answering these questions helps you identify possible patterns and natural consequences of certain life experiences in relationship to money.

Regardless of how your relationship to money evolved and whether you come from an abundance or lack of cash flow, it is up to each of us to define our personal relationship to money and how we intend to use it to accomplish our goals and desires.  Gandhi stated, “A man is but a product of his thoughts, what he thinks he becomes.”   It is our responsibility to project the feelings, emotions and thoughts that reflect the results we desire in life – this is how to define your personal relationship to money.

Author: Chad Sunyich

Below are some figures from the Bureau of Labor Statistics (BLS) that describe general cash flow patterns for the average American household.  These statistics were printed by the BLS in 2006 and is called the “Average annual expenditures and characteristics, Consumer Expenditure Survey”.  Check the figures below to see how you stack up against the average American family.

The average family in 2006 made approximately $58,101 after taxes, which varied from $28,535 for 28 years and under to over $77,000 in the 45-55 year old category.  To make this easier to read, from here on I will stay consistent by only providing averages, and you can make the adjustments according to your specific situation.

The average household is made up of 2.5 persons and approximately 67% are homeowners with 33% renting.  Total average expenditures are $48,398, which would mean the average household should have around 16% left over for wealth creation and retirement savings; however, statistics show this is not the case but rather 30% of total households have less than $50,000 saved up for retirement, including their home.

The average family spends around 10% on food or just over $6,000, 15% on a car or other transportation and approximately 28% on housing.  Healthcare and entertainment each take around 5% and insurance or pensions cost approximately 10% of total household income.  This leaves phone and utilities of around 8% and the remaining 5% I lumped together as miscellaneous. 

Always remember: cash flow is king.  Approximately 15% of Americans households have a zero or negative net worth and according to bankrate.com only 3 in 10 workers expect to have enough cash savings to retire in comfort and 19% are worried they may never be able to retire.

Author

Chad Sunyich

Today, a growing number of American families are finding it more and more difficult to make ends meet, with estimates as high as 50% of families now spending more than they earn.  According to the Mortgage Bankers Association, 1 in every 200 homes will be foreclosed upon and an average of 250,000 new families enter into foreclosure every three months, with many receiving absolutely zero financial training on how to handle a financial hardship.   

The most important thing to remember when experiencing a cash flow crunch is DON’T PANIC!  In America you cannot go to jail for failure to pay your bills, so relax and keep a clear head.  Remaining calm during a financial hardship is one of the biggest challenges you will face, so take a few deep breaths and have faith that everything will work out fine.

If you lose your job or experience a major financial or health crisis, the steps required may be somewhat different than a temporary cash shortage.  For those of you who are running a few bucks short, check out my blog GENERATE EXTRA CASH FLOW BY DONATING for some ideas on how to get some quick cash without paying high interest costs.  After experiencing a life changing event, when you know that you may not have the money to cover your expenses for a long or unknown period of time, the very first step is to identify which of your bills must be paid and which can wait until the current hardship situation has passed.

Determining which bills to pay and which to let go generally comes down to two questions; does the debt carry equity and is the debt secured by a physical asset.  Your home is one of the few assets that is both secured and has most likely built up some equity.  If you have an emergency savings fund, enough income to cover the mortgage payment or at least $20,000 or more in equity, then saving your home is likely the best first step.  Next, make a list of the debts that are either secured or have built-in equity, which usually consists of autos, boats, furniture or other recreation vehicles.

Unsecured debts such as credit cards, signature loans and other lines of credit are the last debts to be considered in a cash shortage as they generally are not secured by a physical asset and cannot build equity.  Unsecured creditors will hire attorneys, send threatening letters, make threatening phone calls to your work and family, and do just about anything to get your attention.  The truth is, they have no tangible asset attached to the debt and can do nothing but file with a judgment and attempt to scare you into paying.

Again, pay the debts that have equity or are secured by an asset.  The rest of your unsecured debts can wait until you decide on your best course of action.

Author

Chad Sunyich

The other day while driving, I heard a spot on the radio about ways to save a few dollars or make a little extra cash flow during these hard times, which I think is an excellent idea and should be adopted by all forms of local media.  The spot discussed selling your plasma as a way to supplement your income or make a few extra dollars to carry you over during trying times.  What a great idea!  You can make extra cash while helping save lives.    

In talking to a friend that donates twice a week and checking the internet, I found that you can make between $20 and $30 per visit for donating plasma.  I know that does not seem like much, but you can give plasma twice in a 7 day period, which equals around $200 per month in extra cash flow.  Not a bad way to cover your extra cell phone minutes, added fuel costs or even payoff high interest debt. 

Most families need an extra $200 per month to carry them over during a financial hardship, and many must rely on title loans, payday loans, signature loans and other types of interest bearing notes to make ends meet, often paying a minimum of 24% interest on the borrowed money.  Donating plasma is a quick, safe and free way to get a few hundred dollars when you need it most.  Donating can also be used to create additional margin to help accelerate the debt elimination process. 

As an added benefit, not only are you making money by donating plasma but you are helping fill the huge shortages at our plasma banks where plasma is used primarily for research; however, your plasma is also needed as life-saving fluid for burn victims, premature babies and leukemia patients.  The catch, you may not get paid for donating plasma that is used as a life saving fluid but the need is even more urgent, giving you an opportunity to both make money and save a life.  Below are some sites that include additional information on donating plasma and how to find the nearest donation center. 

http://www.plasmazentrum.at/en/donating-plasma/find.html

http://www.redcross.org/services/biomed/0,1082,0_20_,00.html

As a sidenote, it will take about 3 hours on your first visit where you will receive a full physical, blood work and general health related screening.  After your first visit, you can plan on about one hour per visit and you will likely have access to free wi-fi, cable TV and snacks.  If possible, I would recommend that you donate one out of every four visits to giving plasma strictly for health related issues, not research, cosmetics, etc. 

Author Chad Sunyich