Loading...
HomeMy WebLinkAboutThe Citizen, 2010-02-04, Page 11THE CITIZEN, THURSDAY, FEBRUARY 4, 2010. PAGE 11. As the economy begins to rebound, so, too, are many of the individuals who were negatively affected by its decline. Be it because of layoffs or investments that steeply declined in value, many people across the country took significant financial hits in 2009. Lots of people are seeking ways to better manage their financial affairs in the hopes they’ll be more prepared should another recession rear its ugly head in the future. One of the best ways to prepare is to manage credit properly, which can be done in a number of ways. • Know why your rating is going up or down. Many people are aware they have a credit score, they just aren’t aware what that score is or how it’s determined. Credit bureaus can provide individuals with their credit score, but that’s only half the process. The other half is why that score is what it is. The two most influential factors in a credit score are an individual’s payment history and how much of their available credit that individual uses. Paying on time is arguably the most important part of achieving and maintaining a good credit score. A single missed payment can have a long-term negative impact on an individual’s credit score. Individuals can set up automatic payments so they never forget to pay a bill. Even a momentary bout of forgetfulness will not matter when missing a payment. All that will show up on the credit report is a missed payment, not the reasons for it, no matter how valid or innocent those reasons are. How much of an individual’s available credit is being used also has a strong impact on that person’s credit score. In general, it’s best to keep credit use to less than 30 per cent of available credit, and many financial advisors actually suggest keeping it closer to 10 percent. An individual should never "max out" a credit card unless that individual is certain he or she can pay the balance in full by the time the next bill is due. Establishing a 10 per cent threshold can allow individuals to avoid the massive credit debts many before them have suffered through. • Consider a secured credit card. Secured credit cars require careful and meticulous research on the borrower’s part, but can be an effective means of restoring a credit rating for those with a bad or even minimal credit history. A secured credit card requires the borrower to deposit money with a lender, and the credit limit is typically the amount of money deposited. Be careful, however, as certain secured lenders have hidden fees and interest rates that can be quite large. Those who are already a member or eligible for membership in a credit union should look into a secured credit card from their union, as credit unions are typically trustworthy sources for secured cards. • Think outside the card. A credit rating isn’t entirely based on how an individual handles his or her credit card payments. Installment loans, if paid on time, can be a boon to an individual’s credit rating. Installment loans can include auto loans, personal loans or even mortgages. Those with relatively short credit histories might find it difficult to secure an installment loan, especially one with a good interest rate. However, individuals who have had credit for a year or so and have made their payments on time while carrying a responsible balance might want to consider applying for an installment loan in the future. Demonstrating an ability to make loan payments on a monthly basis can only provide a significant boost to a credit rating, helping individuals secure bigger loans, such as a mortgage, down the road. • Ask for help. While it might seem as though a co-signer would not be ideal for someone hoping to boost their credit rating, it actually will, so long as the individual makes the payments on time and pays off the loan responsibly. Parents often co-sign loans for their children, allowing children to use their high credit rating as a stepping stone to establish their own credit history. However, borrowers must realize that missing a payment on a loan that has a co-signer negatively impacts the co-signer’s credit score as well as their own. That reality emphasizes the importance of paying on time and, for the co- signer, making a wise decision as for whom it is they’re willing to co-sign a loan for. • Open a bank account. Lenders want to see stability before handing out credit. That’s especially true in the current economy, when lenders who made irresponsible loans to unqualified borrowers either ended up out of business or in need of a bailout. Individuals hoping to restore a credit rating or build a credit history should open a chequing and savings account as a means of illustrating to lenders that they are stable and worthy of the trust and responsibility that comes with credit. The means to restoring a credit rating With tight economic times and dwindling bank balances, retirement may not seem as idyllic these days. How can you adapt to this new financial environment and still make the most of your retirement? Chartered accountant Giovanni (John) Roma in Windsor advises retirees to revisit their financial plans, especially if their income has changed significantly. “Make sure your plan still works for you. The current downturn has thrown a kibosh into the finances of many retirees, so be proactive and go back to the drawing board. Yesterday’s financial plan is no longer the plan for today, and it probably won’t be the plan for tomorrow.” Roma offers these ideas to help keep you on track financially: • Adopt the simple formula followed by previous generations – money in, money out. When you have the money in your pocket, spend only what you can afford to spend, and avoid the use of credit. • Regroup and re-budget. Identify any discretionary expenses, and prioritize your needs and wants. • Run a reality check on both your lifestyle and your expectations of that lifestyle. What can you afford to do? Are your expectations realistic? • Based on your revised budget and your lifestyle expectations, make one of two choices: either downsize to fit your income by cutting back on your discretionary expenses, or supplement your income. • If you decide to downsize, consider selling the family home and/or relocating to another city or town that has a cheaper cost of living. If you decide to supplement your income by returning to work, be positive about this new adventure. Prepare a resume, focusing on your strengths and career accomplishments. Employers often prefer to hire retirees given their proven track records, commitment and desire to work. Plus, a small incentive exists for employers: they are exempted from paying the employer portion of Canada Pension Plan (CPP) payments for employees who are already collecting CPP. • Consult your financial planner or investment professional, and ask questions about financial strategies. Is it time to reinvest? Should you reinvest more conservatively? Are there tax consequences if you decide to sell investments now? Use your experience in the current economic downturn as a lesson and wake-up call for your adult children. Do they have savings plans in place for the future? – Institute of Chartered Accountants of Ontario RSP Deadline March 1, 2010 Seek A Second Opinion! ENIB provides a total wealth management service. A licensed professional can help you plan and achieve your financial, retirement, insurance and education goals. ➟Global Diversification ➟Tax Efficient Investing ➟Private Wealth/ICPM Investment Services Contact Darren Stevenson for a personal account review. Receive a confidential second opinion of how Private Wealth Management can: ➟Reduce your Risk ➟Reduce your Tax ➟Increase your Returns Get a Private Wealth Management Account Working for you today! Call Elliott Nixon Insurance Brokers (519) 523-4481 One Stop Bookkeeping & Income Tax Services Glenda Morrison, CIM Personal Tax Return Preparation & Bookkeeping Services New clients always welcome 81 Alfred St., Brussels 519-887-8642 E-Filing Available E-Filing Available Reasonable Rates JACQUIE GOWING ACCOUNTING SERVICE Accounting & Income Tax Preparation Monthly Bookkeeping Tailored To “YOUR” Needs • Reconciliations • Personal, Farm • Government Remittances Business & Corporate • Payroll • Electronic Tax Filing All services available on site or at our office RR 2 Bluevale 519-887-9248 Fax 519-887-9454 INCOMETAX SERVICE $$ • farm, business, or personal • complete year-round service including tax audit representation • E-File available Over 20 years' experience Quality work at reasonable rates "FREE CONSULTATION" Stephen Thompson R.R. #2, Clinton Home # 519-482-3244 Cell # 519-524-0957 Can you afford to stay retired?