By John Packard

Many people tell me that no matter how they look at things, they are simply not able to make ends meet. They cannot possibly cut back any more than they already have. Consider the following statistics:

• Half of American households live on less than $46,326 a year, the median household income figure for 2005, according to the U.S. Census Bureau. That inflation-adjusted number hasn’t seen a substantial increase since 1999. One out of five households lives on less than $20,000.

• Twenty-two percent of U.S. respondents in an ACNielsen study of consumers worldwide said they had no spare cash left after paying for basic expenses. That compares to 17% of consumers in Great Britain and 15% in South Korea and Germany.

• Some 37 million people, or 12.6% of the population, live below the federal poverty line, according to the Census Bureau. (That line varies by household size and composition; for a family of three with a minor child, the income limit would be $15,720.)

• Nearly 47 million, or 15.9%, have no health insurance, the Census Bureau reports, and medical bills are a factor in half of all consumer bankruptcies, according to research by Harvard University professor Elizabeth Warren. Those who do have insurance often pay a big price: Two of five adults (43%) who bought health insurance on their own spent more than 10% of their incomes on premiums and family out-of-pocket medical expenses, according to the Commonwealth Fund, which describes itself as a private nonpartisan foundation that supports independent research on health and social issues. When an employer provided the coverage, one of four (24%) of those insured spent more than 10%.

Yes, it is true to see that the stats are sobering and frustrating. These are facts that many of our clients can identify with. Many times I hear, “Yeah, that is me, I cannot possibly cut back any more.� This is unlikely. You can cut back. But what I have discovered is that many people choose not to do so. In addition, many students like to wallow in the victim role. They attract what they think about. In other words their condition is a self fulfilling prophecy. If someone constantly tells themselves that they cannot get ahead, well what happens is exactly that. Prosper is about changing mindsets from one of scarcity to one of prosperity. Here are a couple of suggestions. 1.) Write your goals down. Outline what you want to accomplish financially within the next 12 months. Take baby steps. Don’t make your goal too large to tackle. Work on creating intermediate and longer term goals. 2.) Write down a positive affirmation about your financial condition. Then read and re-read it several times per day. Watch what happens!

By Brice Hogan

I have been thinking about this topic for a long time seeing as most people, including myself, have been in a situation where your credit isn’t the best and you’re struggling on the best way to fix it. The problem is most people are in debt and trying to live with out having the proper amount of income coming in and this situation can turn us to more debt and then eventually there are maxed out credit cards and you can’t afford to pay the creditors. At that point you just want to give up. Well, there is a way out of the mess.

Clear up any issues on your Credit Report

Every one has a credit report. It is your history of your relationships with your creditors. But here is an interesting fact most credit reporting agencies do not have an accurate report due to the lender sending in a transaction with inaccurate information. This is very common. The best way to go about clearing up the situation is to send a letter or go to their websites and find out the best way to challenge the report. Some important things to do with your credit report:

Regular Check up. Get a Free Credit Report every 4 months. But your saying I only get one free credit report per year. Wrong. You get 1 free credit report per year from each credit reporting agency. So you cam actually get a free credit report every 3 months. Go to www.annualcreditreport.com for more information. By checking your report you can look for errors or look for any identity theft or. If you see an incident of fraud notify a reporting agency immediately so the appropriate steps can be taken.

Understand Your Debt

Credit card debt is a tricky thing and so you really need to know how much debt you have in order to figure out an avenue to help you pay the debt off. According to the Consumer Federation of America, more than 80 percent of all households have some credit card debt. Of them, the average debt is $12,000. And 10 to 15 percent of households with credit card debt are barely able to pay it off. So here are some basic rules to follow in order to decide what you need to do with your debt:

· If you have enough to pay all your bills do it yourself. A good easy way to do this is set up a bill pay that way all your bills get paid on time.

· If you don’ have enough to pay the bills but do have enough to go through debt management use this avenue. The National Foundation for Credit Counseling is a good place to find your local non-profit credit counselor.

· If you don’t have enough for debt management, but you would like to avoid bankruptcy, consider debt settlement.

· Once you have exhausted this avenue the remaining option is bankruptcy.

3. Make your payments on time

If you are going to re-build your credit it is essential to make your payment s on time. This part of your credit report is the most heavily weighted. It accounts for 35% of your report so keeping your payments current is absolutely essential. If you do this over a 1 to 2 year period you can see a dramatic change in your credit score.

4. Don’t Max out you total Balance

This basically means not max out your credit cards or even come close. The reporting agencies frown on this big time. Generally the rule is to keep your balances on your credit cards about 25% of the available balance. So if you have limit of $1000 try not to put more than $250 on the card.

Build it over time

10% of your credit is how long you have had it. Which means it is important to the previous steps, but also if you have credit cards that have zero balances that you want to close to keep them open so that over time it reports better on your score.

Be sure to implement these steps so that you are able to maintain clean credit. By doing so can ease your financial situation and obtain low borrowing rates when you need it in the future.

We have all heard about the stimulus package which our government is working to get past. There are reports that each tax payer will get $600-$1200. The amount depends on if you are married, and have children.

The question came to my mind; what will America do with these funds if it does go through?
Will we just take the check, and turn around and spend it? Are Americans going to use it to pay off debt?

These are important questions we need to ask ourselves. Right now, think about it! If I received a check for $1000.00, what would I do with it?

The best thing for us to do is to put it towards our debts. I have spoken to students who tell me, “if I only had an extra $1000, I would pay off my credit card debt.�

Now is your chance. You are going to get around that amount from the government, and have the chance to free up debt.
You may feel tempted in spending it on an item you have been wanting for months, and now you will have this extra cash to buy the item. But would you not feel better, if you paid off your debt? You would also free up additional interests that you would have to pay towards the debt.

I know a $1000 will not pay off a lot of debt, maybe not even one credit card you owe, but it gives you a start.
You can put the money into a high yield savings account, or invest it into a certificate of deposited.
It all comes down to you, and what you want to do with the money you will receive.

People naturally like to compare themselves to each other. Most people like to have some sort of base line to see where they stack up. This is really true with personal finance.

The best way to give people a sense of where they stand is to lay out some data. Every three years the Federal Reserve Board conducts a national survey that tracks the financial health of American households.

Some of these numbers are quite interesting. If you and yours are bringing in $40,000 a year, you’re doing better than half the households in America.

For many people, this is hard to believe. The numbers do not lie however.

If your household income is $170,000, you’re among the nation’s top 10 percent wage earners and get to park on the top floor.
Anything in six figures means you’re in the top 20 percent.

Annual income

Income level (percentile) Median income (rounded)
Level VI (90 to 100) $170,000
Level V (80 to 89.9) $99,000
Level IV (60 to 79.9) $65,000
Level III (40 to 59.9) $40,000
Level II (20 to 39.9) $24,000
Level I (less than 20) $10,000

Source: Before-Tax Family Income, 2001 Federal Reserve Board Survey

Remember that high income does not equal rich.

Net worth is more telling. Net worth, is the sum of one’s assets — home equity, investments, savings accounts, retirement funds, cars, furnishings and such things as jewelry, furs, wine collection, old baseball cards — minus all outstanding liabilities such as mortgage balance, revolving and credit card debt, college loans and so on. Across all households, the national median net worth is $86,000. Half of your fellow citizens have more than that, half less. As you see, there’s a massive disparity between the haves and have-nots.

Net worth

Net worth (percentile) Median net worth (rounded)
Level VI (90 to 100) $833,600
Level V (80 to 89.9) $263,100
Level IV (60 to 79.9) $141,500
Level III (40 to 59.9) $62,500
Level II (20 to 39.9) $37,200
Level I (less than 20) $7,900
Source: Family Net Worth, 2001 Federal Reserve Board Survey

So take a look at the following: Where do you stand?