Don’t Get Stuck In The Cold-Plan Now For High Heating Costs!

As the price of crude oil approaches $100 per barrel, millions of Americans are facing the prospect of a difficult home heating season. The national average for a gallon of heating oil is currently $3.11, seventy-three cents higher than this time last year, and many analysts anticipate that the price will go much higher. As a result, many families may be forced to make some difficult last-minute decisions as they try to keep their homes warm this winter. According to budgeting experts, it doesn’t have to be that way – if consumers plan for increased prices now.

This will be a costly winter, especially for residents of the northern states. In order to deal with the increased demand on their budgets, it’s important for consumers to create a spending plan that incorporates the rising costs of heating oil and natural gas. Taking the time to design such a plan is often cited as an essential part of any money management strategy. Unfortunately, with all of the demands on their time, many consumers fail to prioritize their expenses or to plan far enough in advance for significant expenditures like this winter’s heating bills.

A spending plan helps individuals analyze their spending throughout the various categories of their expenses and identify areas that could be trimmed. Almost all of us have some form of overspending that can be put to better use. By adopting a longer view, consumers can adjust their budgets in advance and accommodate increases more easily.

Your daily cup of coffee can help demonstrate the benefits of the spending plan process. If you were to purchase two cups of coffee every day, each costing $2.10, you’d spend $29.40 in the course of a week. Over a one-month period, your coffee would cost $117.60, and your total expense for the year would come to a surprising $1,411.20. Most of us would balk at the thought of paying nearly $1,500 for coffee, but until we adopt a larger perspective, it doesn’t resonate with us. We’re only focused on the incremental expense, the $2.10 per cup.

Looking at incremental expenses in relation to annual costs can have a profound effect on your plan, because it forces you to weigh the importance of each element in relation to the others. In the example above, an individual could decide to reduce their annual expense for coffee to $260 a year by making their own at home. In that scenario, they would have $1,151.20 to allocate to more important areas of their spending plan – a good start toward meeting their home heating needs.

To learn more about the proper steps to take in developing a spending plan that is appropriate to your family’s needs, call your local credit counseling agency. If you’re interested in receiving a free budget analysis from Cambridge, contact the company directly at 1-800-CAMBRIDGE.

Advice to First-Time Homebuyers

As the sub-prime mortgage market continues its remarkable collapse, it’s only natural that lending practices are getting tighter, particularly for those applicants with weak credit histories. But according to a recent survey by the Federal Reserve, 41% of America’s banks have tightened loan standards for prime borrowers, as well. Translation: Even if you have good credit, it’s becoming much harder to qualify for a mortgage.

The mortgage industry is in shock from the sub-prime disaster that continues to rock our financial markets. Part of the current problem is that too many adjustable rate mortgages were given to too many unprepared or undeserving borrowers. Today’s prospective homebuyers should view this as an opportunity to learn more about the mortgage process, to determine whether homeownership is actually within their financial means.

Unfortunately, we’ve come to regard homeownership as a right, but it’s a privilege to own your own home. Rather than lose that privilege by failing to consider the responsibilities that go with it, consumers need to prepare themselves financially long before they sign a mortgage agreement.

Cambridge offers this advice to those looking to buy their first home:

The monthly mortgage payment quoted by your lender is almost always based on your gross income - your income before taxes and other deductions are taken out. That may help you qualify for a nicer house, but that money isn’t truly available to you for your mortgage or any of your other expenses, either. Instead, you should think in terms of your net income - what you actually bring home.

Your new home will more than likely be bigger than your former living space, so you should expect higher energy bills. Be sure to ask the current occupants what their monthly averages are so you can plan accordingly.

You may need to make significant purchases to furnish the additional living area. Be sure to estimate how much furniture you’ll need and what the cost will be, including delivery.

After you have a good idea of your increased expenses, develop a projected monthly budget. If you find that you’ll be struggling to maintain your obligations or that you’ll be unable to set aside monthly savings (anywhere from 5 to 10% of your net income), you might want to reconsider homeownership at this time.

If you can afford your new home, be sure that you have a financial emergency fund equal to three months’ worth of these new expenses, before you buy. Accidents happen. The American Dream can quickly become a nightmare following an unexpected financial setback, but an emergency fund can help get your family through tough times with your home intact.

Talk with friends and family members about their home-buying experiences. Do some research on the Internet, and consider taking a homeownership course if one is available in your area. The more information you have before you move can make for a better experience when you receive the key to your new home.

Money stresses are devastating American families.

by Thom Fox
Community Outreach Coordinator
Cambridge Credit Counseling Corp.

Every day in this country, an army of non-profit agencies works diligently to provide support and bring much-needed services to millions of Americans. These organizations address a wide range of important social conditions, from housing to healthcare, but referral networks between social service non-profits and credit counseling agencies are inconsistent. To eliminate one common omission, Cambridge Credit Counseling is encouraging non-profit organizations to establish relationships with credit counseling agencies that can address their clients’ financial concerns.

Studies indicate an increasing correlation between many common social problems and indebtedness. Findings suggest that the inability to pay debts, combined with demands from creditors, often exposes debtors and their families to harmful levels of stress, contributing to insomnia, anxiety, depression, increased marital tension and, most startling, the deterioration of parent-child relationships[1].

More troubling are the studies that focus on debtors receiving harassing phone calls and letters from creditors and collections agents. These individuals were much more likely to suffer mental and physical complications than debtors who were not the subject of aggressive debt collection. Such studies reinforce the belief that money problems undermine both individual health and family structure. The conclusion of one researcher summed up what health professionals had theorized for years, “Findings would suggest that the current system of resolving disputes between creditors and debtors is far too costly, both to the debtors and to society at large[2].”

As the financial pressures of our society increase, the family and social bonds that keep us together become strained. It’s difficult enough to raise a family these days, adding the burden of debt produces a volatile situation. Cambridge Credit is urging non-profit organizations to reach out to credit counseling agencies to help their financially distressed clients. As a national organization, Cambridge offers its assistance to every community service agency in America. Those interested in learning more about the services offered by Cambridge can contact Thomas Fox, the organization’s Community Outreach Coordinator, at 413-241-2362.

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[1] Ryan, M. (1996). Social Work and Debt Problems. New York: Little Brown & Co.

[2] Caplovitz, D. (1974). Consumers in Trouble: A study of debtors in default. The Free Press.