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The following is a guest post by Jonathan of Master Your Card blog; (RSS feed). This post is a little bit different from many of the posts I have on brip blap, but I thought it was an interesting concept worth talking about - attempts by the banking industry to start pushing consumer debt onto people who have intentionally avoided it.

As the effects of the mortgage meltdown ripple through the entire lending community, the result is higher interest rates and stricter guidelines on who qualifies for credit. In the wake of what could be termed as one of the most devastating credit meltdowns in the history of the United States, many empty-handed investors are searching for someone to pin the blame on. And it seems that they’ve fixed their sights upon the lofty, mysterious citadel of Fair Isaac Credit Organization.

Mortgage lenders are crying foul play on Fair Isaac, citing major flaws in the company’s popular FICO Classic credit scoring model as being the underlying cause for the economic disaster that has taken the United States by storm. What do these allegations mean for the credit industry, and more specifically, the credit card industry? Let’s take a look at a relatively new phenomenon in the world of credit scores: the so called “emerging credit” scoring models.

Emerging Credit scores are largely the result of a shrinking market in terms of the number of consumers who are considered creditworthy. As the mortgage crises escalates, people who used to be considered an acceptable risk to creditors are no longer eligible for even the most basic of credit cards; but these companies still need to make money somehow, so where do they turn to market their credit products if the old crowd just isn’t going to “make the cut” anymore? The answer is found in the large clumps
of consumers referred to as the “unbanked”.

Unbanked consumers are those individuals who have little or no credit history, either by deliberately avoiding all forms of credit, or simply because they haven’t yet had the opportunity to establish credit for themselves. Either way, extending substantial amounts of credit to the unbanked has long been considered taboo by lending organizations, as the FICO Classic scoring model relied on so heavily in credit industries flagged such individuals as being unacceptable risks for investors. Now, however, companies such as Pay Rent, Build Credit, are bridging the gap between the unbanked and prime lending candidates.

For a long period of time, banks and other companies had little use for organizations such as PRBC. Now, however, in an eager, if not altogether desperate, search for qualified prospects, lenders are turning to information brokers such as LexisNexis, PRBC, and credit bureau TransUnion to dig up all the information they can find on an individual’s “unbanked” payment history, such as cell phone bills, rent deposits, tuition, magazine subscriptions, and so forth. Some agencies have gone ahead and begun to utilize this information in new credit scoring models, dubbed as “emerging credit scores”.

In all likelihood, it looks as if these new emerging credit scoring systems may become mainstream in a few years, which would have a dramatic impact on what credit card options are available to the average consumer as a result of creditors having a more complete picture of that person’s financial behavior. What does this mean for you and me? It simply means that more prudence needs to be exercised with traditionally unreported expenditures, particularly those expenditures which occur on a regular and continual basis, such as subscriptions or rent payments. As always, the new systems invariably favor those who are financially responsible and live well within their means.

photo credit: SqueakyMarmot

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This post originally ran as a guest post on plonkee money. Not only the author of a great personal finance site, plonkee’s also got a great second blog over here. I’m about 90% in agreement with her…

photo credit: bogers

American Express - don’t leave home without it! That may be one of the most famous phrases in advertising history, but it tapped into a deep fear for most travelers: the fear of being stranded in the distant unknown parts of the world without ready access to their money. What are some simple methods to safeguard access to your money when traveling?

1. If you are traveling to very remote areas, make sure you have plenty of cash, not just credit cards. The parts of the world that don’t accept credit cards or debit cards are dwindling, but there are still places. Keep plenty of cash, but keep it spread amongst your wallet, your luggage and even a bit hidden somewhere else. I used to prefer to keep some spare money hidden in my toiletry bag on the theory that nobody is going to check there.

2. Carry dollars (or euros). Despite the fact that the dollar is terribly weak right now, it is still the most accepted currency in the world. Carry $100 bills; these are far easier to exchange, ironically enough, overseas than in the US. If you are coming from another country (you’re a European traveler, etc.) I would still recommend carrying US dollars. Don’t count on your drachmas or forints being accepted everywhere.

3. Keep a list of your credit card numbers and customer service - and give a copy to someone at home. There is nothing like having your wallet stolen overseas. However, you want to be able to quickly cancel them if you do lose them or have them stolen, and the easiest way is to have a separate “panic card” ready. Give one to a friend at home in case your panic card is stolen, too.

4. Debit cards are convenient, but pricey - and see point #1, too. When I started traveling in the early 90s, debit cards were almost worthless when traveling. As time has passed, though, they have become far more useful. Be careful when changing money, though - you may pay a fee to your bank and the local bank. In addition, you may get hit with an exceptionally unfriendly exchange rate.

5. Go gray, but be careful. I can’t emphasize enough that you should stay in compliance with the laws of the countries you visit, which often prohibit individual currency exchanges. Depending on the country you visit, though, you may find significantly better exchange rates dealing with individuals than with banks or exchanges. In developing countries with high inflation rates local people will often be willing to give you better rates simply to protect their earnings by converting them to dollars. I would not recommend exchanging with locals, however, unless laws (and safety) permit.

6. Get rid of change. Spend your change as fast as you get it, and small bills, too. These are often difficult - if not impossible - to exchange on your return. Try to spend all of your local currency before you leave the country. Exchanging your money to local money and then back to your money is a terrible waste. Try to spend down to 0 before you leave; put your last few expenses on a credit card.

7. The most important money tip when traveling, of course, is to keep it and yourself safe. Never flash large sums, never discuss how much you have, keep it well hidden and ensure you know how you could get ‘emergency money’ if you needed it (for example, where ATMs are that accept your bank’s ATM network).

Fun (and safe) travels!

Popularity: 1% [?]

When my post on wealth ideas lost to I’ve Paid For This Twice Already in FMF’s March Madness Tournament, I started thinking about snowflaking. Snowflaking is a spinoff of the “snowball” debt elimination concept invented by Dave Ramsey but the snowflaking version of this concept has really been popularized by Paid Twice. In a nutshell, it’s making every attempt to generate income, however small, to apply to your consumer debt. The idea is that even tiny payments on principal make a disproportionate difference to the overall total amount paid when you consider interest.

But since I have no non-mortgage debt, and my mortgage is at a very low rate of interest, I’m not focused on debt repayment. Yet the concept can be tweaked and twisted and all of the sudden it makes great sense in my life and for my (multi-)million dollar journey. I’ll call this concept, for lack of a better word, wealthstreaming. And yes, I know it doesn’t make much sense, but I like the way it sounds.

I had one big stream of income until recently - my consulting work. I have other streams, too - interest, dividends, some web-based income, some (very minor) income from miscellaneous sources like commissions for landing new business. I like to think of all of these as faucets pouring into the same sink - the water’s coming through different sources but ending up going through the same drain (my family’s expenses) and the goal is to make the water pour through in such quantities that the drain can’t process it all and the sink overflows. Neat, huh?

So until recently the consulting income was a heavy stream. Now that I’m problogging for a while, that stream will trickle off (residual income comes in after the work’s completed). Some other income will hopefully pick up a bit - web-based income, referral income (bonuses from new work or recruiting other consultants) and even some other side businesses that I might work on (an e-book is in the works)! I have been doing quite a bit of studying of the coaching profession as well. My goal is to have the streams get heavier and heavier until they match the force of the consulting income stream, because then I can turn that faucet off, and not just for a trial run - for good.

The beauty of some of the streams is that I tapped someone else’s water line. Those dividends? No more work goes into generating those. I made the money, invested it, and now those companies just give me a check once a quarter. I like those streams. A lot. In fact, I want as many of those streams as possible.

Other faucets need to be kept open by my effort. The web income won’t flow unless I keep working on it. Referrals take a lot of work. Those streams are nice; not as nice as the streams from someone else’s line, but more fun and easier to generate than the one-hour-of-work-for-one-hour-of-pay consulting stream.

I try to learn new skills so I can widen the faucets or clean them up - or best of all, I can add another faucet to the sink. I’m picking up web design, slowly - hey, there’s a potential future stream! I am learning about investing in non-stock-market investments - ah, maybe rental income in the future? It’s hard work to develop the skills to add new faucets, but if you have 50 faucets all giving you a trickle it’s easier to maintain than one overstressed faucet creating a bottleneck because there are only so many hours in a day.

So that’s my idea - wealthstreaming, for lack of a better moniker. Adding tiny stream of income after tiny stream and seeing which one flows fastest. Not just concentrating on the big streams, but looking for the little streams that take no effort to maintain. What’s nice about the idea is that since I don’t have a grand idea - I’m still brainstorming the next Facebook or the next Digg - I can work on increasing my income today and not worrying about hitting a million dollar jackpot. I’ll just keep opening faucets until the sink spills over and I have more water than I need - because then I can share the water with my extended family, my friends and others.

Popularity: 2% [?]

The road to hell is paved with good intentions. I try to bring my lunch to work with me, both for health and wealth reasons, but it just doesn’t happen all the time. I’ll say:

• “I forgot to pack it and now I’ll miss the bus”
• “There’s nothing good I want to eat”
• “I like eating fresh veggies at the salad bar”

Basically it all boils down to “I’m lazy.” Either too lazy to cook, too lazy to prepare, or too lazy to pack it. Whatever the reason, I end up getting a salad most days. But as I mentioned, I decided this past year to track my spending to keep it down. I put together a spreadsheet and kept track of every dime I spent on food this year.

So the results, one week short of a year of tracking? I spent almost $9000.

Let me explain, because that’s not entirely true. I spent $1300 out of my pocket. But if I had taken that money and invested it at a return of 8% (which I don’t believe is a realistic assumption but that’s another story) for 25 years, it would have been almost $9000. That’s a lot of money to pass up.

On the other hand, I do get cash back rewards since I put lunch on my Amex Blue every day. Before you gasp at the fact that I put food on my credit card, I should point out that we pay off our credit cards promptly every month, and I never spend anything that I couldn’t pay cash for if I needed to - other than our mortgage.

I also did see a massive downward trend after I started keeping track (with a few bumps). Almost every week I managed to smash down my weekly average, and in recent weeks I was down to about $4 per day. Of course I had a few outliers in there, but generally the trend was good and my habit of writing things down paid off.

The final benefit was eating healthier. If I bring food from home it might be a whole wheat sandwich with turkey or some sort of meat substitute. Fine, but not as good as what I get from the salad bar - lettuce, carrots, oil and vinegar. So I did realize some sort of health benefit from not bringing my lunch. You may argue I could do the same thing at home, but it’s tough to transport salad back and forth to work. Not impossible…but not my first preference.

Planning is the biggest key to success - making sure that you shop wisely and pack the night before are 90% of the battle. So next year I’ll try to cut back from that $9000!

photo credit: malias

Popularity: 2% [?]

A slight break from my usual routine - I’ve added a new feature that’s pretty interesting (to me, at least). You’ll notice I’ve added a “Magazines” link above, and it takes you to a page where you can subscribe to magazines - for free.

Most of these magazines are ad-supported, so they do need you to sign up to increase readership. I do get a commission if you do sign up. Some of the magazine offers are “subscribe for a few issues then pay” type of offers, so be careful that you don’t commit yourself to something you don’t want.

I can say some of them, like CFO magazine, are fantastic resources - I’ve been subscribing to CFO for as long as I can remember and I’ve never paid a dime. I read it cover to cover every month. It’s a testament to the power of advertising, I guess, but it’s a fascinating read and it’s free.

So hopefully you’ll find that useful - let me know if you have any questions about the service!

And as long as we are talking about free, don’t forget about Revolution Money Exchange and Prosper. I can’t make it any more straightforward: sign up through those links, get money for free. You have to provide banking info to get the money out, true, but I did it and didn’t have any trouble - so give it a shot! I love the idea that RME is going to challenge PayPal (which I also like), simply because I like the idea that new companies take on old companies and the competition, overall, makes everyone better.

photo credit: Jan the manson {condemns stealing pictures}

Popularity: 2% [?]

A charity, of course, may rely primarily on their reputation to obtain donations but to a large extent they need to hook you - essentially a customer - into thinking you’ll “get something out of it.” If the charity bumbles this concept and fails to deliver what you expected, they probably won’t continue to get your money.

I have a few specific experiences I’ve had with charities in mind. One is Children International. If you sign up to sponsor a child, you get pictures of the child, occasional letters and all kinds of appeals for holiday presents, birthday presents and so on. Your donation probably goes to a general fund and gets redistributed - it’s not like your check being cashed by the child - but still they give you the illusion that you are supporting a child.

I supported Children International for a number of years although I recently stopped contributing. I had started doing it a long time ago and Bubelah and I decided we’d rather see our money go to different causes (Russian Children’s Welfare Society and The Salvation Army, primarily) The Salvation Army, in particular, has us hooked almost as much as “customers” as donors - they take away things we don’t want anymore - gently worn coats, shirts, shoes and so on. We get more out of them than they do out of us, I think. The RCWS sends us a very pleasant, low-key request for donations a few times a year, but they also provide newsletters and charity fund-raiser invitations, and since both of us have significant connections to Russia we feel some personal connection to their mission.

But there’s another kind of charity - one that despite an admirable mission really botches their chance at hooking someone in for life. I think a lot of charitable givers do get “hooked in” or “turned off” on their initial contact with the charity. I dislike the United Way for what I saw as heavy-handed “forced giving” tactics in the corporate environment. I was pressured incessantly by my company’s management to give to the United Way when I was a wet-behind-the-ears accountant. My office was a 100% giver! Woohoo! Yet I said I preferred not to give, because at the time I supported another local charity and saw no reason to give to a national organization. It may not have been United Way’s fault, but getting reamed by senior partners about giving to one charity instead of their precious United Way (and thereby messing up their 100% giver claim) made me unlikely to give to United Way again in my lifetime.

Another one was Doctors Without Borders. I love their mission - it is one of the purest forms of charity I can imagine to go into a war zone and treat ANYONE injured, regardless of status or creed or condition. Yet they fumbled their initial encounter with me. I made a fairly large (for my income at the time) donation to them in my dad’s name and asked them to send a card telling him about it for his birthday. This was an established program, not something I made up. They missed it. They never sent it, despite several calls. Yet I started receiving an avalanche of mail seeking further donations - probably more than any other charity who has ever approached me. So since my attention span for charity giving is not unlimited, they lost my attention. I turned and looked elsewhere.

A charity is in a tenuous position compared to a business. Since they seldom actually give you anything in return other than a good feeling, it’s hard for them to capture your attention if they ever give you the slightest bad feeling. I grumble about Microsoft products but I still keep using Windows, because the good outweighs the bad. A charity can’t do that. They need to bat 1.000. There is no margin for error. There are so many charities doing so many good things that it’s easy to be distracted by the next ‘good charity’ when a ‘bad charity’ fumbles that initial contact.

So who are the ‘good’ and ‘bad’ charities? I am willing to bet two people will have exactly the opposite view of the same organization, and I’m sure someone could disagree with all of my assessments above just because of their own initial contacts with those organizations. It’s all determined by that first contact, when you decide whether or not to become a customer.

photo credit: amishsteve

Popularity: 3% [?]