Filed under: Debt, Real Estate, Wealth, Recession

You’d think a guy pictured often with the likes of Paris Hilton would keep a hand on his wallet. But Scott Storch, a 34-year-old hip-hop music producer who helped launched the career of Christina Aguilera and Beyonce, and is seen around town with socialites like HIlton, is the latest entertainment name to fall into foreclosure.

Storch, who Palm Beach Post columnist Jose Lambiet estimates was worth $70 million as late as last year, is losing his $10 million Miami Beach home to SunTrust Bank. Besides owing a year’s back mortgage on the 10-bedroom, 16-bath mansion, Storch also owes the electric company and a security company. Storch also had his Ferrari Scaglietti and his prized motorcycle, a Bones Bike, repossessed. So much for the high life.

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Filed under: Debt, Saving, Wealth, Relationships

According a current article from Reuters, how couples handle money early in their marriage can have a profound impact on the rest of their lives. Now, I don’t disagree but couples superior not wait until after the honeymoon to speak about the BIG issue. Money is the number one problem that couples fight about and a major factor in most divorces. Yet surprisingly, many couples don’t discuss cash until there are problems. Some key issues that you must discuss before you walk down the aisle with anyone.

• How much money do you both have in savings, checking, IRS’s, 401K’s and other assets?
• What liabilities do you or your partner have? Include mortgages, car payments, school loans, personal loans, and credit cards?
• What is the current status for you and your partner with the IRS? Beware of marrying anyone who owes the IRS money. It can cause havoc for both of you.
• How do you both feel about money? For some money represents control, others view it simply for fun. Some folks are savers. Identify what your attitude is about money.

Continue reading Money is the #1 Issue to Discuss Before Saying “I do”

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Filed under: Debt, Relationships

The economy is pulling marital bliss right down the crapper along with it and due to fewer assets raising the temperature of already emotional and heated divorces to boiling level. Many divorcees are already fighting over money and with the economy doing so poorly are now dividing up debts rather than fighting over summer homes and frequent flier miles. MSNBC reported on a case in which a freshly divorced husband and wife had to remain living in the same home because they couldn’t afford to live elsewhere and another case in which the income of the involved celebrations had to be adjusted down from $15 million to under $1 million causing even more bitterness!

Historically divorces and the economy have had an interesting relationship, in the last 3 recessions the divorce rates have risen and peaked within a year of the end of the recession. In the early eighties the divorce rate peaked at 5.3 per 1,000 during the recession caused by the Iranian revolution after which it tapered off until the early nineties where it again capped off at 4.8 during a downturn in the industrial and manufacturing industry. Finally the divorce rate climbed back up to its most recent high as the tech bubble popped and dot coms began failing.

Continue reading As goes the economy, so go divorces!

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Filed under: Cards, Debt

A GfK Roper Public Affairs and Media for CreditCards.com poll found that people would be rather talk about anything with complete strangers before they discuss credit card debt. Religious views, politics, age, weight and health problems are more popular topics.

Obviously it’s difficult to find solutions to a problem when you can’t even speak about it. But it may be even more damaging. The rise of consumer credit has made it nearly impossible to tell a person’s financial situation without looking at their tax returns. Remember the LendingTree commercial with the guy who has a dream home and a nice vehicle but is in debt up to his eyeballs? That’s a very common situation. That guy you envy probably leases his car, is upside down on his home, and pays for his haute couture with a wallet full of credit cards.

But you’ve no way of knowing that, and so you end up feeling a need to keep up with the Joneses, even though the Joneses are broke. There’s nothing you can do about people’s unwillingness to speak about their debt, even though you certainly should consider opening up about your issues with a few trusted friends. You might find out they have similar problems. But keep in mind that most people are probably in far worse financial shape than you’d think from meeting them. We live in an age of conspicuous consumption.

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Filed under: Debt, Shopping

The garage was stacked with thousands of dollars of merchandise still in original packaging. There were 100% cotton t-shirts studded with rhinestones (2 per package - $5.00), stacks of heavy knit sweaters in pastel colors (8.00), boxes of shoes and boots still wrapped in tissue paper ($10.00/pair). It was a yard-sale shopper’s feast, distinguished by the fact that everything was new. It was also - as the niece running the sale explained - a display of her aunt’s full-blown QVC shopping addiction.

How many days or nights had a probably sad and lonely woman sat in front of the TV set, ordering two of these and six of those? How many UPS deliveries had arrived? What percentage of the buys had actually been worn?

Closets of clothes with price tags still attached are one of the signs of compulsive buying. This one was hard to miss.

Much more common in women than in men, compulsive shopping often appears in a cluster of other addictions - alcohol, drugs, eating disorders. It can show itself as a symptom of depression as well as of bipolar disorder. It might also be associated with a trauma history or emotional deprivation in childhood. Like other addictions, compulsive shopping and spending initially makes a person feel superior then ultimately much worse. When it comes to on the web addiction, what’s frequently found is women shopping, men viewing pornography, and teens playing games.

Continue reading Compulsive shopping - I have a book about it in one of these boxes

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Filed under: Debt

In the midst of a 23-month prison sentence on dog-fighting charges, former Atlanta Falcons star quarterback Michael Vick has filed for bankruptcy protection. The bankruptcy filing says that Vick owes between $10 million and $50 million to creditors.

It’s hard to know what to say here besides the obvious: Michael Vick is a complete moron. He jeopardized his career and freedom by participating in animal cruelty and mismanaged his money. Is there some facet of his life that Vick hasn’t messed up royally?

In the bankruptcy filing, his lawyers said that Vick hopes he “can, after the conclusion of the bankruptcy case, rebuild his life on a personal and spiritual level, resurrect his image as a public figure, and resolve matters with the NFL such that he can resume his career.”

Anything’s possible. He’s broke and in prison, so there’s nowhere to go but up. Perhaps he has the ability to make a comeback as a late-night televangelist.

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Filed under: Banks, Debt, Tax, The Dolans, Wealth, Bankruptcy

Walk past a newsstand these days and you’ll see dozens of glossy magazines with the faces of the rich and famous staring back at you. Glamour, fame, fortune! But behind the fancy clothes and re-touched photos, celebrities are just people who, like us regular Joes, make serious mistakes. No, not bad plastic surgery or making the Worst Dressed list, we’re speaking about making serious money mistakes.

Here are nine that have made headlines recently…

Money Mistake #1: Not Signing a Pre-nuptial Agreement
If the rampant rumors are true, Madonna and Guy Ritchie might be the latest celebrities calling it quits–and the latest to potentially end up in a nasty fight over money since the Material Girl apparently didn’t have a prenuptial agreement. This puts Madonna’s estimated $600 million fortune at risk. Remember, earlier this year another British court ordered Sir Paul to pay ex-Heather Mills a whopping $48.7 million, so this could cost Madonna dearly.

You don’t need to be filthy rich to need a pre-nup. If you bring assets to your partnership that you want to be sure you keep 100% of if things don’t work out, it’s essential you work out a pre-nuptial agreement before you are married.

Money Mistake #2: Not keeping your will up to date.
Actor Heath Ledger’s tragic death was compounded by the fact that neither his girlfriend, Michelle Williams, nor their daughter, Matilda, was included in his will. That wasn’t a slight…Ledger just hadn’t updated his will since 2003, well before either was in his life.

We all get busy, and visiting a lawyer to update your will isn’t at the top of anyone’s “fun” list, but it’s one of the most important things you can do to protect your loved ones should something unexpected happen to you. Be sure you update your will to address any major life event, such as marriage, divorce or the birth of a child or grand-child.

Money Mistake #3: Losing a home to foreclosure
You’ve probably seen former Tonight Show host Ed McMahon in the headlines lately. In a sad turn of events, McMahon, once famous for knocking on people’s door to make their dreams come true, is now facing the nightmare of losing his home to foreclosure.

Records show McMahon is $664,000 behind in payments on his Beverly Hills mansion. How could this happen? Simple: McMahon got caught by the housing bust just like so many other Americans. He purchased a massive home and took out a home equity loan when banks were saying “yes” to nearly any request. Meanwhile, the value of his house went down with a very weak real estate the market, and he got behind in his payments.

Other celebs to lose their homes this year include queen of soul Aretha Franklin and disgraced baseballer Jose Canseco, who simply abandoned his $2.8 million pad — just walked away and let the bank take it. (See a gallery of current celebrity foreclosures here)

Money Mistake #4: Going Bankrupt
We know, we know, cry us a river, right? It’s hard to muster much sympathy for celebrities who made a fortune and squandered it all, but the list of celebs forced to declare bankruptcy is surprisingly long. The newest member to join this unfortunate club is rapper MC Hammer, who burned through $30 million with his penchant for fancy automobiles, homes and a huge entourage. Other bankrupt celebs include boxer Mike Tyson, figure skating darling Dorothy Hamill and Debbie Reynolds.

Keep reading to learn about the two superstars who are in danger of adding their name to the list…

See the full list

Continue reading Money Mistakes of the Rich and Famous

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Filed under: Cards, Debt, Recession

As lenders realize that they spent the last few years throwing cash at anyone with a pulse and an IQ over 20, they’re cutting back credit limits for a lot of people, even those who have never been delinquent.

Here’s where it gets really bad: one component of your FICO score is the amount of credit you currently have drawn down divided by the amount you have available. Lowering your limits decreases the denominator and can swiftly send your credit score plunging — even though you didn’t miss a payment, open a new account, purchase a Ferrari, or do anything else to draw the ire of the credit gods.

So millions of people have seen their credit card stories go something like this: use credit card, make regular payments to build strong FICO score, see your credit limit slashed because of broader macroeconomic conditions, be required to pay a higher interest rate because of changes in your credit score caused by something the bank, not you, did. Oh, and you’ll also have to pay a higher interest rate if you borrow money from someone else to buy a house, which cost you thousands of dollars over the years.

The conspiracy theorist in me thinks that that’s exactly how it’s supposed to work out: lend someone money, reduce the limit, and then lend them more money at a higher interest rate. It’s brilliant!

I would be nice to see the Fair Isaac take some action to prevent these credit limit cuts from increasing the cost of credit for people who have behaved responsibly. Somehow I doubt that will happen.

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Filed under: Debt, Transportation

If achieving financial security is important to you — and it probably is if you’re reading WalletPop — the completely worst source of information is the Madison Avenue marketing genius. If you want to be rich and happy, you would do well to take a sledgehammer to your television.

But even by Madison Avenue standards, the message behind the funny FreeCreditReport.com commercials is bad. Here are the lyrics to catchy song I recently found myself humming:

Well I’m shopping for a new vehicle, which one’s me? A cool convertible or an SUV.

F-R-E-E-E, that spells “free”, credit report dot com baby …

I’ve said before that I oppose the idea of automobile loans for the vast majority of consumers, and this commercial makes abundantly clear why they’re so stupid: mortgaging your financial future to prevent strangers from laughing at your posse is … well let’s just say that my thoughts on that one sentence would have to be edited considerably to qualify as merely vulgar.

Here’s my advice for vehicle shoppers: pick them like upwardly mobile executives pick wives. First get the car you can afford, and then upgrade when your fortunes are improved.

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Filed under: Debt, Tax, Fraud

I’m all for the government cracking down on collecting child support payments, and taking the money directly out of IRS payment seems like a winning plan. But the $2 billion that the government has collected so far isn’t all from deadbeat fathers. I, for instance, am part of the 39% of those who had money withheld for an unpaid federal debt. And I still don’t know why.

I apparently owed the federal government $89.49 and they took it from my rebate check. I got a letter in the mail from the Department of the Treasury that told me, “As authorized by Federal law, we applied all or part of your Federal payment to a debt you owe.” Then it gave an address and phone number for a Birmingham, Ala. processing center.

I called, of course, and all they could tell me is that the Transportation Security Administration had taken my money. They stated they could give me their main number. They might as well have offered to give me the number for the White House to ask President Bush what was up with my payment. I didn’t figure you could just call a mammoth government bureau and get any kind of response.

Continue reading IRS confiscation of rebates isn’t just for deadbeats…it’s for me!

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