Larry Holmes

There are tons of ideas in this WSJ article that will help you fix your financial life in 2009. I just want to comment on some that I think will be the most useful for the largest number of people.

Problem: You want to apply for new credit, but aren’t sure if your credit is good enough.

Solution: Get a free credit score. Several Web sites — Credit.com, CreditKarma.com and Quizzle.com — allow consumers to check their credit scores free. Although CreditKarma and Quizzle offer scores developed by the credit-reporting companies, including TransUnion and Experian, and not the widely used FICO score developed by Fair Isaac Corp., they can still provide users with a quick snapshot of where they stand. At CreditKarma.com, consumers can estimate how certain actions — such as applying for a new card, being late on a payment or paying on time — will change their score.

It’s also a good idea to check your detailed credit reports at least once a year, which you can do free of charge at annualcreditreport.com.

– Jane J. Kim

Comment: I work with creditors every day and this is good advice. If you haven’t taken a free look at your credit report in a long time, you want to do so. It is estimated that over 80% of credit reports have some kind of inaccurate information on them. And something like 25% contain serious enough inaccurate information that may cause someone to deny you credit.

It´s also good to know about CreditKarma.com. I can see how knowing in advance how certain actions will change your credit score would be very useful.

Problem: You’re drowning in credit-card debt.

Solution: Consider working with a nonprofit credit-counseling agency. Consumers seeking help with debt need to tread carefully. As Americans’ credit-card bills have spiraled out of control, the airwaves have filled with advertisements for “debt-settlement” services that say they’ll help consumers settle debts for a fraction of what they owe. But they often charge high up-front fees, and their strategies can drag down clients’ credit scores and even make their debt burden balloon.

Nonprofit credit-counseling agencies offer a different approach. After reviewing your financial situation, the agency may offer you a debt-management plan, which will help you steadily pay down the full amount owed over a period of roughly three to five years. Creditors will often reduce interest charges or waive fees for consumers participating in these plans.

A good place to start looking for a nonprofit credit counseling agency is www.debtadvice.org, a Web site maintained by the National Foundation for Credit Counseling. The NFCC sets guidelines on fees that member agencies can charge consumers and requires agencies to provide services free of charge if a consumer can’t afford to pay. To find NFCC member agencies, click on “find a counselor now.”

—Eleanor Laise

Comment: Good advice.

Problem: Your health plan refuses to cover a medical treatment.

Solution: Appeal the rejection. Start out by calling the insurer to see if the problem is a simple billing or procedural mistake that can be easily corrected. If not, appeal the decision. Most disputes center on one of two issues: whether your care is medically necessary, or whether it is something that’s covered under your plan.

Either way, you’ll want to secure copies of key insurance documents, including the denial letter and a full explanation of your plan’s benefits, often called the “Evidence of Coverage.” That will help you understand what’s supposed to be paid for by your insurer. If your appeal centers on medical necessity, enlist the help of your doctor, who can write a letter explaining why you needed the treatment. You should also try to find medical studies backing your case.

If the health plan upholds its denial, you may have other places to turn. Most states have an outside review process for health-insurance appeals, though not all appeals are eligible. For more detailed advice about filing a health-insurance appeal, try the Web sites of the Kaiser Family Foundation and the Patient Advocate Foundation.

—Anna Wilde Mathews

Comment: Health care providers who have attended my seminars have told me the same thing.

Problem: You need affordable health insurance, fast.

Solution: Comparison-shop online. Healthinsurance.com and eHealthinsurance.com give you detailed estimates of multiple health-insurance plans in your state and what’s covered under them. You can apply online — without having to fork over any medical records — and in some cases hear back from providers in minutes. Healthinsurance.com also gives estimates for travel insurance and dental coverage. And eHealthinsurance has information on health savings accounts (HSAs) and options for small-business owners. The eHealthinsurance portal for student health insurance is also good for the budget-conscious undergrad or graduate student not covered under a parental policy. Discount cards are offered through the site.

—Mary Pilon

Comment: Been there, done that. I know it´s a pain, but it´s what you need to do.

Problem: Your Individual Retirement Account has plummeted in value.

Solution: Convert what’s left to a Roth IRA. When you roll over traditional IRA assets to a Roth, you have to pay the income taxes up front on the account’s value — but those values, and income-tax rates, are both relatively low at the moment, says Ed Slott, an IRA consultant in Rockville Centre, N.Y.

With a Roth account, there are generally no taxes on withdrawals or any future earnings, unlike with traditional IRAs. There’s also no mandatory distribution schedule — again in contrast with traditional IRAs, from which account holders must begin taking minimum distributions by April 1 of the year following the year they turn 70½ years old.

Converting to a Roth could work well either as a year-end fix or as a way to plan ahead: Legislation approved by Congress earlier this month waives any required withdrawals from traditional IRAs for 2009. That means you could roll over assets from a traditional IRA to a Roth without having to first take a mandatory distribution. So more of your assets could wind up protected from future taxes and withdrawal requirements, Mr. Slott says.

One other advantage: You can leave a Roth account intact for your heirs. Heirs other than your spouse would have to take required withdrawals each year, but they generally wouldn’t owe tax on those withdrawals.

To be eligible to convert traditional IRA assets to a Roth, your modified adjusted gross income must be no more than $100,000 a year, either for an individual or a married couple filing jointly. Neither a required IRA distribution nor the converted amount would count against that limit, but they still count as taxable income. See IRS Publication 590, at irs.gov, for more information about traditional and Roth IRAs.

—Kelly Greene

Comment: Fabulous idea. I´m a huge believer in Roth IRA´s. And as Kelly says, this is a great time to convert.

Problem: You don’t know how much money to stash away for your child’s future college tuition.

Solution: Develop a savings plan. The encyclopedic financial-aid Web site FinAid.org has a section with more than 50 calculators, but the “savings plan designer” is among the most useful. It shows exactly how much you should plunk into an interest-bearing account each month in order to reach a certain savings goal. It also asks how much you’ve already saved and what the interest rate on those savings has been. Then you punch in how many years you have before your child enrolls, and how frequently you want to contribute.

Experts say parents who are financially able should generally expect to pay at least half to two-thirds of their children’s college costs through a combination of savings, current income and loans. According to the calculator, someone with $20,000 saved up already and with 18 years to go before the child graduates should aim to contribute $818.25 a month to cover half of projected costs at a private college, making certain assumptions.

—Anne Marie Chaker

Comment: As someone who has put two kids through college at the same time, take her advice. And the sooner the better.

Problem: You need to find more ways to tighten your budget.

Solution: Check out new Web sites that help reduce your monthly bills. BillShrink.com helps consumers save money by finding tailored deals on cellphone plans and credit cards based on their individual needs. The site, which will analyze a consumer’s spending patterns, credit score and any existing credit-card balances, will suggest the best credit card to maximize rewards or lower fees and interest rates. If you’re looking for a lower-cost cellphone plan, the site searches through plans from all the major carriers and returns the best matches, based on how many minutes you use each month and where you live and work. Another recently launched site, ratesurfer.com, will alert you when rates change on your credit-card accounts and, if you let it, will move your balances between accounts to make sure you’re paying the least amount of interest. At SmartHippo.com, homebuyers can review and rank lenders and compare mortgage rates with rates that other people with similar risk profiles have obtained.

Other free personal-finance Web sites and many banks will provide consumers with a snapshot of all of their bills in one place while also providing budgeting tools to help them keep track of their spending.

—Jane J. Kim

Comment: Over the years, I´ve worked with thousands of people in helping them with their own financial planning. I can tell you that 99% of you definitely need to tighten your budget immediately. Start with Jane´s ideas, and I´ll give you more throughout the year.

Problem: You’re overwhelmed by unpaid hospital bills.

Solution: Your hospital may be willing to give you a discount on the bill in exchange for your agreeing to set up a payment plan or pay some costs up front. If you’re uninsured, appeal to your hospital’s sense of fairness, noting that the uninsured are frequently charged far more than the insured for the same services.

Also, request a copy of your hospital’s financial-assistance policies and look into charity care. If you qualify for Medicaid, the program often pays for care retroactively. Seek help from consumer groups. Some organizations include the Medical Billing Advocates of America, Access Project and Patient Advocate Foundation.

Try to avoid putting medical bills on credit cards or using home loans to pay them off. The consequences of not paying credit-card companies or home lenders — such as high interest rates or even foreclosure — can be greater than those from not paying hospitals.

If collection agencies come calling, promptly send the collector a letter requesting verification of the debt. Then, the collector can’t resume collection activities until it sends you confirmation of the debt. You can also write collectors a letter telling them to stop contacting you, though this doesn’t mean your debt has gone away. The Federal Trade Commission explains your rights: www.ftc.gov/bcp/edu/pubs/consumer/credit/cre18.shtm.

—Sarah Rubenstein

Comment: Again, I work with creditors and I know what they will do if you will work with them. I´ve seen hospitals offer 30% discounts and higher by agreeing to a payment plan.

Sarah also gives good advice about what to do when you hear from a collection agency. I´ve had collection agencies attend my seminars as well.

I know this is a long post, but do yourself and your family a huge favor by doing some of  these things. You´ll get 2009 off to a much better start.

Photo credit: daviddmuir

Larry Personal Finance budget, college tuition, credit, credit card debt, credit report, credit score, roth ira