January 2, 2020 at 8:30 pm #63997
The only reason you would need a LOE for payment shock is because you have a valid reason for missing it. Other than that your ending balance would need to be represented as plus $200 from the last month. You can always change the payment days of your bills if this will present a problem. Otherwise while you did end up saving 200 for that previous months billing cycles it shows up in actuality as say minus 200 one month and plus 400 the next. You need plus 200 without fail.January 3, 2020 at 11:03 am #64026
I’m a bit confused about the bank statement thing as well. So are they only looking at your beginning balance vs. your ending balance? Or are they also looking at your daily balances and/or that the minimum balance doesn’t dip below the payment shock amount? Honestly I’d much rather just take my payment shock and deposit it into a different account every month to ensure that it doesn’t get touched because keeping the money in my operating checking account with money coming in, bills getting paid, etc. is going to be harder to keep track of. But when I asked about this at the workshop, the lady giving the presentation made it sound like its going to be too confusing if I do that.January 3, 2020 at 11:20 am #64030
A couple things that I think you need clarification on. They look at the beginning balance and ending balance to determine payment shock savings. They will look at every single transaction to determine if you have 1. good spending habits 2. if your balance ever got to zero or negative 3. if you made any large deposits or withdraws not associated with your employment. Let’s be clear your payment shock savings is calculated across ALL accounts. Naturally the fewer accounts you have the easier it is to keep track. The problem with putting $200 a month into a separate account is that now you have to guarantee you 1. actually do that and 2. that your other accounts never have an ending balance less than your beginning balance.
If you have 3 accounts with $100 $400 and $1000 respectively in January let’s say and your payment shock is $200 then that means between the 3 accounts you need (100 + 400 + 1000) + 200 in February for a total of 1500 + 200 or 1700. In March you will need 1900. April 2100 and so on. You CANNOT simply have 1 account where just 200 in every month and say you saved 200. because what if you other accounts of 100 400 and 1000 are now 90 250 and 670. That means you lost money over all. Payment shock savings is like net worth. If you net worth goes down that’s not good.January 3, 2020 at 11:25 am #64032
It’s my understanding beginning balance vs end balance. Someone else please correct me if I am wrong?
Here’s the thing. I can change my due dates on bills, within reason (because i cannot just do it Willy-nilly every month), but I cannot change my paydays. If my statement ends immediately on or close after a payday, the number is inflated because I will not have used these funds to yet pay for the bills I would use to pay. Then, during the next month, if I am paid at a decent time before my end statement where my bills are removed, it looks like I have spent all my money or that I did not save payment shock even though during month 1 it was just that certain bills had not yet come out. Eg if my total end balance is $5500 in month 1 but then $2300 in month two because bills came out by that time and it was after my actual pay day, then it looks like I lost $2200 vs paid my bills and saved $1100.
@TTrumble: I believe you have addressed this aspect before and stated that Letter of Explanation could be appropriate in this sort of scenario?January 3, 2020 at 11:32 am #64034
This would be where a transaction history would come into play.
You also have a grace period to pay your bills. Have you thought about waiting until a particular week of the month to just pay everything?January 3, 2020 at 11:33 am #64035
Now I’m even more confused!!! Okay so my bank statements cut on the 20th of each month. My ending balance for my primary checking account in December was $391. So are you saying that because my ending balance was $391 on December 20th, it can never dip below that amount??? Even if I’m faithfully putting $200 in my saving every month?January 3, 2020 at 11:40 am #64036
So instead of a Letter of Explanation, they will look at transaction histories to demonstrate that I am doing things correctly?
I do not have grace periods on all of my bills, unfortunately, so, no, I have not considered waiting out a nebulous grace period I may or may not have on some bills. I pay them on or slightly before time.
@TattedQueen87 that was my understanding and why it’s so confusing for me, too! Because my end balance will fluctuate on the primary checking even though the balance will go up on my one savings account.January 3, 2020 at 11:41 am #64037
Correct. On January 20 it must be at least 591. February 20 it must be at least 791.
If you are taking 200 out every month to put in a separate savings account then you will be required to write a LOE for each withdrawal from checking AND each deposit to savings because the the UW will NOT connect the dots no matter how clear the paper trail seems to be. You will also probably need to get a transaction history printout of each account from your online account website, make sure each page has the full URL looking like the one below for the link to this forum (but for your bank website) on either the top or bottom of the page as a header or footer AND get each page bank stamped at your local branch. This is one of the reasons the lady at your workshop said it would be more confusing.
January 3, 2020 at 11:55 am #64039
- This reply was modified 1 year, 3 months ago by Nelsont.
This is super aggravating. So, basically it better that my statement end balance when I actually start this process is closer to the bare minimum payment shock amount. (in actuality my payment shock is $46). Because now I’m going to have to make absolute certain that my account reflects the $391 plus increases by $46 every month on the 20th…
So lets say for example on January 20th when my next statement cuts, I happen to have $800 sitting in my checking because I haven’t paid my phone bill yet. Does that mean that for February my account now will have to have $800 + the $46 payment shock otherwise “I didn’t save”??January 3, 2020 at 11:57 am #64040
Exactly what my question became!!!! And wait, how is your payment shock $46, but mine is $200 even though I am not trying to qualify for more than I am paying?!?!January 3, 2020 at 12:01 pm #64041
My intake appointment isn’t until mid-January so I honestly don’t know for absolute certain because I don’t have an action plan yet, but I’m getting $46 by using 31% of my monthly income minus my current rent.January 3, 2020 at 12:03 pm #64042
Yeah, would you mind reporting back when you do? I am being told the bare minimum will be $200 even for qualifying for less than 31%…BUT please don’t listen to me because I am brand spanking new in the process as well! Your MC will definitely be the one to advise.January 3, 2020 at 12:35 pm #64043January 3, 2020 at 1:01 pm #64046BakerTheBakerMember
Everyone is advised to save $200 per month minimum.
And you have it right – whatever money is in your account on the statement date is “stuck” and any change in balance will require explanation. The fewer of these, I have found, the better. In a perfect world, your MC would like to see a steady increase of the Payment Shock amount in your account each month with no need to explain discrepancies. So if there’s $0 in there today, there will need to be $200 in there on the next statement. If there’s $10,000 in there, there will need to be $10,200 on the next statement. If you save more, that doesn’t change the expectation that the bank account balance increases by your specified amount each month.It benefits you to have as few accounts as possible, and as little money moving between accounts as possible. Setting up a separate savings account is actually making more work for everyone.January 3, 2020 at 1:10 pm #64047
So basically, I’m going to have to repeat what I did last month and pay all of my bills in the exact same order so that the account has the exact same amount PLUS an additional $200 next month on the 20th BUT at the same time I have to be careful and not save too much money because I will essentially screw myself and set the bar higher for the next month. So if I accidentally forget to pay a bill before the 20th and my account reflects additional funds, I’ll have to do that again next month.
I’m already stressed out about this.
What about situations when bills fluxuate. For example my electric bill was $200 last month, but could be $250 next month… But now I’ve locked myself in to making sure I have $391 + increase the payment shock every month.
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