JW’s Financial Coaching Podcast Lesson #107-How the credit score is the most overrated measure of financial success in the personal finance world

Play
  • The role that the credit score plays in the financial industry
  • What role should it play in your finances?
  • What a credit score can’t do for your finances
  • Build up other financial disciplines in your life, credit score won’t matter
  • Quote of the lesson from Tony Robbins

The JW’s Financial Coaching Podcast_107

There are tons of resources online about the credit score: ways to improve your credit score, how the credit scoring system works, and products you can buy to boost your score. But most of those resources harp on the importance of a credit score.

But why do we need a credit score? If you don’t plan on borrowing money, do you actually need to worry about it?

On today’s podcast lesson we are going to discuss the credit score and why I think it might be the most overrated measure in the financial world today. Do you need a credit score? Well perhaps, it mostly depends on your view of debt and whether or not you are going to be borrowing in the future.

Whether or not you need a credit score, I think it is more important to focus on what a credit score can’t do with your money. It can’t help us:

  • Save money
  • Invest money
  • Pay off our debt
  • Help us follow our budget

The way I look at a credit score is this-what’s more important than a great score or no score, is NOT to have a bad score. Bad credit will haunt you in many ways, so if you have fallen behind or gotten dinged due to a foreclose or repossession, working on paying those old debts back is paramount to getting on solid financial ground.

If you do have a great credit score, there’s nothing wrong with that, but what is it costing you? I’ve worked with a lot of couples who are struggling to save money but have a great credit score.

I just want to fight against the whole idea that the credit score is the be all, end all. It isn’t and it isn’t even close. In my opinion instead of focusing on improving your credit score first, I’d rather focus on saving, investing, paying off debt, and developing a solid budget. Doing those things first will improve your credit score, but focusing on your credit score first won’t improve those other things.

As mentioned on the show, I’ve done a lot of other podcasts and blog posts on the topic of your credit score.  You can check them out below:

Today’s quote of the lesson is brought to you by the JW’s Financial Coaching Newsletter

“You either master money, or, on some level, money masters you!” Tony Robbins

Enjoyed this lesson? If so, please consider taking a few minutes to leave a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through Stitcher SmartRadio or iTunes, or by downloading the iPhone app. Or you may listen to the podcast on the JW’s Financial Coaching Facebook Fan page.

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Friday Financial Tidbit-Three tips for budgeting your next raise

When was the last time you got a pay raise?

Did you handle it well?

After a few months did it even feel like you had gotten a raise?

3 tips for budgeting a raiseNo matter if a raise was scheduled, or a surprise, if it was a $100 month raise or a $2,000 month raise it still feels good to be recognized with a pay increase. However, often we can end up spending more on lifestyle than our raise if we are not careful. If for example after getting a $300 month raise, you go out and sign up for a brand new car payment of $385, in real term you did not receive a raise; you took in essence a pay cut! To help avoid that situation in the future below are three tips for budgeting a raise

Stick to your plan

Do you have a plan with your money each month? If so then getting a raise doesn’t change the plan one bit. If you are paying off debt then, putting the raise completely on your debt will increase the speed of your debt payoff. If you are trying to play catchup with retirement saving or college funding then a raise will go a long way towards getting caught up. !  If you are already out of debt except your mortgage, you could even start to pay extra monthly on your mortgage and retire that debt early.

Often it is tempting to change a plan because of an increase in income. But a plan is a plan so having more money to budget each month shouldn’t change your plan, it should just speed up the plan.

Avoid Lifestyle inflation

I got to be honest, when I get a raise, my first inclination is to dream of what my wife and I can buy with it. This is right in line with the mindset of our culture today that preaches instant gratification, not patience.

Now don’t hear me say that increasing your lifestyle is wrong.  Spending more on lifestyle is more than OK, but it all depends on where we are at in our finances.

A lot of times we get ourselves into trouble by increasing our lifestyle parallel to our income and we push aside getting out of debt or saving. By putting 100% of a raise into increased lifestyle our budget and finances are pushed to the maximum which leaves no margin for life.

Instead of an increased lifestyle being the first thing we do with a raise, often it should be the last thing we do after taking care of debt, giving, saving, and investing.

Save more

Particularly if a raise is a small monthly amount, it is easy to overlook the option of saving. However after a few small raises pass by our emergency fund could easily be out of sync.

After each raise we receive, I like to look at our emergency fund and determine if it truly represents three to six months’ worth of expenses. If it does and we are comfortable with the amount in the fund we are good.

If it doesn’t then we need to step back and beef up our savings a little bit to reflect the increase in our monthly expenses.

But savings isn’t just for emergencies. It can also represent saving for a replacement for our vehicle or other big purchases. Using a raise to increase savings for big expenses coming up is a great way to save money without having to cut back on spending.

Also when we talk about “saving” we’re also talking about investing. The recommendation we make is to put away 15% of your income into retirement. However most people are not there yet.

A good way to increase the amount that we’re saving for retirement is to take a raise and up percentage a few points.  If you are making $5,000 a month and are contributing 6% ($300/mo) of your pay into retirement and you get a raise to $5,500 a month, why not up your contribution to 8%.  That way you will be putting $440/mo into retirement with the $140/mo increase coming entirely from you raise.  You will not miss the money a bit and with the power of compound interest your balance will grow even further.

So how do you budget a raise?  I would love to hear how you go about budgeting a raise.

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JW’s Financial Coaching Podcast Lesson #106-How close to the debt cliff can I get before I fall off?

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  • Based on the article ‘How Much Student Loan Debt Is Too Much?
  • That question is a game of how close to the edge of the cliff can we get to before we fall off
  • What question should we be focusing on instead?
  • Rather focus on getting away from debt as much as possible
  • Quote of the lesson

The JW’s Financial Coaching Podcast_106

What is more important, determining what the most amount of debt you can take out or determining how you can purchase an education, home, car, etc the cheapest way?

Inspired by an article titled “How Much Student Loan Debt is Too Much? Here’s a Formula’ that I found on Yahoo Finance we are going to talk about the too much debt game that our culture likes to play.

The article has some good information, however it starts off with the position of determining the maximum amount of debt once should get for a degree. It’s the old game we used to play as children. Where we would jump off something and see if we could do it or not without getting hurt. However the game always ended the same, the last person to jump from the highest spot, always got hurt.

Instead of asking what is the maximum amount of debt we can take out for a purchase, isn’t it better to determine what is the minimum price we need to pay for that purchase?

The problem with determining what the maximum amount of debt we can take out is, that it gives us no financial margin in our life. If one thing goes wrong, our plan goes out the window. The problem is that kinds rarely goes as planned.

I’d rather see an article dealing with out to get an education on the cheap that requires the least amount of borrowing, or no borrowing at all. Again it is a mindset thing, but when we ask ourselves the question, How much? Instead of, how much a month? Our finances will go to another level.

I’m not against owning nice stuff, I’m against owning nice stuff with debt.

Below are other resources mentioned on today’s lesson:

Today’s quote of the lesson is brought to you by the JW’s Financial Coaching Newsletter

Enjoyed this lesson? If so, please consider taking a few minutes to leave a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through Stitcher SmartRadio or iTunes, or by downloading the iPhone app. Or you may listen to the podcast on the JW’s Financial Coaching Facebook Fan page.

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JW’s Financial Coaching Podcast Lesson #105-The Morality of Debt

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  • How are creditors and borrowers supposed to act
  • What a debt agreement actually is
  • Viewpoint from the borrower and the creditor
  • How to avoid the rat race all together
  • Quote of the lesson

Slide1

Do creditors have an obligation to lend money and treat borrowers with decency?

Do borrowers have a responsible to pay back their loans, even when it isn’t convenient or beneficial to do so?

We tackle those tough questions on today’s lesson. This lesson was inspired after listening to other shows and reading material such as David Graeber’s book “Debt-The First 5,000 Years” that left a bad taste in my mouth.

To be honest doing research on this lesson really helped me form my opinion on this topic. Therfore my thought might be a little raw and hopefully they come across clearly.

But today we focus the morality of debt and we look at it from both a borrower and lender point of view.

What do we mean by debt? I’m focusing on the traditional borrowing of money from a bank or other lending institution. I’m not talking today about a debt to a friend or family member that is non-monetary.

But in my opinion from the borrowers point of view, we have a moral obligation to pay our debts if we have the money to do so. If debt becomes inconvenient, I don’t think you should just simply walk away. There is an obligation to pay when you signed the note. Not a promise to pay as long as you are able to, or a promise to pay as long as you have a job. It was to pay back no matter what. That’s why debt is often compared to slavery.
Now if you currently are behind to your creditors, you’ve walked away from your debt either voluntarily or involuntarily, or have filed bankruptcy in the past this lesson is not to judge you in any way. But I am fighting against the “It’s not your fault!” mentality when it comes to your debt.

On the flip side let’s look at the lender’s point of view. Obviously I’m not a big fan of debt, and because of that I could never be a lender because that would be hypocritical on my part. However I’m also not for making it illegal to lend out money either. But if you are going to loan money out, is it too hard to make sure you can loan money to people who have a realistic chance of paying it back?

It is too much to ask to take responsibility for your risky loans and not ask for protection from the government when those risky loans come in default? Subprime loans are risky, so if you take the risk, you should also take the loss. All I’m asking is for you to be fair.

Ultimately the best way to avoid the whole morality of debt to begin with is to not play the game all together. If you are in debt, make it a goal to payback all your creditors as soon as possible so that you can be done with them.
When the option of debt is removed from the table, you have to think differently and make different choices. Those choices might be painful at the start, but over the long run they will lead to growth.

Previous lessons mentioned on the show:

Today’s quote of the lesson is brought to you by the JW’s Financial Coaching Newsletter

“Better to go to bed hungry than to wake up in debt.”Unknown

Enjoyed this lesson? If so, please consider taking a few minutes to leave a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through Stitcher SmartRadio or iTunes, or by downloading the iPhone app. Or you may listen to the podcast on the JW’s Financial Coaching Facebook Fan page.

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JW’s Financial Coaching Podcast Lesson #104-How to get back up after a financial setback

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  • We love to share our success, shy away from our setbacks
  • Financial setbacks occur frequently
  • How to recover from a financial setback
  • Financial setbacks are painful in the short run, but can be beneficial in the long run
  • Quote of the lesson

The JW’s Financial Coaching Podcast_104

Financial setbacks happen more times than we like to admit. It’s not something we like to talk a lot about and who can blame us? It’s easier and more enjoyable sharing and listening to shows that share their debt free stories or other stories of success. Not so much fun to share our failures. Often because their can be a lot of shame, embarrassment, and frustration associated with a financial setback.

There are a lot of reasons why financial setbacks occur. It can be a result of a job loss, illness, divorce, major repair to a home or car. Or it can be we just took our eye off the long term goal of we had a financial relapse and went back into debt.

Whatever the reason for our setback, it’s important to take steps to learn from our setback and ensure that it doesn’t happen again. Today’s lesson we share five things to do to get back up after a financial setback. They are:

  1. Get back to the basics
  2. Make yourself a new goal
  3. Don’t try to hide from the setback
  4. Look at what caused the setback
  5. Remember how the setback felt

Financial setbacks are painful in the short run, however they can be beneficial in the long run IF we learn from the lessons they bring. Setbacks come in various ways and different dollar amounts, but they do and will happen. But it doesn’t have to be a life changing event in a negative way. Rather it can be a turning point in the right direction as well. It is all about how you react to it.

If you are going through a financial setback please get in touch with me and I would be more than glad to walk with you in recovering.

Other material referenced in the lesson:

Today’s quote of the lesson is brought to you by Audible.com

“Don’t wait until you’ve reached your goal to be proud of yourself. Be proud of every step you take toward reaching the goal.”Unknown

Enjoyed this lesson? If so, please consider taking a few minutes to leave a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through Stitcher SmartRadio or iTunes, or by downloading the iPhone app. Or you may listen to the podcast on the JW’s Financial Coaching Facebook Fan page.

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JW’s Financial Coaching Podcast Lesson #103-How Our Mindset Impacts Our Finances

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  • Personal Finance is more than just the numbers
  • What is Mindset?
  • What Mindset on money do you have that is a hindrance?
  • How our mindset impacts our finances
  • Quote of the lesson from Adam Braun

The JW’s Financial Coaching Podcast_103

A lot of us are scared to look at and manage our finances. Often because the thought of dealing with numbers is a scary proposition. But the more and more I study and learn about personal finance, the more I realize that the numbers are actually a small part of the process and that behavior is actually more important.

I think Dave Ramsey says it best that “Personal Finance is 80% behavior and only 20% head knowledge.” So today we’re focusing on the behavior aspect our finances. But we’re going deeper then just behavior, we’re actually going to talk about the mindset that allows that behavior to happen.

To me mindset is actually even more important than behavior. That’s because the behavior is important, but the mindset that allows us to change our behavior is even more important than the behavior ourselves. In today’s lesson we try to prove that out by using the following three examples:

  1. Our mindset in paying off debt
  2. Our mindset in saving for a down payment for a house
  3. Our mindset on how we actually view money

What is the point of today’s lesson? The point is to challenge you how you view your finances and look at your own mindset when it comes to money. Do you have a negative mindset towards money? What about debt, budgeting, saving, investing, etc.? Mindset alone won’t pay off you debt, save for emergencies, or start to give more. But it will keep you motivated and grounded as you move towards you goal.

Below are other podcasts and blog posts mentioned in the show:

Today’s quote of the lesson is brought to you by Audible.com

“Big waves start with small ripples.”Adam Braun

Enjoyed this lesson? If so, please consider taking a few minutes to leave a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through Stitcher SmartRadio or iTunes, or by downloading the iPhone app. Or you may listen to the podcast on the JW’s Financial Coaching Facebook Fan page.

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JW’s Financial Coaching Podcast Lesson #102-Why I wrote “A Tale of Two Houses”

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  • Why I wrote “A Tale of Two Houses”
  • What inspired me to write a book in the first place
  • What “A Tale of Two Houses” isn’t about
  • What “A Tale of Two Houses” is about
  • Quote of the lesson from Chris Rock

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A Tale of Two Houses Is Live!

After months of hard work and anticipation, I am so proud to finally announce that my new book A Tale of Two Houses-Our journey of buying a house the right way after buying one the wrong way is now available for purchase on Amazon!

order-amazonClick here to get A Tale of Two Houses now!

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JW’s Financial Coaching Podcast Lesson #101-Where not to get a down payment for your next home

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  • Having a down payment is an important part of buying a home
  • Where not to get a down payment for your next home
  • Borrowing money for a down payment is like a shell game
  • Why we need to beware of government programs that “help” home buyers
  • Quote of the lesson from David Henry Thoreau

The JW’s Financial Coaching Podcast_101

 

 

 

 

 

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JW’s Financial Coaching Podcast Lesson #100-100 money thoughts from 100 lessons of the show

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  • Different format to the show today
  • Sharing my thoughts from doing 100 lessons of the show
  • Doing the podcast has taught me a lot about money
  • How you can help show your support for the show
  • How you can buy a copy of “A Tale of Two Houses”

The JW’s Financial Coaching Podcast_100

 

 

 

 

 

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