Category Archives: Financial

Financial

Credit Score – Do I Care?

Do I care about my credit score? If I listen to Dave Ramsey, my “credit score doesn’t matter because I don’t need to borrow money anyway.” If I listen to Clark Howard, I get tips on what to do if there are “issues.”

I attended a bunch of “how to survive getting out of the Army” classes a few years ago. One of the classes was about finances and included a look at my credit score. My recollection of it then was something over 800. The picture shows the current status:

credit_score

I’ve had a Delta Skymiles American Express card for five years or so. A friend ran his whole business through his card and travelled frequently from the miles. I’ve bought four or five tickets now with miles, including two to Europe the summer of 2015. It adds up. Dave Ramsey doesn’t like credit cards. I’m OK with it as long as you follow Clark’s advice and pay it off in full each month.

“I’ve told my kids many times that most of the lessons my dad tried to teach me growing up I still had to figure out on my own.”

I learned several weeks ago that the AmEx card (AKA “American in Distress” card) provided the FICO score for free. I was intrigued to see that my score had been slowly drifting downward for the last year. Interestingly, AmEx/FICO even provides the reason(s). My credit worthiness (?) had been declining because 1) it had been an increasingly longer time since I had last borrowed money for anything (“12 months same as cash” for an air conditioner in 2008), and I was close to maxing out my AmEx month-after-month. Apparently they don’t care that it’s paid in full month-after-month.

I’ve decided to try a little experiment. I raised the credit limit slightly, so the utilization rate is lower. I now send an early partial payment so the average balance stays lower while paying the rest in full on time. This is super easy to do with Web Bill Pay from my credit union. Finally, I borrowed $600 from myself. Yes, really. My credit union will let me borrow money using my own cash as collateral. The finance charge on $600 for six months at 2.2% is less than $5. I thought for that little bit of “wasted money” I could have a little fun and see what happens. Again, auto payments are already in place to ensure I don’t miss anything and pay it off early.

I’ve told my kids many times that most of the lessons my dad tried to teach me growing up I still had to figure out on my own. However, the idea of paying cash for things, paying bills on time, not going crazy with cars, and saving a little bit every pay period stuck from the beginning.

About the graphic – I moused over the timeline dot at three different places and did a screen capture each time. I layered all three images in Photoshop Elements, erased parts as needed, and cleaned up various artifacts.

I’ve mentioned before there are a couple of great general saving/investing books I really like. They are linked to Amazon below as are one each I like from Dave Ramsey and Clark Howard.

PS If you happen to buy one of the books on Amazon I get a few cents on a gift card. Over the years I’ve made just enough to cover most of the costs of hosting the website. What happened to being a dot-com millionaire?

Financial

They say “you can’t get rich quick.”

Even though the adverb is actually “quickly,” the sentiment is true. You can, however become comfortable over a long period of time. And, there is no shortage of people willing to “help” you along the way.

My first investing experience was establishing an IRA with a full-service brokerage firm. The IRA limit at the time was $2,000/year, which I invested without knowing what I was doing. I was encouraged to try a variety of things. Hmmm. Who puts a $100 of their first $2,000 in silver? This was the inspiration for my thought that I’ve never lost money on an investment… That I didn’t learn something from!

A couple years later I was hired by a firm that had a 401(k) with a bit of a match. The “free money” was nice, but I still didn’t really know what I was doing. Then one day at a mall book store I came across a book called The Only Investment Guide You’ll Ever Need by Andrew Tobias.

The book has lived up to its title. I have not purchased another investing book since! Tobias covers the spectrum of options from banks, CDs, stocks, bonds, and mutual funds all the way to the complex derivative types or betting that the market will go up or down. The basic premise is that as you become better off and more sophisticated, you can make use of progressively later chapters.

A co-worker introduced me to the National Association of Individual Investors and their Dividend Reinvestment Program. The idea is that you can buy shares of stock in any of a variety of companies for a fixed dollar amount per month (fractional shares rather than whole ones) w/o the use of a broker. The dividends would be used to buy more fractional shares. The biggest thing I learned was that it’s a lot of work to track purchases 0.15 shares at a time. This was not for me!

I came across another book that has had a great impact on my approach to life and investing – The Millionaire Next Door by  Thomas Stanly and William Danko. The book presents numerous case studies on the premise that flashy people are not rich, and rich people are not flashy. My favorite line from the whole book is a quote from a Texas rancher about people who have a “big hat and no cattle.”

I’ve given both books to both kids.

Here’s what I’ve learned along the way:

  • No load mutual funds; don’t pay commissions
  • Index funds have lower expenses
  • Don’t give away the company match on a 401(K)
  • Drive reasonable cars for a long time after you’ve paid for them
  • Clark Howard has good advice for daily spending
  • Clark also says to max out a company match, fund as much of an IRA as you can afford, and if you still have money put it in the 401(K)
  • Dave Ramsey has good advice for people who need radical help, think “gazelle intense”
  • Money magazine focuses on what you should have done last month – too late
  • Kiplingers and Smart Money are both great magazines

(If you happen to buy either book, I get a few cents towards maintaining my website. The investing advice isn’t going to make me a dot-com millionaire!)