Financial Freak Show

At what point do you feel mental pain as a result of a purchase (or in the case of married folk physical pain?) How much money can you blow before you feel you need permission so your other half won’t “bring the pain?” If you’re single at what dollar amount do you feel guilty for buying something?

 Since my wife and I are trying to reach some specific financial goals we are kind of strict about any money that we blow. The dollar amount that would trigger my wives fury while we were trying to eliminate our personal debts (I know this may sound insanely low to many of you) was around $25. Do remember though that my wife is a saver by nature and I’m the one that liked to spend. Also remember that I’m talking about spending money that wasn’t in our spending plan – I’m not talking about things like food, gas, needed things around the house, car maintenance etc. – I’m talking about things we hadn’t planned for like a cool $52 sweatshirt, or a $175 replacement for the broken cell phone – you know that sort of stuff.

Now that our debts have been cleared (with help from some learned behaviors like this one) our spending threshold has now been adjusted accordingly. We’re now closer to the $80-$100 range for “free” spending. Now that we’ve worked so hard to always discuss and share our finances we usually talk about most things over $50 anyway (note that we talk about it…not fight about it). Hopefully one day with enough hard work and discipline when I surprise my wife with the new Cadillac she wants and the only discussion we’ll have will be where we’re taking it for dinner that night and who gets to drive – now there’s the spending threshold I’m shooting for!

Agreed upon spending limits is where a couple’s shared finances can really help a couple succeed over the long term due to the unavoidable accountability. How’s the saying go? “At some point he’ll have to come home!”

What dollar amount do you feel you should have agreement with your spouse before buying something as to avoid your home turning into a bad Jerry Springer episode?  If you’re single at what dollar amount do you feel you’ve let yourself down buy spending too much?

No, this isn’t a post about selling drugs to pay down your debts, though that could work pretty well until “the man” comes looking for you. Of  course once they catch up with you and slap you in prison for the rest of your life you probably won’t care much about repaying CitiBank.

If you follow my posts you will know that I recently sat my lazy butt  down on the couch and watched the entire 2-hour Cocaine Cowboys documentary. For those of you familiar with this program you’ll know that the people interviewed and discussed in this program worked diligently for years to become the best in the cocaine importers in the world.

So the question that came to my FinancialFreak mind after watching this program was what made these guys so special, how did these guys become the best in the business while others were being mowed down in the streets. Two things come to mind. They showed persistence and they performed with excellence, they paid attention to every last detail. These people never gave up, they were absolutely relentless. When they failed at a drop or a pick up they made corrections and went at it again.

Here is an excellent example of what made them so effective. According to a pilot being interviewed they came up with a plan to drop large bundles of cocaine fitted with radio beacons into the water off the coast of Florida from a plane then retrieve them by speed boat. Apparently they had an issue with the suppliers taking shortcuts while packaging the product so as soon as the first drop hit the water the bundles exploded spreading a couple million dollars with worth of high grade cocaine into the Gulf of Mexico. Here is where the persistence part comes in. Do you think this was their last attempt at this plan? Of course not these guys are grade A hustlers. So after delivering a couple mil’ worth of dope to the fishes they tried again. They readdressed the issue with their Colombian suppliers and demanded new packaging for a second attempt. Again the bundles leaked and the drugs were destroyed. So do you think this was their last attempt at the plan? Nope, again they contacted the suppliers had them fix the issue and after two tries and several million dollars in losses they finally got it right.

So through their persistence they became the first guys to move massive amounts of Colombian coke into Florida. While striving for excellence in their chosen trade they only got better at this. The point here is that they never let up, they never folded, and they never stopped fighting, they kept throwing punches until ”the man” finally took them down.  Most people don’t even begin the fight to create excellence in thier lives let alone stay with it. This brings me to my question for you….

Why are you not the biggest, baldest hustler in your city? Let me know what you should be doing better in your life but haven’t displayed the excellence or persistence these guys have?

Young people knows how to run fast but old people knows the way   -unknown

A survey of over a of over 1100 people ages 62-75 were posed a retirement question that only they have the experience necessary to answer. No matter how many finance blogs or books you’ve read, and no matter how many classes you’ve taken…nothing you have done to date, unless you‘re retired, will give you the experience and life lessons required to answer the following question:

If you could turn back time how would you have planned differently for retirement?

56% would have started saving earlier  

39% would have allocated more money towards retirement

27% would put money into safer investments

7% would put more into riskier investments

5% would have used a professional advisor

I found the results interesting because the two biggest I shoulda’s were behavior based mistakes and not really what I’d call investment mistakes. The two biggest mulligans they would take had little to nothing to do with investment proficiency and everything to do with the actual task of just getting the retirement savings in place and growing. So I’m thinking no matter what your situation may be right now it’s a good time to get about the business of putting yourself into a position where you can take the advice of these old timers and get things moving for your future. Imagine if you not only were able to run fast but you also knew the way.

So now that you know what the people “living the dream” have to say about their retirement savings what steps are you going to take to heed their advice? Or are you going to look back in a few years and repeat these same survey answers to the next crowd?  

Source: Harris Interactive and Financial Freedom Senior Funding survey of 1,140 seniors age 62-75

Those of you that have followed me may be familiar with one of my personal goals. A zero credit score (let me clarify I said a zero credit score…not a low credit score). I want to take a few minutes to explain myself on this one.

To many people the idea of a zero score this sounds like financial suicide. But for those that subscribe to the debt free FinancialFreak way of handling your finances you see the bigger picture beyond the FICO score, and can also see well beyond the “pay off your debts” talk into a more prosperous future where you stack up money instead of stack up bills. Again let me clarify I said a zero score not a low score. Though they sound similar these are two completely different things. A low score shows that you’ve been financially irresponsible (that’s not good a good thing). A zero credit score shows that you do not use debt and in turn do not have to repay those debts (that is a good thing). The credit scoring system is used to calculate the likelihood of a borrower paying back what they borrow, sounds simple enough to me. Credit scores are based on many things amount of debt, debt to income, number of outstanding debts, payment history, types of credit, available credit, blah, blah, and blah. Simply put the score is a number used to represent your borrowing history and your payment history combined with a dash of “what if” representing the near future.

First off let me start by saying the credit scoring system, in my opinion, is greatly flawed and very subjective in almost every instance it’s used. The biggest issue I have is that it does not take into account one of the most basic thing needed to properly repay outstanding debts – the amount of money  you have in your possession (assets) and how much money you have coming in. Now to me the first things I think of if when I make a loan would be “does this dude have a job and how much does he make?” If the answer to that question is yes and more than enough then we can go in to the person’s past repayment behavior.

To prove my point read these quotes from the myfico.comexplanation of what the credit score ignores – remember these are quotes from their web page

FICO ignores your Salary, occupation, title, employer, date employed or employment history

And another:

Any information not proven to be predictive of future credit performance

So according to FICO your “Salary, occupation, title, employer, date employed or employment” are not “predictive of future credit performance” – No wonder our lending institutions are falling faster than Dick Cheney’s hunting partner! And to think most people are making major financial decisions based on the effect it may have on this scoring system. I’m sorry, but I think “Salary, occupation, title, employer, date employed or employment history” are key factors in someone’s ability to repay money I lend them. Honestly I highly doubt they believe your income and assets are not proper indicators of your worthiness. The truth is they have no easy way of acquiring and selling this information legally.

After doing quite bit of research I have decided that there is very little need for a high credit score in my life. True, the last time I checked my credit score it was very high. This was due to the fact that I carried a good amount of various debts for many, many, years and never missed a payment The issue I ran into was that to better pay my debts, and someday create some wealth (hopefully), I had to eliminate the debts that were supporting my high credit score and eliminate them permanently. So the effect this has on my credit score is the more money I have (because I’m not supporting monthly debt payments) the lower my score will fall. So I figure if that’s the case lets shoot for ZERO! I know that may sounds crazy but unless I plan to borrow money often and repay it on regular basis there’s really little benefit in working to support this score.

So unless you plan to borrow and payback money again and again and again why would you base financial decisions on supporting your credit score? Remember these are companies that believe “Salary, occupation, title, employer, date employed or employment” is not “predictive of future credit performance.” I think I’m going to work on getting money and keeping money not work on borrowing money and paying back money.  Oh, and I guess this also means at some point I’ll have a paid for house too, and to that I say “how bitchin’ would that be!”

For more on this topic my post Issues with a Zero Credit Score I discuss some of the potential setbacks I may face with after completeing this goal

So how do you feel about the credit scoring system and your credit score in particular? How do you plan to manage you credit score in the future and why?  - go ahead call me a FinancialFreak, its okay…I can take it

I don’t really buy into the idea that where you are is where you’ll stay (if that’s the case I’m in serious trouble!) I believe you can change your lot, at least in this country. I also believe you make your own bed – if you like it or not. I don’t believe in consoling people financially and telling them “it’ll be okay….everything will be fine” when they are wallowing in their own mess and everything really won’t be okay. I think sometimes a tough approach is what’s needed.

Consoling people often will only prolong the discomfort but blunt honesty, no matter how uncomfortable, is more likely to get results. With that said I do feel compassion has a place in personal finance but only to the extent that one is not enabling or encouraging non-productive behaviors. I think the most productive approach is to help a person by giving them the tools they need to change themselves not fix it for them. If a person does not learn from his mistakes (or the mistakes of others) he will likely repeat the same mistakes until he does learn, again only prolonging the pain.

So here is what I do when faced with a question about someones misbehavior….I do my best to answer honestly, I don’t pull the punches, I answer the questions I’ve been presented and let the chips fall where they may. I realized sometime ago the only person that could fix me is me. So I don’t try to fix others (that’s their own miserable job) instead I work on my own issues and encourage others to do what they need to do to help themselves. 

Spend your energy truly helping others to help themselves and real progress can be made, handing a drink to a drunk, sugar coating your advice, telling them things will work themselves out and you’re, many times, only prolonging the pain of lessons they must learn for themselves.

Remember….“Build a man a fire, and he’s warm for a day. Light a man on fire and he’s warm for the rest of his life.”  -author unknown

Has a tough honest approach in your past had a positive outcome? Did it change the way you or someone you know was misbehaving?

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I now this has little to do with personal finance but it caught my attention and reminded me that we all can make mistakes. This story reminded me that no matter how bad you screw up somebody else has already 1-uped you.

 Thank you James Earl Ray for keeping the dream alive

This was the quote engraved on a plaque to be presented to actor James Earl Jones honoring famous black Americans and was to be presented to the actor at a ceremony held on Martin Luther King Junior Day in 2002.

 FYI…James Earl Ray was accused of the 1968 assassination Dr. Martin Luther King, Jr.

 Think anybody lost their job over that? Can you top that one?