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Dave Ramsey and Suze Orman are the Grandfather and Grandmother, respectively and respectfully, of personal finance in America or at least most folks agree that these two are respected experts in the field of personal finance, so I started by reading their books. You can see my review of Dave Ramsey’s book, The Total Money Makeover: A Proven Plan for Financial Fitness by clicking here.
You can add a child as an “authorized user” on your [credit card] account. When you do this your child will begin to build a credit report at the three credit bureaus that will help them establish their own solid credit score. In essence, they will inherit/piggyback on your credit score. … If your FICO credit score is 720 or higher this is a smart move.” – Suze Orman
Please use this information for good, not to put a 2018 Dodge Charger in your baby’s name! I don’t know what I expected but I was surprised how much I learned from this short book. I’ve owned the paperback for years, but until I started this challenge I let it sit around gathering dust. There are several pros to the book and few cons. Most important for those of you are not about that reading books all the time life is it’s an easy and quick read. Once I focused, I was able to speed-read through the book in a couple weekends. If you don’t have time to read a detailed, complicated or long personal finance book this one can get you up to speed very quickly.
Other Lessons Learned
As the name implies, the book is a series of easy “Dos” and “Donts” reads, mostly in paragraph form. You can also buy an accompanying DVD set, online guides, or classroom courses. Rather than re-hash the entire book, below are twelve of my favorites with commentary, where warranted.
- “Call the credit card company and ask if they can do any better on the interest rate. If they don’t budge, let them know your intention is to do a balance transfer to another card.”
- You have everything to gain and nothing to lose (especially if you have a credit score of 730+). We had a listener save money doing this, and Rich and I both saw a credit card limit jump simply by keeping our income up-to-date, which for most cards you can update online.
- “Check your FICO Credit Score 2-3 months before you go car shopping.”
- For everything you need to know about your credit and FICO scores, check out our The Truth About Credit ft. Liz Weston episode, author of Your Credit Score: How to Improve the 3-Digit Number That Shapes Your Financial Future.
- “College is worth it when it is affordable. The best school is the school that works for your family’s finances.”
- “If students limit their total borrowing to less than they expect to make in their first year of work, they should be able to handle their repayments.”
- “Aim to live rent and mortgage free in retirement.”
- Listen to How to Quicken Your Savings, Reach Financial Independence, and Retire Early, where we discuss how the average household spends $57,000 with over 60-percent of their income going to just three expenses: home (33%); transportation (16%); and food (13%)
- “Do factor in inflation: if inflation averages a moderate 3% a year, it will reduce the purchasing power of $1 today to less than 50 cents in 25 years.
- “If no one relies on your income, then you don’t need life insurance. Make sure you have term life insurance in place until your younger child is at least 23 years of age.”
- “Don’t worry about getting to 800 or higher. Life is too short to obsess about your credit score. Maintain a score in the range of 720-760 and you will be just fine.”
- Don’t aim for a perfect credit score. Getting a perfect credit score is nearly impossible, however, you should still aim to get a good score. However, at the end of the day, the only thing that you should be aiming for is getting a good enough credit score so that you can get the loan that you need.
- “If you aren’t 100% confident you will always pay off your store cards in full each month, you are to turn down any offer of a store card.”
- “Parents: you should not borrow a penny for a child’s college education if you are not on track with your retirement savings. There are no loans for retirement. If you scale back your retirement savings to pay for college costs, it raises the odds that you will need to turn to your children when they are adults.”
- “Don’t take a loan from your 401k. It is important to understand that if you were to leave your job, you typically must repay the loan within 90 days or so.”
- For more info, check out our post: When should I use a 401k loan to pay my bills and debt?
- “Don’t let a lender tell you what your mortgage limit is.”
- Are you aware of the true cost of homeownership and living within your means? Check out Renting vs. Buying episode with Wealth Advisor, Kirk Chisholm
The above lists are only a highlight of the great takeaways I got from this very quick read. The book is light, informative, and it feels like you’re being spoken to rather than lectured. I recommend you give a read!