Quick Hits: No credit score isn’t such a risk. Online predators not so common. The hammock bathtub.

• If you decide to get financially fit, and pay off your debts, it’s going to affect your credit score. That’s because your credit score is comprised entirely of the relationship you have with debt. The less debt you’re interacting with, the more negatively it will affect your score. So, what happens if you never borrow money at all? Well, most credit agencies can’t calculate a score for you, and it makes it difficult for you to do things that require a score. Like rent an apartment. Or get a mortgage for a new home. I didn’t say it was impossible, mind you, and those of us committed to staying debt free the rest of our lives are willing to jump through a few hoops to get stuff done. Besides, as more and more of us stop relying on credit, things will start to change. Already, Experian estimates that there are 64 million unscorable consumers in the country, and there are new companies are trying to find new ways to judge their financial viability. Who knows? In a couple more decades maybe the credit score will be as useful as it was in 1945.

• If you have children, then the ever-present fear of sexual predators might be a problem for you. We want to protect our children from the pedophile hiding under the bed, or on the street corner, or behind the computer screen. It’s likely, though, that that fear is just a touch exaggerated. For example, a few years ago, a study showed that despite social networks online being populated more and more with kids, most of them still resembled your everyday real world community – “comprised mostly of good people who are there for the right reasons.” Child predators were actually few and far between. Bullying was more of an actual concern. Facts put fears into perspective, which is a good thing, because our fears about our kids are starting to hurt them. Fact: Sex Offender Registries are listing more and more teenage children (and even some pre-pubescent kids) who are haunted for the rest of their lives due to a moment of foolish sexual indiscretion.

• I’m not sure if you could actually get clean in this tub, but it looks really cool.

Quick Hits: What got you broke won’t get you free. Money management tips from 1939. Near space exploration.

• It takes time, when you’ve first hit the point of being broke, to realize that you can’t keep doing the things you’ve always been doing. You go through much the same process as the five stages of grief. That opening stage of denial can be difficult to overcome, because the bad habits that got you into trouble are so hard to break. People think they only need to change one little thing, and all of their troubles will evaporate. That’s why it’s so important for me to make sure that the person who is asking me for financial coaching is actually open to being coached. I don’t want to be fighting their excuses every time we come together to have them try something new. What got you broke won’t get you free, you’ll have to change.

• This is a great post covering the finer points of a money management pamphlet that was written in 1939. This was written before there were credit cards. And before the FICO score ruled over everything. And that was less than one hundred years ago. Now, the average American family has a negative net worth. Maybe we need to humbly go to our ancestors and ask for their advice?
  

• 50 years of exploring near space, and we’ve barely just scratched the surface. I love that we’ve started reaching out further using unmanned missions, but I hope that we return to the moon in my lifetime.

FPU Lesson 4 – Dumping Debt

The fourth week of FPU attacks the biggest problem most of us have when it comes to winning financially. Out-of-control debt. Below are my notes from the lesson, including the key points that I highlight from the video when leading the class, and some supplemental material that I think could help the class go further on this topic.

Lesson 4, Dumping Debt

Key Points

Consumer debt has only become accepted as normal in America over the last 40 years. The credit card has only been in existence since 1950. It wasn’t until after 1970 that their use became widespread. Your ‘need’ for a good credit score is a recent invention. The Sears catalog used to warn customers against buying on credit, and now it’s their biggest money-making department.

Don’t believe myths about debt. It isn’t part of a healthy financial plan. Debt is a product being sold. Remember that whenever they offer a financing option. You’re being sold a product that is tremendously profitable for them. You don’t have to have a car payment. “90 days same-as-cash” isn’t actually the same as cash. Your FICO score has nothing to do with your financial stability. You can live a perfectly normal life without ever touching debt.

Remember the importance of gazelle intensity. It’s very easy in our culture to wander into a crippling amount of debt. Between stupid loans and consolidations, you can suddenly wake up and find yourself under a mountain of payments. Escaping from that kind of mess takes focus, sacrifice, and intensity. The same motivation a gazelle has when it’s running for its life.

Challenge

Chop some plastic. The first step to getting out of debt is to STOP borrowing more money. This is the week we break out the scissors and ask the class if they’d like to cut up some credit cards.

Go Deeper

If you want a more honest picture of how debt and wealth really works, check out these resources:

• The Millionaire Next Door by Thomas Stanley

• The Truth About Money Lies by Russ Crosson

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Next week, Lesson 5 – Buyer Beware.