Education

Apr 20

New Web Series: Financial Freedom Fridays (Part 1 of 2)

Recently, I started a weekly series, called “Financial Freedom Fridays”, that was initially planned for my Instagram account.  But I decided to go ahead and share the series also on my Facebook page and Twitter account for Thurow Financial.  This weekly series is a posting with a graphic of step by step action to take in your debt free journey.  Now even though these postings are taking place weekly, it does not mean you will accomplish each week’s steps.  In matter of fact, I just posted week 3’s tip which will in no way take a week if you have debt.  Nor would I consider it to.  in some instances, week 3’s tip could take a few years, but the point is just to provide a organized way to kick off your step by step debt free journey so that it will not overwhelm you.  As your relationship with your spending and overall financial situation is around 85% emotional and 15% head knowledge.  If you are in debt, than the emotional tie you have with your spending is winning. So I am here in any way to provide the necessary content to get you focused down the right path towards being not only debt free, but to becoming wealthy.  Below are the first three week’s of postings I have done on my Thurow Financial social media accounts for you to have an all-in-one place to come back to and review.

#FinancialFreedomFridays

Week 1’s Course of Action:

  • Go to the web sites of each company that you currently have debt with and print out the front account summary page.
  • Make sure that you are 100% current on all of your accounts.
    • If you are not current, make the necessary payment(s) to become current.  Do not pay one cent more than you have to in order to become current.

 

 

For this week’s course of action, it is important to, not only become current, but to maintain being current, on all of your debt accounts as well as your necessities.  Your necessities include your housing (mortgage/rent), housing insurance (home owners/renter’s), utilities (electricity, water, sewer, & gas), groceries, and transportation (auto insurance, fuel, or public transportation).  If you are, good job. Keep it up by just making the minimum amount required. You’ll see why as you continue reading down to week 2’s course of action.

Now of course your payments on any of your debt accounts should only be paid after you have taken care of your necessity payments.  If you have any questions in regards to this week’s #FinancialFreedomFridaytask, leave below in the comments section.


Week 2’s Course of Action:

  • Build your Starter Emergency Fund

This Starter Emergency Fund is the beginning stage to building your fully funded Emergency Fund.  This dollar amount is based upon your annual net take home salary/pay.  If you take home less than $25,000 net, your goal is $500. If you take home more than $25,000, than your goal is $1,000.

The goals of either $500 or $1,000 are to be your main focus on building the starter Emergency Fund.  You should deposit the money into a completely separated liquid money market that you’ll have 24 hour access to, but it’s not your main account, nor is it linked to any other accounts.

While you are building your starter Emergency Fund, be sure you maintain current on your debt by just paying the minimum payments required and of course, your necessities like rent/mortgage, groceries, utilities, and transportation needs.


 

Week 3’s Course of Action:

  • Begin to pay off all of your debt owed, except your mortgage (if applicable).
  1. Get a updated written record of your most up to date account balances on your all of your debt.
  2. Then list them from the smallest balance to the largest, ignoring the interest.
  3. Once determined how much remains in your budget after paying the four necessities (see above) and the minimum payments for all of your debt accounts from the second lowest balance to the largest balance, attack your smallest balance debt that you owe with the remaining amount on your budget.
    1. For example: Your total household monthly income = $4,500.00
    2.  Total Payments on the necessities (housing, utilities, transportation & groceries) = $3,500.00
    3. Remaining amount to pay the minimums on 2nd highest to highest debt = $1,000.00
    4. Total Minimal Amount Payments Due on 2nd Highest – Highest Debt = $650.00
    5. Remaining amount to attack your smallest debt = $350.00
    6. Total Amount Due on smallest debt is $1,000.00
    7. Take your remaining amount of $350.00 and apply it to the smallest debt.  This will leave you with a remaining balance of $650.00.
    8. REPEAT the steps above.  However, your actual that you may spend on your necessities, with the exception of your housing, may vary month to month.  Let us use, for this example, everything remains constant.
    9. YOUR FIRST DEBT PAYOFF, will be completed in 3 payments with $50.00 left over.
    10. FIRST DEBT PAID IN FULL – ACCOUNT CLOSED –  Take the payment amount of $350.00 and apply it to the second lowest debt and its minimum payment (which is $50.00).  This will make the total payment amount on this debt $400.00 until paid off.  Follow these steps of rolling over your monthly payments for each additional debt remaining in the order of the next smallest to the highest.

Recap Week 1-3 Course of Action:

In the first week, I had you print your account status updates to make you aware of where you’re standing financially. Knowing your total financial picture is key to making any progress on your debt free journey.  Then the first course of action was simply pay the exact dollar amount it would take to either stay current or to become current and not a penny more. This was to prepare you for week 2.

In week 2, while still paying just the minimum amount due to maintain your current status, begin building your Starter Emergency Fund. To determine how much, $500 if you’d take home less than $25,000 net annually and $1,000 if you made more. Deposit this money into a liquid money market that is not attached to any other account but accessible. Your Emergency Fund equals insurance, not investment.

In week 3, I discuss and break down your course of action of actually paying down your debt.  Ignore the interest rates on these, as you will be paying from the smallest debt owed to the highest debt owed.  The fact you will be making achievements quicker will boost your confidence level as it will be an emotional battle through this particular process.

My next posting will come during week 6.  To get the postings for my series #FinancialFreedomFridays, be sure to Like the Thurow Financial Facebook page, or Follow the Instagram and Twitter accounts of Thurow Financial.  The links to these social media accounts are listed both on the top left of this web site and the bottom right corner also.

Oct 1

What is and Why do we need Credit?

The one financial issue that is always brought forth to making a decision on any purchase, what credit card do I use?  But first, before you decide to choose that piece of plastic to slide and/or tap to make a purchase, you must truly understand what credit actually is and do you honestly need it.

According to Experian’s web site (experian.com), credit is borrowed money that you can use to purchase goods and services when you need them.  You receive a card from a particular financial institution (credit grantor) for which you sign an agreement to payback the amount you spend (or borrowed), plus any applicable finance charges and fees at a agreed upon time.

There are four types of credit:

  1. Revolving credit. With revolving credit, you are given a maximum credit limit, and you can make charges up to that limit.  Each month, you carry a balance and make a payment.  Most credit cards are a form of revolving credit.
  2. Charge cards. While they often look like revolving credit cards and are used in the same way, charge accounts differ in that you must pay the total balance every month.
  3. Service credit. Your agreements with service providers are all credit arrangements.  You receive electricity, mobile phone service, gym membership, etc., with the agreement that you will pay for them each month.  Not all service accounts are reported in your credit history.
  4. Installment credit. With installment credit, a creditor loans you a specific amount of money, and you agree to repay the money and interest in regular installments of a fixed amount over a set period of time.  Car loans and mortgages are two examples of installment credit.

Video Courtesy: Ramsey Solutions – Why Not Use Credit Cards?

Why do I need credit?

First, let me tell you a little about the famous FICO.  A FICO score is a type of credit score created by the Fair Isaac Corporation.  Financial institutions and/or credit grantors use this credit score to assess risk and determine whether to issue credit.  There are five factors while using credit that determines one’s FICO score: payment history, level of indebtedness, types of credit, length of your credit history, and the number of new credit accounts.  I will follow this posting up with a more detailed posting on what FICO is and when it was founded.  Ultimately, the FICO score tells you how well you are managing debt, and not your own money.

Now back to having credit and the supposedly reason(s) why you should have it.  The Fair Isaac Corporation, Equifax, Experian, Innovis, TransUnion and plus the thousands of financial institutions and services will all very convincingly suede you to have credit.  These industries spend billions of dollars on many forms of advertising and marketing to make having credit cards and financing a purchase as attractive and popular to the consumer for pure attraction.  This form of marketing and advertising is a form of brainwashing.  Credit services only benefit the big corporation and not you the consumer.

So do I need credit?  The truth is YOU DON”T.  When commonly asked, I receive the same answer every time.  I need credit to build history and my FICO credit score so I can buy a vehicle and/or house.  I usually say okay.  So then I ask, why do you need a FICO score?  The response is mostly to get credit.  So, do you see a picture that is being painted.  It easily resembles a ring, aka the ring of debt.  The FICO does not benefit you in any way.  Stay away from the FICO score at all costs.  The sooner you begin paying cash, avoiding debt, and running from FICO, the better off you’ll be in the long run.