What if…, by 720 Credit Score

What if… today was THE day.
Today was the day when you stopped worrying about that thing that has been nagging you all year.
Today was the day when you realized that the struggles you have been going through have been blessings in disgu
ise… and now, the blessings are filling your heart with joy.
Today is the day that you will look back with immense gratitude, as this was YOUR day.
Today is the day to feel blessed, because 2013 is going to be unlike any other year of your life.
Are you ready for it?
This is YOUR year!
This year is going to be easier for you and your family.
This is the year you will have the breakthrough you wanted financially.
This is the year that the pain you feel… will be taken away from you.
Together, let’s all come together and me 2013 the best years of our life. That’s what I’m going to do… will you come with me?
Post any thoughts below.
With all our love… have a Merry Christmas, and if you don’t celebrate Christmas, have a wonderful Holiday!
To an awesome 2013,
Philip, Lily, Ava, Dominic, Lucas and Emma

The tale of the envelope, by 720 Credit Score

With Christmas just a couple of weeks away, I wanted to share this tip for protecting your wallet when you hit the malls.
I call it the “envelope system.” It works like this:
1. First, create a holiday spending budget. I know a lot of parents who want to create lasting memories for their children, so they go overboard, buying tons of presents for their kids.
But think back to your own childhood. How many gifts are etched into your memory?
Probably not many. Your children will remember the time they spend with you more than the gifts they will receive.
And if you are racking up your credit card bills, you probably feel stress and anxiety, which will detract from the time you spend with your children.
So create a reasonable budget, determining how much you can afford to spend on each person on your list.
2. Leave the credit cards and debit cards at home.
I’m totally serious about this. If you don’t take credit cards or debit cards, you cannot overspend. It’s that simple.
If you do take credit cards and debit cards, you can. So just leave them at home.
The more radical this idea sounds to you, the more important it is that you implement it.
Taking credit cards with you is just too tempting, even to the most disciplined shopper. The allure of “buy now, pay later” will allow you to make impulse purchases.
If you take only cash, on the other hand, you will limit your spending to the cash in hand. Those impulse purchases will be impossible.
3. Create “wallets.”
This is where my “envelope system” comes into play …
Before jumping in your car and hitting the local mall, pull out some plain white envelopes and write the name of each person you are going to purchase a present for on individual envelopes. (If you have eight people to buy presents for, you should have eight envelopes.)
Within each envelope, place the appropriate amount of cash you have budgeted for this person—no more and no less.
Each of these envelopes represents the wallet you have for each person on your list.
You might want to bring a little extra money for lunch, but be sure to leave your credit and debit cards at home.
When you purchase a present, use the money from the appropriate “wallet.”
This method will create a psychological barrier to impulse shopping. If you are tempted to splurge on a gift, you will be dissuaded when you consider whose wallet you will withdraw money from in order to cover the impulse shopping.
What do you think? Does this help you avoid the “holiday credit card hangover”? Leave a comment below and let me know.
Philip Tirone
P.S. You can use this tip for other events: birthdays, anniversaries, and other events that call you to the mall!

How to Fight a Collection Report

This letter asking for information about how to fight a collection account just came into my inbox:
“I am currently fighting a collection agency who suspiciously has me owing over $1,000 to a hospital that I have never heard about, and that is no longer in existence. The collection agency’s report states that I had a dog bite and visited the emergency room.”
My student went on to say that the collection company could not link his Social Security number or current address to the bill, and so the collection agency asked my student to send a letter to dispute the matter.
You know, to clear things up …
So my student sent a letter letting the collection agency know his SSN, his address, and his current employer. Guess what collection company did? It took the information from the letter and entered it into the database, linking my student’s Social Security number, address, and current employer to the bill.
That’s right: My student was trying to correct an error, and the collection agency used this information to make the error even worse! Boy does this have me steamed!
If a creditor or collection agency ever mistreats you, fight back! The Fair Credit Reporting Act is a set of laws that protects consumers from creditors and credit bureaus that is incorrectly reporting information.Under this act, you have the right to dispute any item on your credit report that you believe is wrong. And credit agencies must respond to your dispute.
Here are the steps you can follow to fight a collection report.
1) Upon identifying an error, send a “dispute letter” detailing the items listed incorrectly in your credit report. Since my student is dealing with a dishonest collection company, I suggest that he approach the credit bureaus directly.
The first letter should state, very simply, “I am writing to request that you remove information from my credit report. The information does not belong to me.
“Following are the details: [Insert the details of the mistaken account, and include a copy of your credit report with the incorrect account highlighted].
“Please investigate this claim and remove the inaccurate information from my credit report.”
2) Upon receiving the dispute letter, the bureau will contact the creditor and ask it to verify that the item in question is correct.
3) Expect a written response from the bureau within 30 days. The response will either provide the results of the investigation, or it will request more information from you, in which case it will have another 15 days to complete the investigation.
4) If you do not hear back within 30 days, fill out this form, which will help you fight back and protect your rights under the Fair Credit Reporting Act.
5) If the agency determines that the dispute is valid, or if it cannot verify the disputed item’s accuracy, it is required by law to remove (permanently or temporarily) the item you are disputing. Unless the agency receive information validating the account’s accuracy, the information should not reappear on your credit report.
6) Be sure to keep great records. Send letters via certified mail, return receipt requested. And pull your credit report a few months after the dispute has been resolved to make sure that the inaccurate information doesn’t make its way back onto your credit report.
Hope this helps. If you have more questions about how to fight a collection account, be sure to leave a comment below.

Bad Money Decisions, by 720 Credit Score

If you ever took a traditional economics course, you learned that human beings make rational decisions about their finances, and choose things that are in their best interests.
But you only have to look around you to find evidence that human beings are far from rational, particularly when it comes to finances.
We all consistently make irrational and stupid choices that cost us more, both in the short and the long run, because we are not always capable of deciding what is in our best interests.
This understanding of how real people make real financial decisions comes from the (relatively) new field of Behavioral Economics. This discipline looks at the intersection of psychology and economic theory, and it paints the human animal as a far more irrational creature than Adam Smith ever imagined.
Check out these five ways that humans make poor money decisions, and see if you can recognize any of your past blunders:

1. Seeing a High Price Can Make us Pay More

We like to think that we know a fair price when we see one, but the truth is that we’re remarkably suggestible. For instance, take a look for the most expensive wine on the menu the next time you are out to a nice dinner. Often, you will see a single bottle listed at $100 or even more, while the rest of the wines are listed at about $25-$50 per bottle. That one expensive bottle is listed on the menu to make the $50 bottles seem much cheaper in comparison.

Many restaurants literally only keep one bottle of the expensive stuff, because they don’t intend for anyone to actually buy it. It’s there to sell the $50 wine, which would have otherwise seemed far too expensive compared the other options.

What’s happening here is something Behavioral Economists describe as anchoring. Once we have a number in our heads, it anchors our expectations for price. Dan Ariely, in his book Predictably Irrational tells how Williams-Sonoma was frustrated at poor sales of its bread machine, priced at $275. The solution they came up with was to offer another model – one that was larger and priced at $400.
Suddenly, sales of the cheaper model rose, while no one bothered with the spendy version. This was because shoppers suddenly had something to compare the original to, and $275 no longer seemed like too much to spend- at least not compared to $400.

2. We Hate to Lose, Even When we Already Have

If you’ve ever held onto a tanking stock because it’s sure to regain its value, then you have been a victim of loss aversion. Loss aversion is psychological quirk that makes us work much harder to avoid a loss than we will to achieve a gain. In terms of the stock market, once a stock starts doing poorly, we think of the money we have already lost, and we fear further losses. But instead of cutting our losses, and accepting the fact that the money we’ve already spent is a sunk cost, we hold onto those stocks in the hope that they’ll pick back up again.
You can see loss aversion in nearly every aspect of life. This is the reason why we keep those bread machines we spent nearly $300 on, even though we never make bread in them – and we could certainly get something for them at a garage sale. The simple fact that we will never see that $300 again is enough reason to let the machine gather dust, because we’ll kick ourselves for “only” getting 10 bucks on a resale.

Loss aversion is also why we are so unwilling to cancel memberships to gyms we don’t attend, clubs we don’t go to, and cable packages we don’t use. We think about how much it will cost to rejoin if we were to quit- forgetting that every month we’re allowing more money to go down the drain for fear of “losing” the original enrollment fee.

It’s very difficult for us to remember that that money is already gone.

3. We Overvalue Free Things

bad money decisionsHow many times have you ordered a book that you’re not entirely certain you want, just to make sure you qualify for free shipping from Amazon?
When you do that (and we all do), you end up paying more money overall and end up with an unwanted item, to boot.
This is clearly irrational.
For some reason, the word “free” seems to scramble our brains. When we are offered a free item or service, we forget what other costs there might be to that item or service because we are so focused on the fact that we’re not paying money. What’s really interesting is that we are willing to pay more in order to get something free. That’s why Amazon offers free shipping for orders over $25, and why many marketers and retailers give out free gifts with purchase.

4. Future Needs Vs. Today’s Wants

We think things in the future are less important than things happening now. Human beings have a very hard time planning for the future. Apparently, 75% of Americans nearing retirement in 2010 had less than $30,000 saved, which is a pretty horrifying statistic. But before we write off three-quarters of the retiring population as irresponsible laggards, we should look at our own behavior.

  • How many times have you bought something with a credit card without a specific plan to pay it off?
  • How often have you promised yourself you’d diet only to be tempted off the path the moment you see a box of donuts?
  • How many times have you left work for yourself to do in the morning, only to curse yourself the next day?

What’s going here is something called hyperbolic discounting. That’s a 50¢ word for our unconscious feeling that now matters more than later. We know that we ought to put money aside for retirement, but man is that far away! And the money is here now. So, we tend to think that retirement will take care of itself, while the money can be put to “good use” now.

5. We Overestimate the Possibility of Unlikely Things Occurring.

Our brains are wired to think that things we can easily come up with an example of are likely to happen. This is something called the availability heuristic. What that means is that we think we’re much more likely to win the lottery or win big in Vegas than is statistically possible just because we can think of examples of people who have won.
Since we can think of those examples, we think the outcome is more likely. And every time you read a news story or see a movie about such winners, your brain believes that you winning is even more probable.
Even if you are able to sidestep the availability heuristic, you may still fall victim to the similar gambler’s fallacy. This is when you believe that something is “due” to happen because it hasn’t for quite some time. For example, you might bet on a coin coming up heads on the 21st toss after it has come up tails every time for 20 tosses. It seems as though the coin is “due” to come up heads, but it’s still only 50/50 odds.
Otherwise rational investors may find themselves following the gambler’s fallacy by avoiding buying stocks that are going gangbusters, for fear that there has to be a fall eventually. Statistics may show a general regression toward the mean (i.e. – everything evens out eventually), but general statistics are meaningless when talking about individual events.

Irrational Money Decisions Affecting Your Life

Approaching all of our financial decisions rationally is remarkably difficult to do. It pays to think about the money choices we make, and try to figure out what our motivation is each time. A little mindfulness and self-knowledge can do wonders for combating irrational decisions.
Source: Good Financial Cents

Just Say “No” to Retail Store Credit Cards, by 720 Credit Score

It’s that time of year where I have to issue my big warning:
Steer clear of retail store credit cards!
From now until Christmas, you will likely spend a few days in shopping malls. And more than a few of the retail stores you visit are going to try to seduce you into applying for a retail store credit card.
“You’ll save 10 percent on today’s purchase by applying for a retail store credit card,” they will tell you.
You’ll hear it over and over. In fact, just about every major store has a promotion intended to lure people into signing up for a retail store credit card.
Retail store credit cards will hurt your credit score.
And they will hurt your wallet.
Let’s say that you go into Banana Republic to buy your mother-in-law a sweater. The cashier tells you that if you sign up for a Banana Republic Card, you will get a 15 percent discount on that day’s purchases.
Let’s do the math and see how this adds up …
Imagine that the sweater costs $55. This means you will save $8.25 if you sign up for a Banana Republic Card.
But consider all the different ways you might end up spending MORE money:

  1. You will have to pay interest on the sweater, assuming you do not pay the bill immediately. And you will also have to pay interest on all future purchases.
  2. And there will be future purchases. If you have a credit card, you will be more likely to engage in retail therapy, and you will be more likely to spend more money at the store. (In fact, this is why the stores want you to sign up for their credit cards. They know people who use credit cards end up spending more money than people who use debit cards or cash.)
  3. You might even spend more money that day. I should take advantage of this offer, you might think, piling a few more items in your shopping cart and thinking that you are “saving” money because of the 15 percent discount.
  4. You have added a credit inquiry to your credit report. Credit inquiries count for 10 percent of your credit score, so your score drops a few points. This will cost you money in the future as a lower credit score means you will have a higher interest rate on other credit cards, your home loan, or your car loan.

My point is this: The $8.25 “savings” ends up costing you a bundle.
Think of it this way: Why would retail stores promote these cards with discounts unless they know they can eventually make money off the retail store credit cards?
As always, be sure to leave a comment below, particularly if you successfully fight off a pushy sales clerk trying to get you to sign up for a retail store credit card!

Survey: I want your feedback, by 720 Credit Score

I wanted to let you know that we are about to put together some great new content for our weekly blogs. And since we want to make sure that we are over-delivering on our promise to you, we are wondering if you can help us prioritize.
We want to know what your favorite blog posts are. Would you mind taking a short survey to let us know?
Here is the link.
Thanks for your time.
Philip Tirone
P.S. The survey is only four questions long, and it won’t take more than a couple of minutes … Once again, here is the link to the survey.

The Debt-to-Limit Scam, by 720 Credit Score

Have I told you how much I LOVE getting letters and emails from people who have been through my program?
I received some feedback a couple of weeks ago from a student who has called into my one-on-one Q&A session. She’d unexpectedly had her credit card limits reduced, which affected her debt-to-limit ratio, which in turn caused her how to save money on car repairs score to drop.
Credit card companies do this regularly—they promise you a big limit, and then a few years later, they lower your limit out of the blue. This hurts your credit score, which is in part based on the debt you carry as a percentage of a limit.
For instance, let’s say you have a $10,000 limit and a $1,500 balance. Your balance would be 15 percent of your limit, which would be looked upon favorably by the credit-scoring bureaus.
But if the credit card companies went and dropped your limit to $2,000, your balance of $1,500 would be 75 percent of your limit, which would be looked upon negatively by the credit-scoring bureaus.
It’s a scam!
Well, this happened to one of my clients, and I told her how to fight back. Then I got this letter (which I’m editing slightly so that you have the complete context):
“I had one card with a limit that had been lowered, and I decided to try for the second time to get it raised because they refused my request the first time. I called, and after spending 1.5 hours on the phone with five or so people (who by the way, got a little more patronizing with each one), they still would not do it.
“But … during the conversation, one of them mentioned something about calling the “Portfolio Risk Department.” After just five minutes on the phone with ONE person in the Portfolio Risk Department, they restored my full credit limit! Done!
“I never would have known to even try this if not for your fabulous program and awesome encouragement! Thank you so much once again!”
At times like this, I love my job more than usual. I’ve said it before: Your credit score is your financial reputation, and I’m tickled pink to help people fight back when their reputations are being tarnished!
With that in mind, let me know if you have any questions about rebuilding your score. From time-to-time, I answer them in my weekly email/blog. Leave a comment below, and I’ll try to answer it in the coming months.

Your Freedom Ratio, by 720 Credit Score

I consider myself a pretty financially savvy guy, but my CPA just introduced me to something that opened my eyes…
Dave observed that I will not truly be free until I no longer have to work to cover my overhead. If my passive income doesn’t cover my monthly expenses, I’m controlled by my need to make money.
I’ve heard this concept before, but he really opened my eyes in a different way.
What if I invested my money in such a way that it creates cash flow sufficient to cover my monthly expenses? Then my time will truly be my time. I could do whatever I wanted to do…
I could choose to work.
I could choose to kick back in Hawaii wearing a Speedo and eating bananas on the beach.
I could choose to become an avid stamp collector.
I could choose to make teeny, tiny little birds out of paper.
I could do whatever I wanted to do because I wouldn’t have to worry about monthly overhead.
Some of us have investments, but Dave made an important observation…
If your investments aren’t creating cash flow, then they don’t give you freedom over your day-to-day life. Instead, they exist as some far-off abstraction and may or may not fluctuate upward or downward when you finally need them.
The Freedom Ratio basically tells you what percent of overhead your passive income covers. So if your passive income is $150 a month and your expenses are $6,000 a month, your Freedom Ratio is 2.5 percent. In other words, your passive income covers 2.5 percent of your monthly expenses.
Once I looked at it this way, I started asking myself: What are the investments I can make that help my Freedom Ratio.
What am I spending money on that really doesn’t serve me?
See, if I can bring my monthly overhead down and in turn invest that saved money so that it produces cash flow, my Freedom Ratio will go up… which would make my life a lot easier.
Lily and I have created a plan to build our Freedom Ratio. Here is what it entails:
First, we went through our credit card bills and realized that we were spending money on things that made no long-term differences in our lives. So as a test, we have vowed to be “cash only” on day-to-day expenses. I’m really curious to see how much we are going to save.
We use the “envelope” system for our day-to-day expenses. Instead of putting anything on credit cards, we put cash into envelopes and we spend money based on the money we pre-planned for the week.
We started this week with three envelopes:

  1. Food
  2. Lily and kids
  3. Philip

Just this morning, Lily came to me and said, “I picked up your dry cleaning. You owe me $37 out of your envelope.”
I said,“$37 for dry cleaning! That’s a rip off.”
She said, “Philip, you had 17 shirts.”
I said, “Next time, I want to take it to a place that charges .99 cents per shirt.”
She said, “Great, you find that place and let me know.” 🙂
My point is this… we have NEVER had a conversation about the cost of dry cleaning, so I didn’t know it cost me that much money every time I wore a “dry clean” shirt instead of a washable shirt.
Now that I think about my money in terms of the Freedom Ratio, I’m going to work (and spend) smarter. It just makes sense.
At the end of the week, we will:
Take any leftover money and put it in our investment savings account, and then review the receipts and make a plan to spend even less money next week (if possible).
Like I said, this is Week One. I’ll let you know how it goes in future weeks.
What do you think?
What questions do you have?
Do you and your family want to do this with Lily and me?
If so, let’s do it!
Post any questions or comments you have, and by next week, I’ll record a conference call with the most asked questions and ideas.
I will teach you what I’ve learned… and at the same time, teach me what you have learned.
Let’s rock this idea and become free! Isn’t that what life is about?
Philip Tirone
P.S. David Fenton, my CPA and the creator of the Freedom Ratio, is a rock star. I’ll have him do a blog post in the future.

A Dirty Reputation, by 720 Credit Score

Listen to the interview here:

This blog post is about something near and dear to my heart…
No, that’s not a joke. See, sales has a dirty reputation—our culture says it is a bad thing.
But the truth is that a salesperson should give the buyer something he or she really needs—and that’s a good thing.
Plus, what most people don’t realize is that even if they aren’t in a sales position, they are still in sales.
If you ever apply for a loan, you will need to sell yourself to the loan officer. If you ever apply for a job, you will need to sell your talents to the employer.
If you ever want to woo a significant other, you have to highlight your positive qualities.
So I’m a big fan of improving the sales process.
This is why I interviewed my friend Eric Lofholm, a master sales trainer (in fact, he once trained Tony Robbins’ people).
If your job is sales-related (real-estate, insurance, pharmaceutical, service-providers, etc.), you must listen to this recording and learn how you can tweak three systems to massively improve your results.
The recording is at the end of this blog post.
And remember … even if you aren’t in the sales business, you are in sales, so I encourage everyone to listen to this recording below!
Philip Tirone
P.S. Ever wanted to be a better communicator? Master sellers learn excellent communication skills, so be sure you listen to this recording if you want to improve your relationship with your spouse, friends, or family members.

Listen to the interview here:

To learn more about Eric’s Selling System, click here for more information.
To purchase Eric’s system at a special discounted price for all of my followers, click here to purchase.