Category: CREDIT BLOG

I’ve been saying it for years, and I stand by it!
I think you should add your children as an authorized user to one of your credit card accounts.
I know you probably think I’m nuts, so let me back up …
A couple of weeks ago, I sent an email encouraging parents to use family meetings as an opportunity to teach children about certain values (like financial responsibility). Otherwise, they might be influenced by peers, credit card companies, or banks … and the results might be ugly.
After all, schools don’t teach this to our children, and banks prey on people who are financially vulnerable.
So if you have children, you would be wise to start teaching them now about credit, money, and financial responsibility.
Teaching children about credit, as well as how to manage credit, will help you raise financially responsible adults, and it will open doors for your children down the line.
Okay, so why do I think you should add your children as authorized users? Let me explain a four-part plan:
1. Add your child as an authorized user but do not give her/him a card! Here’s the important part: Add your child to a credit card that is in good standing. This will allow your child to “borrow” your good credit score, which means his or her credit score will begin to increase.
2. Use family meetings as an educational platform where your children learn about interest rates, budgeting, savings, and credit scoring.
3. Once your children begin demonstrating that they understand the value of money and are financially responsible, you might want to provide children with credit.
You can do this by establishing something that I call “Bank of Mom” or “Bank of Dad.” If your daughter wants to buy something for $30, lend her the money (assuming you can afford it), and create a weekly or monthly payment plan.
Then insist on timely payments, and tell your daughter that she will pay interest if she is unable to pay within a specified time frame. If your daughter is late making a payment, assess a late payment fee as part of your strategy for teaching children about credit.
The goal is to replicate the credit card companies as closely as possible.
4. Once your children prove themselves by continuously repaying debts, you might want to give them actual credit cards. Now, I know this sounds crazy, so let me explain …
I suggest that you allow your child access to the card only long enough to hand it to a cashier, and only if you are present. This way, your child will not be able to memorize the credit card number, nor will he or she have prolonged access to your account.
Then, make sure that your children pay their debt to the credit card company. I suggest that your children pay you instead of the company; this way, you can preserve your credit by making payments on the account regardless of whether your children are paying you.
Then, when the credit card statement arrives in the mail, sit down and go over it with your child. Explain the annual percentage rate, fees, late penalties, over-the-limit fines, and minimum payments. Then ask your children to verbalize their plans for paying their loans in a timely manner.
Expect your children to make mistakes, and help them create plans for correcting their mistakes. If they splurge and end up owing more than they can afford, perhaps they can do extra housework in exchange for an increased allowance. And, of course, teaching children about credit means that you call their cell phones—perhaps at 8 on a Saturday morning—to inquire about any late payments!
What do you think? Do you like this plan?
Do you think I’m crazy? Do you love this plan? Leave me a comment below and let me know!
Philip Tirone

Sometimes, I hear from people who are drowning in debt. They just don’t know what to do to get themselves out of their financial holes…
One of my readers, John, recently left such a comment on my blog, and I wanted to take this opportunity to answer it. Here is a summary of his comment:
I recently filed bankruptcy, and I know I need to open three new credit cards, but I cannot get the secured cards that you recommend because I have no extra money. Please help me. I’m drowning.
Okay, I have several pieces of advice…
First, if you have been through a bankruptcy, it is important to open three new credit cards after the bankruptcy has been discharged.
I recommend secured cards, which require you to pay a deposit. But if secured cards are not an option, then I recommend becoming an authorized user on someone else’s credit cards (in good standing).
If neither of these options are available, then and only then should you apply for subprime credit cards.
I dislike subprime credit cards because they usually come with high fees and high interest rates. You can’t do anything about the high fee charged to you upfront (or annually), but you can avoid the interest by charging only small amounts on your credit card to keep it active, and then paying the balance in full.
That said, I have another concern about John’s message: “Please help me. I’m drowning …”
This is my advice: Do not use credit cards as a method of paying for day-to-day life, especially post bankruptcy, unless you have a long-term budget that shows you can repay the debt.
If your budget does not prove that you can repay the credit card debt you plan on incurring to pay off your other bills, you will find yourself even deeper underwater in the months and years to come.
Yes, credit cards are a great tool for getting yourself out of a financial jam, but only when you know you have the means to pay your bills down the road.
You must—must, must, must—create a budget, take a hard look at your finances, and know exactly and when you can pay off those credit cards.
Sincerely,
Philip X. Tirone
P.S. As always, leave your comments and concerns below!

Holy cow. I just read an article that reminded me to be terrified …
If you have a 780 credit score, and you make one late payment, your score could plummet as much as 110 points.
That’s right—your score could drop from 780 to 670 in just a month. That could cause your interest rates to shoot through the roof.
Worse, it could cause you to pay a ton in interest payments.
So this week, I want to focus on the nitty-gritty…
I know that administrative housecleaning isn’t fun for anyone, but you cannot afford to put it off.
Take an hour this weekend to get your bill-paying mechanisms in order. Sign up for auto pay, make sure you know when your credit cards are due, and just make sure that you have a system that protects your credit score.
It might sound simple, but forgetting to pay one bill could be devastating.
Of course, even if you have the best systems in place, money might be tight one month. If you do need to pay a bill late, here are a few things to keep in mind:

1. Your utility payments are not included in your credit score unless your account is sent to collections. If you have to make a choice between paying a credit card late or a phone bill late, pay the credit card on time and pay the phone bill late. This will keep your credit score intact.
2. Most credit card companies do not report a bill as “late” unless it is past due by more than one billing cycle, which is usually about 30 days. So if your credit card is due August 5, it probably will not be reported as late if you pay it before September 4. Of course, you’ll still have to pay a late fee, but at least your credit score won’t be hurt!
3. And finally, if you cannot pay a bill on time, don’t hide from the creditor. Just call them up and say, “I’m having a tough month. Could you give me a 60-day grace period to make some adjustments to my finances?” They might say no, but if you have been a great customer, they will probably say yes!

That’s it for this week’s blog. It’s short and sweet, but you have some homework …
Buckle down and spend an hour on the “nitty-gritty” by making sure you have a system in place so you pay your bills on time each month.
And if you have an innovate system for keeping your finances organized, I’d love to hear it. Leave a comment below.
Philip Tirone
P.S. I’m serious. I really want you to share your ideas below. I’m committed to building a financially savvy community, and we need your help in spreading ideas!
Here’s what I do to keep my finances organized:

1. First, I make use of technology to pay all my bills. This means that I have “auto pays” set up for every bill, which includes utilities, credit cards, rent, car payments, and the like.
2. Then, I have automatic reminders to review my statements on the 1^st and the 15^th of every month.
3. I put all my “bills to pay” mail into a folder, and I review them every other week. I know this might seem simple, but before I implemented this easy step, I had envelopes scattered everywhere—my car, the kitchen table, and my desk. It made it tough to stay on top of the administrative stuff.

Wow! I got tons of responses from last week’s email and blog about how Lily and I created Tirone Family Meetings!
I want to spend a few more weeks responding to some of the comments, and sharing with you some other ideas I have about creating a family with great financial sense.
Here’s one of the comments from Mary:
“… I go out of my way to have impeccable manners with my son – everything from holding a car door open for him (now he opens mine) to phrases like, “May I please have the juice,” followed by “thank you.” While I’ve had friends ask why I “do that” they are also the first to tell me what a joy my son is to have in their homes; that he helps, includes younger siblings in play and is ‘very polite.’”

Okay, so here’s the thing she wrote that really hit me: “Modeling at home is critical to molding a good citizen.”
Right on, Mary! I couldn’t agree more. When it comes to being a good model for your children, this applies to everything, including your financial habits!
So if you have children, now is the time to replace your bad financial habits with great financial habits so that you set a good model.
Here are a few resources for teaching your children to be frugal about money, and also adopt a healthy paradigm about money.

• Secrets of the Millionaire Mind by T. Harv Eker. What I like about this book is that it explains the financial blueprint that parents leave to their children.

Even saying something like, “No, you can’t have a new bike because we can’t afford it” can give your children a negative financial blueprint. It teaches a children that life is something that happens, not something that they create.

True, you might be unable to afford a bike, but imagine how motivated your child will be if you say things like …

“Yes! Let’s figure out how much bikes cost, and then let’s come up with a plan so that you can earn some money and buy a new bike. Here, I’ll help you. In fact, if you want me to put aside $5 each week out of your allowance, that can go into the pot too.”

This teaches children that money is a vehicle for achieving goals. It encourages your children to have goals, and it encourages them to be proactive about finding solutions.

And perhaps most of all, it teaches them to go out and earn money, to save money, and to decide when and how to allocate money to a resource.

• Read at least one book from David Bach’s Finish Rich series. This includes Smart Couples Finish Rich, The Finish Rich Workbook, and Smart Women Finish Rich.

• And be proactive about looking for any other financial management books or classes that seem interesting to you. The key is to break whatever bad cycle now so that you can transfer better values to the next generation by setting a great example.

In fact, in next week’s email, I’ll give you a great resource (for free) for teaching children about money, and for setting a good example.

Have you found other great resources for teaching kids about money, or for replacing your own bad habits with great financial management habits? Let us know by leaving a comment here!
Also, if you have questions about breaking bad financial habits, be sure to post them below.
Philip Tirone

I talk a good game about being a family man, but a few months back, my wife (Lily Tirone) and I were put to the test …
I was attending a conference, and a presenter (Warren Rustland) said that if a person’s family culture is weaker than all the other cultures surrounding the family (school, neighborhood, church, etc.), then the kids could learn more from other cultures than from the family’s culture.
It makes a lot of sense… If your family’s culture isn’t strong, your children will be pressured by their peers, coaches, and teachers—and they might end up adopting the wrong values.
A second presenter (Greg Baer) then said that the amount of time parents devote to molding their kids will be in direct proportion to their happiness and success.
A lightening bolt struck.
See, I realized I was spending more time trying to build my company’s culture than I was trying to build the Tirone family culture.
So nine weeks ago, Lily and I implemented daily “family meetings,” which we will continue as long as the kids are in the house.
Lily and I want to create an extraordinary bond with our children, and we want them to have great relationships with their siblings.
So when we considered the structure for our Tirone Family Meetings, Lily and I discussed the answer to this question: What do we want to instill in our family?
1) We start with a prayer.
2) Everyone tells the rest of the family what they are excited about. (My three-year-old son is excited about his water balloons—every day!)
3) Then we review the day and what will happen over the course of the day—Daddy is coming home for lunch; Grandma is taking the kids to the zoo… that sort of thing.
4) Next, we talk about the Tirone Family Value of the Day.
It’s important to note that Lily and I let the kids choose which value they want to discuss. We want our kids to feel important and respected, so we give them choices, and then we follow their lead.
We cover everything—from sharing to being kind to finances.
Our kids are young (the oldest is five), so the lessons are geared to their age.
For instance, we bought the “Savvy Pig,” a piggy bank that has four chambers and four coin slots instead of one. These four chambers represent the four things we want our kids to do with their money—save, tithe, invest, and spend.
As they grow older, we will build on these lessons by discussing credit, investment tools, and vehicles for savings.
Regardless, Lily and I are spending each day building a culture that will allow our kids to thrive.
What do you think? How do you teach your children important values and skills? I’d love to learn what you are doing. Also, share how you are teaching your kids about their finances so that they can learn from their parents’ mistakes and experiences. Share your thoughts here…
P.S. For the first four or five weeks, we struggled to stay committed to having daily Tirone Family Meetings. In fact, one day I started to leave the house without having a meeting when my youngest, Luke, came running to the door to stop me.
“Daddy, Daddy!” he said. “Family meeting?”
At that moment, Lily and I realized that these meetings are a game-changer. Be sure to let me know if you have any ideas for making family meetings stronger!
Philip Tirone