JW’s Financial Coaching Podcast JW’s Financial Coaching Podcast-A show devoted to answering your personal financial questions and covering current events in personal finance. Giving people a new perspective on their money!

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Highlights of today's show:

  • Answering  listeners' questions on personal finance
  • Can money in an HSA count towards your emergency fund?
  • How to decided between going on vacation and paying down your mortgage
  • It's all about ratios when deciding between spending and saving
  • How grocery shopping with credit cards can make you fat

One of the biggest reasons I started this podcast three years ago was to help answer listeners' questions on money. Today we answer two questions sent in by the listening audience.

The first question is regarding Health Savings Accounts (HSA) and emergency funds. Should you count your money saved up in an HSA as part of your emergency fund? First of all I love HSA's and have used them for over five years now. In short, HSA's are savings accounts that you can contribute tax free money to help pay for medical expenses. The best thing about them is that you can roll over the balance you have left at the end of each year so you can build up quite a bit in the account.

While medical expenses are one of the most common expenses that you would use your emergency fund for, it's not the only possible emergency. Job losses, repairs to homes or cars, and emergency travel are others that you might have to use your emergency fund for and there is a penalty for taking money out of an HSA to use for non-medical expenses. Therefore while I think you can count your HSA towards the 3 to 6 months worth of expenses that I recommend having in an emergency fund, I still want you to have at least 3 months worth of liquid cash in your emergency fund, to take care of the non-medical emergencies.

Below are some posts and a podcast I have done before on HSA's:

The second question is how to determine when to save and when to spend. Andy has been paying extra towards his mortgage each month but wants to take a nice vacation with his wife next year. Should he take a year off from paying extra on the mortgage to save up for the vacation?

This is a great question that unfortunately I don't have a definite answer for. Ultimately I think you need to save for the vacation. When you are debt free except the house and have your emergency fund, that is the time for you to enjoy all your hard work in getting to this point. With that said, would it be wise to take a nice vacation every year and not pay extra on your mortgage? Probably not. Likewise I don't want you to pay extra on your mortgage and never enjoy what life has to offer either. There needs to be a balance in what you do. The best thing to do when you are in these situations is to talk it over with your spouse, if you're married, and agree on what you will do with your extra cash for this upcoming year. Some years might be a "Vacation" year and others might be a "Mortgage" year and therefore over time you will be saving and spending in good ratios.

Finally I also highlight an article I found from MSN Money citing a study that found that people who pay with a credit or debit card for their groceries spend on average 40% more on junk food then those who pay with cash. I found this to be interesting and share why this is another example of how our financial habits impact our life, and in this case our health.

You can subscribe to future podcasts through FeedburnerStitcher SmartRadio, or iTunes. Or you may listen to the podcast on the JW's Financial Coaching Facebook Fan page. In addition, if you have enjoyed the show for a while now, please leave a review of the podcast on iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

If you have any comments, questions, or ideas for future shows you can send them to me and I will integrate them into a future show. There are two ways to get in touch with me: 1.) Email me at JWFinancialcoaching@gmail.com - Please put “podcast” in the subject line and keep your questions brief so they are readable on air. 2.) Simply fill out the form on the contact page. Please fill out your name, email, and your question/comment/suggestion and we will read it on air.

You can find prior editions of the podcast at the podcast archive page.

April 21, 2013  
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Highlights of today's show:

  • Confessions of a Financial Coach
  • Even though I teach this stuff, I still have struggled with money
  • Being honest to help motivate you
  • It's OK if you make mistakes, just learn from them.
  • Another reason to have an emergency fund

I have a confession to make; even though I'm a financial coach I haven't always handled my money the "right way." That is why today I am doing a special "confessions of a financial coach" show. I'm doing this to show you that handling your money well is not some skill that others are born with. Rather it is something you can learn no matter how old you are or how much you make.

Ten confessions of a financial coach:

#10-I have bought things or invested in funds because a co-worker or friend said it was a "good idea." #9-I have believed that there was such a thing as good debt. #8-I have signed up for service, didn't look at the fine print and had to pay a "Gotcha" fee. #7-I have overdrawn my checking account using my debit card. #6-I have bought things I did not want or need to impress people. #5-I don't like sticking to a budget. #4-I have gotten a store credit card just for the initial 10% savings. #3-I have gotten house fever and bought the first property I liked with no money down. #2-I have experienced buyer's remorse while pulling out of the store parking lot. #1 I have bought something on sale and convinced myself that I was saving money.

It wasn't easy exposing my past financial mistakes with you but I hope this gives you hope. Even though I teach this stuff for a living, I am still tempted to fall. You are going to make mistakes with your money, but when you make mistakes learn from them.

I did a podcast on this same topic on my second ever podcast. In full disclosure it is awful in both audio quality and presentation, which just goes to show you that if you keep working hard you can improve in different areas of your life.

Also I highlight a post I wrote last week on emergency funds. I've done shows and written post about emergency funds before, but like I mentioned in the post, instead of trying to predict or stop an emergency from happening, just realize that life is going to happen so be prepared with an emergency fund. My challenge to those of you who don't think you need an emergency fund is to go ahead and have one for one year. After that one year I think you'll realize how much peace it can bring to your life.

You can subscribe to future Podcasts through FeedburnerStitcher SmartRadio, or iTunes. Or you may listen to the podcast on the JW's Financial Coaching Facebook Fan page. In addition, if you have enjoyed the show for a while now, please leave a review of the podcast on iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

If you have any comments, questions, or ideas for future shows you can send them to me and I will integrate them into a future show. There are two ways to get in touch with me: 1.) Email me at JWFinancialcoaching@gmail.com - Please put “podcast” in the subject line and keep your questions brief so they are readable on air. 2.) Simply fill out the form on the contact page. Please fill out your name, email, and your question/comment/suggestion and we will read it on air.

You can find prior editions of the podcast at the podcast archive page.

April 14, 2013  
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Highlights of today's show:

  • My wife Lisa joins me on the show to share our experience in picking a realtor
  • Why we learned it's important to get different opinions
  • How we've gotten our home ready to put on the market
  • What's next for us in selling our home
  • Ways to increase your financial literacy during Financial Literacy Month

Today my wife Lisa joins me on the show to help share our experience so far in selling our house. Together we discuss the thought process on how we went about selecting a realtor, what we have learned about getting our house ready to put on the market, and how much we have looked at new homes to buy.

[caption id="attachment_10211" align="alignleft" width="200" caption="Lisa and Jon"]Lisa and Jon [/caption]

We hope to do more of this type of show in the future once we start to show the home and receive bids on it as well as when find a new place for our family. If you have any experiences you would like to share with picking a realtor, showing your house, or anything else related to you selling your home, please leave a comment below.

Lisa has been on the show before to talk about managing finances as a married couple, cheap date night ideas, sharing our financial goals, and sharing the listeners goals for 2013.

In addition, April is Financial Literacy month. I'm not going to do any podcasts based on financial literacy this year as I feel that financial literacy is a continuous endeavor no matter what your financial situation is. So instead, my challenge to you this month is to learn something about personal finance you have wanted to but haven't for whatever reason, whether it be on budgeting, investing, insurance, or something else. If you are looking for literature to help you out please take a look at my recommended reading list and see if there's anything on there that can help you out.

Below is a list of podcasts I have recorded and articles I have written about financial literacy month.

You can subscribe to future Podcasts through FeedburnerStitcher SmartRadio, or iTunes. Or you may listen to the podcast on the JW's Financial Coaching Facebook Fan page. In addition, if you have enjoyed the show for a while now, please leave a review of the podcast on iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

If you have any comments, questions, or ideas for future shows you can send them to me and I will integrate them into a future show. There are two ways to get in touch with me: 1.) Email me at JWFinancialcoaching@gmail.com - Please put “podcast” in the subject line and keep your questions brief so they are readable on air. 2.) Simply fill out the form on the contact page. Please fill out your name, email, and your question/comment/suggestion and we will read it on air.

You can find prior editions of the podcast at the podcast archive page.

April 7, 2013  
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Highlights of today's show:

  • How to avoid the Lifestyle Inflation Trap
  • What is lifestyle inflation?
  • How lifestyle inflation can harm your finances
  • 4 keys to raising your lifestyle the right way
  • Being content with where you are financially

Investopedia defines inflation as, "the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling." We see this in our everyday lives when we compare the price of gas today to the price when we first got our license. Or when we go to the grocery store and look at the price of milk. But on today's show we discuss the topic of lifestyle inflation and how it can hurt our finances down the road.

[caption id="" align="alignright" width="400" caption="Credit: Lifehacker"][/caption]

For most of us, no matter what our income is, we will experience life style inflation throughout our lives. For example, about 10 years ago right after graduating from college, I lived on campus for a year with some of my former roommates who were still in school. I lived in about a 100 square foot "room" for a year. But now I don't have to live like that, or drive the same car I did 10 years ago. So lifestyle inflation in and of itself is not bad, in fact I WANT you to improve your style of living. But sometimes we can fall into a trap of only increasing our lifestyle while not increasing the rate of saving or giving in our budget. This is why, despite the fact that currently you probably are making the most money you have ever made, you don't feel like you are getting ahead.

To increase your lifestyle the right way I recommend doing these 4 things with your money to avoid the lifestyle inflation trap.

  1. Get out of debt-The easiest way to increase your lifestyle is to pay off debt and avoid taking out any new debt. That is because debt increases our risk by adding monthly obligations to our budget. When we eliminate these obligations we are able to spend more and not have to worry about meeting those monthly obligations
  2. Do a monthly budget-By seeing where your money is going either on paper or on a spreadsheet, you will avoid increasing only your lifestyle because you will see that you are out of balance with your spending. This will help you avoid taking out a $450 car payment when you get a $400 a month raise.
  3. When increasing your lifestyle also increase your saving/giving by a set amount-Again I want you to increase your lifestyle, but not at the cost of saving and giving. My wife and I decided long ago that if we ever got a raise we would increase both our saving and giving as well. This has helped us stay in balance while increasing our lifestyle at the same time.
  4. Remember your long term goals-By asking yourself, "How will this increase impact me five years from now?" you will be able to resist the urge to simply just keep up with the Joneses. Instead you will put things in perspective, look at the long run and see if this increase aligns with your goals and values.

If you apply these principals to your finances, you stay away from getting sucked into the trap of lifestyle inflation.

How has your family dealt with lifestyle inflation? Has it been a problem for you? If so how do you fight against it?

You can subscribe to future Podcasts through FeedburnerStitcher SmartRadio, or iTunes. Or you may listen to the podcast on the JW's Financial Coaching Facebook Fan page. In addition, if you have enjoyed the show for a while now, please leave a review of the podcast on iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

If you have any comments, questions, or ideas for future shows you can send them to me and I will integrate them into a future show. There are two ways to get in touch with me: 1.) Email me at JWFinancialcoaching@gmail.com - Please put “podcast” in the subject line and keep your questions brief so they are readable on air. 2.) Simply fill out the form on the contact page. Please fill out your name, email, and your question/comment/suggestion and we will read it on air.

You can find prior editions of the podcast at the podcast archive page.

April 1, 2013  
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Highlights of today's show:

  • The Credit Score lie
  • The facts about the FICO
  • What makes up your FICO score
  • The alternatives to credit scores
  • What to focus on instead of your credit score

Don't Be Fooled By The "Build Your Credit Score" Lie!

Today's show is being hijacked by Steve Stewart, my friend and cohort from MoneyPlan SOS. He is passionate about exposing the manipulative messages from those trying to get to your money and the lies that we are told about debt, including building your credit score.

By all measurements, Steve is considered eccentric. His views on debt are not conventional and his view on credit scores make him sound as if he is broadcasting a conspiracy theory. He accepts that misconceived view and hopes you will listen to his message: That he has been lied to about building his credit score!

Don't misunderstand, he certainly does not want to hurt or damage your credibility. However, his message is being published in order to help you see that there is something seriously wrong with the Credit Scoring system. He will also show you how to win IN SPITE OF IT.

The Facts about FICO

FICO stands for Fair Isaac and Company and was renamed Fair Isaac Corporation in 2003. FICO is a publicly traded company on the New York Stock Exchange that provides analytics and decision making services intended to help financial service companies make complex, high-volume decisions. One of those services is Credit Scoring, which simplifies the process and summarizes the information into a 3-digit number.

What makes up a FICO score

Your FICO score is generated from a computation of five things http://www.myfico.com/crediteducation/whatsinyourscore.aspx

  • 35% from your payment history on debt products (loans, credit cards, etc)
  • 30% is based on the amount of money you owe
  • 15% comes from the length of history on those debt products
  • 10% takes into consideration the types of credit you use
  • 10% evaluates how much new credit you have

I urge you to make the observation that should be completely obvious here: The entire FICO score is based on debt and debt products. It is a one-sided measurement of debt. Did you notice there is no mention of how long you have worked at your current job or even the balance in your savings and retirement accounts?

Credit Score pays off debt LIE picAlso, notice how everyday purchases and normal monthly bills are not included in the calculation? Your cell phone payment, your electric bill, even your rent payment will never help your credit score, but miss one single payment by a day or two and they will ding it! Fair Isaac isn't really all that fair, is it?

Who uses credit scores

When was the last time you used your credit score? You can't remember because it has never happened. You have never used your credit score, only companies and lenders do.

I never gave my permission for FICO to collect my information and sell it to a bank in order to rate me. I never signed a form that gave them the permission, did you? Isn't it funny that we live in a world where people are supersensitive about giving out their Social Security number, or even having their phone number listed in the phone book, but WANT the credit reporting industry to collect their personal banking information and allow them to make a profit by selling it to a bank that is trying to sell you money? That's crazy to me!

Credit score lies!

You've heard it all over the place: You need to build your credit score. We are told to have at least three credit cards and use 30% of the available credit in order to have the best score. If I had three credit cards with a $5,000 credit limit on each then my available credit would be $15,000. According to the traditional advice we are supposed to run 30% of that balance ($4,500) through our plastic each month. I don't know about you but I would have a hard time paying off that bill to avoid interest charges, thus going into more debt. That is just really bad advice!

We are also supposed to have a good mix of debts. A highly-regarded personal finance expert once told the father of a female grad student with no debt, a good job, and a decent chunk of money in the bank to consider getting a small installment loan in order to build her credit score. THAT IS SIMPLY IRRESPONSIBLE ADVICE!

I know of guy offering a credit-building program for $1,000 (or four monthly payments of $297, that's convenient!). He states that the program "will teach you how to raise your credit score, so you can pay off your debt!" LIAR! Does he take us for fools? How does a great credit score pay off debt? Does FICO cut us a check? Maybe they will send us a coupon or rebate voucher. Credit scores do not pay off your debt. DON'T BELIEVE THE LIES!

FICO spokesperson Craig Watts once stated that "In rare circumstances it is possible to get a [perfect] FICO score of 850. For a broad section of the population, it probably isn't possible, even if they do everything right." So what the heck are we doing all this for? What is all this energy wasted on building a stupid score supposed to get us?

Calm down Steve. It's not that big of a deal

Granted, a better score could allow you to refinance higher interest rate debt to lower interest rate debt, but you still have the debt to deal with. Don't mistake reduced interest payments with savings. Paying off the debt once and for all will save you more interest than any low-rate transfer balance ever could.

As a side note: My financial security will not be compromised because of an idle threat that someday an employer may want to pull my credit report or my insurance rate might be a little higher because I don't have any debt, thus can't have a great FICO score. I'll more than make up for missing out on a great score by staying out of debt and building wealth instead. Employers don't even care about the score as much as a trouble-free credit report and my insurance agent can go jump in the creek if they jack my rate because of a silly 3-digit number. I'll just go to Flo if that happens, she'll take care of me.

Credit score alternatives aren't sexy

It just infuriates me that people are being led to the debt-slaughter without a clue. If news stations want sensational stories and controversial commentary then why won't they feature a segment about the unknown alternatives to the FICO score? I'll tell you why: They aren't sexy!

Credit cards are sexy. Expensive luxury vehicles driven by celebrities (or crashed by Amanda Bynes) are sexy. Discussing tricky ways to manipulate your credit score is sexier than the dull, mundane, yet successful way of building wealth by saving money in a bank account or investing in your boring retirement account. Well, that is until the market has a correction and then the financial world is coming to an end (we'll leave that for Jon in a future podcast episode.)

Do the right thing

Here are four morally-based ways to do the right thing while maintaining a good credit score without being trapped by debt:

  • Pay your bills and debts on time: Anyone can be creditworthy if they just follow this one rule
  • Save $1,000 or more in a savings account: Emergency savings is the antidote to avoiding new debt
  • Cut up your credit cards: Stop borrowing more money. If you don't like living without credit cards then somebody will issue a new card. Target or your local gas station would be glad to have you back!
  • Check your credit report for free: Go to AnnualCreditReport.com http://AnnualCreditReport.com for access to your credit reports at no charge. Challenge any discrepancies with the credit bureaus. Save your money by saying "No" when they offer to sell you your score.

Don't I need a great FICO score to buy a house?

This is the question that keeps people in the credit-score-building game for life. We have been led to believe that we can't buy a house if we don't have a great credit score. First of all, you can buy a house with a good score, a great score, or even a bad score if you pay for it with cash at the closing. I understand that this isn't easy to do, especially for first-time homebuyers or people in debt, but investors are snatching up acres of real estate in Florida and California right now because they don't have to prove financing and don't have to wait to be qualified for a loan.

What you aren't being told: There is an Alternative to the Credit Score

The good news is that the market has answered our call for help when people trying to live a debt-free lifestyle need a mortgage (the only type of debt that is remotely acceptable). It is called "alternative credit". Actually, alternative credit has been around for ages, just under a different name. In the old days it was called "shoebox credit". As the name implies, you would bring a shoebox full of receipts and cancelled checks to prove your bills were paid on time. This process was very time consuming for banks - that is why they were so quick and eager to get away from the manual underwriting process in lieu of the credit scoring system.

Then came eCredable. I love eCredable http://MoneyPlanSOS.com/eCredable and what they stand for. This is a service that will verify all your payments - cell phone, cable bill, rent, etc - and provide your lender with password-protected access to your credit-worthiness report. Do they have to accept it? The Equal Credit Opportunity Act Reg B says they do. Steve Ely, CEO of eCredable, stated "Every creditor is required by law to consider anything that you present that helps them assess your credit worthiness when they are using other credit related information to determine your credit worthiness."

So there you have it. As long as you pay your bills on time, even if you don't have any debt, you can qualify for the best rates out there. You can have no debt and no credit and have no problems.

You can get a free account by visiting http://www.ecredable.com/money-plan-sos and use the promo code SOS.

Don't Be Fooled By The "Build Your Credit Score" Lie

Let's review:

  • Credit scores are 100% based on debt
  • You don't use your credit score, banks do
  • We never gave FICO, a privately held company, the authorization to make a profit from selling our data
  • You are being misled by experts who say you have to build your credit score
  • Good financial behaviors, like saving money, are not sexy and don't warrant airtime on the news
  • You don't need a FICO score to buy a house, there are alternatives that you aren't being told about

Want to see my credit score?

Once I learned how money really worked I stopped worrying about my credit score. I've been on a mission to educate everyday Americans like you about the trappings of debt, credit scores included. I was curious, however, to see if my credit score had eroded away. After all, I haven't borrowed any new money or had any open credit accounts for over 5 years and the only debt we have is a small mortgage. We can all assume that my credit score is really weak!

I created a vid-torial to show the readers of my blog how to get their score. In the process I discovered that FICO tries really to sign you up for a $14.95 a month credit monitoring program - really hard! It made me really cranky. Watch the video to see what I mean and you will discover, just as I did, that I have been lied to about "Building my Credit Score" http://www.moneyplansos.com/cranky-old-guy-gets-his-credit-score/

You can subscribe to future Podcasts through FeedburnerStitcher SmartRadio, or iTunes. Or you may listen to the podcast on the JW's Financial Coaching Facebook Fan page. In addition, if you have enjoyed the show for a while now, please leave a review of the podcast on iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

If you have any comments, questions, or ideas for future shows you can send them to me and I will integrate them into a future show. There are two ways to get in touch with me: 1.) Email me at JWFinancialcoaching@gmail.com - Please put “podcast” in the subject line and keep your questions brief so they are readable on air. 2.) Simply fill out the form on the contact page. Please fill out your name, email, and your question/comment/suggestion and we will read it on air.

You can find prior editions of the podcast at the podcast archive page.