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Three years ago, I had an 816 FICO score. 100% flawless credit record. I was always borrowing money on lifestyle enhancements that I didn’t need but made life fun for the short haul. I chased free points on credit cards. By spending $100k on credit cards, I got a free flight worth $650. I would often spend more than I really should. No plan. No budget. But I paid off the cards every month come heck or highwater. If it meant my charitable giving couldn’t happen. So be it.
I discovered how the banking and credit industry gets fees from my purchases. Between the bankers and the merchants, they were encouraging me to spend more than I really should be – and spending on short term life style items.
Then, I learned budgeting and cash envelopes. I paid off my cards and closed the accounts. I went with a much simpler plan. Save up and pay cash. I learned how to control the desire for more “stuff.” I learned to be content and live of less than I make. I learned how to do something smart with the difference so that I really could beat debt and build wealth. I learned to make giving a priority.
I paid off the car leases and saved up to pay cash for two cars. I have paid off over $150k of debt that was on my credit bureau. 100% paid as agreed. Isn’t that the best case scenario? I put another 50k cash in the bank. I was able to start funding college for my kid and maxing out my retirement accounts due to this new knowledge of budgeting and the credit industry. Paying off debt and increasing savings has made a very significant increase to the bottom line of my personal net worth statement. (Not that I believe Net Worth is an indication of winning at life, but it can be an indication of winning with money. Which is why I focus on optimizing life and money. Net worth alone isn’t good enough – Just ask the “rich young ruler” Jesus spoke with).
Proverbs 22:7 – “Just as the rich rule over the poor, the borrower is slave to the lender.” I learned that the FICO score is really an I Love Debt score. I learned FICO really predicts how good of financial slave you are to the bankers. Good slave = high number. Bad slave = low number. The FICO score is NOT an indication of winning at life nor money. If you want to remain a slave always making payments to a banker, it makes sense to worship at the altar of the great FICO. You will be rewarded with nicer masters but will never ever gain your freedom. The only way to have a good FICO score is to have many masters, always be faithful to those masters, and never ever try to gain your freedom.
Its been two years since I paid off and closed my credit cards. From using MyFICO.com, I learned that my FICO score dropped 63 points because they apparently do not like people who save up and pay cash. Apparently cash in the bank and increased net worth are not factors in the FICO score formula. The MyFICO.com simulator tells me that if I keep making my house payments on time for the next two years without borrowing any more money, my score will drop to 733. Make every payment on time, get out of debt, a credit bureau that shows every single Master has marked my file “Paid As Agreed” and the great FICO will reduce my score to 733 – below average. That’s so weird!
That’s ok. I hang out with some really weird people these days. In fact, given my definition of freedom and slavery, one could argue that my blog and business is really just another stop on the underground railroad to financial freedom. Two years from today will be my 40th Birthday. It happens to be a Friday. On Friday’s every other caller is extremely weird. They call into Dave’s show to celebrate their weirdness in front of 4 million people by screaming “We’re Debt Free!” In light of this weirdness and view of freedom. My family has a very simple financial goal:
Friday, July 29th, 2011 – Call Dave!
What’s your goal? When will I be listening in to the show and hear you scream?
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