How Important Are Credit Scores ?

I have been trying out social media to see what I can learn. About a week ago I put up a simple Twitter Poll on @bigcajunman, about Credit Scores and the results were interesting.

The first thing I saw was that only 16 folks answered, which is a little disheartening. I have 3600+ followers, but I guess folks are busy these days.

The question I asked was quite simple. Which is more important:

  • Blood Pressure Level
  • Credit Scores
  • Cholesterol Level

I was glad to see the results.

Results from my first Twitter Pool on Credit Scores

Yes, your blood pressure level is much more important than your credit score. Nobody died from their credit score, but many folks die from the complications from High Blood Pressure. Remember the most important part of your Retirement plan, don’t die! Your Health is the first thing you should worry about.

credit scores

Risks of a Low Credit Score

If Equifax gives you a low score you won’t get loaned money or won’t get a Credit Card. You can repair it if it is low. You may feel stress due to a low credit score. Stress is bad for your health as well.

Risks from High Blood Pressure or High Cholesterol Levels

Aneurisms, Blood Clots, Stroke, Heart Disease or Death.

From a lay person’s perspective, I would say that your Blood Pressure and Cholesterol levels are something you should know. Being able to quote your Equifax Numbers, doesn’t seem as important.

Do something about your health and then worry about credit.

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Jumping to Conclusions

One of the biggest peeves that I have is folks’ inability to listen to a problem description completely before leaping to a conclusion. Given I work with engineers, mathematicians and the like, they can generally be described as “problem solvers”, and they enjoy showing that they can get things done.  Unfortunately, many times they jump to the wrong solution because they have not really listened long enough to figured out what the problem was in the first place (they have not taken the time to listen first and then synthesize a response after they have heard all the facts).

Let’s take a good financial problem, and see what conclusion you jump to?

Say you have a friend (Harvey) who is 52 years old, and he has realized that thanks to bad planning on his part he doesn’t have enough money to retire early (or possibly at all). He was hoping to have $3 million by the time he retired, and he haven’t even cracked the $1 million dollar mark in his RRSPs, and other investments.

A quick solution that I heard one friend blurt out was the following:

“Harvey, you are going to have to take more risks with your investments to try to compensate for the slow growth you are getting currently”

Seriously, this was actually a response, and on the face of it, it sounds like a possible answer, until you think that taking the existing moneys that you have and putting them in a more risky portfolio (with leverage, or something even more hideous) just means you could end up much farther behind.

Another comment was that Harvey was going to have to “beat the market” and of course the commenter knew of an advisor who has great success achieving this holy grail of investing.  My guess is that this is where lots of investors end up; in the Beat the Market trap (as you can tell after 30 years I have seen many folks who thought they were beating the market but didn’t quite get it done).

Finally, I mentioned to Harvey that another solution might be to start saving more money now, and/or paying down debt faster and maybe altering his lifestyle so that he could have a larger retirement fund later.  If neither was  possible, then simply abandon the idea of retiring early, and just stay diligent in your saving plan.

Which idea makes more sense? Oh and yes the Jump to Conclusions title is a reference to one of my favourite movies Office Space.

Office Space

The Jump to Conclusion Game (Click on it to go to Amazon to buy this Great Movie)

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Celebrate the Slow Thinkers

Many of my friends think of me as a fast thinker, in that many times I have very snappy answers to their quips or stories, but it took me a while to figure out that while I do have a quick mind, my initial ideas and response to most problems that I am confronted with is wrong!

That is correct I am a quick wrong thinker, but I am a much better slower thinker, if you give me enough time, I will eventually figure out the correct answer to a problem.

I used to think not getting the correct response right away was a sign of a weaker mind, but now I realize that some problems need time to view all the possible different angles, before they are acted upon. There are a few remarkably quick and smart minds out there, but there aren’t that many out there (trust me, I have met many folks who think they are quick thinkers, but they are usually as wrong as I am).

Countless times I have made “snap” decisions which at the time seemed great ideas, but in the end they were wrong (or effectively wrong) when I look back on them. There is no shame to ask for time to think about things, and if someone pressures you to make a snap decision follow the advice of a noted child psychologist, who says that when  your child confronts you with a snap decision simply answer:

If you need an  answer now, the answer is NO, if you want to wait a while, we’ll see what I decide.

This is the mature way to deal with any decision (now I am not saying get into over-think gridlock, however, under thinking a problem is just as bad).

The next time you think that someone is somehow inferior because they take longer to make decisions, ask yourself if they end up making good decisions or not, that is really the real barometer. As my wife points out to me many times, if, instead of listening or looking at a problem, you are attempting to formulate a quick “solution” you are in danger of choosing the wrong “solution” or worse the right “solution” for the wrong PROBLEM.

The Great Wall of China Did not Get Built Overnight, it took a while, just like a good decision!

This is a great picture my brother took when he visited China. Sometimes good things just take a while, so be patient, and don’t rush things too much, you might not like how the rushed version turns out.

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Job Hunting: Your Facebook Page is Your New Reference

Job Hunting: Your Facebook Page is Your New Reference, the personal reference for a job is a key part of the hiring process, and more than once, when I have been involved in hiring someone, we have checked the persons references, only to find out that the reference:

  • Doesn’t know the person used them as a reference, and thus doesn’t really have much to say about them.
  • Doesn’t know the person used them as a reference, is annoyed and thus gives a bad reference
  • The person doesn’t even remember the person

The importance of a solid personal and job reference is the cornerstone of any job application, however, what is now supplanting the reference as the major impediment for folks who are qualified getting hired, is your Social Network Page(s).

If you enjoy Social Networking sites like Facebook, Pinterest, Twitter, Instagram or whatever, remember that whatever you put there, future employers are going to see it as well. Many folks think that if you set the privacy capabilities of these sites to a strong setting, outside folks are not going to see it, but I can assure you that anything you put on a Social Media site will be visible to folks who want to see it. I’ll say it again, Facebook Page is Your New Reference !

What kind of silliness have I heard of causing folks to not get a job?

  • Having a Twitter account and “bad mouthing” former employers (or current employers), on the site. If I am going to hire you and I see that, my first thought is, “What are they going to say about our company?”.
  • Pictures of you at a party “having a good time” (let’s leave it at that), as a future employer, do I start to wonder whether you are a reliable employee, or a party animal?
  • “Other pictures” (no more need be said), seriously folks, when did posting pictures of yourself in your underwear or less, become a normal thing? An employer sees that and says (out loud), “Indiscrete employees, if they post this, why should I trust them to keep any company secrets”. Remember if you are “tagged” in a Facebook picture, even if it is not yours, you are in trouble.
reputation
Simple reputation explanation

These are just a couple of the interesting ways you can thwart your job applications.

What do I do ?

How do I find out what others can find out about me?

  • Google your name and see what others can see (without even looking very hard).
  • Comb through your social media sites and see what is there (and look with a future employers point of view)

If you have some bad stuff out there, get rid of it as best you can, and hope no one has kept copies. Remember, Facebook Page is Your New Reference.

Any other areas I might have missed on this, dear reader?

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Seniors and Debt

Retired with Debt?

One of my goals is to retire with no debt (not sure whether I can pull it off, but it is a goal), however TD Economics posted a disturbing report on Canada’s Aging Household Debt Burden which suggests my dream may be harder than I think it will be (or maybe I just won’t ever retire, thus making the goal always achievable).

The report is quick to point out that they are not singling out our Seniors as becoming spendthrifts and money wasters, every age group has their debt-to-income ratio increase, however, the problem with seniors is so many are on fixed incomes, paying off debt becomes a much more painful experience for them to endure. The 65+ group is also the group with the largest debt growth over the past little while.

An interesting twist on this debt increase being better is in the report:

Notwithstanding the rising household vulnerability, the
fact that a substantial share of the new borrowing has been
tilted towards the older age segments might lessen the overall
risk compared to what would be the case if concentrated
in the younger age groups. That is because older Canadians
tend to have lower debt balances and larger asset bases
which to fall back on.

TD Economics – October 11, 2011

So because seniors typically have lower debt balances to begin with, it’s not as bad that they are building up debt now? That’s an interesting point of view to have (which I do not agree with). It’s kind of like my argument that since I have lost weight before, it was OK to pack on a few pounds, because I wasn’t that fat to begin with, and I have proven I can lose weight. To say the argument is optimistic is an understatement (but then again it does use a lot of stock pricing logic (i.e. if it went up before, it will go up again), so who knows, maybe it is correct).

The authors do put a more sensible statement in the next paragraph:

Lastly, the trend towards retiring with debt increases
uncertainty with respect to these households’ longer-term
financial outcomes.

TD Economics – October 11, 2011

Precisely the point I worry about, if I retire with debt how can I pay it off, and what happens when interest rates go back up? Yes my CSBs will increase but my debt will grow even faster than that (note my humorous view that by the time I retire I will be using CSBs to save, just to be careful).

Are you planning on retiring with debt? If so, why?!??

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