How Do I Reset My Money Mindset and Get Out of Debt? Pause Investing to Save for a House? How Does a Credit Score Actually Work? (Money Q&A)

23:27I find though that the SEP IRA feels a little too complicated in some scenarios. So the solo 401k, I typically at the end of the year, I have one. Now typically at the end of the year, we'll have my CPA run the numbers. They do the math and say, hey, here's how much you can put into this solo 401k. And usually they try to tell me, okay, you can put all the way up to the cap or if there are times where I couldn't. I remember back a couple of years ago, there were years where I couldn't. And so they just tell me, they come to me and tell me how much I can put in there. There's also the Roth Solo 401k, which is fantastic.

24:00And that is another great account. Like if you're looking at a Roth 401k, the Roth Solo 401k works exactly the same way, but you can't have employees outside of maybe, you can't have employees in your business outside of a spouse. So once you start to have employees, if you start to go and build this business and to maybe like a consultant or something like that, then it would change the way that you can do this. But if you wanted to get a really, really good amount in there, you can layer in the Roth IRA and you can layer in some other accounts that allow you to save for retirement. You also have the HSA available to you.

24:30So you can contribute to a solo 401k or SEP, whatever you're looking into. You can contribute to your Roth IRA and you have the HSA available to you as well. In addition to the traditional IRA, if you wanted to go that route and you wanted to save on taxes in a specific given year. So I think the account is the easy decision. I think figuring out your tax situation is gonna be the harder portion, which is why I would look into the exclusion versus the foreign tax credit. I think those two things are gonna help you really figure out where you need to land. It'll be the big difference in this equation.

25:01But Solo 401k for sure, definitely look deeper into that. I think it is my favorite account overall and one of the best wealth building tools. Thank you so much for the question and congrats on your progress thus far. I think that's absolutely amazing. All right, the next question is from Nathan. Nathan says, I listen to a lot of great personal finance podcasts, but yours is at the top. Well, thank you so much, Nathan. I truly appreciate you listening. I am 51 with$750 ,000 in my Roth IRA,$575 ,000 in a traditional rollover, and$10 ,000 in a taxable account. Wow, that is absolutely incredible, Nathan.

25:37Congratulations. That is amazing. I work for the railroad and plan to retire at 59 to 60, which will give me about 95 to$100 ,000 per year and railroad retirement at 67 instead of Social Security. I have a special needs child and want to leave my Roth for my kids. Should I contribute more to my Roth IRA or a taxable brokerage account? I may also receive 400 to$500 ,000 inheritance and would love a flat fee advisor recommendation. So Nathan, thank you so much for the kind words. And you have done a phenomenal job. Having$1.3 million plus in your accounts with railroad retirement waiting for you is one of the strongest positions I have seen in a while.

26:18But a couple of things that I would tell you to do first is to look into this Roth versus taxable equation. And there's something else I would do instead. But if you have a special needs child and they really need to have this money on hand in order to continue their everyday living, then I would consider this. Now, this is what I would do in your shoes, okay? So just think about this and take this with a grain of salt, but I want you to kind of see if you can go talk to someone about this. I would not name them directly as a beneficiary in my Roth or any accounts because that can disqualify them from, you know, any means-tested benefits like SSI or Medicaid or any of that other stuff or the other programs that they may depend on.

26:55Now, if they're depending on some of these programs, I would definitely look into those rules. But the money is meant to help them instead of kind of remove some of the other benefits they have in place. And so the fix for this is you can actually draft up a special needs trust. You can go to an attorney. They can help you through this process to figure out how to draft up a special needs trust. And you can pair this with something like an ABLE account, if it makes sense for your scenario, where those two things can really help you as a companion for everyday expenses. So an ABLE account is great for those everyday expenses.

27:25The special needs trust is making sure that they get the money in the way that makes sense for them while also ensuring that they get care and help from some of these government agencies that are there to help special needs folks. And so this does require some special planning from an attorney. And this is not a do-it-yourself thing. This is a more complicated thing. But I would definitely have a conversation at least with someone and talk through, okay, well, what does this stuff look like? And how can I set this up in a way that makes more sense? Now, let me get to what you're actually asking.

27:55But that's the first thing I would do is I would just say, hey, let's get some protections in place. Let's get this legally protected so that we have that in place first. Now, this may cost you a few thousand dollars. If it does, that's just part of, you know, setting this up properly. And that's a-okay in my book. Like, I would be okay paying that, especially in your position where you are. I'd be okay paying that knowing that my special needs child is getting the care that they need. And it's all going to be structured legally in the correct way. So that's the first thing I would say. But to get to what you actually asked, your instinct to leave the Roth to your kids is smart.

28:27I think it is something that most people need to know the rules around the Roth. It is a great thing to hand down to your kids. A Roth that is inherited passes down actually tax-free and it keeps growing for your heirs tax-free and non-spouse heirs must empty it within 10 years. So you have a 10-year window if you inherit a Roth IRA where you must empty that out and no income tax will be owed along the way. Now, the taxable brokerage account gets what we call the step-up basis at death, meaning your heirs are gonna inherit it as if they bought it at the date of death value, wiping out all the capital gains entirely, which is a very cool benefit of something like a tax brokerage account.

29:09And this is where I think both of these are pretty air friendly. The step up basis is a very, very powerful thing. Now, let me explain the step up basis really quick for those who haven't heard of this before. Let's say, for example, you have a taxable brokerage account and you ended up putting$100 ,000 in that taxable brokerage account and it grew over the years to $500 ,000. So the gain in that account is$400 ,000. Typically, when you pull money out of that tax brokerage account, you're going to owe long-term capital gains tax on that money. And that's going to be 0%, 15%, or 20%, depending on where your income is at that time.

29:43But when you pass away, something called a step-up basis happens, where then all of the sudden, now that account moves all the way up where none of that tax is going to be owed on that money, all the way up to the the point of death. And so if you died and you had$500 ,000 in that account and your kids inherit that money, all of a sudden the clock resets. And if they keep those dollars invested, then they would owe on the growth of that money after the date of death. This is a pretty cool benefit to a taxable brokerage account. And so that's the other thing to look at is both of those have the pros and cons of this.

30:16And it depends on your situation on which you want to look at. But there's also one other thing to look into is if you plan on retiring at 59 to 60, your railroad benefits start at 67. What are we going to do in between there? And how are we going to think about this? You may have to draw down on some of these accounts for that time being for the seven years that you have that differential there. And so that's another thing that we want to look into and think through how we want to structure this and make this work for your retirement as well. But one thing I would say is that you are in wonderful shape thus far.

30:44And this is all about optimization. It's all about thinking through the process and exactly how you want to do this. So here's the things that I would tell you to do. One is I would make sure I talk to that trust attorney and ensure that you at least have a conversation, figure out what they could do for you. And then you can make the decision on if it is the best possible option for you. Then when you're looking at the Roth versus the taxable, you want to understand, okay, well, am I going to give this entire account to them? How do I want to think about this? Do I want them to be able to pull on this in the next couple of years?

31:10And so both of those have tremendous benefits overall when it comes to your kids inheriting that money and they can continue to allow that money to grow in the Roth for up to 10 years after the date of death, or you can give them the taxable and then you are going to have a step up basis in the taxable on the date of death. And so between those two things, both are great options. It's just going to depend on what you really want to see them do with that money. Do you want them to keep it invested? Do you want them to draw on it? How do you want to think about that? And then from there, you can make that choice.

31:41But I would first start with those two things. And again, you're in a wonderful position. Congrats to you on all the hard work you have done thus far. I think that is warranted. And you're gonna see these accounts compound pretty quickly over the course of the next seven to nine, 10 years because of the way that you have set this up. Once you hit your first million, you really start to see it accelerate as time goes on. So I congratulate you and truly, truly appreciate you sending in the question. And let me know what you decide. I would love to hear more as you start to think about this. My relationship with money has changed a lot over the years.

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35:34Awesome. The next question is from Lindsey. Lindsay says, good afternoon, Andrew. I've been listening to your podcast on and off since 2021 and 22. Your podcast helps give me momentum to keep good financial health and to go through the financial steps. My question is, how do you prioritize your value areas in life and tell yourself that you are okay financially? My husband and I went through a season of lack the last few years, but we are now in a season of abundance and we have one times our income saved for retirement before our 30s, a six-month emergency fund, and a sinking fund. But my mind still sees us struggling.

36:09How do you make that mental shift? Lindsay, I absolutely love this question, and I am so glad that you sent this in because I think so many people out there feel this. You get to the point in time where, first of all, you guys are doing absolutely incredible. Having one times your income saved, having that emergency fund in place, having everything set up in a way that makes sense is absolutely incredible. And I think what you are doing here is, you know, you are on top of your game. So I want you to know right now that if you're at a point in time where you feel as though you've got extra money on hand and you've got this cash on hand where you are in a position of strength, then let's start to work on our money mindset.

36:50And I would first tell you to look and acknowledge that you are probably having a scarcity mindset. So you wanna figure out where that's coming from. And when it comes to a scarcity mindset, I had this for years and years and years. I struggled with this forever. I came from a middle-class household. And for me specifically, everything I did when I was growing up, I had to earn myself. Where even when I was going to high school, for example, I went to a private high school, everybody around me was kind of given things. They were given things in a way where I was kind of shocked at how much stuff they were given.

37:23And I was always the type of person that I had to go and earn it. I had to go out. And if I I wanted to go buy something, I had to go earn money in order to go buy something. My parents didn't just hand me money. My friends, we would go to the mall, for example, and I would watch their parents just hand them a bunch of$20 bills to go buy stuff at the mall. Me specifically, I had to bring my own money every single time. And so because of that, I had a similar mindset where I had to earn this. I had this scarcity mindset and I didn't want to go back to that feeling where I always had to do certain things that created this environment in my brain of like, hey, I need to earn it every single time.

37:59And so sometimes it feels as though you still need to continue to earn it, even though you've already got to the point in time where you can start to enjoy your money a little bit more. And so what happened here is then this caused me in my 20s to have this really frugal mindset. And I've talked about this a number of times, but there was a point in time where I hit rock bottom. I was living paycheck to paycheck on my first job. I hit rock bottom. I didn't have enough money to fill up my gas tank. And at that point in time, I decided, okay, I'm going to turn this whole thing around. But that also doubled down on my scarcity mindset because I hit rock bottom and I figured out my finances and I figured out how to budget.

38:33I figured out how to start to build wealth. I figured out how to increase my income, but I still had the scarcity mindset that I didn't want to go backwards to where I was. And so, you know, my upbringing had a huge impact on me because there were times, you know, like we, you know, my parents own a business and when the business went under, we had to go live with my grandmother for a few months. There were times where like all these different things would happen to me. And I just had this scarcity mindset. Like I don't ever want to feel that way. I don't ever want to do this. And so I would hoard money or I would put money aside and feel as though I just couldn't enjoy it.

39:02And it took me throughout my entire twenties to work on this. And what I realized was that spending is a skill. It's a skill that you can work on. And there's a skill that you can earn. And when you start to think about spending as a skill, It's going to change the way you think about money. And this is going to be something where I want you to kind of create a list of things that you actually value. Now, your values and your husband's values may be very different. Maybe you're looking at your values and you value, I don't know, fitness and you value traveling and you value doing other things and your husband values a very different set of things.

39:38But you can come together and work towards common goals that are going to help both of you achieve what you want in this life. Okay. And so you got to think through, okay, how much do I have left at the end of every single month? Well, if I'm hitting my retirement goals, if I'm hitting my investment goals, if I've got my six month emergency fund, if I've got everything in place, guess what? You get to enjoy some of that money. You have earned the right to enjoy some of that money. And I want you to know that right now, because this is one of those things that now, once you realize, okay, I can enjoy some of this money.

40:08Now we need to identify those values and we need to spend a little bit more on those values. So I want you to create what I've talked about in the past called a blow fund. A blow fund is something where you put a set of capital inside of a little sinking fund on the side that you can spend on things that you actually want to spend money on. So set aside, maybe it's$100 to begin a month. Maybe it's$200. Maybe it's$300, depending on how much you have left over. And start to use that fund as a place where you and your husband can enjoy that money. And maybe you split it up if you want to enjoy it on your own and you want to put it towards your own hobbies.

40:44Do it this way. Split it up where each of you get half and you just start to spend it on things that you actually enjoy. I want you to practice spending more on things on purpose. Because in my 20s, I didn't practice this enough. And then I started to practice it a little bit more in my early 30s. And now I have it down pretty much to a science. And sometimes I actually spend overspend on my values. And so I have to reel it back at times to make sure that I am on track. And so in reality, this is going to be something that you'll never fully master. Nobody ever fully masters the game of money.

41:15But what you are going to be able to do is you're going to be able to spend more on your values and spend more on things that bring you joy. But it comes down to really talking about this and having a conversation about this and being intentional about writing out those values. I love to do this where I will actually recalibrate every couple of months and say to myself, well, am I really going in the right direction and rowing in the right direction towards my values? I've seen this happen a few times where I've started to overspend just on random stupid stuff, for example. And then I'll go back and look at my values and I'll say, well, this isn't supporting what I really want to do.

41:48This isn't pushing towards the goals that I actually have. This isn't pursuing financial freedom, the freedom that I want for me and my family. This isn't pursuing that long-lasting legacy building wealth that I really want. And so instead, I need to make sure that I recalibrate and I reprioritize. Let me give an example of this because I just started to do this recently. One of the things that I have said throughout my entire life is I think that a boat is a big old waste of money. I think a boat is one of those things that is an appreciating asset that goes down to zero at some point in time.

42:19But then I started to rent some boats with my kids and I saw the smiles on their faces and my wife absolutely loves going out on the boat and how much fun and how much happiness and joy it brought my family. Where I live in Florida, we have islands all over the place that you can boat to. You can hang out on the island all day and then shoot back. It's basically like having your own private beach for the most part. And so I realized pretty quickly, this is something that is so incredibly valuable and we are creating these amazing memories. And so I started a boat fund where I am going to, at some point in time over the course of the next five or six years, I'm going to buy one of the dumbest purchases that you can buy.

42:54I'm going to buy a boat, but I'm going to pay in cash. And I am going to make sure that I do not ever go into debt for something like that. But this is a scenario where I said to myself, what are my goals and what are my values? I want my family to enjoy these experiences together. And so that is why I went out and started this boat fund. And so over the course of the next couple of years, I'll talk about this on the show, but I am going to, you know, have these dollars set aside so that I can buy this boat. Now I, if anybody wants to know the parameters around what I'm doing here, I'm actually investing the dollars because I don't care if the market pulls back when I'm ready to buy the boat.

43:29I'll just wait a year or two longer if that's the case. But for me, for most people specifically, if you're saving for something short term like this, I highly recommend you doing it in cash. I just know what the what the rules of the game are here. And I'm pretty, pretty much ready to just allow that to grow a little bit more and take that risk. And then if it does pull back, I'm OK not having the boat. I'll just continue to rent them. But that's just going to be the way that I do it and the way that I structure it. And so I came to the conclusion that forever. I didn't want to do it because I know how much, you know, a money, how big of a money pit a boat is.

44:00But instead I decided, you know what, I'm going to build a cash plan to go out and buy a boat. So I put a little bit of money every single month in that fund. Going to see what happens here. And I'm really, really excited for it. But that is me practicing spending on my values. That is me practicing exactly what I'm talking about here. I want you to start practicing it, put it in this blow fund and start to see how you feel about this. How do you feel about spending a little bit more on yourself. How do you feel about taking the extra classes or going out on that fishing charter or going out and doing an extra vacation or two a year or buying the extra stuff at the store?

44:30How do you feel about it? And then start to really just exercise that muscle. Now, you don't want to take it too far, but you want to exercise that muscle a little bit more frequently so that you can build the skill of spending. And I think that's going to be one of my favorite things that I love to unlock for people is building the skill of spending because money is there to enjoy. It is there to bring you value. And that's what I want it to do for each and every single one of you. So that's the starting point is first work on the psychology. But as you're working on the psychology, put it into practice because doing those two things together is going to allow change.

45:04And that's what we want when it comes to spending. All right. So now we're going to talk about the financial scam of the month. And I am going to be willing to guess that many of you have had this happen to you over the course of the last couple of months. or maybe over the course of the last couple of years. And if you have, I want you to comment down below on Spotify or Apple Podcasts or YouTube or wherever you're watching this podcast, because I would love to hear from each and every single one of you. And the funny thing is, is when I planned to do this episode and planned to talk about this specific financial scam, the same evening that I set up this episode, I got the literal text message that I'm about to talk about right now, this exact scam.

45:43It was hilarious. And just one of those things that made me realize I'm probably supposed to talk about this in the podcast. I'm excited for it. So this is the USPS or the FedEx or the DHL or Amazon logistics. This is the scam. We're going to get a text message that you missed a package. Now, if you have seen this in the past before, many times you'll get a text to your phone that says, Hey, miss package, click the link so that you can recover your package. Well, most parts of this country right now, many people are expecting a package of some sort. And if these scammers get people and they get a lot of people, which we're going to talk about a second, they can actually send out this text message and they are just playing a volume game, hoping that you're expecting a package and you're going to click the link.

46:22So here's the numbers behind this scam. People reported$470 million in losses to text-based scams in 2024, which was just two years ago, and nearly 100 million more than the previous year with package delivery scams as the single most reported category. So the number one category where people are getting hit with scams when it comes to text messages is package delivery scams. The FBI and the United States Postal Service issued joint warnings about a dramatic surge in these text-based phishing scams that are happening right now. And so here's how this works, because it is a very low pickup that you won't notice, but here's the big thing, okay?

47:02A text message arrives, and it looks like it's from the United States Postal Service or FedEx, or I get them from UPS all the time. It always says UPS, DHL, or Amazon Logistics. And the message references a package that could not be delivered or a customs hold or an address confirmation needed or a small re-delivery fee. And it's usually like$1.99 or$2.99. Now, what the message does is it creates mild urgency. So the one that I got, for example, says, hey, you need to respond by tomorrow. We're going to send it back to the company where you ordered this package from. And so it makes you say, okay, I'm going to try to get this information to them so that they can redeliver my package tomorrow or the next day.

47:43And it's going to say your package is either easier to delay or they're going to send it back. And then there's a link that almost looks legitimate. So a common pattern to look at this for would be like uspsdeliveryupdate.com or fedextrackingalert.net or uspsredelivery.com. And sometimes they use link shorteners to hide the destination entirely. But the link is going to lead to a fake website that mimics looking exactly like the carrier's branding. So if it's a USPS one, it'll look like their branding. If it's a FedEx one, it'll have the purple and orange logo and it'll look exactly like the FedEx website.

48:20And it'll ask you to confirm your address and pay the small re-delivery fee. Now, here's what happens because this$2 charge is a smokescreen. All it's there to do is to get your credit card number when you put in that information or your phone number or your address. and it's going to start to take some of your information and sometimes even your login credentials for the specific websites if you have one. And the data gets sold combined with other breach data and used to open accounts in your name. And so if you ever get these text messages, what I would say is do not ever click the link and do not ever put your information in with that specific link.

48:58I got one recently, which was the funny thing, but I hadn't got one in the past before this, before I started to talk about this, but I had friends that I've talked to who get these all of the time. And I think it's really, really interesting how they do this because you are not even thinking about it. You're probably expecting a package and if they hit you at the right time, all of a sudden they perfectly are going to hit you where you're just going to say, oh shoot, I was expecting that package today, didn't get it. I better make sure that I put in this information. And so you may be asking yourself, well, how do they get this information and how do they find it?

49:27Well, the main way is from these data brokers that are out there. There are data brokers that sell your information and they take your information and they will sell your name or your phone number or your address, whatever information they have on you. And they will sell it to these scammers left and right. They don't care whatsoever. They have your information. They just want to sell it to these scammers. And so what you want to do is get your information removed from these websites. And so the way to do that, the way that I do that is with a service called DeleteMe. DeleteMe will go to these data brokers and they will remove your information from these websites, which if you do not use a service like DeleteMe, will take you hours and hours and hours.

50:06And so this is a big portion of my financial protection plan online. And every single person should have a financial protection plan online in 2026 because this is the time where scams are getting better and better and better. So use DeleteMe to remove your personal information. And it is one of the best services out there because they also will continuously monitor these websites to make sure that your information is removed. So if you go to joindeleteme.com slash PFP20, You can get 20 % off Delete Me with that link. So I highly recommend that you do this because again, this is something I have been doing for years.

50:41It is one of the best services that I use. They get rid of that personal information so you do not have to worry whatsoever. They get rid of that personal information. It would take you hours and hours to do this on your own but Delete Me does it for you. And so I highly recommend that you look deeper into that. This is one of the most important things that you can do. So you are not subject to a lot of these different scams that are happening. and if they get a piece of your information, all they have to do is go to the data brokers and get the rest of it and they can open accounts in your names, loans in your names, all sorts of different things.

51:10I am so strict on this stuff because I had my identity stolen. I know what it feels like. I know what a pain it is. And so this is why it is so important to me to spread this message of all these different scams so that it doesn't happen to you. All right, so the next question we have is from Cassandra. Cassandra sent in and said, should we keep investing aggressively or pull back in order to save more for a down payment on our first house? So Cassandra, this is a great question. I think a lot of people struggle through this question. And it's a big, big thing that a lot of people have to think through because right now in today's day and age, unfortunately, the housing prices have risen over time.

51:47And so sometimes you have to think through, okay, well, if I'm going to make any meaningful progress towards this down payment, I may have to either reduce my investing or make a shift in my entire budget. But here's a couple of things that I would think about first is number one is I would look at your area and think through total cost of ownership because it may make more sense right now to rent than it does to buy. And so what I would do is we have a total cost of ownership calculator that you can download for free. If you go to mastermoney.co slash resources, and you want to look at the difference between buying a house versus renting a house in your area, because if you're saving for a down payment, not realizing that, you know, you may be spending way more on buying a house than you would just renting and investing the difference.

52:27That's the first thing I would look into. And we have tons of episodes diving deep into that if you want to look through that. But if you're thinking through, okay, well, I am going to be buying a house over the course of the next couple of years, and I don't really have a firm timeline yet, then here's how I would think about this. Once you run those numbers, then it's time to come down to, okay, well, am I hitting my retirement goals? If you're hitting your retirement goals with your investing, that's the bare minimum that you need to invest is figure out, okay, how much do I need to retire with?

52:55And I want to hit those retirement goals first. Once you have that in place, then you can start to save for a down payment on a house because the last thing you want to do is allow a house to derail your progress towards retirement. If you stopped or slowed down investing and all of a sudden started to save for three to five years into retirement, you are losing out on not just those investment dollars, but also the opportunity cost that those investment dollars would have grown to if you would have kept them invested. Whereas if you moved the money over to your down payment, it's likely going to be sitting in cash because if you are saving for a down payment, typically we want that in a high yield savings account sitting in cash so that you have it available when it comes time to be able to buy the home.

53:38And so this is one of those scenarios that I think if you are looking at a five year or less time horizon, it is a big difference in what you're doing there. So some non-negotiables or things like your 401k match, making sure you're investing enough for retirement, making sure you have your emergency fund in place first, then you can go and start to save up for that home. But I wouldn't really slow down investing unless you are just above and beyond where your retirement numbers are. Outside of that, I would continue with the plan of investing and then try to increase your income to save more for those retirement goals or save more for the house goals if you can.

54:13Otherwise, there's nothing wrong with renting. And I want everybody to remember this. There's nothing wrong with renting at all. Now, I want everybody listening, obviously to own a home. I think it's great to own a home, but it's not a financial decision. It's a lifestyle decision. And when we think about this as a lifestyle decision, it's going to change the way we actually think about money long term. The Shiller Index, go look up the Shiller Index for home prices over the course of the last few decades, and you will see homes have appreciated after inflation and everything else right around 2 % to 3 % every single year.

54:40And because of that, investing those dollars into the market can be a big, big difference for a lot of folks. Now, sure, if you're not investing and you are deciding to build up your wealth in your home, The big thing about the home to remember is that you can't pull money out of your home in retirement. This isn't something that you can utilize in retirement. So if you want financial freedom, if that's your number one goal, prioritizing investing first, and then everything beyond your retirement number, then you can put towards some of the other goals like buying a home. So I think that is the way to kind of think about this.

55:10You want to make sure you run total cost of ownership, understanding the entire total cost of ownership of buying a house, because there's a lot of additional costs that most people don't factor in. And then from there, you can really make a sound and solid financial decision. So thank you so much for the question. Really great question. I truly, truly appreciate it. All right. So the next one is from Unique. So Unique says, how does a credit score actually work? So this is a great question, Unique. And this is something where I'm going to go through the different areas of your credit score. And then I'm going to show you how to 80, 20 year credit score, the areas that you should be focusing on and the areas that you really don't have to focus on as much as some of these other areas.

55:48So here's actually what goes into your credit score. And I want you to understand each of these. So number one is payment history. So payment history is 35 % of your credit score. So this is whether or not historically you have paid your bills on time. And it is the single biggest factor by far. Meaning if you make sure that you are paying your bills on time and you have a length of credit history that makes sense, this is going to be 35 % of your credit score. So the way to make sure that you're making those payments on time is to ensure that you are automatically paid. You're setting up auto pay on all of your different bills.

56:23That's the first thing that you need to be doing so that you can automatically make these payments. And if you're worried about, okay, well, I don't know if I'm going to have money in that account. You can actually move the dates of a lot of your bills to a couple of days after whenever you get paid. So if you get paid twice a month, you can move the date of those bills, let's say to the 15th, for example. So you know when those bills are hitting. And so it makes it a lot easier. but I highly recommend that you automate your money when you're looking at payment history. Number two is your credit utilization or the amount owed.

56:52And so this is how much of your available credit you're using. So let's say, for example, that you have a$10 ,000 limit on a credit card and you use$1 ,000 per month on that$10 ,000 limit on a credit card. That means you are utilizing 10%, okay? If you spent$5 ,000 on that card, you're utilizing 50%. And so this is spread across all of the different credits that you have available to you. So if you have 10 credit cards with$10 ,000 available and you spend$10 ,000 across all those credit cards per month, then you're using 10%. So this is one of the most important factors. This is actually 30 % of your credit score.

57:30And this is going to be a big, big deal. So you want to make sure that you're leaving your credit utilization below 20 % is like the max that I would do. but if you can even do it even lower than that if you can make it to something like below 10 percent that is what people with really high credit scores do is a study was done that looked at people with 850 credit scores and most of them kept their utilization below seven percent so i want you to notice two things payment history and the amount owed or your credit utilization those two alone are 65 % of your credit score, meaning that that is a huge, huge portion of what's going on.

58:09But the third one is the length of credit history. So this is gonna be 15 % of your credit score. So these three areas right here are the 80 % I'm talking about. The 80 % of your credit score that you really need to worry about is a length of credit history. How long have you had credit? If you are just graduating from college and you have not had credit for very long, then all of a sudden you're gonna realize, okay, well, I don't have a length of credit history that's really, really impactful. And so older accounts can help you with this. And this is why I always want you to keep some of your oldest credit cards open, if you can, some of your oldest pieces of credit history.

58:44But this is only 15 % of your score. So the first two are the two that you need to focus on dramatically. And then the next three are less, but the length of credit history is 15 % of your score. So between your payment history, your credit utilization or amounts owed, and the length of credit history, that is 80 % of your credit score right there. Those three things, and really two of them are 65, and those are the two you really need to focus on. The fourth thing is credit mix. So the mix of different types of credit. Do you have a credit card? Do you have a mortgage? Do you have a car loan?

59:12Do you have that, that, that, that, that, that? All of these different pieces are going to be about 10 % of your score. I would not worry about this. If you're saying to yourself, well, I've only ever had a credit card, maybe I should open up some other loans. No, don't do that. Just instead, continue on the path that you need to continue on for your own personal situation, but don't open up a bunch of different loans just so you have more credit mix. It's only 10 % of your score. And then the last thing is new credit. So how often are you applying for new accounts? This is also 10 % of your score.

59:42Every application can trigger a hard inquiry, which can drop your score. So if you've ever opened a credit card or you've ever gotten a mortgage, you can see, okay, my credit score, boom, it dropped 5 % or it dropped 7%. That's why. is because new credit inquiries are gonna drop your score temporarily and then it bounces back. So these are just the different things that are going to impact your credit score long-term. And these are the things that are gonna make the biggest impact. If I was anybody out there who was thinking about, okay, how do I fix this? Payment history, making sure you are always, always, always, always, always paying on time.

1:00:16It's the number one factor in your credit score and your credit utilization. Those two things are gonna be the two biggest things that you need to focus on. Then the third thing, if you wanted to add in a third thing is the length of credit history. But if you are newer to this, just focus on the first two and not the third one. You don't have to worry as much about the third one. That's how you increase your credit score over time. And it takes a little bit of time, but once you get it there, you are really cranking this out and doing some great stuff. It's a six-figure decision to make sure that your credit score is on top of its game.

1:00:45So really, really good stuff there as we start to think through this. Now, we're going to jump into a quick health corner. All right. So welcome to another health corner. Really, really excited for this. And, uh, there has been some things that I have been doing as of late that I wanted to talk to you guys about. So I've talked about my sleep issues over the course of the last couple of years. And I have done a bunch of different things that have helped me with those sleep issues. And this is one of them. So recently, and this is not sponsored whatsoever. Uh, I'm just kind of talking about them.

1:01:12I'll talk about the pros and cons of this. But recently I realized that I am really hot when I sleep. I run hot and everything that I do, I just radiate heat off my body all the time. I work out a lot. And so my body temperature is pretty high. And so because of this, when I sleep, I am waking up a lot. And I think part of the reason was because I was hot. So I invested, I bought it with my own money. This is not something that is sponsored. I invested in what is called a chili pad. Now a chili pad is basically a mattress topper that you put underneath your sheets that cools down your bed to a specific temperature.

1:01:44So I actually run mine about 55 degrees on my chili pad and it cools my entire body down while I'm laying down on my sheets. And it has helped me tremendously with my sleep. In fact, I'm seeing deeper sleep and I'm seeing a, just a big difference in it overall in my HRV and in my sleep scores. So I have been getting sleep scores in the nineties on my Garmin for runner nine 70 ever since I got the ChiliPad. So this has been a huge portion of what has helped improve my sleep over that time frame is making sure you cool down your body. Now I got the ChiliPad Cube, which is the cheaper version. It's about a$500 mattress topper.

1:02:24It runs cool water through these coils that are on that mattress topper. Now here's the problem with it. This is the thing I don't like about it is the coils. The coils press up against your back and it feels a little bit uncomfortable for me, but I'm willing to make that trade off so that I can have deeper and better sleep. So right now, I'm not really that comfortable in my bed because of those coils, but you get used to it over time. And many people have reported they got used to it as well. And so I have noticed after using it for about 30 days now, I don't notice it as much anymore. It used to, like at first, the first couple of nights, I felt like I was sleeping on a bed of extension cords, but now it feels a little bit better.

1:03:02And it's not as thick as an extension cord at all. Don't think that. It's a very small little coil that runs water through it. So you can kind of feel the water running through your back and then you get used to it. It's not a big deal at all. Some people put some mattress toppers on there, but it can impact how cold it gets, but it gets very cold. I mean, it's, it can, it actually makes a huge impact. It takes water. You run the water through the system. The system then goes and chills that water and then runs it through your mattress pad. So it's a pretty cool system the way that it works. And they have other competitors out there.

1:03:31There's chili pad. There's eight sleep. I think there's some other ones out there. And I was debating on either going with a chili pad or a bed jet. The way that bed jet works, if you don't want those coils, is it's a fan that you put under your comforter and it shoots air into the bed, basically. And you can make it cold air or warm air or whatever else. So if you think you would like that more, that's another thing to look into as a bed jet. It's about the same price as the chili pad cube. So that's definitely something you can also look into. So again, this is my health corner for this week.

1:04:00It has been very helpful for me to have that chili pad in place. And again, I've been sleeping, you know, seven and a half to eight and a half hours on that chili pad and really not having much wake up at all. Actually, a couple of times I've woken up because I've been too cold. So that's been an interesting dynamic and a big shift for me as well. So again, thank you guys so much for listening to this episode of the personal finance podcast. I truly appreciate each and every single one of you. And if you want to dive deeper more and you want to be able to asked me these questions live on calls, consider joining Master Money Academy.

1:04:30Master Money Academy is where I do these live coaching calls on a weekly basis. And we have all of our courses in there and everything else. And we have a seven day free trial down below if you want to check it out. But it is our community, our personal finance community, where people are working on common goals in order to be able to build wealth. You can bounce ideas off each other in there. And there's so many other cool things that we have available. So nothing to lose. If you want to check it out, join for seven days. Link is down below in the show notes. Other than that, I truly appreciate each and every single one of you being here and we will see you on the next episode.

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