Keeping More of What You Make

Part 1 - Introduction and Credit score

Instructors:

Garrett Gunderson

Garrett Gunderson

Garrett B. Gunderson is a financial advocate to dentists.  Through the value of Soul Purpose, he empowers people to build sustainable wealth consistent with their passion, purpose and knowledge. Last year, his firm saved doctors over 7,800,000 dollars in recovered cash through his Financial FastTrack program.

Garrett Gunderson, New York Times bestselling author of Killing Scared Cow and a financial advocate to dentiste discusses how you can keep more of what you make. In this first section, Garrett will review how your credit score impacts your credit li

Hi, this is Garrett Gunderson, New York Times bestselling author of Killing Scared Cow and a financial advocate to dentist. I'm excited to be talking to you today about how can you keep more of what you make. You see out there being productive there's a lot of things going on in the dental office and as a business owner I know that there's a lot of time constraint because when is there time for everything else especially when we look at personal finances. And if we look into the media, one of the things that happen there is they try to tell you it's complicated, they got to tell you or you got to rely on an expert. I got to ask if there were so many financial experts, why were we in financial catastrophe that we're in. I've seen statistics that anywhere between 92% and 98% of dentist are not prepared for retirement and wouldn't be able to be in retirement at age 65. So, today rather than given the old contrive advice of save more, sacrifice, differ and delay your money. I'm going to give you specific tips and practical strategies of how you can keep more of what you make. Find where there are leaks. Plug those leaks so you have more cash flow immediately. So I want to make sure that you can take and implement this right away to improve your cash situation. And I got to tell you with the dentist that we worked with those are pretty substantial numbers. The average dentist saves $2884 a month in cash flow. And this isn't through budgeting and constraint. But this is through proper strategy and techniques of what I'm going to cover today. Anything from how you manage cash flow to even looking at your credit score and how can improve that and how that might improve interest rates. Because we're at all time low at interest rates today. So we're going to be covering that. We're going to look at everything from your corporate structure, what type of corporations there are, and what advantage that each one have. We're going to look at other things like how you take your income and how that impacts you from a tax perspective. If you own a building what that means from a tax perspective. We'll look at insurance. Do you have unnecessary coverage or duplicate coverage or anything that way that overextend you or having you pay more than you need to or when we get to the investment side. Are there hidden fees or hidden commissions that are a drag on your money? So this is how we're going to put more money in your pocket rather than overpaying the government or giving the financial institutions more than their fair share so you could regain control of your finances and build more wealth. So hopefully you're in the right place and I won't make this over technical, overly boring. I'll try not to be monotone. I'm going to make finance as exciting as it can be and hey when there's more money in your pocket that just seems to be a better situation. So from a tax perspective let me just say this. We found that in a survey of 117 doctors where I got on the phone with docs that we're working with my firm, a 107 of them were overpaying their taxes. Now that's a pretty substantial percentage and the average overpayment was $11,700 a year. This isn't some offshore accounting or this isn't something to do with being a sovereign citizen and those crazy technics. This is simply looking at a proactive strategy to say with the new economic recovery act and making sure you take your income properly and have the right corporate structure where you're overpaying taxes. See most accountants become a little bit reactive. They become more preparer of tax form than planners of tax strategy and because of that that's why a lot of docs are leaking money. And so let's kind of stop some of that. So I want you to kind of being by thinking where is it that you might be leaking money as we talk about all these areas. When was the last time you check your credit score. When was the last time you look at your insurance coverage whether that's car, home, liability, disability and medical or life insurance? Do you have the right amount? Do you have the right deductibles, the right elimination periods? And we're going to talk about what that means and how that you can determine if that's proper. You know if we look at your credit score that impact what rates you're paying on your car, home owner insurance, and definitely any loans that you may have. And so I want you to take that into consideration because we really could start improving your finances immediately with these things. Now when we look at investments, if you're funding retirement plans, do you know what those expenses are whether it's administration expenses or the expenses within the funds. Sixty Minutes did a special where they said that there's 401(k) that have up to 12 different expenses: admin fees, legal fees, marketing fees. You know you name it, all within these plans that aren't fully disclosed. So because of that that's where we can find some of these leaks and plug it. Well start listing. Where are those places that you haven't look or maybe you could be leaking money. Let's start diving in to the very first place right now. Credit. Now why is credit important? Because 83% of Americans have an error in their credit report. That error is so substantial that a fourth of them get denied credit when they go to get a loan. Doctors may be paying bills on time but bill paying is only a third or less of what constitute or make up your credit score. So I'm going to give you a what makes that credit score, how that might impact you, and here's the biggest advantage right now. Interest rates are at an all-time low and debt is negotiable. So if you haven't talked to those institutions recently to get a better interest rate, you're overpaying them. Now let me say it again. You're overpaying them if you haven't done that negotiation. So if you do something called credit dressing is what I called it. Which is you spruce up and dress up your credit score by understanding how the credit score work. Now you have even more negotiating power and leverage when you call to get a better interest rate. So here's the first resource. Annualcreditreport.com will allow you to check your credit score for free once a year. You can look at Transunion, Equifax, Experian. Those are the three bureaus and find out what's going on. Here's what to look for when you pull it up. No. 1 are there inconsistencies or errors, right? Let me give some more contexts one more time. If there are errors it's going to affect your credit score. If you want to get simply a $200,000 loan, right. Let's say it's a mortgage, a $200,000 mortgage on a condo or something you would pay an extra $6,000 at closing to buy the same interest rate if you're the 719 credit score than if you're already 720. So one measly point is a $6,000 cost to give the exact same interest rate. So it's important you know. They're looking when you're getting car insurance what your credit score is. So that impacts your rate. They may not talk about that or say that but it's actually impacting you. So, inconsistency hurt your credit score. Is your name spelled the same, do you have the same address everywhere that's on there. I mean does it have your employment address the same. Does it anything, you look through that. Now here's the dirtiest trick that these bureaus do, not the bureaus but the recording of the financial people to the bureaus. Credit card companies are notorious for this. You probably heard of something called loan-to-value. So if you have a revolving debt like your credit card. And you have an available balance of $10,000 or that's your limit. Well, let's say you go and charge $2000 on that card. If the agency, the credit card agency doesn't report your limit, it may look like you're max out when you spend $2,000 because they're not showing how much is available to you which would still be $8,000 meaning it's a 20% loan-to-value. All you're doing is you spent $2,000. You've got $10,000 total. So you have $8,000 available. If they don't report it, it looks like you've maxed out. And your loan-to-value is a major component of what makes up your credit score. So you want to look. Are they reporting your available balance or your limits? If they're not, it's going to hurt your score and the reason they want your score to be lower is you're not going to have more competing cards coming after you with better interest rates. So pay attention to your loan-to-value. If you can keep your loan-to-values under 20% or 30% and here's the thing, even if you pay the credit card off in full each month, it still is important to keep your loan-to-values low because they look in at certain times. And when they go to look in, they might find hey you go $4,000 on a $10,000 available balance or limit and they're going oh that's 40% loan-to-value even though you're going to pay it off in two days. You don't know exactly when they're doing the reporting so here a couple of technique. One, increase your line of credit. More available credit means better credit score. That's cool. The second thing is have more than one card but not too many. Three tends to be the optimal on a personal side. A business side doesn't matter. If the business cards are not reporting the credit agencies as long as you don't default it doesn't impact your credit score. So that's an important notation. Stop getting department store cards. Hey you get 10%, you get 30% off if you get your card today. They give you small balances and it's usually high interest rate if you don't pay exactly on time or your loan-to-value get hurt quickly and it does something called an inquiry. Inquiry hurt your credit score. When you do inquiry too often that lowers your credit score. That's when you have credit card companies, banks, card dealers, anyone check your credit that's a hard inquiry. When you check your credit, it's a soft inquiry. Soft inquiries can happen all day long. It won't impact your score. But limit the number of times you let people look at your score. You're car shopping and you go to multiple dealership don't let them pull your report. Send them your annual credit report and say here's what I look like if I'm going to borrow. I'll actually have you pull my credit if I decided to buy from you. A lot of times they're trying out to pull a credit and sometimes they pulled it twice. They'll pull it to see if you're a candidate then they'll pull it when they do the actual financing that's going to lower your score. So debt-to-income is critically important. This is actually how much money do you earn or take home in comparison to the amount that goes towards loans. So if we look at mortgages, car loans, credit cards, student loans, all those. What percentage of your income goes to paying towards that is your debt-to-income. When you get above 30% debt-to-income for every dollar you have at ¢30 or more are going towards debts, that starts to hurt your credit score. Like credit score being lower means you have less available credit that you can get to, higher cost on car insurance that I mentioned before. So I know a lot of people they want to shorten mortgages because the institution says I'm going to give you lower interest rate. But what you got to realize that might hurt your credit in other places because it forces you in higher payment. Not to mention actually I am going to mention, it creates more risk when you are force in a higher payment. And I have especially find it revolting when these banks say hey if do biweekly payment you'll pay off your mortgage quicker. They charge you to do it. They force you an extra full payment a year by doing that and that's why it pays off sooner. But you got to realize less than 5% of people actually pay off the mortgage by following a mortgage plan. It's typically they stroke a check and even in the overall population less 5% of people ever pay off their mortgage. So one if you've done that congratulation that you've paid of the mortgage. But be careful about shortening your loans, it hurt your debt-to-income, it lowers your credit. And what's nice is there's no rule saying that you have to pay a loan off by just going 30 years or 50 years. You can stroke a check and pay that thing off in one fell swoop. I called it method versus objective. If your objective is to pay off a student loan, if your objective is to pay off a car loan or a home or any of those things, that's a great objective, I would never talk you out of that objective. But consider the method. Giving the bank extra money means locking more of your money away up to them. And here's the interesting thing. If you and your neighbor had the same house and couldn't make payments and you've been paying for 5 years extra payment on a 15-year mortgage and your neighbor was on an interest only was always late and irresponsible, guess who the bank goes after first for foreclosure. The person with equity in their home even though you were the more responsible person it puts you at risk. So no. 1, make sure you have liquidity first. Get savings. Have more cash on hand and then consider if you could be responsible and discipline enough to build a side account to pay off any of these loans at one time. Now I'm still on credit and I'm going to go more into cash flows, one four feature points, but I just want to give you some insight that when we talk about strategy it's not just about saving, it's about creating savings and building peace of mind and having your foundation build as well.