Good Debt Vs. Bad Debt

I had to chuckle.  I wanted to find a nice little online tool to reference to readers without making a lesson plan out of a blog post.  So, in my first search over the Internet, all these articles came up about presidents' net worth, celebrities' net worth, the top whatever number rich folk lists, etc.  Would be interesting to know the number of people who read those articles that knew their own net worth.

Anyway, some things people should just know...where they came from and where are they going; their social security number by heart; the date, time and location of their birth; compatibility; the date they want to retire coinciding with the date that they should be able to retire; where all the important papers are such as insurance policies, all the different kind of wills, and any power of attorney docs; the dollars and cents and/or value in each bank account and/or investments; and lastly, their net worth, cashflow and credit score.

Don't know too many people who want to be broke, but know a lot of people who would like to be financially free.  To be financially free is to have a cashflow where there the passive income dollar amount is more than the expenses dollar amount.  Passive income is income that comes in without going out and punching in at a job to get it.  Passive income would be income from real estate, investments, businesses, etc.  Financially free is not going out to the job every day.

Having a good credit score helps to make the financial terms favorable such as getting a low to zero interest rate and other incentives.  There are ways to obtain financing for homes and cars without using a credit score, but it requires a significant down payment, an excellent employment and personal history, and other special demonstrations and documentation.

My personal definition of credit is:  
"Credit is simply someone getting something that they can't afford to pay in full upfront on a payment plan and then paying extra money on top of the payment plan to use the payment plan." 

The majority of consumers use credit because it's "easier" to use to get stuff.  The only thing is that if credit is used to purchase something, having an excellent credit rating is key so it would be as close as possible to making layaway payments but with the merchandise already in hand.

I. Here are the formulas:

1. Assets - Liabilities = Net Worth
2. Income - Expenses = Cash Flow
3. FICO Score = Credit Score (important to know*)

II. Tools randomly found on the Internet**:

CNN Money Net Worth Calculator:  http://cgi.money.cnn.com/tools/networth/networth.html

PremierWest Bank - Financial Answer Center

• Calculating Cashflow: http://answers.premierwestbank.com/page.php?b=24532459-0&c=1451
• Calculating Net Worth: http://answers.premierwestbank.com/page.php?b=24532459-0&c=1449
• Personal Cashflow Spreadsheet:  http://office.microsoft.com/en-us/templates/results.aspx?qu=personal+cashflow&ex=1&origin=TC103107637#ai:TC103107654|

Free Annual Credit Report:  https://www.annualcreditreport.com/cra/index.jsp



III. Great Learning Tool***:

Rich Dad Poor Dad Cashflow 101 Game:  Online Version and Board Game
http://www.richdad.com/Rich-Dad-Games/CASHFLOW.aspx




*Learn more about FICO and Credit Scores at:  http://www.myfico.com/crediteducation/whatsinyourscore.aspx.
Remember, there is no need to pay to obtain a credit report from all credit reporting bureaus.  Everyone is entitled to a free annual credit report from all credit reporting bureaus from https://www.annualcreditreport.com/cra/index.jsp. 
Be careful of multiple inquiries.  Multiple inquiries affect the credit score except the inquiry for the person requesting a copy of their own credit report.
In addition to public records and creditor reporting, credit reporting bureaus get their data from applications. What a consumer puts on an application and tells the lender goes on the credit report file for all to see - including current creditors and those who hold judgments against that particular consumer.
Be sure that the free credit report program reviews offered by banks are not using the free annual credit report opportunity that is available directly for consumers.

**Not an endorsement or recommendation.  Just a reference.

***I personally have the game and it's more than just having fun.  Great for any age.