Soldier of Finance (9 page)

In a recent interview with credit scoring expert Philip Tirone (
www.philiptirone.com
), I learned a startling fact: About half of the credit card companies don't report card limits accurately to credit bureaus. For example, your card carrying a limit of $1,000 may only show a $500 limit on the credit report. Even if you kept the balance at 30 percent of the limit shown on your monthly statement (below $300), that $300 will look like 60 percent on your credit report, causing your credit score to drop.

Why do they do this? According to Philip, they don't want to lose you to competition. Credit card companies target offers for new cards to people with certain credit limits. If you have a limit of $10,000, you're likely to get an offer from a different company, hoping to convince you to switch from your current card. If your limit is falsely reported as $5,000, you will not be targeted by the competition.

This practice is completely illegal, of course, but that doesn't stop it from happening, so beware. Your score will suffer. Philip shared three suggestions with me that can help correct this problem:

1.
Check your credit report and confirm whether or not the limits are reported accurately. If you find an error, call the credit card company and ask them to rectify it.

2.
If this doesn't work, send a letter to the credit card company, asking them to verify your limits. Don't say anything threatening or complaining. The letter should appear to be a routine check into the limits of your existing cards. Once you receive the confirmation letter, write a letter to the credit bureau requesting that it correct the error. Include a copy of the credit card company's confirmation letter, a copy of your credit card bill showing the correct credit limit, and a copy of the credit report showing the incorrect limit.

3.
If neither of those work, call the credit card company again and read the riot act to customer service. Inform the representative that you are recording the call, and demand that the company report the proper limit. As a last resort, report the company to your state's Attorney General's office. The practice of incorrect credit reporting is, after all, illegal. Usually, however, you will find the problem resolved within the first two steps.

Go / No Go

• Credit repair takes time. The more negative items on your credit score, the longer it will take.
  
• High debt lowers your credit score, but so does no debt.
  
• Every time you apply for credit and a credit check is run, it lowers your credit score.
  
• The first step in repairing your credit is to gain control of your spending. This requires lifestyle changes.
  
• To establish credit, you must use credit, but you must demonstrate reliability. You cannot miss payments—ever.
  
• Pay off your debt. Stop charging things and find ways to reduce the amounts you owe.
  
• Credit cards have become necessary; get the most out of them by using them in a way that helps your credit score rather than bringing it down.
  
• Make sure you have the right credit cards, primarily Visa, MasterCard, Discover, or American Express. Avoid department store cards and subprime cards.
  
• Limit the number of cards. You should have at least three but no more than five.
  
• Keep your utilization ratio as low as possible. Never use more than 30 percent of the available limit on any card.
  
• Check your credit report to make sure your card limits have been reported accurately.
  

“This isn't good.”

Those were not words I wanted to hear, and coming from an experienced Navy SEAL, they were especially ominous. We were in the middle of Baghdad, far outside our normal operating area, in the middle of the night.

One of my squad's primary assignments was to protect a high-ranking Iraqi official. Any time he needed, or wanted, to go somewhere, we were to escort him. This night in particular, he was to make an appearance at a bank that had been attacked. We received the call at two o'clock one morning. From a dead sleep, we had twenty minutes to be ready and out the gate.

Setting out to our unknown destination was the first time I had ventured into the middle of Baghdad. Not only did we not know where we were going, but also as we drove along, I noticed civilians along the street wearing black ski masks, armed with AK-47s.

Our training prepared us to fight an enemy, but in this situation, there was no way of knowing who was a friend and who was a foe. Only if they started shooting would we know they were the enemy. Many were probably Iraqi guardsmen, who often wore masks to protect their identity, but we had no way of knowing for sure and all we could do was hope for the best.

Eventually reaching our objective, we drove past the bank and turned left into a cul-de-sac. From there we made another left-hand turn, into an alley, hoping to then turn our vehicles around for the return trip. But the alley was nothing more than a dead end, too narrow for turning. In the pitch dark of early morning, backing out required us to alight from the Humvee.

It was at this point that the Navy SEAL made his ominous comment: “This isn't good.”

Nervous enough already, I didn't need him to tell me that, but he didn't stop there. “This isn't good. We need at least two hundred guys where we are right now.” We had close to fifty, including the SEALs.

Fortunately, nothing terrible happened. Eventually making our way out of the alley, we completed the mission and headed back to base. This experience impressed on me the importance of knowing where you're going. I never wanted to feel that way again.

If you feel that your financial situation is hopeless, it's probably because you have not figured out exactly where you want to go. Set goals to define your mission, and then develop the skills and discipline to accomplish them. Without a clear understanding of your destination, you will not only have a tough time getting to where you need to be, you will not enjoy the trip.

Every mission has a purpose. When you made the decision to become a Soldier of Finance, you must have had at least one or two goals in mind. Perhaps you want to save for retirement. Maybe you want to start a business or pay off student loans, or fund your kids' education. Whatever the goal, it needs to be clear and detailed. You don't want to head off into the financial war zone without knowing where you're going. Define and refine your goals, then move toward fulfilling them.

Goals are closely connected to orders. Military missions always start with a basic objective in mind. This objective helps to define the type of operation you need to plan in order to accomplish them.

Your goals should be well thought out and detailed. Setting both short-term and long-term goals is imperative. These include:

• Lifetime goals
  
• 3-year goals
  
• 1-year goals
  
• 90-day goals
  

These goals define your overall financial missions; you will likely have several goals in each category. Begin with lifetime goals and set shorter-term goals to build toward them. Take your time as you think these through. Don't forget that lifetime goals involve your Battle Buddy, so be sure to set aside time to talk through them together. Be specific. For example, “I want to get out of debt” and “I want to make a million dollars” are good ideas, but they are not detailed. They are more of a dream than a specific mission. You will need to think through the details and realistically set goals that you can reach. Instead of saying, “I want to make a lot of money,” determine specific amounts and build a plan to attain them, based on where you are now and what stands in the way of your goal. It might look something like this:

• Lifetime goal:
  Retire at 45 with a minimum of $1 million in my portfolio.
  
• 3-year goal:
  Have $100,000 set aside for investments that can create passive income for retirement.
  
• 1-year goal:
  Pay $18,000 off my credit card debt.
  
• 90-day goal:
  Stop eating out more than once a week and put aside the money I save for future investment.
  

Your goals may change as time goes on, but if you don't have something specific, they will never happen. If you don't know where you're going, you'll never get there.

List your specific goals in the following areas:

Lifetime goal: ____________________________________________________________________________

3-year goal: ______________________________________________________________________________

1-year goal: ______________________________________________________________________________

90-day goal: ______________________________________________________________________________

 

Now that you've set specific goals, plan the details of how to attack each one in turn. Military Operation Orders, or “Op Orders” for short, are directives summarizing the intent of the operation. They outline exactly what needs to be done in order to achieve the desired result. In other words, Op Orders are the plan for achieving goals. They are designed to make sure everyone involved is absolutely clear on expectations, roles, and assignments.

The only real difference for a Soldier of Finance is that you give your own orders, based on your mission and your goals.

Complete an Op Order for each goal. Writing things down is an important part of organizing your plan and sticking with it. Something about the act of putting ink on paper increases your belief in the goals and your motivation to achieve them. You will find inspiration by periodically reviewing what you have planned and written, especially as you see the progress you have made.

Yes, you can plan it in your head, but the process of writing forces you to think things through more thoroughly than you are otherwise likely to. It will also help you to remember the plan and commitments involved. Resist the temptation to sit at your computer and type them out. You want a handwritten hard copy.

Your Op Order includes several steps:

• Step 1. Name the mission.
  Think of each financial goal as a separate mission. I recommend that you give the operation a name. Big military operations always have a grandiose name to instill confidence in personnel. In my lifetime, the best known have been Operation Desert Storm, Operation Desert Shield, and Operation Iraqi Freedom. Giving your goals a code name will help you stay focused and add a little fun to the process.
      The name can be anything that helps you identify the goal. Operation Student Loan would be a typical code name for your attack on your college debt. Paying off credit cards could be Operation Discover Freedom or Operation Visa Revocation. Whatever name you decide to use, write it in the first line of your Op Order.
  
• Step 2. Define the mission.
  Naming the mission is one step in defining it; it also needs to be clarified in detail. Decide exactly what you want to accomplish. Everything previously discussed about the specific details of setting goals applies here. Do not be vague. You will have to follow this plan, so think it through.
      Don't make the mission so complicated that you can't keep track of it. Make it something simple, like “Pay off the $5,000 balance on my Visa card.” Referring to the information in your SIT Report will help determine if your Visa card is the ideal debt to tackle first. If it is, then tackle it first. Rank the debts listed in your SIT Report by priority and write the first priority in the second line of your Op Order form.
  
• Step 3. Define the timeline for the mission.
  Give your mission a specific time frame. Be realistic about what you can do. If you can put aside an extra $500 a month to tackle your Visa card, then you can assume a 10-month duration for the mission. The exact time will not be quite as simple to figure due to interest calculations, but if you can't figure that out, at least set a general timeline. With a date set, you can determine what you need to do on a weekly and monthly basis in order to stay on track.
  
• Step 4. Analyze the situation.
  Every mission will be different. Once you know what you want to accomplish, you can analyze your resources and the obstacles you face; essentially, compare your strengths and weaknesses.
      Do you have a stable paycheck? Do you have things you could sell to help pay off a debt? Do you have a burning desire to eliminate this debt? These are all strengths. You need to acknowledge your weaknesses as well. They include anything that will negatively impact your ability to reach your goal. If you have no savings, that is a weakness. If you are a shopaholic, that's a weakness. If you are unemployed, that is definitely a weakness you will need to address in your mission planning.
      In fact, if a weakness is big enough to derail the whole operation, consider placing one mission on hold while you deal with the other. Mission Visa Reduction might have to wait for Mission Get a Job.
      Once you have assessed your resources, get creative. Let your imagination run wild. What could you do to earn extra money? What can you sell? Do you have any talents that you can use to make additional income? What expenses can you eliminate from your daily life that will leave more money for your goals? Do you really need a gym membership? You could exercise by running around the park and save that amount in your monthly budget. Opportunities are everywhere if you start looking around.
      Finally, consider threats to your plan. I like to think of these as the obstacles you must overcome, or the enemies you must defeat, in order to reach your goal. It will be very difficult to completely eliminate credit card debt if you are still charging purchases. If you don't have any money in savings and rely solely on your plastic in the event of an emergency, a sudden car breakdown or a medical crisis could cause you some serious problems in reaching your goal.
      You might not be able to do anything about some of these problems, but you should at least be aware of them. And if you
  can
  do something about them, then add that to your overall plan.
  
• Step 5. Plan your attack.
  Once you have completely analyzed the situation at hand and fully understand the importance and details of your goal, it's time to determine exactly how you will progress toward it. This is where minute details come into play, and they cannot be discounted.
      A goal is made up of many smaller segments; it is important to develop a plan of attack in small increments. If your mission of paying off a $5,000 balance in ten months requires that you make an additional payment each month of $500 to bring the principal down, and you get a weekly paycheck, you must plan to set aside $125 from each check in order to meet your goal. Details become important subgoals in the bigger picture.
      I cannot stress how important such planning is. That night in Baghdad, I desperately wished that someone had done a little more planning, so we at least knew where we were and how to get help if we needed it. We were fortunate that nothing bad happened, and you can't predict everything. What you
  can
  do is plan as much as possible to minimize the surprises. Success depends on knowing where you're going. As Yogi Berra said,
  “If you don't know where you are going, you will wind up somewhere else.”
  

Select your first goal and create an Op Order for accomplishing it. Repeat this process for each goal that you have right now.

1
. Mission Name: _________________________________________________________________________