What’s Poppin’,

This is the Master Money Newsletter where we teach you to be rich so you have enough money to become a 30-something snowbird.

Too hot? Go up North. Too Cold? Head down south.

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Here’s what we have on deck today:

Read: Why You Need to Fix that Broken Credit Score

Watch: How Much Do You Need Invested to Live Off Dividends

Listen: How much do you need to Actually Feel Wealthy? (This will Shock You!)

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"Why You Need to Fix that Broken Credit Score"

Believe it or not, your credit score has a massive impact on your money as a wealth builder. Today, I am going to bring back my best friend “opportunity cost” to show you why. I am not talking about it saving you a few bucks here and there. Your credit score actually has a $1M impact on your money (Listen Here).

Ramit Sethi said it best when he said to focus on $30,000 problems, not $3 problems. Well, in this case, let's focus on the $1M problem of your credit score.

First, let's look at how it impacts various areas of our lives.

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Your Mortgage

For most people, this is the biggest loan you will take out during your lifetime. Even a small difference in the interest rate can result in significant savings over the life of the loan.

If you take out a 30-year mortgage of $300,000, a credit score of 760 or higher might qualify you for a rate of 4.5%, while a score of 620 might get you a rate of 7%.

Don’t shoot me over the rates, this is an example to get my point across.

Over 30 years, the person with the higher score would save over $100,000 in interest.

4.5% interest rate pays $1,520 a month. 7% interest rate pays $1,995 a month.

Over the 30-year period, the 7% loan would cost you around $171,000 more than the 4.5% loan ($718,200 - $547,200). Also, the monthly payments would be about $475 higher ($1,995 - $1,520) with the 7% loan compared to the 4.5% loan.

That's not all! Now we have to factor in some good ol’ fashioned opportunity cost.

What if you invested the difference over the life of the loan? Oh, boy you are going to love this.

Drumroll, please.

That is $979,000 in opportunity cost just because we decided to make it rain in the club every weekend when we were 23 and get into credit card debt.

Yeah, I am personally attacking you "make it rain" person.

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Auto Loans

I don’t love buying cars.

I have driven them all. Fancy cars, beat-up cars, middle-class mobiles.

The fact of the matter is cars do one thing. Go down in value. If you are a car person, more power to you. I am not. I’d rather spend my money on other things.

But, we all need a whip to get around town (unless you bike to work like Mr. Money Mustache). And when you buy a car it can be very costly to your bottom line if you have a poor credit score.

Say you buy a fairly inexpensive car and get a $25,000 car loan. You get it on a term of 60 months (way too long, by the way).

A person with a credit score of 720 or higher might get an interest rate of 3.3%, while someone with a score of 500 might get a rate of 15%.

Over the life of the loan, the person with the higher score would save over $7,000.

But you know I won’t let your eyeballs scroll further without investing $7k, right? I mean, you know me by now.

Let’s invest $7,000 one time and see what happens.

Whoa! $100K for just one car. Imagine if you bought 7 in your lifetime. Or if you were married and you each bought 7. That becomes a multi-million dollar mistake just because your credit score was low.

This works over and over again when you need to borrow money.

So, if you have a low credit score, what can you do?

Focus on the 80/20 of your credit score to get it up.

When trying to build up your credit score, use the 80/20 method.

Focus on the 80%:

• Payment History - 35%
• Amounts Owed - 30%
• Length of Credit History - 15%

Worry less about the 20%:

• Credit Mix - 10%
• New Credit - 10%

This is how you can master your credit score.

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News You Can Use

Hidden Costs of Cars 🚗

Vox's article examines the financial burden of car ownership, particularly for lower-income individuals. The piece suggests that the true costs of car ownership—like repairs, maintenance, and insurance—are often underestimated and can lead to financial strain and even repossession. This issue is particularly pertinent given that cars are a necessity for many Americans.

Home Affordability 🏡

The Visual Capitalist has compiled a list of the most affordable U.S. cities for home buyers. By comparing median household income to median home prices, the report identifies cities where homeownership is most achievable. Topping the list are cities in the Midwest and the South, where housing remains relatively affordable despite nationwide trends of increasing home prices.

Smart Saving 💵

A Business Insider article tells the story of a saver who moved more than half of his cash to a Certificate of Deposit (CD) due to its high Annual Percentage Yield (APY). Despite the fact that his money is locked for a specified term, the saver is confident in his decision due to the significantly higher return than a traditional savings account.

Lottery Tax 💰

If you've ever fantasized about winning the Powerball jackpot, this CNBC article offers a sobering perspective on the tax implications of such a windfall. The report explains that a substantial portion of the winnings—potentially close to half, depending on the state—would go towards federal and state taxes. It's an important reminder that even lottery winners can't escape the taxman.

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High-Performance Book Club 📚

I get a ton of questions from listeners and readers as to what I am reading. So we decided to let you know via the newsletter. The High-Performance Book Club will be a way to share this. If you want to be Elite in your career, business, or with your wealth, then welcome to the club. If you would like to see our previous picks, you can find them here.

​How to Build Your Portfolio to Maximize Returns and Minimize Risk​

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​How much do you need to Actually Feel Wealthy? (This will Shock You!)​

​The Crazy Difference in Buying Power Today (By Decade!)​

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Youtube

​How Much Do You Need Invested to Live Off Dividends​

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