One of the Best Ways to Improve a Credit Score

In this 7-10 minute article:

  • Can debt actually be good?
  • Credit scores… the best ways to improve a credit score and build a credit history
  • Secured credit cards

Bad Debt vs. Good Debt

One of the biggest problems facing our generation is that many of us cannot apply for loans when it comes to expensive purchases such as a car or a house. The biggest reason for this is that we lack a credit history, which is very difficult to have if you’ve never had any form of debt.

Debt seems to be somewhat of a taboo word these days, but hopefully as you follow Dollar Sign University, you’ll learn the responsible ways to use debt to your advantage. Yes. Debt can be good in some cases! But you have to be wise with it.

Building or Improving a Credit Score

One of the best ways to improve a credit score and build a credit history is through a secured credit card.

A secured credit card is practically the same thing as a traditional credit card, but with one twist: you must put a security deposit down.

Many times when someone decides to apply for a loan of some sort, they are required to present what is called collateral. Collateral is essentially something of value, such as a home or other asset, which the creditor (the one giving the loan), can seize in the event that a loan is not paid back.

In short, your security deposit is acting as collateral in a very liquid form for the credit card company. Say that you mess up and forget to pay your bill, not only will this VERY negatively impact your credit score, but you will also have funds withdrawn from your security deposit in order to cover the costs of your mistake.

DO NOT BE CONFUSED: A secured credit card is not a debit card!

Although in the case of a secured credit card, you are putting money down before receiving your card, that money should only act as a security for if you make a mistake, not as something you can withdraw from.

A debit card works by withdrawing money from your checking account at your bank. You deposit a check and money is transferred into your account, then you can swipe your card which transfers money out of your account.

When you make a purchase on a credit card, you are borrowing money, and at the end of your billing cycle, you are required to pay that money back. You can do that through a minimum payment (not recommended since it may end up costing you more in the long run) or in full (recommended since it affects your credit score in the most positive way, and is the cheapest option in the long run).

An Example:

For an example, let’s take the Discover it® Secured credit card. In my opinion getting one of these cards is one of the best ways to improve a credit score.

To obtain one of these cards is very simple. You first apply for the card and send over the money for your security deposit.

In the case of this card, your security deposit is going to be the same as your line of credit (the amount you’re allowed to borrow in a given billing cycle). The minimum is $200 and the maximum is $2500. That cash that you put down is held by the company for 8 billing cycles, and returned afterwards if you’re a responsible credit user, so that they can judge whether or not you are fit to posses an unsecured credit card. It can be beneficial to choose the maximum limit you can afford as it allows you to hold a higher balance on your card if needed, without exceeding a high percentage of your credit limit. It is best to hold a low percentage of your balance at any given moment. Do keep in mind however, that you’ll be unable to access the money you gave to them for 8 billing cycles.

After you apply and put down the money, they decide if you’re approved or not. If you are, then your card is shipped to you in the mail. You then must use the card responsibly in order to boost your credit in the most healthy way possible.

DSU Life Hack: Best Ways to Improve a Credit Score

One of the best ways to improve a credit score with this card is to put some subscription purchases like your monthly payment for Spotify or Netflix on your card, connect your card to your bank account, set up an autopay program, and don’t use your card for anything else. This allows your card to never be charged more money than you expect each month, and it will automatically withdraw money from your bank account so you’ll never miss a payment.

Fast forward 8 billing cycles… If you have been responsible you’ll receive a nice “surprise” deposit into your account or check from Discover, and you will have proven that you can build credit with an unsecured card. You’ve now built a bit of a credit history, which although it may not be good enough to apply for a home loan, it is a great start to getting there!

Concluding Thoughts

Credit and debt can be very beneficial when used properly. One of the best ways to improve a credit score and build a credit history is through getting a credit card, but if you have little to no history, a secured credit card can make this opportunity more accessible. We’ll eventually discuss why credit is important and how it can benefit you in the future.

-Zach

Roth IRA’s

In this 5-7 minute article:

  • Retirement… already?
  • No taxes?
  • What is a Roth IRA
  • How to set up a Roth IRA
  • Amassing millions with your Roth IRA

Retirement Already?

Let’s be honest, I can almost guarantee that 90% of you who are reading this article are not thinking about your retirement yet. Why would you? Depending on when you want to retire, it could be more than 40 years from now! In this post, I hope to explain to you why 40 years could be worth millions of dollars to you, and how you can retire rich: the easy way.

How much money will you need to retire? Well that depends on the person, but you can take steps early on to make sure that you’re almost guaranteed to have enough.

There are multiple forms of IRA’s (Individual Retirement Accounts/Individual Retirement Arrangements), but in this article, I’m going to touch on what a Roth IRA is, and how it can help you.

The main goal of an IRA is to save for retirement. One of the best things that our Millennial/GenZ generation has going for us is that we have time on our side! Two things that mix extremely well together happen to be time and investing, primarily because of compound interest, covered in another article.

But how does an IRA work?

There really isn’t much to it! You take money from a bank account, put that money into an IRA account, invest in various funds or stocks you believe have potential for growth, and you let it grow until you’re ready to retire and take the money out.

In the case of a Roth IRA, all the money you withdraw at the account’s maturity date (the date at which money in the account can be withdrawn without penalty), is tax free! I’m sure if any of you reading this have ever received a paycheck, you understand that you’re not entitled to your full paycheck because taxes are withdrawn. Much like your paycheck, money you earn from investing is subject to taxes (with some exceptions), which is why this tax free withdrawal of money from a Roth IRA can be so useful!

There are a few catches to this though.

Each year, you’re allowed to contribute a maximum amount ($6,000 this year), which is subject to your personal situation based on income or marital status. For example, you’re only allowed to contribute up to your AGI (Adjusted Gross Income) in any given year. Say you’ve made $3,500 by the end of the year, at the end of the year you will only have been able to contribute $3,500 rather than the $6,000 maximum. On the other end of the spectrum, let’s assume you made $139,000 by the end of this year. You’re now completely ineligible to contribute to your Roth IRA because your AGI is over the maximum amount that you can earn this year to be eligible to add money to your account. Finally, if your AGI this year is between $124,000 and $139,000 you can contribute a reduced amount.

Another catch that I touched on earlier is that you’re not allowed to remove the earned money from your account without penalty until you have reached the age of 59½. At this point, your Roth IRA will have matured, meaning the money that you have earned is available for use. However, you’re generally not required to withdraw the money until you’re 70½.

But why would you put away so much money at an early date?

For context, let’s assume you’re 18 years old in this example (the age at which you can start your own Roth IRA without permission and cosigning from a legal guardian).

On your 18th birthday you put $6,000 into your account, do your research, and invest in some funds or securities that you believe are going to be successful in the coming years. That year your account value increases by 7% (accounting for all other factors such as inflation). Fantastic! At the end of the year your account now has a value of $6,420. Not bad for not having to do any physical work other than research…

The next year you decide to do the same thing and add another $6,000 to the account. At the beginning of the year, your account is worth $12,420. You earn another 7% that year in the market after doing some great research and careful investing! That account has now grown to $13,289.40. Because you like your results so far, you decide to do the same thing until your account has matured.

When you turn 59½, you check your account balance which reads $1,334,912.45. That’s a nice sum of money to help out for retirement (although it can be a great idea to consider exploring the option of using more than one retirement investment vehicle). With little to no effort, your money was able to work for you over time to provide you with an awesome result at the end of its 41½ year shift!

So now you want to start up a Roth IRA… What are the steps?

To begin, you’re going to need to choose what company you want to use. A few examples include TD Ameritrade, Fidelity, or Vanguard, but it’s all up to you on which one you prefer. They differ through their user interfaces, service, and trading fees. It’s never a bad idea to do a basic google search on them all and check out the features. If customer service is something you really value, give them each a call and ask them to walk you through the features. While they’re doing so, gauge how helpful they are and how polite they are over the phone. I’ve found this to be an excellent judge of how a company will treat you if you open an account with them. However, do keep in mind that one customer service representative may not be able to accurately reflect a company as a whole.

You’re then going to need to open the account. There should be instructions for how to do this on the website of whatever company you choose to work with. If you don’t want to mess with doing so on your own, you should choose a company to work with that has a brick and mortar location near wherever you live. Should you choose that route, go in to the building, explain what you want to do, and someone from the company will help you.

After you’ve opened the account and deposited some money into it, you’re ready to invest. Be sure to do proper research on what would be (in your opinion) a logical investment. Keep in mind that you can always lose money in the stock market, so it is unwise invest money you can’t afford to lose. It’s important to understand that you are investing for the long term because this is a retirement account.

Still have questions?

Should you have any questions about Roth IRA’s or IRA’s in general, feel free to contact me. Another great resource is the IRS website at this link for more details on IRA’s.

-Zach

Meal A Day Millionaire

If you could become a millionaire by sacrificing eating out once a day would you do it? Let’s discuss how to become a Meal A Day Millionaire!

In this 5-7 minute article:

  • Becoming a Meal A Day Millionaire
  • Saving to invest
  • Compound interest and its role in wealth accrual

Compound Interest

This concept is quite simple, but it requires discipline. In my compound interest article, I discuss more in depth how compound interest can be used to your advantage as long as you have time on your hands. Before I go any further I want to make you aware that although this method of becoming a millionaire is very easy, it takes a lot of time!

Let’s look at what it would take to become a millionaire for the price of a meal a day!

Laying The Foundation for the Meal A Day Millionaire

Depending on where you live, an average meal would more than likely cost you anywhere from $8 to $15. This may not seem like a lot of money, but the cost of a meal could be very valuable in the future if you put that money to use elsewhere.

We’ll begin by crunching a few numbers.

For example purposes, we’ll assume that an average meal costs $10, and the average month consists of 30 days.

Over the course of 30 days, you place $10 into a bank account so that at the end of the month your account has $300 in it. You then decide to place that money into an investment account that averages a 7% gain on your investment yearly.

The next month, you repeat the process and place another $300 into the same investment account. You do so for the next 10 months until the year is done and so far, you have saved $3,600, and gained a little bit of interest.

Although $3,600 is a pretty reasonable amount of money, the million dollar magic comes over time.

Road To One Million

Let’s say that over 45 years you repeat the process. In total, you’ve contributed $162,000. That’s a lot of money, but it’s still not $1,000,000… However, because you were able to place the money into an investment account gaining 7% value each year, your investment has now grown to $1,028,697.52.

Congratulations, you’re now a millionaire! Yes… it was THAT easy!

But how did that happen?

In a brief summary, each year your money gains a little bit of interest. The next year the money that your original investment generated also gains interest in addition to what you already contributed.

In the example above, the $3,600 would gain $252 (7% of $3,600) of interest in one year. The next year (assuming you didn’t add any more money to the account) that 7% would be applied to the full $3,852 ($3,600+$252) in the account, yielding $269.64. Because you’re putting more money in each month, your account has a higher value on which to compound.

Concluding Thoughts

Compound interest was the way that you were able to gain such a large amount of money off of your investment. Again, this is explained much more in depth in my compound interest article.

Saving just a little bit of money each day, can provide massive results over the long haul. This is easy to do if you have the discipline! Feel free to check out how this compounding works with your own numbers here.

If you have any questions on compounding wealth over time, contact me!

-Zach

The 9th World Wonder: Autopay

The Great Wall of China, the Christ Redeemer Statue, Machu Picchu, Chichen Itza, The Roman Colosseum, The Taj Mahal, and Petra: all of these make up the 7 wonders of the world. What are the 8th & 9th? Find out below!

In this approximately 7-10 minute article:

  • The 8th Wonder of the world… what is it?
  • The 9th Wonder of the world… what is it?
  • Using autopay to your advantage can free up time and stress from your life.
  • Setting up autopay for various platforms.
  • Using autopay to pay yourself!

The 8th Wonder

Compound interest is the eighth wonder of the world. He who understands it earns it… he who doesn’t… pays it.

Albert Einstein

Albert Einstein knew the power of compound interest, and even considered it the 8th wonder of the world. The power of compound interest, when used to your advantage, can be incredible, allowing you to amass large amounts of wealth. We talk more about that in the article linked here!

Bills Are Stressful!

Each month, bills come in for a number of different recurring purchases we make. This could include a mortgage, rent, those Spotify, Netflix, and Hulu subscriptions you love, or even utilities expenses — for which you may have multiple separate bills!

Lets be honest… it’s tough to remember to pay all of those on time.

Autopay – Automating Your Life

Autopay can be one of the simplest ways to combat the issue explained above. Writing checks, swiping cards, or manually transferring money take away from your precious time and your peace of mind. Automating your life with autopay can provide you with a solution to this problem.

What is autopay? Autopay is the ability to automate payments from your bank accounts or credit cards to provide payments for monthly services. As long as you have enough funds available to execute the payment, you will be able to make the payment without worry.

Setting Up Autopay

Setting up autopay for bills is quite easy. It usually takes just a few steps:

  1. Find out if the organization offers autopay. Sometimes this option is unfortunately not available.
  2. If autopay is offered, there should be a sign up link on the website or mobile application for the service. There should be directions to sign up!
  3. If you are unable to find a link for autopay, call or email a customer service representative for the company in question. They should be able to walk you through the process.
  4. Link a bank account or credit card that you monitor closely. This will be the account that processes the recurring charges.
  5. Closely monitor this account and always make sure that you have enough money available to pay your bills.

Step 5 is extremely crucial. If you set up autopay on an account with insufficient funds, you could be subject to fees from your bank or a ding on your credit score if utilizing more than your given limit!

It’s always important to leave enough money to cover your expenses in the account you have chosen. My personal preference is to leave between 2 & 3 months of a buffer for my monthly autopay expenses in my account. This buffer protects me from unexpected expense increases, as well as the ability to plan for emergencies.

Autopay Example

Let’s say you and your friend live in the same apartment complex, and you both set up autopay for 3 accounts: Gas, Electric, and Internet. Your gas bills are generally $25 monthly, electric $50 monthly, and Internet $75 monthly. In total, you expect the average to be approximately $150 monthly.

The intelligent DSU subscriber that you are, you decide to leave $450 minimum in that account to cover unexpected expenses. Your friend who isn’t subscribed, decides to leave $150 in their account.

After three months you experience no problems, but on the fourth month, you experience a massive heat wave, so you both decide to turn up your air conditioning. At the end of the pay cycle, your electric bill has doubled to $100!

Lucky for you, your account had enough to cover the extra expenses, but your friend has had a different experience. While you’re enjoying your nice cool condo unit, your friend next door is sweating, scrambling to come up with the extra $50 to complete the payments.

Concluding Thoughts

Using autopay can be a great method to save yourself some time, but without proper funding, you can find yourself in a sticky situation. If you play your cards right, its a great tool to mastering your personal finances.

In a future article, we’ll cover setting up autopay to pay yourself first – one of the easiest ways to amass wealth in a manageable way!

Feel free to give autopay a try today if you haven’t already. From credit card bills to Netflix subscriptions, autopay will work with just about anything.

As always, reach out with any questions.

-Zach

The 8th World Wonder: Compound Interest

In this Approximately 5-7 minute article:

  • The 8th wonder of the world, compound interest. What is it, and how can you use it?
  • The population and compound interest.
  • Basic examples of compound interest.
  • Compound interest with contributions.

Compound Interest

Compound interest is more than likely one of the most useful tools that Millennials and Gen Z can use. The reason for this is that we have an enormous amount of time on our hands! Einstein once called it the 8th wonder of the world!

Compound interest is the eighth wonder of the world. He who understands it earns it… he who doesn’t… pays it.

Albert Einstein

Compound Interest and the Population

In the 1700’s, the earth was inhabited by just over half a billion people. In the 1800’s the world’s population broke a billion. In the 1900’s the rate of increase started to pick up and over the span of 100 years the world population increased by nearly 5 billion! Check out today’s world population here!

Obviously, this phenomenon was influenced by numerous reasons, however it’s clear that the more people there are on the earth, the more opportunity there is for children to be born.

For example, say there are 2 families of 2 people. We currently have 4 people.

Each family then gives birth to 4 kids each. Now there are 4 parents and 8 children.

If you calculate this enough times, the end result eventually amasses to a number far greater than the original 4 people we started with.

Obviously, this would take time to happen… it wouldn’t be something that occurs over night. Compound interest with money works in a similar way.

Time to Talk Money

Let’s say that today you decide to invest $1,000, and you expect that each year that $1,000 is invested, you’ll receive 7% interest (an average return one might expect from the stock market based on its history).

After 1 year, you’re left with $1,070 ($1,000*0.07 + $1,000)! You’ve made $70 by letting your money do the work for you, and you decide to leave your money in the same account for another year!

After year 2, your balance is $1,144.90 ($1,070*0.07 + $1,070)! This year you made more than $70 off of that same initial $1,000 investment. You actually made $74.90! Seeing that this worked out even better for you in year 2, you decide to leave the money in there for another 48 years.

50 years down the road, your initial investment has grown to $29,457.03! This is the power of compound interest!

Now let’s take it one step further and say that you decide to contribute $1,000 a year to that same account with the same average of 7% interest. In other words, each year you contribute another $1,000. At the end of 50 years your investment has grown to $435,985.95! That’s not bad at all!

Compound interest works best over time, and the more time you have on your side, the more your investment has a chance to grow! This is why you have an advantage if you are young.

Be sure to check out our upcoming articles on how you can become a millionaire for just the cost of one meal a day and Roth IRA’s. We’ll touch on this concept again.

Compound interest is more than likely one of the most useful tools that millennials can use. The reason for this is that we have an enormous amount of time on our hands!

If you’re interested in testing out compound interest scenarios, click the link here for an online tool I love to use!

Still have questions? Reach out!

Cheers,

-Zach

Learning From Mistakes

Let’s talk about learning from mistakes today… If you’re not big on reading, I’ll summarize this post below — thank you for visiting this page!

In this approximately 5 minute read:

  • If you don’t know me, I’m Zach, founder of DSU.
  • I started this blog in 2017, grew to 20K monthly page views, and shut it down.
  • Why would I do that? Continue below…
  • We’re back with a new, modern look!
  • This post is an introduction to who we are – expect this post to be less informative than your average DSU topic discussion.*

Introduction

For those of you who are new to Dollar Sign University, welcome! My name is Zach, and I started this blog back in late 2017. DSU was created as a resource for GenZ, Millennials, and other generations to learn different ways to make, save, and invest money. We give you the tools to succeed in life, and excel above your peers! You might be wondering where all the posts are if this blog is 3 years old? This is where the story of learning from mistakes begins.

Growing Dollar Sign University

Mid to late 2018, DSU was beginning to gain traction. My guest contributor at the time (Amy) and I had grown DSU to approximately 20,000 unique monthly page views a month. I was posting 3 articles a week with a podcast guest interview series recorded each week (also coupled with articles for the interviewees). All of this made for quite the busy schedule. Ask me about why this takes so much time.

Other Commitments

Alongside this blog, I was running a paint company of my own, which was also beginning to take off, booking approximately $20K in our first month of true operation. At this point I was unable to sustain doing both projects at once, and DSU was unfortunately making less money than the other company. I made the tough choice to put DSU on the backburner, eventually cancelling the renewal on my web hosting subscription through GoDaddy & WordPress.

Fast forward a few months, and the other business ended in an unfortunate partner dispute. At that point, I realized that I truly enjoyed the blog work, and it felt rewarding. I called the experts at GoDaddy and WordPress, and they informed me that the information was all long gone by then, and that the web data was deleted from their servers.

Learning From Mistakes

For a year and a half, I have debated getting back online and recreating DSU to build it back to what it once was. I have now decided to renew the site and continue to provide unmatched informative articles to our subscribers, to advance our generation’s understanding of wealth, economics, and professional development!

It was most definitely a poor decision to shut down the site, despite scheduling complications, though in the spirit of learning from mistakes, we are back and better than ever!

Reach Out!

If you would like to contribute to DSU or have topics you would like to be discussed, please reach out via the contact forms. Your opinions are valued, and can provide great insight to others. Another way to support us is through subscribing to our newsletter! We’ll never spam you. This should be up and running within the next month.

As I currently write from Hawaii,

Mahalo,

-Zach