Q & A Wednesday - Multi Level Marketing, Credit, Investing and more...
Updated: May 18, 2020
Q: // Joey, Illinois: If I paid my car loan off, will that build my credit?
A: Congrats on being able to pay off your car loan. You are one step closer to being debt free. So, to answer your question straight. Yes, paying off your car loan will help your credit. But I want to clarify, it won’t raise your credit as if you paid off your credit card. OK, so I’m about to give you some unwarranted information with the intent to help you or someone listening. So there are only two types of loans that report to your credit. There are Installment loans and revolving loans. The easiest to explain are installment loans. Those are car loans, mortgage, and personal loans. They are simple agreements saying, “ you let me borrow a certain amount and after a certain amount of payments for an arranged amount of time you are done. So in 30 years you will not have a mortgage payment anymore. Now revolving is a little bit more complicated. A Credit card is a revolving loan. It means that you can technically have it forever. You pay off a credit card and you can use it again and again. That’s why it’s called revolving. Revolving loans have more risk to it with the most reward. So if you stay under 30% of your available credit. That would help your credit more than making your regular auto loan payments... OK, So that was a lot, but hopefully helpful and digestible.
Q: // Anonymous: If I’m illegal can I buy a house with an ITIN?
A: I want to start by saying, I am so sympathetic to illegal people in this country. It is very hard to live here and have some of the privileges we have. And I’m not talking politically, this is on a Human to human level. If you know what illegals have to go through just to get half of what you have. You would sympathize too. Ok, to answer your question,Yes. You can purchase a home without a social security. They will have to use their ITIN which is your (Individual Taxpayer Identification Number). But unfortunately it comes with obstacles. The obstacles are that you would need proof of legal income. Which is hard for illegals. You would need proof of income like a paystubs or W-2. And add on to that, interest rates are usually higher and some places ask you to put 20% or more as a down payment. I do sympathize. I tell my wife all the time that it sucks that we allow illegals to build the homes in this country, which I see everyday, but we can’t put them in a position to afford them. God has a plan for all of us right?!?!?!
Q: // Dan, Florida : I'm older so I'm not worried because I wasn't too far from retirement, but I was let go in my job and I have around $20,000 in my 401(k). What should I do with my money? My wife’s and my Social Security should cover our day to day expenses.
A: I’m sorry you lost your job, but congratulations that you are in a position to retire. That’s the power of savings at work. Dan this goes to you and anyone else that has had a retirement plan and left their job and didn’t know what to do with the money. There’s multiple options so I’ll run through them real quick, If you are someone else that is transferring to another job. Some 401(K) plans allow you to roll over your money., but if you're like Dan and don’t have another 401(K) to put your money in, go to your local bank or credit union. Not the mega banks if you can avoid it, and speak to their financial advisor and they can roll over the money for you and you can tell them how much or little risk you want. Or you can open an account at preferably a Fidelity Investment or Vanguard. Those are the two best and cheapest investment companies, and you can put your money in a retirement mutual fund. Those two come with some stock market risk, this next one has minimal to no risk which is an IRA (Individual Retirement Account) and it's pretty much a savings account for your retirement money.
Q: // Casey, Chicago: What is the best and easiest way to invest in stock?
A: I know I talked about how to buy stocks through the apps previously and that was more on how to purchase and own individual stocks. Now if you want to get into investing and putting money away on a safe bet to make more money in years. I have to talk about Mutual Funds and ETFs. A mutual fund is like a pool of stock put together for you to invest in. It’s not an individual stock ownership, but you’ll own multiple pieces of a variety of investments like stock, bonds, and money markets. Now ETFs are more or less the same, but they are bundled by a specific group of stocks passively managed. So have you ever heard, the Nasdaq is down 5% today. If you ever wondered what that means I can tell you right now. So NASDAQ is an ETF ( Exchange Traded Funds) that was put together to be publicly traded. Nasdaq is made up of stock that are mostly tech and online businesses. So Apple and Amazon can be part of it. The stocks can change as long as they fall under the same theme. The reason for Mutual Funds and ETFs are for you to win. The more diversity you have in stock the better chance you have of your stock going up. So if you buy Nasdaq, if Apple were to ever go down, you still have Amazon and 100 more tech companies, then either your ETF value will not fail or it will rise because Apple failed and another company rose in its place. As long as technology as a whole is good then your investment should continue to rise. That’s a lot of information and that's a very high level. So to answer your question Casey, I would invest in Mutual funds, set up an auto deposit to that fund, like $25 a check, and forget about it. Check back in 10 years and thank me then. I wouldn’t do ETFs because they are more expensive and can get a little more complicated. Now the best places to buy mutual funds are Fidelity and Vanguard. They have minimal cost. Now just look for any mutual funds they have and read a little on it and invest in it. That's simple. It’s not as exciting as buying individual stocks, but it’s a lot less risk and more odds of you making money.
As things have been quote unquote settling, with Covid-19 I have not been talking about it as much as I used to. I guess because whoever is going to get their stimulus money got it and there's not too many questions out right now, but I am a true believer that knowledge is power and I due want to let you know about the Cares act and some things that fall under it. Now, it’s not as simple as I’m making it seem, but The Cares Act are laws that the government passed to help you get over this Pandemic and the Economic difficulties that it has brought you. Now, a few things you may know under the Cares Act that you may know like your stimulus money and the Small Business loans, all that fell under the Cares At. Now I want to talk to you about a few other laws that are out there that hopefully can help you through these tough times and if not, hopefully this information can help someone you know. There’s a few things so I’m going to just mention them one by one in a high level and if you have any questions you can email me and I would love to answer any of your questions.
So Under The Cares Act:
You will get an additional $600 if you apply for unemployment.
If you have government funded student loans, your payments will be suspended through Sep. 30th.
You can withdraw from your retirement account if you are under age and they’ll waive the 10% penalty, and you can pay the taxes in 3 years.
Credit Companies can not report you as negative if you have a deal with the creditors.
You have up to 120 days of eviction relief for tenants in federally back housing and you may not be served with an eviction notice until July 25th.
And If you have a Federally backed mortgage which are most mortgages, you can not be foreclosed. Foreclosures are suspended.
My hope and intent is for this information to give someone some kind of comfort if they are making the life decision between feeding their kids and paying rent. Or if they have retirement money they think they can’t touch that will help them.
Q: // Dee, NYC : I just got a credit card a few months ago to build credit and my father said that the best way to build credit is to use my credit card to buy gas or pay for my MetroCard and pay it off every month. I try to do that, but then I spend it on other things too like food. What's the best way for me to build credit without having the card in my pocket because then I'll use it. I hope the question makes sense. Thank you.
A: It makes perfect sense. So a lot of people recommend using your card for gas, for example and tell you to pay it off every month. They say that to keep your card quote unquote“active”. Now, that is not a need. As long as you have your card, it is active. The best way for you to build credit and not be tempted to use it is to have your card at $0 and cut the card and do not use it anymore. I want to clarify, do not close the car, just cut it. So to build credit, you need to be under 30% of your available credit, not max your card, and make sure your payments are made every month. That’s it. Soooo if you cut your card, leave it at $0 balance. You will satisfy all of the above without being tempted to use your card.
Let me tell you this thing that happened, so I worked in the branches and to open an account we had to pull your credit. So a guy came to my desk and told me “ I might not have any credit cause I just got out, I did 4 years. So I looked at his credit and he had a 780 credit score. And that was because before he got locked up he opened a credit card. Then he decided not to use it for 4 years and that kept his credit up.
All this to say, if you go to jail, you will get great credit. Nah, I’m joking... Cut your credit cards and stay out of Jail.
Q: // Dominic, Arizona: Should I lease or finance a car? What are the differences?
A: I get asked this question a lot. Thank you Dominic for this great question. So the difference with the two is the difference between renting a home and buying a home and as you know, buying a home is way better. So in your situation, always finance or buy, do not lease a vehicle. You would be renting the car and you have to pay it back with nothing to show for it. At least if you finance a car, which finance means to take out a loan to buy the car. You could always sell the car and get your money back. Always always Always finance, do not lease. There is no reason to lease a car unless you are an athlete that travels.
Q: // Crystal: I was presented with this opportunity where I can be self employed and hire other sellers under me to sell Mary Kay which will eventually make me a lot of money. And I can make other people rich too. What do you think?
A: Man, you guys ask me questions that’s going to get me in trouble one day. I have to be honest and I know a lot of you are either in companies like these or have been in companies like these.Now I want you to keep in mind that I want the best for you. So I will give you my quick answer and give you a resource that will give you a lot more information. These companies are called Multi-Level marketing Companies that are mistaken for Pyramid schemes. Now multi level marketing companies are legal and pyramid schemes are illegal. I won’t go into too much detail on the differences, but they both make a triangle. Meaning, the person on the top is the one that gets rich, and the person on the bottom loses. These are business for the best of the best sales people. Now I am a great salesperson, I mean I am really good. And I would never get into one of these companies. Now that’s just me personally. So to answer your question Crystal, If I were you I would step away and that’s just my opinion.
Now In my show notes, I will leave a link to a video by John Oliver who can very well explain Multi Level Marketing companies a lot better than me in a much more entertaining way. If you are in one or are thinking about one, please watch the video.
OK my P2P family, Hope there was some great information there for you.
Now, this information is for you to use and grow financially, but it’s also for you to share. Please subscribe to my podcast and share. Now I want to mention, Thank you Thank you for sharing. I get access to see my viewership numbers and they are growing fast each day, and that’s because you guys are sharing this. I can see it. I want you to know that you are playing a role in changing people's lives by getting them access to this information you didn’t have prior. This is for you by you. Paying this information forward is how we can change the lives of our children and our children’s children. Let’s flip the world upside down. Thank you my brothers and sisters.