The Bottom Line is BS

The bottom line is BS. It’s not important. I know, that’s quite the statement. Contrary in fact to everything you’re taught I’m sure. But it’s true. The bottom line on your financial statement is not the important line. Why? Because there is nothing you can do with it. I mean, you can make adjustments to things in the middle so that the number, maybe, gets a little bigger. However, At the end of the day, there will only be so much you can free. It’s a value with a fixed range and to make it bigger requires you limiting or constricting yourself to do it. Therefore the bottom line is BS and instead, your focus should be at the top.

 

Focus at the top

Where your focus should be is at the top. This is the line with infinite possibilities. This is the line that can make a real difference in your financial freedom. Now, if you’re on salary you may say, “But wait a minute! That line is also fixed!” And indeed if you don’t have any plan or intention to change it then yes, it will be. If you have a plan, if you have the intention to change it, however, then you’re playing a different ball-game. First and foremost you could always ask for a raise, but this would be limiting, if your tying to get out of debt or make a significant increase to your income this is a very unworkable way to approach it. You can only ask for so many raises before your boss is just flatly going to say no. You could go for that promotion but again, it is unlikely you will get them every year. Instead what you need to do is look at what activities you can do that will have a more direct and dependable impact on that top line.

 

A Dependable Impact

A dependable impact means something you can do that you know will yield a certain result. To give an example of the opposite, if you are a salaried exempt employee, working overtime will not yield additional income. Maybe it will help you earn a bonus for meeting that target or hitting that deadline, but that’s not dependable is it? If you are paid the same whether you work 16 hours or 8 in a day, what’s the point? You love what you do? That’s fine, but shouldn’t you be paid for it?

 

So then what would be a dependable impact? It would be an activity or action that you know will yield a certain result every time. In the context we are speaking, an action that you know will yield a certain monetary return for it’s performance. For example lets say you can make $100 for building a webpage, so then earning more money in a month becomes a very simple problem right? Simply build more webpages until you’ve covered what you need. Heck, then build more so that you have more than you need. Working more will have a dependable impact on what you make. The problem then becomes one of scaling.

 

Scaling

Scaling, specifically how to, completely depends on what your dependable impact is. In most cases though it will be one of two scenarios.  You either hire someone to help or you devote yourself to the dependable impact full time (which most likely at some point will still require you to hire someone later.) In the webpage example above, as your experience and reputation grows, you can charge more. Or, it could be getting someone else to help and cutting them in on some of the profit. The point though is to push what is working and to push it hard.

 

Final Thoughts

If you are in debt, or looking to earn more. The solution to both is to look up. Put focus on that top line, find something you can do to make a dependable financial impact and then once you have found that, scale it. The reality is the bottom line is BS, it is merely a reflection of what you have done, but don’t make the mistake of believing it is all you can do. Your potential is unlimited and this world has no shortage of money to be earned, so find out who has yours and collect it.

 

Have a question on getting out of debt? Or Earning more? Send them to me!

Difference Between a Hard and Soft Credit Checks

 

Were you trying to do something when someone said to you, “We’ll need to run a hard credit check for this.”? Did you wonder what exactly that meant and why it matters?  What is the difference between hard and soft credit checks? Here I’ll explain what a hard credit check (also known as a hard credit inquiry) is, what a soft credit check is, and answer the all important question of why it matters. In fact, I’ll answer that all important question right now. It matters because hard credit checks can affect your credit score. Specifically, many hard credit checks within a years time can adversely affect your score by a few points.

 

Example hard credit checks include:

  1. Credit card applications (where most people rack up the most inquiries)
  2. Home mortgage application
  3. Loan applications of all types, student or otherwise.
  4. Apartment rentals (Note: this sometimes falls under soft inquiry. Ask landlord for inquiry type details.)
  5. Opening brokerage accounts

Did you notice a commonality with all these activities? If so you would be absolutely correct! That commonality is that they all require you to have taken an action. Your authorization of a credit check is considered a hard check. You give permission for these to be run, they are the checks you know about. So why are they considered bad? Why do they negatively affect your score? Only running one hard credit check most likely won’t affect your score at all. However, if you ran say, five within a week, this likely would. Why? Because making multiple hard requests (requests you knowingly authorized) signifies to the evaluator that you are in need of money fast. This is especially true in the credit card space.

 

How exactly these things are evaluated is entirely at the discretion of the credit agencies. While it is not always true that a person applying for a lot of cards in a hurry is because they need money fast, it is a pretty safe bet to make. That said, some agencies know people like to shop for the best offers and will combine multiple requests and classify it as only one request. The degree to which such inquiries can adversely affect your credit varies, but of all the factors that your credit score is made up of, this one isn’t usually high impacting. You can expect many hard inquiries on your report to drop your score by a few points. These do get removed after two years, but only affect your score for one.

 

Soft Credit Checks

So how about soft credit checks? As you may be guessed, when dealing with hard and soft credit checks, if a hard credit check is one that requires your permission to be run, a soft credit check is one in which it is not.

 

Example soft credit checks include:

  1. Almost all “pre-qualified” offers
  2. Employment background checks
  3. Apartment rentals (Note: this sometimes falls under hard inquiry. Ask landlord for inquiry type details.)
  4. Sites like creditKarma (Awesome resource site, I highly recommend them)

Unlike a hard credit check, a soft credit check does not adversely affect your credit score. It also does not show on your credit report. To be blunt and to the point, the only real reason soft inquiries exist is so that companies and “authorized” individuals can check your score without you knowing. It’s how credit companies know how much to offer you on a new card. It’s how your existing credit card creditors know if they can adjust your rates, and it is how many landlords across the U.S. determine if they should rent to you. CreditKarma gets some kudos for at least using that little loophole to allow you to see your own score at any time, but make no mistake, they are using that data as well for targeted advertising to you.

 

So there you have it, the difference between hard and soft credit checks and why it matters. I recommend you check your credit report periodically to see what hard inquiries are on file. An easy way for you to spot identity theft is to look at our report and find hard inquiries for things you know you weren’t doing. Each of the three reporting credit agencies will let you obtain your credit report for free once every twelve months. For more information on how to do that, visit the Federal Trade Commission website.