GASB Statement No. 83: Certain Asset Retirement Obligations

Effective after year ending June 15, 2018, GASB has issued Statement No. 83 for AROs. It is intended to establish criteria for determining the timing and pattern of recognition of a liability and a corresponding deferred outflow of resources for asset retirement obligations (ARO.)

An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset.

This guidance is separate from the landfill closure and post-closure maintenance guidance (GASB Statement No. 18.) This will most likely affect special districts, such as hospital authorities that use imaging equipment that require radiation and sewage treatment plants that have laws or regulations requiring shutdown and dismantling in the future.

GASB 83 requires an ARO liability to be recognized when it is incurred and reasonably estimable, similar to other liabilities. The liability may occur as a result of external or internal obligating events. External events include approval of federal, state or local laws or regulations, establishment of a legally binding contract or as a result of a court judgment. Internal events may be a result of contamination or other events.

Recognition occurs by placing the asset into service. If a capital asset is purchased, an external event previously listed requires a liability, then the purchase of the asset triggers recognition. Once the ARO liability is recognized, the offsetting debit is a deferred outflow of resources, unless the capital asset is permanently abandoned prior to operation. Should this occur, the offsetting debit is to expense.

GASB 83 requires measurement of the liability upon recognition based on the best estimate of the current value of outlays expected to be incurred. This is based on the weighting of all potential outcomes, including the costs of all equipment, facilities and services needed. The deferred outflows of resources (or expense) would be the same number.

After the initial measurement, the government should adjust the current value of the ARO for inflation or deflation. They should also evaluate relevant factors that would adjust the estimated outlays, including, but not limited to changes in technology, laws, regulations, contracts, court judgments and other factors.

Should a liability increase or decrease before retirement of the capital asset, there is a similar adjustment to the related deferred outflows of resources. Should the adjustment occur at the time of retirement or after retirement, an expense is recognized in the period of occurrence.

The deferred outflow of resources will also amortize systematically and rationally over the period of the capital asset’s useful life. The period would shorten if the ARO was recognized initially after the asset was placed into service (amortize over the remaining estimated useful life.)

The footnote disclosures should disclose the following:

  1. general description of the ARO and associated capital assets with the source of the obligation (law or regulation, court ordered, etc.)
  2. methods and assumptions used to measure the liability
  3. remaining useful life of the asset
  4. description of how and required funding or assurance provisions are being met (review surety bond, letters of credit, etc.)
  5. if not separately presented in the Statement of Net Position, amount of assets restricted for the payment of the liability 

This post is a summary of the pronouncement. You can visit the GASB website for the full statement. Audit service in Gainesville, Jacksonville & Ocala, FL.

If you have any questions or need an audit proposal (if you are a GA or FL entity), please email me at Audit services in Valdosta & Tallahassee.

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How To Get Past The Receptionist On A Sales Call

You finally mustered up the courage to use the phone to sale your service. When you call your target customer, the person answering the phone quickly sends you packing.

While this may be demoralizing to you, it’s not personal, it’s his or her job to protect the boss’s time. The worst thing you can do is use shady practices to get past the gatekeeper. You will most likely need to deal with them again in the future, so make an ally instead of an enemy.

Some of the more popular ones that have been used in the past, but I do not recommend are:

  • Acting as you already know the buyer, when in fact, you do not. “Good Morning, is John in?” This is not as effective as it was 10 years ago because receptionists have learned, but it still works. The problem of acting like you are a good friend is when the call is placed through, the buyer is upset you got through and the receptionist may be reprimanded and would be upset with you. Even if you get an appointment, you have made an enemy at the front desk.
  • Throwing the receptionist off balance. There are both good ways and bad ways to interrupt a receptionists standard script to weed out sales calls. A bad one is:

You: “Hello is John in?”
GK: “May I ask who’s calling?” or “What company are you with?”
You: “Who is this?” or “I have to have a company?”
GK: “What is this about?”
You: “That’s why I’m calling him.”

  • Avoiding direct responses. Most receptionists use three questions to brush off a salesperson: Who’s calling, What company are you with, and What’s this about? Sales reps sometimes use phrases such as “I’ll be happy to tell you, but it’s important I speak to him” and “I’m not exactly sure” to avoid these questions. It’s best to be honest and answer.

The best way to get through the gatekeeper is to make him or her your ally. I use the following script:

Me: “Good Morning. This is Jack with ABC Co. Is Jill available?”
GK: “She is not in her office right now, would you like her voicemail?”
Me: “Please, but first with whom am I speaking?” (If did not identify upon answering)
GK: “Debbie.”
Me: “Debbie, what is the best way to reach Jill in your opinion?”

While you may be screened, this simple way gets through to the buyer, their voicemail, or with some businesses, a relayed conversation with the buyer through the receptionist. It’s simple, but better than being shady. I sell services, so I do not want a bad reputation in my area.

As mentioned above, you can use pattern interrupt to take control of the conversation without being deceptive:

GK: “XYZ Corporation, how may I help you?”
Me: “Good morning, who am I speaking too?” (Pattern Interrupt)
GK: “This is Debbie”
Me: “Good morning, Debbie. This is Jack with ABC Co, I’m calling for Jill.”

This takes the initial ammunition from the gatekeeper.

The last method I use is to call during nonstandard hours. Most companies operate around 8am to 5pm, I make calls starting at 7:30am and after 5:30pm frequently. I have even had a little success speaking with potential clients on Saturdays.

During off times, you can usually get to a buyer’s voicemail. I leave a brief email telling who I am, what I do, ask for an appointment and leave my number. I wait two business days and usually follow up with an email.

What do you do to get past the gatekeeper?

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Joint Venture Agreement

If you are considering a joint venture with another company, make sure you have a signed agreement in place that spells out the product, service or other outcomes desired and how the joint venture will be managed.

Your agreement will need to outline the following, at minimum:


1.1 Formation. Company 1 and Company 2 (the “Venturers”) agree to form a joint venture (the “Joint Venture”) on the terms and conditions set forth in this agreement.

1.2 Name. The name of the Joint Venture will be NAME.

1.3 Principal Office. The principal office of the Joint Venture will be at ADDRESS.

1.4 Term. The term of the Joint Venture will commence on the date of this agreement and will terminate on xx/xx/xxxx unless terminated earlier under the provisions of this agreement.

1.5 Purpose. The purpose of the Joint Venture is to (STATE PURPOSE.)

1.6 Assets. Title to assets of the Joint Venture will be held in the name of the Joint Venture and, except as otherwise provided in this agreement, no Venturer has any right to those assets or any ownership interest in them except indirectly as a result of the Venturer’s ownership of an interest in the Joint Venture. Assets of the Joint Venture may not be commingled with those of a Venturer or any other person. Assets belonging to a Venturer that have not been transferred to the Joint Venture will remain the assets of the Venturer and will not be considered assets of the Joint Venture despite the fact the Venturer uses the assets in performing its obligations under this agreement.


Get the entire 7 page joint venture agreement emailed to you in Word format.


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Statutory Close Corporations in Georgia

Certain licensed individuals or groups can elect to practice as a professional corporation. My personal business is organized in the State of Georgia this way. The specific rule in Georgia is O.C.G.A. § 14-7-1.

Please note that I am not licensed to practice law, this is just my understanding and experience of the law as it relates to me. Get guidance from an attorney if you have questions.

Professions allowed:

  • Certified Public Accountancy
  • Architecture
  • Chiropractic
  • Dentistry
  • Engineering
  • Land Surveying
  • Law
  • Pharmacy
  • Psychology
  • Medical
  • Veterinary
  • Professional Nursing
  • Harbor Piloting

Corporations having 50 or less shareholders may organize or elect to become a professional corporation. If through amendment, at least two-thirds of shareholders must approve. The following must be on each share certificate issued:

“The rights of shareholders in a statutory close corporation may differ materially from the rights of shareholders in other corporations. Copies of the articles of incorporation and bylaws, shareholders’ agreements, and other documents, any of which may restrict transfers and affect voting and other rights, may be obtained by a shareholder on written request to the corporation.”

Share Transfers

Unless stated in the articles of incorporation or by the rules that govern (O.C.G.A § 14-2-911 & 912), shares of a close corporation may not be voluntarily or involuntarily transferred. Except to the extent the articles of incorporation provide otherwise, this Code section does not apply to a transfer:

(1) To the corporation or to any other holder of the same class or series of shares;

(2) To members of the shareholder’s immediate family (or to a trust, all of whose beneficiaries are members of the shareholder’s immediate family), which immediate family consists of his spouse, parents, lineal descendants (including adopted children and stepchildren), and the spouse of any lineal descendant, and brothers and sisters;

(3) That has been approved in writing by all of the holders of the corporation’s shares having general voting rights;

(4) To an executor or administrator upon the death of a shareholder or to a trustee or receiver as the result of a bankruptcy, insolvency, dissolution, or similar proceeding brought by or against a shareholder;

(5) By merger or share exchange under Article 11 of this chapter or an exchange of existing shares for other shares of a different class or series of the corporation;

(6) By a pledge as collateral for a loan that does not grant the pledgee any voting rights possessed by the pledgor; or

(7) Made after termination of the corporation’s status as a statutory close corporation.

A shareholder wanting to transfer shares must first offer them to the corporation by obtaining an offer to purchase the shares for cash from a third party. The offer must be in writing and state the offeror’s name, address, number and class of shares, offering price per share, and any other terms.

A third party is eligible to to purchase the shares if eligible to become a qualified shareholder under State or Federal tax statutes and the purchase will not cause a personal holding company or other tax penalty.

Within 20 days of receiving the offer, the corporation shall call a special meeting to decide whether the corporation should purchase the offered shares. Within 75 days of the offer, the corporation should provide written notification of acceptance or the offer is rejected. If the corporation makes a counteroffer, the shareholder must provide a written notice within 15 days to accept or the counteroffer will be rejected.

If an offer to purchase the shares is rejected, the seller can transfer the shares to a third party 120 days after making the offer to the corporation.

Compulsory Purchase of Shares Upon Death

The executor of the Estate may require the corporation (or cause – see above) to purchase or dissolve the shares of the decedent, unless specified in the articles of incorporation.

A person entitled to exercise the compulsory purchase right must deliver a written notice, describing the number and class of shares and a request that the corporation offer to purchase within 120 days of the shareholder’s death to the corporation. See the corporations timeline from the transfer section above.

If the corporation makes an offer, they must include the latest annual and interim financial statements. The corporation’s offer must be accepted in writing within 15 days or it is rejected.

If determined by the articles of incorporation or other written agreement, the price and terms are fixed, unless the purchaser defaults. Under default, the seller is entitled to commence a dissolution.

If an offer to purchase is rejected or no offer is made, the person exercising the right may commence a proceeding against the corporation to compel purchase in the superior court of the county of the corporation’s registered offices. The corporation must notify in writing, at its expense, all of the shareholders and anyone else the court requires ofthe commencement of the proceedings.

The court determines the fair value of the corporation and orders the purchase or dissolution of the corporation. If the corporation does not make a payment within 30 days of the court order, the seller can petition to have the corporation dissolved.

Usually, all costs of the court proceedings are split equally between the corporation and seller. The court may assess a portion or all of the total costs against the seller if the fair value does not exceed the corporations last offer or against the corporation if the fair value exceeds the offer.


All the shareholders may agree in writing to regulate the exercise of the corporate powers and the management of the business affairs of the corporation, and the relationship among the shareholders.

This in effect, (a) eliminates a board of directors, (b) restricts the powers of the board, (c) effectively treats the corporation as a partnership, and (d) creates a relationship among the shareholders and the corporation that would otherwise be appropriate only among partners.

If the corporation has a board of directors, but an agreement exists that restricts their powers, the board is relieved of the liability of the law. The liability is transferred to each person the power is vested.

A provision eliminating the board of directors or entitling one or more shareholders to dissolve the corporation is not effective unless the articles of incorporation or bylaws approved by the shareholders contain a statement to that effect.

The statutory close corporation may operate without a board of directors if the articles, bylaws or other agreements have a statement to that fact. Not having board (allowing the shareholders to manage) and not having the requirement for annual shareholder meetings is one of the main benefits of organizing as a close corporation. An annual meeting is required if one or more shareholders deliver a written request at least 30 days before May 31st or other designated meeting date.

While a corporation is operating without a board of directors (1) all corporate powers are exercised by and under the authority of the shareholders; (2) unless proved otherwise, (a) action requiring director approval is authorized if approved by the shareholders, and (b) action requiring a majority vote of the directors is authorized if the majority percentage of shareholder votes on the action; (3) the shareholders with the powers of the board are liable for the law imposed on directors; (4) a statement that the corporation is a statutory close corporation without a board of directors and that the action was approved be the shareholders; and (5) the shareholders may appoint one or more shareholders as designated directors, allowing to sign documents.

Any amendments to the articles of incorporation eliminating the board of directors must be approved by 2/3 of the votes.


Like with the other corporation structures, liability is limited. Although the close corporations do not observe the usual corporate requirements, that is not a ground for imposing the personal liability to the corporation on the shareholders.


A merger that would terminate the close corporation status or create a close corporation of the surviving corporation must be approved by 2/3 of the votes.

Sale of Assets

A sale, lease or exchange of all or substantially all of the property of the the statutory close corporation must be approved by 2/3 of the votes.

Termination of the Professional Corporation

The corporation can terminate its status as a professional corporation by amending the articles of incorporation to delete the statement that is is a professional corporation. The amendment must be approved by 2/3 of the votes.


The articles of incorporation, bylaws or shareholder agreement may authorize one or more shareholders (or percentage of shares) to dissolve the corporation at will or occurrence of a specified event. Those exercising a dissolution must provide written notice of the intent to dissolve to all other shareholders. 31 days after the effective date of the notice, the corporation can begin the liquidation process.


The Federal Tax Rate is a flat 35% and Georgia Tax Rate is a flat 6% plus net worth tax.

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Negotiating A Raise

When I left my last position, I did not negotiate properly. I felt that I was underpaid compared to others (since payroll was under my duties, I saw what everyone else made.) I gave a two-week notice, but gave them the opportunity to keep me on at a 20% higher salary. They did not flinch.

I had wanted to start my own business anyway, but I should have waited until my wife started receiving paychecks first. Since leaving, I have read how to properly negotiate for a raise.

In I Will Teach You To Be Rich, Ramit Sethi outlines a three-month plan for asking for a raise.

  • Three months before you ask, start tracking everything you do and the results received.
  • Three months out, you also need to sit down with your boss and discuss expectations and opportunities to exceed.
  • Two months before, ask to sit down with your supervisor again. Show your results and ask what you can do to improve.
  • One month before, schedule a meeting with your manager and mention that you want to discuss compensation. Ask what information you need to bring to the meeting. You should be able to judge at this point whether s/he is receptive to the idea.
  • Two weeks before, role play with co-workers or good friends with business experience. Get competitive salaries for your position. and are the ones listed in the book. (Note from me: I use Robert Half’s salary guide, but there are others specific to industries. Depending on where you live, the cost of living is different so the salaries may not be relevant. For example, the average site controller salary (nationwide) is $90,000, but the cost of living in my area is 84 (100 is average.) Multiply the 90,000 by .84 to get the salary average in your area, which is $75,600 using this example.

If your request is denied, the next step could be to look for another job. Since most employers ask for your salary history, a 10% raise is common.

Erin Burt with Kiplinger magazine gives similar advice, but not in the 3 month time frame. She advocates using timing after a big win on your behalf. Your boss will be happy with your performance and may be more open. She also mentions considering additional benefits and perks in lieu of a salary increase.

I should have used either pieces of advice, but I was chomping at the bits to get started.

What steps have you taken to successfully get a raise?

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Finding Your Desire

I started reading Think and Grow Rich by Napoleon Hill this weekend. Last week was a difficult week in my journey, so I needed an uplifting book. I have seen numerous posts in the past where this book has been credited with changing lives. Click the link above to get your own copy (Affiliate Link.)

This afternoon I am reading the chapter on desire. I have always thought goals important, and the book outlines how to take your financial goal and turn into the outcome desired. “Consists of six definite, practical steps:

  1. Fix in your mind the exact amount of money you desire. Be definite as to the amount.
  2. Determine exactly what you intend to give in return for the money you desire.
  3. Establish a definite date when you intend to possess the money you desire.
  4. Create a definite plan for carrying out your desire, and begin at once, whether you are ready or not, to put this plan into action.
  5. Write out a clear, concise statement of the amount of money you intend to acquire. Name the time limit for its acquisition. State what you intend to give in return for the money, and describe clearly the plan through which you intend to accumulate it.
  6. Read your written statement aloud, twice daily, once just before retiring at night and once after rising in the morning. AS YOU READ, SEE AND FEEL AND BELIEVE YOURSELF ALREADY IN POSSESSION OF THE MONEY.”

To apply this to myself:

  1. $500,000
  2. I intend to give up 8 hours per week. I will work an additional 8 hours on my “side hustle” to generate the income needed, invest and grow to $500,000. Considering the average person watches 4.5 hours of TV per day, I can reduce TV and other time wasters without sacrificing family time.
  3. November 1, 2043 (turn 66 in the month.)
  4. My plan is to have a side business (office cleaning), publish eBook (working on a book to write business plans) and offer information products on my blogs. I will need to save nearly $8,000 per year, but each year I do not reach, the amount will increase. I will invest all savings, primarily in quality stocks.
  5. & 6. Done!

What are your retirement goals? How are you achieving?

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Writing A Business Plan

Your business plan is a document that:

  • Describes your new or existing business
  • Defines your customer’s needs and your ability to meet them
  • Examines your competitors strengths and weaknesses
  • Addresses barriers to success
  • Details marketing strategy to get your share of the market
  • Sets goals for start-up, development and net income
  • Tells lenders or investors what they have to gain by investing in you

While creating a business plan is burdensome, there are 3 important reasons to create one:

  • Easier to secure financing
  • Gives you a well defined goal
  • Operational guidance for the next several years

Business plans are usually 15-20 pages long and broken down into seven parts:

  1. Executive summary – Highlights the major points from the other parts in the plan.
  2. Company description – Detailed description of your business, goals and mission statement.
  3. Products/services offered – Describe what makes your products or services unique or able to compete in the market you plan to serve. Also include any future products or services planned and a feasibility statement.
  4. Market analysis – Description of your target market (ie. specific customers or industry.) To make sure your business has a chance to succeed before starting, you need to spend a considerable amount of time researching:
    1. Industry
      1.  market size
      2. market potential
      3. current trends
      4. future of the industry
    2. Competition
  5. Strategy and implementation – Marketing and operating strategies you plan to use. You will give information on your pricing, position in the market, location, advertising & promotions and how you will handle demand.
  6. Organization and management team – Highlight you and your team’s experience. Include copies of all key personnel’s Resume. List the company ownership and the business structure you are using.
  7. Financial plan and projections – The other parts give your lender a “feeling” about whether you can succeed, but this section is going to be thoroughly reviewed. You need: 
    1. Investment Needed
      1. start-up costs
      2. loan application
      3. equipment and supply inventory
    2. Income Projections
      1. year one, break out by month
      2. year 2 – 3, detail quarterly
    3. Summarize Financial Needs

If any of the following apply, add to support your plan:

  • Personal Financial Statements (sometimes requested from a lender) prepared by a CPA
  • Contracts entered
  • Lease agreements


There are numerous programs that will help you create a business plan, most at a cost. You can get examples of plans at, but they link to LivePlan software, which is $19.95 per month. They do have sample plans you can use to create your own, I like the accounting service one.

The Small Business Administration(SBA) allows you to create a business plan for free and save as a PDF file. All you need to do is register for an account. I will create mine on this site and make available sometime in the future. The SBA also has a 30 minute web course on creating your business plan.

Other resources:

  • SCORE – Find a local mentor or take part in web based training, mostly free
  • Local or area college or university business program
  • Local chamber of commerce (you will have to join to use resources)
  • CPA or accounting firm
  • Local economic development program (usually affiliated with city/county government)


First of all, I would not recommend this if you are just starting out or planning to go into business. The reason why is you may skip some of the most important parts (see profit motivated section below) to complete. Plus, if you are boot-strapping like me, you may not have the cash to invest. Having said that, if you are determined to pay someone, get in touch with me:)

Hiring outside help will cost you anywhere from $150 for a generic plan to $10,000 for a comprehensive plan. It all depends on the amount of research required, turnaround time and details needed. If you are wanting a significant loan, a generic plan will not be sufficient. Depending on who you use, the hourly rate will usually be in the range of $25-200 per hour. I personally charge $36/hour for this type of service, but I am an accountant and marketer, not a professional writer.

When speaking with a consultant, make sure to communicate the following:

  1. What you need. Clarify who does what. Who provides the research on customers, competition, area economy and finances? If the consultant is researching and not local, how will they get that information? Does the consultant have experience in your industry?
  2. What you want. The consultant will need to know who is reviewing the final plan and a list of specific needs. You need to share your goals for the now and future of your business.
  3. What you have. The consultant will need any current research, access to an accountant or attorney if they need financial or legal information, and anyone else that will provide specific data.
  4. When you need. The consultant needs a deadline date.


If you spend the time putting together your business plan correctly, you may come to realize that your business will not generate a profit very easily. Take emotions out and DO NOT START A BUSINESS. That is what a plan and research are for, if you cannot make a profit, do no proceed. You will cause yourself stress and potential financial ruin if you keep going with a bad plan or business idea.


Now that you have written the plan, you will share with bankers, venture capitalists or other professional lenders. They are bound by confidentiality, but if you share with anyone else, make sure you get a written non-disclosure agreement. Your ideas are your property, you do not them to be shared with other parties.

I hope this helps serve as a guide for when you prepare your own plan. I am creating an eBook that goes into more detail. Subscribe below to get a .pdf copy of my book so far.

Please comment or reach out to me at

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Trend Analysis In Sales Forecasting

Plato once said “a good decision is based on knowledge and not on numbers.” 

That stood for approximately 2,400 years, but I do not believe that is the case anymore. We can use numbers coupled with knowledge to guide our actions now.

A large part of my last position as an accountant for a large food service company was sales forecasting and creating operating budgets. If you are creating a sales forecast, trend analysis is probably the easiest method to figure sales and expenses if you have been operating for a while.

Using a restaurant as the example, if you had 100,000 in revenues last May, that would be a good starting point to base this year’s May revenues if nothing else has changed. Most companies take that figure and add a stretch goal, such as 10%. You can also use last years expenses and subtract any unusual or one-off expenses to budget your costs. I typically budgeted costs using sales and multiplying by defined labor targets, food cost and other direct expenses. So if food cost is 28%, labor 27.5% and supplies 10%, I would expect to net $34,500 based on sales of $100,000.

Besides year-over-year budgeting, trend analysis can be used to tell you where you are going.  You can use Excel to build a trailing 12 month sales chart.

Step 1 is to create a date column:

Step 2 is to add a monthly sales column:

Step 3 is to create a column that adds sales year-to-date. You will need to create a formula to add the previous months sales to the current month. In the picture below, I showed the simple formula I used:

The final step, Step 4 will be to chart your sales. The chart below was created using the following order of steps: Highlight the 3 columns -> Select Insert at the toolbar -> From the selections go to the Line Graphs -> Choose Line with markers. Your chart will look like this:

This chart will give you your YTD sales and monthly sales. Examine months where sales are not uniform, such as what caused a great month or a sales miss. Use that knowledge to budget and improve on the future. Then you can prove Plato wrong!

No matter what method you use to forecast sales and expenses, it is important to do so in order to effectively guide you in your daily decisions.

If you need any help creating sales forecasts or financial planning and analysis, join my email list.

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Credit Utilization Rate

As mentioned in a previous post, 30% of your FICO credit score is based on your credit utilization rate. If you have a $2,000 balance on your credit cards and a total credit limit of $5,000, your credit utilization rate is 40%.

Some research done by Ben Luthi for Nerdwallet describes a 30% utilization ratio being preferred by lenders. To maintain that threshold, multiply your credit limit by .30 and try not to exceed that dollar amount.

One common mistake people make, including me when I paid down all my debts 15 years ago, is cancelling cards when paid off. While this is a psychological win, it hurts your credit utilization rate, thus credit score.

Of course, if you maintain a debt balance of $0, you can close all of your accounts. I do not recommend that though since credit cards can double as an emergency reserve if you are ever in a pickle.

Other than paying down debt, you can also decrease your credit utilization rate by asking your current card companies for a credit line increase or apply for new cards. While this may improve your credit utilization ratio, if hurts your credit score due to credit inquiries, which make up 10% of your score.

It’s best to pay as much as possible every month, but if you are getting ready to apply for a mortgage or car loan, you may want to try to play the “credit utilization game” outlined by Lindsay Konsko.

I would love to see comments from you. Especially how you overcame the burden of debt.

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Managing Credit Responsibly

I have very good credit now, my current FICO score is 821. This has allowed me to finance used cars below 3.9% APR or obtain credit cards if needed. I only have 3 cards currently, a Discover, Master Card and Visa.

I use the Discover card for day-to-day purchases, so I had my balance reduced to $1,500 several years ago. The other 2 are for emergencies and each have one recurring payment to keep them open. In total, I have $9,900 in available credit if needed.

When I graduated college I had about $2,500 in credit card debt at a very high interest rate. 18 months later, my balances had ballooned to over $9,000 between 3 cards. Plus I took a loan of $15,750 for a 2 year old Nissan Maxima at 10.5% APR (this was 2002, so while high, not unusual for the time.)

I worked full time, but could never seem to pay down the debts. That is when I decided to take a second job to pay down my debts. This was before Dave Ramsey made the idea popular. I got the idea from seeing how much the people that cleaned our offices made and how quick it was. I bought a bunch of equipment from a retiring individual, most of which was never used. Then I sent out 100 letters.

One company bit. I bid $4,500 per month and was awarded a one year contract. It was more than I could do by myself, so I called my best friend (now brother-in-law) down to help and split the profit with me. We ended up having that account for 3 years before a large public company bought them out and took the service in-house.

With the second job, I was completely debt free within 18 months.  However, I bought a house in 2004 and a waterfront lot in 2005, both with debt financing. The house was purchased with a FHA loan at 6%. One of my biggest mistakes has been never refinancing while rates are so low. 

I sold the lot in 2009, netting a profit of over 30%. Of course, I could have made much more if I had sold in 2007!

Currently I do not have any credit card debt and would like to keep it that way. Building a cash reserve can be difficult. It also may be a better idea to save in tax deferred investment accounts and fund emergencies with debt, as long as you can do so responsibly.


FICO scores range from 300-850. Several services provide the score for a fee. I am able to see mine for free through both Discover and Ally.

Lenders use this score to determine credit risk and the rate of interest they will charge you. The higher the score, the less risk you are perceived to be. Anything above 800 is considered exceptional and above 740 is very good. 670-739 is the median in the US and below 669 is considered high risk. Below 660 and you may not get mortgage premium insurance for a FHA loan.

Scores are calculated based on:

  • 35%: payment history: Timely payments and lack of derogatory information. Bankruptcy, liens, judgments, settlements, charge offs, repossessions, foreclosures, and late payments can cause your FICO score to drop.
  • 30%: debt burden: There are several metrics including the debt to limit ratio, number of accounts with balances, amount owed across different types of accounts, and the amount paid down on installment loans.
  • 15%: length of credit history: As a credit history ages it can have a positive impact on its FICO score. There are two metrics in this category: the average age of the accounts on your report and the age of the oldest account.
  • 10%: types of credit used: Its best to have a good mix of different types of debts (installment, revolving, mortgage and consumer finance.)
  • 10%: recent searches for credit: credit inquiries, which occur when you apply for a credit card or loan can hurt your score, especially if doing often.


You can check your credit reports with Experian, Equifax and TransUnion from the website above for free each year. I recommend choosing one of the above every six months.

Your payment history, balances, recent credit inquiries and any derogatory information will be included in your report. Check your addresses, jobs, and credit accounts to make sure you recognize everything. You can dispute anything you do not recognize directly from this site.


This is easier said than done. Credit cards are great if you can pay them off. You are getting an interest free loan plus whatever reward included with purchasing. However, I would try to use cash or a debit card if you carry a balance. Depending on your FICO score, you are paying anywhere from 12%-25% interest on the balance each month.


Unless you make thousands of dollars in purchases each month and are offered great rewards, you should not have an annual fee. If you are re-establishing your credit after a bankruptcy or collections, you may also have an annual fee. For the most part, credit card companies are very competitive and you should find one with good rewards and no annual fees.


Every year, I call Discover to see what the best rate they can offer me. If the rates are higher than Citi or PNC, I will use them instead. I switched to PNC for 2 years when Discover raised my rates. Sometimes they give me a limited time rate (9.9% for purchases during the next 12 months) or a lower permanent rate option. Even if you pay in full every month, you should never skip this in case you cannot pay in full one month.


There are numerous credit card comparisons online. One of the best is NerdWallet’s. I would stay away from the credit cards solicitations in your mailbox and any store offers. Most stores charge extremely high interest rates, plus they want more of your business. Saving 10% off a $100 purchase is not worth it.

I personally have used the store offer twice in the past 2 years. 1st was for an Amazon purchase of a mattress, a $400 purchase. The discount was worth it, although not the best mattress. The second was at a Belk’s department store. I had an interview and needed a suit. I found a $600 Banana Republic suit on sale for $400. On top of that, Belk’s gave 20% off if using a Belk’s card and another 20% if a new account. I got the card, suit and job!

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