Money matters can be one of those things you deal with as an adult only after you realize your financial affairs need some serious attention. Once you recognize you need to get in control of your financial health, the first step is to create a budget. You need to examine your income and outflow; you may be oblivious to where your money goes without holding yourself accountable for your spending habits.
Budgeting and your credit go hand in hand. If you've been denied credit and had to resort to having someone finance a car for you, you may be wondering if you can insure a car not in your name. The answer is, it depends. So, to avoid this situation and make sure you aren’t denied credit in the future, take steps now to improve your credit.
1. How to Budget
The first thing you have to do when starting to budget your money is to understand why you’ve decided to budget to begin with. Regardless if you're saving up for a big purchase or trying to improve your credit, knowing what motivates you is just as important as making the necessary changes. Any changes you want to make will be more attainable and easier to achieve if you can remind yourself why you’re doing it. Staying motivated is essential to being successful.
2. Research Different Budgeting Approaches
There are several effective options available when it comes to managing your money. One such method is the 50/30/20 budget; it suggests using 50% of your income on needs, 30% on wants, and the remaining 20% on savings or debt. The key is finding a method that will work best for you.
3. Determine the Difference between Actual Needs and Wants
Sometimes the line between the two may blur, it’s important to be honest about your needs and learn to prioritize both your needs and wants. In time, you can teach yourself to be rewarded for your financial diligence by treating yourself to things you want because you budgeted for them. Ideally, you should consider your budget as a way to make sure your spending and your financial goals coincide.
Despite your best planning efforts, life has a way of throwing the odd curveball at you. You can get ahead of these unexpected expenditures by making sure you set a little bit of money aside so when adversity strikes, you will have an emergency fund to draw from instead of incurring debt on a credit card. A good way to do this is to take advantage of automatic transfers from your paycheck to a saving account. When you use such automated services, you are saving without actually having to physically move money.
Once you have a budget in place, make sure you review it regularly. Financial matters aren’t often static and changes need to be made from time to time. Stay on top of your financial changes and adjust your budget as necessary.
4. Improve Your Credit
Whereas there is no quick fix for repairing your credit, keep in mind that slow and steady wins the race. There are small things you can do consistently that will improve your credit. As simple as it sounds, paying your bills on time are essential. Even if only a few days past the due date, not making payments to your creditors in a timely manner will adversely affect your credit score.
Be sure to review your own credit report annually to see not only where you need to improve but also to make sure the information in it is accurate. The most effective way to improve your credit is to lower your debt; the less debt you have, the better your credit will be.
Your livelihood can be directly impacted by your relationship with money. Make sure you understand your financial health and make the necessary changes.