1. Establishing and Managing Credit
There are many benefits of having good credit. Lenders aren’t the only ones who look at your credit and credit history. Employers, insurance companies, landlords, cell phone providers, amongst others, can reference your credit history when they make decisions about you. That’s why having good credit may help you with everything from getting a job to getting a new cell phone service.
In order to have good credit you first need to learn what helps you to establish good credit. Doing things such as:
- Acquiring a secured or unsecured credit card in your name
- Getting a loan (such as a student loan or an auto loan) in your name, with or without a cosigner or co-applicant
- Paying utility, cell phone, or other bills that are in your name
- Opening a checking account and using your debit card
- Building a savings account
In addition to establishing good credit you must be able to maintain it as well. I suggest you start small with a loan or line of credit that you can comfortably pay every month along with your other commitments. If you have a credit card, consider charging only what you can afford, and pay it in full every month. This may also keep your debt-to-income ratio low.
Also, payment history accounts for roughly 35% of your credit score, and the first missed payment has the largest negative impact on your credit score. By making payments on time every month, you’re showing financial accountability.
Bear in mind, just about 30% of your credit score is based on the percentage of your available credit that you use. Maxing out your credit card or lines of credit will negatively impact your credit score. A good universal rule is not to go beyond 30% of your available credit line. One of the best ways to manage your account balances is to stick to your personal budget regardless of your credit limit.
2. Setting up a budget
- A budget helps you figure out your long-term goals and work towards them. It helps you to map out your goals, save your money, keep track of your progress and make your dreams a reality.
- Creating a spending plan allows you to decide in advance whether you will have enough money to do all the things you need to do or would like to do. Following a budget will keep you out of debt or help you work your way out of debt if you are currently in debt.
- Building a budget forces you to take a close look at your spending habits. You may notice that you’re spending money on things you don’t need.
- Life is filled with unexpected surprises. Your budget should include an emergency fund that consists of at least three to six months’ worth of living expenses. This extra money will ensure that you don’t spiral into the depths of debt after a life crisis.
- As important as it is to spend your money wisely today, it’s also critical to save for your future. A budget can help you do just that. It’s important to build investment contributions into your budget.
3. Investing for the future
Preparing for your financial future is the best thing you can do for you. It is the only way to make yourself and family secure for a brighter future. One way to do this is by saving. Savings ensures your family’s future.
Another option is to invest. Savings and / or income should be invested in order to yield returns and to eventually increase the income of the family. If you keep your money in your back pocket instead of investing it, your money doesn’t work for you and you will never have more money than what you save. By investing your money, you are getting your money to generate more money by earning interest on what you put away or by buying and selling assets that increase in value.