Managing your money and credit
cards responsibly can increase your credit score and set you up for a
healthy financial future. Mismanaging your money and credit cards can
set you back financially and create a poor credit score. You can turn it
around, however, by getting your finances under control and making
better decisions in the future.
Budget
Managing
your money properly involves writing out a budget and following it.
Track your expenses if you don't know where your cash is going. Save
your cash receipts for a month or two and go over them with a fine-tooth
comb. Look over your bank statements and credit card statements as
well. Getting a clear idea of how much you spend, and what you spend it
on will help you make adjustments to your budget, if necessary. If you
are spending more than you are bringing in each month, some serious
trimming is in order. Eliminate any unnecessary expenses, and make sure
you are living within your means.
Using Credit Cards
Manage
your credit cards and use them to build your credit, for emergencies
and ease. For example, when you make a large purchase on a credit card,
you can dispute the charge and have an easier time reversing it than
paying cash if something with the purchase goes wrong. Charge automatic
payments to your credit cards, then pay them off in full each month. If
you must leave a balance, keep it under 30 percent of the available
credit you have. This will keep your debt-to-credit ratio low, which
increases your credit score. Carrying large balances can cost you
hundreds--or even thousands--of dollars, on top of lowering your score.
Managing Your Cash
Develop
a system that allows you to keep more of your cash. If you seem to
spend less when dealing with actual money, carry cash. If you blow
through your cash, try to purchase everything you can on your debit or
credit card--then pay it off at the end of the month. Pay your
retirement and savings accounts first, then your basic living expenses
and debts. Give yourself--and your partner--a set amount of
discretionary money each month to treat yourself however you want.
Aggressively cut back on everything you can and attack your debt if you
carry high balances on your credit cards. Eliminating credit card debt
will give you more cash to hold onto each month.
Obstacles
Save
at least $500 to $1,000 in an emergency fund so you don't have to rely
on credit cards for emergencies. Even if you can only spare $10 per
payday, it will grow over time. A new sweater or hand bag--even if
hugely discounted--does not constitute an emergency. Once your debt is
paid off, use cash when possible. For example, if you have $2,500 in
savings and need a new water heater, use your savings rather than
running up a credit card. Replenish your savings as soon as possible.
Ideally, you should work to have at least six months worth of living
expenses in savings.
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