Just like diet and exercise are necessary for a good health, your financial health is also dependent on good habits. This means that one should first be aware of their personal financial situation and overall goals. Once we know where we stand, we can then exercise new habits to be successful in reaching our financial goals. The other equally important aspect is understanding credit and how our decisions affect our overall credit score.
Here are 11 ways you can keep your personal finances in shape:
1. Know Your Goals
For some people, there’s the dream of taking a trip around the world or a sabbatical from work. Others are looking for a car or even a new home. Choosing your personal money goals is an important first step to get your financial house in order. After all, if we don’t know what our financial goals are, how can we strive to work toward them?
2. Create A Budget
Most people spend about two-thirds of their income on three essentials: food, housing and transportation. After that there are the usual debt payments, household costs, optional items like entertainment and hopefully some saving to consider. Create a monthly budget by allocating spending goals for each category.
3. Document Your Spending
Keeping track of every expenditure over a two-week period can offer insight into wastes, from restaurant meals to cab rides. You can jot them all down using a pen and paper or take advantage of free apps and online tools like Mint.com.
4. Learn To Negotiate
Prices are often a lot more negotiable than we think, even in big-box department stores. If you’ve seen a lower price listed elsewhere, don’t hesitate to ask the store clerk if he can match it. The worst case scenario is getting a “no.”
5. Compare Items Online Before Visiting The Store
6. Not All Debt Is Bad Debt
While debt has earned a bad reputation in the wake of the subprime mortgage crisis, managing credit and even taking on some debt can actually be useful. Evaluate your debt decisions by considering the pros and cons carefully.
7. Quickly Pay Off High-Interest Debt
Credit card loans are among the highest interest rate debts around, averaging roughly 17 percent. Paying off credit cards as soon as possible can help reduce fees and interest rate charges that inflate your overall payments over time.
8. Create A Solid Credit History
Lenders base most credit decisions on our credit history. That means that the decision of whether or not to loan a consumer money, and at what rate, depends largely on what we’ve done with money in the past. For consumers with a limited credit history (because they have few or no financial accounts) there might be more difficulty in establishing new credit, and the dream of one day owning your own home may forever be just a dream if you can’t get approved for a mortgage. Pay bills on time, and be sure to have at least a few accounts in your name.
9. Review Account Statements
An unfamiliar charge on a credit card is often the first sign of identity theft. Make it a habit to carefully review all mail from financial institutions regularly to make sure your accounts aren’t being misused. If you see an erroneous charge, contact your financial institution immediately.
10. Check Your Credit Report Frequently
Everyone is entitled to a free credit report once a year. (You can get yours at annualcreditreport.com.) Your credit is your responsibility. Reviewing it gives you the chance to fix any mistakes that could be hurting your credit score.
While it may seem at times like your financial health is suffering, it is never too late to turn it around. By incorporating these simple items into your finances, you can expect to find your financial well-being at a steady improvement.