In these times of economic uncertainty, it’s tempting to stuff your cash in a shoe box or mattress and forget about financial planning. However, planning is more important during monetarily unstable times than it is during those points when the money and credit are flowing easily.
To navigate the treacherous waters of today’s economic climate, you must be financially savvy, and the best place to start is with your own personal accounts. The money-motivated decisions you make today can and will affect your future stability and your ability to provide for your family.
Budgeting: The Basics
The most important thing you can do to improve your financial situation is to establish a realistic budget and follow it. Establishing a budget involves much more than figuring out how to spend less than you earn; it also involves setting aside money for savings, emergencies, and special occasions. Here’s how to establish a basic budget for your family:
- Track your income and expenditures for an entire month. Include everything you spend money on – even your morning coffee.
- Look for areas where you can reduce your spending. If you’re eating out excessively, this is a great place to start.
- Put it in writing. Write down the amount that you will spend each month on the following categories: housing, food, clothing, transportation, entertainment, and other bills. This is your basic budget.
- Don’t forget to factor in savings. You should tuck away a pre-determined amount each month without fail. Treat your savings account like another bill that must be paid. In fact, take the percentage set aside for savings right off the top.
- Monitor your budget and make adjustments where necessary.
4 Tips for Building a Sound Credit History
If you want the American dream – a house, a car, and a business – your life will be infinitely smoother if you have a solid credit rating. Your credit score not only determines whether or not you will get credit, it also determines how much you will pay in interest for credit extended to you. Following are four ways you can improve your credit history:
- Pay all of your bills on time. Paying your bills late or failing to pay them altogether dramatically lowers your credit rating. Be sure to always pay your bills regardless of how small or unimportant they may seem. Something as simple as forgetting to pay for your magazine subscription can have surprising consequences.
- Monitor your debt-to-income ratio. A good debt-to-income ratio is anything that falls under 36-percent. The lower your number, the higher your credit rating will be.
- Do not max out your credit lines. In fact, try to only use 10-percent of your credit limits. For example, a credit card with a limit of $1,000 should have a balance of $100 or less.
- Establish a mix of credit. Your credit report should show a mix of credit lines including home, auto, and revolving-credit accounts. Never rely too heavily on one type of credit. It’s also a good idea to keep older accounts open even if you’re not using them as older accounts carry more weight than newer accounts.
Now back to that car or house you’ve been eying; it doesn’t have to be entirely unobtainable if you don’t have the ideal credit history. For those situations that put you in a bind, there are companies that will help individuals in your situation, like Auto Credit Express. These sites will help you find the right loan that will fit your budget and credit status, though it is critical that you are realistic with what kind of loan you will be capable of paying.
How to Make Sound Investments
If you want a secure financial future, you have to make sound investments. While stuffing your money in a lock box might keep it safe from thieves, it will not prevent you from losing money. You see, your money will never be worth as much as it is right now as it loses value over time due to inflation. To stay ahead of the game, you must make sound investments in order to help your money grow in value.
One of the best ways to keep your money safe and help it grow is to place your savings in interest-bearing bank accounts. While you may not get a high return on money placed in these types of accounts, you will not lose money. Put aside a smaller amount of money for investments. Place the bulk of the money into low-risk ventures like saving’s bonds and Unit Trusts. Once you have a solid foundation of secured savings and low-risk investments, you can start venturing into investments that pose higher risks and rewards such as the stock market.
Securing a healthy financial future doesn’t happen overnight. You must make sound decisions regarding your finances each and every day in order to live within your means, maintain your credit rating, and save for the future.
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