A fundamental truth of life is the essentiality and the importance of money. This is all the more true in this day and age of jet-setting individuals and trendsetters. With all our best intentions and skills we are determined to save enough to lead a dream life. However, when it comes to saving money not many of us are adept at it.
What you need is complete financial freedom, and there are a few ways to achieve that. It all starts with the necessary learning of the fact that without proper management of money, expenses can pile up. The more debt you have, the less is the freedom to enjoy life.
In the following section, our experts have listed all that you need to be aware of when managing your hard-earned money. Let’s have a look at what should you do.
Credit control
Full control over the credit is required to keep tabs on when you have accumulated more debt than you can swallow. This means you need to remain aware of the income, purchases, credits and other forms of mortgages. The credit score is an essential parameter that enables you to keep tabs on your money management. A good credit score of 670 and above is highly sought after.
The more you continue paying your debts off in time, the more improvement you see concerning the credit score. Never use more than 30% of your available credit to ensure proper management of your hard-earned money. To know more about how to get your free annual credit report and improve your credit, read on.
More about the credit report
Invest in a third-party agency to get the authentic credit report for your account. Several reputed organizations and firms calculate and deliver you the credit score. A quick internet search will list most of the expert and available companies. A general rule of thumb is to get your annual credit report verified by a second firm.
A credit score generally consists of the following aspects; personal information, open accounts of the holder, public records and all the credit inquiry concerning the previous and the current year. Always make sure of the details since errors might creep in.
About the FICO score
There is a second parameter as important as the credit score. This is the FICO score. The FICO score is taken into account for most of the loans including the car/home loan or the insurance on the property. There are instances when potential employers have asked for the FICO document to make sure of the credit score of the individual.
The FICO score is calculated by a combination of 35% of the payment history, 30% the net amount owed, 15% for the length of the credit history and 10% each for the new credit and the credit owed. A good FICO score is within the range of 260-300.
But it’s all about score maintenance
Now that you have been made sure that the credit score is essential, the question remains, how to maintain the score? Well, money management gurus will tell you “it’s an art,” but there are a few key areas that you need to consider concerning your spending pattern that will enable you to maintain a good credit score.
In the following section, we will have a look at what you can do to maintain the credit score.
Self-control is vital
When the primary goal is to save money, you need to learn to operate within a fixed budget for the month. How good you get at saving money is entirely dependent on self-control and purchase control over reflex spending that you can exercise in your daily life. The key is to learn to separate between what is essential and what can get deemed as extravagant.
Investing to safeguard the capital
Yes, there are market risks. But the truth is, the more you invest right, the more you safeguard your wealth. An investment makes your money work for you, so do not let it sit idle. You can avoid high-risk ventures if you are a newbie but go for the low to medium risk ventures and witness the magic of investment.
Avoid the unnecessary NSFs
NSF or No Sufficient Fund is like a red flag when the credit score and money management is concerned. The more your fault on your payments, the more you fall into the debt trap. Your overdraft fees increase so does the interest and the penalty levied by the banks and financial institutions.
Cultivate the saving mentality
You need to learn to save. There is no going around this! Let’s be honest and think it through. If you are thinking about saving money, you have to do exactly that; save! This means you need to curb your reflex spending. You don’t have to live like a miser, but it is an excellent idea to rethink an expensive purchase when the income is down or practicing a save first and spend later theme for all your purchases. There are too many distractions all around the world, and instant gratification is what individuals are after; learning to be mature regarding money matters is essential in this day and age.
Operate within a budget
Yes, it is depressing to think about budgeting the spending for the month and sticking to the plan. It goes without saying that you need to learn to operate within a fixed budget for the month to cap your spending. You are on the debt side of matters the moment you cross your budget. If you keep overspending repeatedly, then you will see your capital vanish away. There are three main pillars when it comes to budgeting, and these are the income, the cash flow, and the expenses incurred. So, tighten those purse strings accordingly.
Saving your money and securing a better future is entirely up to you. The spending comes naturally to every one of us but making those retirement plans takes a lot of responsibility. Keep tabs on your credit score and the FICO score to make sure you are planning and managing your money right.
