The state of your personal finances follows you throughout your life. If your finances are a mess, it can affect your credit score, which could eventually affect your ability to make important purchases. But when your finances are in order, life is a lot less stressful. That’s why it’s important to constantly look for ways to improve your personal financial situation. Check out these tips to learn how to get your financial life in shape.
Consolidate andEliminate Debt
One of the best thingsyou can do to improve your personal financial situation is to reduce andeventually eliminate your debt. If you have a lot of debt, you might considerobtaining a short-terminstallment loan to consolidate it intoone monthly payment. Then, you can focus on paying off the balance of the loaninstead of paying multiple minimum payments each month.
If you don’t want toconsolidate your debt or you don’t have a lot of it to consolidate, you shouldfocus on eliminating it completely. Consider starting with a credit card andother accounts with the smallest balances and working your way up to anyaccounts with large balances. Dave Ramsey calls this the Snowball Method ofpaying off debt. The method is easy to implement so you only have to focus onsticking to it.
Create a Personal Budgetand Stick to It
For many people,handling their finances means knowing how much money is coming in and going outeach month — that’s it. But it’s important to yourfinancial health to create a personalbudget that helps you plan for the future and meet your financial goals, andit’s even more important to stick to your budget once you create it.
To create your ownbudget, add up all of your income and make a list of your monthly expenses.Then, think about your financial goals. Maybe you want to start a savingsaccount, start to invest some of your money, or put aside some cash dedicatedto taking a vacation. Whatever your goal is, calculate the amount of money youneed to put aside monthly to reach the goal in the timeframe you’ve allottedand then add that to your budget. Also, in addition to money for your regularmonthly bills and household needs, you should include amounts in your budgetfor holiday and birthday expenses, entertainment, clothing, car and repairs,household maintenance expenses, and anything else your family spends money oneach year. Then, divide the annual amount into monthly payments to include inyour monthly budget.
Focus on Improving YourCredit Score
Your credit score isimportant because it’s used by financial institutions when you need to borrowmoney. So if you ever want to purchase a car or a house or get a small loan,you’ll need a good credit score.
It’s a good idea tocheck your credit score and report once or twice per year to make sure all ofthe information is correct and to see what you can do to improve. To keep yourcredit in check, be sure to pay all of your bills on time each month and don’tuse all of your available credit — you don’t want to appear like you’re maxedout. Remember, your creditscore is like your adultreport card — make sure it always shows good marks.It can be difficult to getinto the habit of continually focusing on your financial health. But once youget started, it becomes second nature. Remember, the better shape your financesare in, the less stress you’re in, so make it a priority to focus on yourfinances as soon as possible.