Many factors make up financial responsibility, but at its core is one fundamental rule: You mustn’t spend beyond your means. This doesn’t mean breaking even each month, it means spending less than you make so you can begin to save. You never know when an emergency or other unexpected expense comes up, and you need to put enough aside to be able to reasonably plan for these events.
After repairing your credit score through BoostMyScore, to live a life of financial freedom, you’ll want to take a close look at your spending habits and reorganize them if necessary. The first thing to do is distinguish needs versus wants. For example:
– If a luxury apartment doesn’t fit your budget, rent an efficiency apartment.
– Choose the data plan you can afford, not the one you wish for.
– Don’t take on a mortgage that costs more than 30 percent of your monthly take-home pay.
– If you can’t pay for it outright, don’t upgrade to the latest mobile device.
Just because your neighbors are buying luxury homes, fancy cars and the latest electronics, that doesn’t mean you should, too. If you can’t afford it, don’t buy it. They aren’t going to help foot your bills, so you don’t want to hold yourself to their standards (you never know, they may need to climb out of debt themselves). Focus on what you need and what you can afford.
Budgeting is a key piece of properly managing your new credit and financial lifestyle. Sit down and construct a budget. To do this, write down in detail your income and expenses. Next, eliminate any expenses you don’t need or cut back where you can trim. The goal is to create a financial plan where you can pay your bills and have money left over each month. If you have bad spending habits and don’t rectify them, you’ll end up with another poor credit rating. A budget will help you to see your cash flow and keep yourself on track. Once you have spent the time to create a realistic budget, be sure to work that budget and tweak it as necessary.
If you can’t pay off your monthly credit card balance, you’re spending beyond your means and driving yourself toward debt. Every month you don’t pay in full, you’re paying interest. Credit is supposed to be a convenience, not a way of life. In other words, you shouldn’t rely on plastic to pay your bills. Instead, use it to your advantage.
– Avoid carrying and (over)spending cash.
– Pay off balance each month and keep your credit score strong by keeping your utilization low.
– Use credit cards to earn rewards.
In the event of an emergency where you must spend beyond what you can pay off, be sure to always pay more than the minimum. You’re in a better financial place now and, by using credit responsibly, you’ll avoid the low scores that previously kept simple necessities out of your reach.
A good rule of thumb is to always “pay” yourself first before you settle your other bills or go shopping. Stash aside at least 10 percent of what you’ve earned each paycheck. If you can afford more, even better because you can consistently build your savings. Over time, you’ll establish a nice nest egg you can use for retirement or, worst-case scenario, when an emergency occurs, such as a job layoff.
You’ve put in a lot of effort by boosting your credit score with BoostMyScore, so you want to be sure you maintain your good standing. Financial responsibility is all about keeping yourself out of debt. If you’re careful not to misuse your credit or overspend, you’ll stay in good shape.