10 Ways to Improve Your Personal Finances 5 Comments
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Americans are struggling financially. Wages are stagnant, consumer spending is down, decent jobs are hard to find, and gas and food prices are up and, no, it is not the 1970s. All of those metrics have one thing in common. None of us, as individuals, has influence over them anymore than we do with the past despite our concerns about them.
Two of the areas that fall within our sphere of influence include our credit score and our personal savings. By managing your credit score, you can save considerable money over a lifetime. By savings appropriately, you can make the most of your earnings. By focusing on your sphere of influence and minimizing your sphere of concern, you empower yourself to control what you can.
From Dancing with the Stars to vacation hot-spots for special interest singles, there is a measurement and a ranking for everything these days. Your credit score is no different. A credit score is a three-digit number representing your creditworthiness; it is an estimation of your ability to pay back loans to lenders.
A good rating can save a lot of money over a lifetime, while a bad rating can mean thousands of extra dollars spent in interest payments over the same period. Whether your credit score is good or bad, there is usually always room for improvement.
5 Ways to Improve Your Credit Score
1) Pay bills on time
It is only fashionable to be late to the party, not with your credit card, cell phone, car insurance, and other bill payments. The majority (35%) of what affects a credit score is payment history, so the quickest way to improve your credit score is to not miss or be late for any payments.
2) Lower your credit utilization ratio
When you see someone double fisting it at the bar you can predict what state they will be in by midnight. Your bank has the same perception of you when you have a high credit card balance relative to your credit card limit, so get your credit card balance below 50% of your available credit card limit.
3) Preserve your credit history
Do not close credit card accounts like doors on an ex, even if they are paid off, as longer credit histories tend to have higher credit scores. Be sure to use your credit card once in a while and pay it off before the balance is due to let credit rating agencies know you have not closed your account.
4) Correct your credit report
Especially because of increased credit card fraud, a la Target, visit www.AnnualCreditReport.com or call 1-877-322-8228 annually to get a copy of your credit report, analyze it for accuracy and contest errors, including misspelled names, incorrect addresses and false claims. It is never good to have false rumors floating around about you, especially in their financial history, so correct yours.
5) Get a gas station credit card
Because gas station credit cards can only be used at gas stations (not at Nordstrom) and you buy gas anyway, get a credit card for your favorite station and pay the small balance off before it is due every month for several months – your credit score will increase like waistlines over the holidays because you will demonstrate your ability to manage a credit card.
As for savings, it was recently announced that Americans are saving at a rate of 4.3% for all kinds of future expenses, including retirement, cars, weddings and education. With that savings rate, no wonder personal debt is higher than Colorado on April 20th. That savings rate means a slow march to achieving any financial goal.
5 Ways to Save More Money
1) Pay yourself first
Set up automatic payroll direct deposits to your 401k, emergency savings, savings or investment accounts so a portion of your paychecks never touch your hands and risk being spent on a latte. Keeping this money out of sight and eliminating your involvement, like Karen Walker with her step-children, is best for everyone involved.
2) Increase savings contributions with each pay increase
We have all spent a bonus, raise or gift before we received it, doing our savings no good. Whether through a job change, promotion or simple pay raise, send all or most of any pay increase to your 401k, emergency savings, savings or investment account to beef up your contributions and reach your financial goals sooner.
3) Reduce and eliminate expenses
There are plenty of ways to cut back on expenses; switching from cable and satellite TV to Netflix and Hulu, cancelling landlines opting for cell phones, switching phone plans, or making your own coffee and packing your lunch. Cutting your spending by even 5% and sending it to a savings account will feel like a raise.
4) Do a monthly spending detox
We all look great after a week or two of detoxing, so apply the same principles to your spending occasionally by taking a week or weekend off of spending by riding your bike and walking instead of driving, eating at home instead of eating out, hosting a game night rather than club hopping and anything else you can think of to eliminate spending and put the money you would have spent towards your savings. Your wallet and belt will thank you.
5) Make more money
A raise, a promotion or a new job can help secure your financial future. Take a few minutes each month to refine your LinkedIn profile, keep your resume up-to-date, manage your personal brand at work, follow companies or groups on LinkedIn related to your industry and maintain your education to stay fresh, leading to that pot of gold at the end of the rainbow.
Managing your credit score and savings will increase your sphere of influence and reduce your sphere of concern. By focusing more on what you can influence (i.e. your personal finances), you can minimize your sphere of concern (i.e. the lackluster economy’s impact on you).
Author Bio: This post was provided by The Debt Free Guys. If you found this helpful, please see our previous post on Modest Money about “The Importance of Vocabulary” or visit our website every Friday for our #MoneyConscious Mash Up to stay on top of how the economy is affecting you.