Keeping your finances in order is a lifelong pursuit, requiring perseverance and discipline. From the early days of building your credit rating with introductory credit cards, to retirement planning for your golden years; successful money managers lean on proven financial strategies.
Your path to financial independence/security includes consistency, but there are important things to do at each stage of your financial life. Building credit, protecting it, and using it wisely are each important, but you’ll work harder establishing yourself as a young person. Once you’ve amassed good credit references, your goal should be to protect your positive rating. At each phase of life, you’ll draw on different forms of credit to realize your financial goals. Loans, credit accounts, mortgages, and other forms of financing each serve consumers in different ways, so it is important to keep your options open throughout your life.
Keep these financial tips in mind as you set the stage for lifelong financial success.
Plan for the Worst
Budgeting is a precise science, accounting for every anticipated expense. However, even those dedicated to crafting sound budgets experience occasional difficulties. In many cases, it’s life’s unexpected expenses that push well-defined budgets beyond reasonable limits. To offset unforeseen financial hits approach your finances with a safety net in mind. While hoping for the best always consider the worst possible financial outcomes and plan accordingly.
Maintaining a reserve or emergency fund is a good way to hedge against unexpected costs. If you lack emergency resources, start setting up your fund by setting aside funds each month and dedicating the money to your reserves. Draw on the financial cushion as needed, but only for bonafide cash crises that call for emergency funding.
Build and Protect Credit
Establishing your credit rating and protecting it from negative entries is a deliberate process. Early on, when you have few credit interactions to point to, it can be helpful to use a credit card to build a history. Even when companies are hesitant issuing standard cards, they are generally willing to extend terms for a secured line of credit. Cards like these depend upon prepayments, which users draw from. Though they don’t give you the same flexibility to rack up charges, as a regular credit card would, the secured versions nonetheless add positive repayment data to your personal credit rating over time, which will slowly build up your credit score.
Loans and credit cards are not the only items that influence your credit score. Credit reporting agencies also look at other forms of debt and money management. Utility bills and mobile phone contracts, for example, can bump your rating upward or downward, depending upon your payment history. To maintain the best possible rating, address every obligation timely – even those that don’t seem important. When short-term difficulties do arise, work directly with lenders to come to terms. Waiting until collections or foreclosures are in progress is too late. By that time, your delinquency has been reported and is part of your official credit record and can take years to clear off your credit history.
Your financial life unfolds on a continuum, so it is important to keep the ball rolling forward. In order to stay on track, set financial goals for yourself, including savings and investment objectives. One simple strategy is breaking your life into decades, which feature particular financial benchmarks. Your twenties, for example, might include opening investment accounts and beginning to make contributions. In your thirties, acquiring real estate may be your goal, so saving for a house becomes a priority. As the years roll on, retirement concerns and other wealth building efforts take center stage, calling for adjustments to your financial approach.
Without a clear plan, your financial future is left to chance, which can have catastrophic consequences. With actionable goals on the record, however, your financial success becomes intentional, leading to consistent returns and security. By building and protecting your credit rating and creating a financial cushion, you’ll always have the tools you need to overcome financial difficulties and borrow for your dreams.by