Establishing a budget early on is the key to a successful financial future. While many people make a lot of money during their lifetime, a lot of them have nothing to show for it. If you set up a budget and stick to it you’ll retain a good credit score and enjoy having money available when you need it.
Setting up a budget
Setting up a budget is relatively easy to do. The hardest part is using willpower to refrain from making impulse purchases that can pile on more debt quickly. The first thing you need to do is make a complete list of your monthly expenses including your rent or mortgage, car payments, car insurance, gas, electric and cable bills, your cell phone, any loans and credit cards. Then factor in a rounded-up number for gas for your vehicle, tolls, child care, lunch, and groceries. After you complete that list then write down your total net monthly income. This will give you a very clear indication of how much debt you owe and how much of the money you’re bringing in is actually yours to spend. Hopefully, you have enough for personal enjoyment. If not, then make every effort to double up on your credit cards or loan to reduce the amount of monthly debt.
Importance of a stellar credit report
It’s hard to imagine but there are still many people who go through life blind clueless as to what their credit score is. It isn’t until they actually need or want something that they can’t fund on their own without a loan that it comes into play. For many, this is a hard way to find out that your credit is less than desirable. To avoid this scenario from happening to you, it’s in your best interest to first acquire a free credit score and then to carefully look it over section by section for accuracy. This will allow you to see and review your credit score and make improvement where needed prior to purchasing a home, a car or applying for a personal loan. If you have credit cards maxed or near their limit or too much revolving credit available it can actually reduce your credit score. By keeping track of your score you can improve it and keep it at a level that will get you the credit you need at the best rates.
Start young and grow to your potential
As a young college student, you may not realize the importance of having good credit. But, after you complete your schooling and it’s time to venture out on your own you’ll get a quick reality check. If you are working part time for some extra spending money or to cover your books and personal essentials, apply for a credit card. Once you have it, use it only as needed and then pay it off each month. This way you’ll begin to establish your credit worthiness to potential lenders and you’ll have a small amount of money to get you through a tight month.
If you establish a budget and stick to it when you are first starting out on your own, you’ll develop important money management skills that will continue to pay off in your favor throughout your life. Learn to only buy what you need and then to save up for the other things you want. By doing this you’ll always have money on hand and you’ll pay less than others do by placing it on a credit card and paying it off with interest over time.