The Blueprint: Budgeting, Credit Scores, and Other Things No One Told You

Writer: Julisa Lee

Editor: Esthefany Castillo



It’s not a secret that adulting is hard. Life is expensive and a lot of us struggle financially. We haven’t had the luxury of being taught how to properly manage our finances; as a result, we are learning by trial and error. I've both learned from my mistakes and have acquired knowledge in my profession as an accountant. I want to share a few tips I believe are the foundation of financial literacy.



Budgeting


This isn’t an option. Not everyone is a nerd like me with a full Excel spreadsheet to organize what bills will be paid with each check. It is, however, crucial to be aware of where your money is going. Tip: Mint is an app that keeps track of upcoming bills, monthly budgets and spending habits.


Start with Necessities: These are rent, food, utilities, things that you absolutely need to survive. This also includes your credit card and student loan payments. These go first. Next, make cuts to what isn’t a necessity. Do you really need cable? How many times have you been to the gym in the past three months? Can you get your hair and nails done less frequently?


Build a Savings: It doesn’t matter how small it is, the point is that you start. Deposits, trips and emergency expenses all need to come from somewhere; make it a priority to be prepared. You don’t want to swipe your credit card for these things if you don’t have to.




Allow Yourself Room: Yes, you want to make cuts to your spending, but you also want to give yourself the room to go out and spend money on frivolous activities. Why? Because most likely you’re going to do it anyway and when you do, you’re probably more likely to swipe your credit card and spend more than you would have had you allotted yourself some money for it. Give yourself an allowance and try to stick to it.




Build Your Credit Score


Your credit score is your financial report card. It’s going to determine the interest rate and limit on your credit cards, auto loans, home loans, etc. Tip: Credit Karma offers free credit monitoring and helps identify problem areas as well as provides possible solutions.


Payment History: Make sure you pay things on time, even if it’s just the minimum. Missing a payment or having an account go delinquent will hurt your credit score more than anything else.


Credit Usage: Keep it under 20% to avoid negative impacts. Hack: If you’re really struggling, try applying for credit limit increases to lower your usage percentage. Getting out of credit card debt is hard, but doable. Before taking any settlements or filing for bankruptcy, try to consolidate your cards. A solution for you might be a personal loan; the interest rates are much lower than the rates you’re paying on your credit cards and you’ll get a fixed payment amount and term.


Tip: If your credit usage isn’t the problem, consider Self Lender, a savings option that will issue you a loan for a CD which you will pay monthly. When the payments and terms are up, you unlock the CD and get your money back. In other words, you create a savings while establishing good payment history and diversifying your credit portfolio.



Other Financial Gems


Retirement savings: I believe at this rate we can agree, Social Security benefits will be non-existent by the time this generation needs it. If it isn’t, it likely won’t be enough to sustain a living. It would benefit you to put money into a retirement account for the future. Participate in your company’s 401K plan, especially if your company matches your investment. That’s free money and it will earn interest.


Taxes: Stop overpaying your taxes. Yes, I mean that. Everyone loves a check come tax season, but what’s it really worth? With more money in your pocket now, you can better your financial situation. Instead of giving extra money to the government and holding out for a refund, pay off your debt quicker or deposit those extra funds into an interest-bearing account and make money.


Do the work sooner rather than later. Buckle down and prioritize ;don’t stress making investments when you’re paying interest on debt. Make smarter money moves. Your future will you thank you.


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