Balance Your Checkbook
Keeping an accurate checkbook register is the cornerstone of money management. This allows you to know exactly how much money you currently have to save or spend and helps you to keep track of where you spend your money.
Calculate Your Net Income
Know all of your sources of income, and what the actual amount is after deductions have been made (Net Income). Deductions may include items such as automated income tax withholdings, regular 401(k) contributions, or medical premium payments. Your Net Income ultimately determines what you can spend or save each month.
Create a Personal Budget
A budget is your roadmap for spending and is a tool to help you achieve your financial goals. Save your receipts and add up your expenses for a month. Subtract expenses from your net income. If the result is a positive number, then you are living within the limits of your income. If the result is a negative number, your expenses are exceeding your income. Look for non-essential expenses that you can reduce and recalculate. Ask yourself if each expense is a “want” or a “need”, and try to minimize spending on the “wants”. Most importantly, once you create a budget, stick with it. Make adjustments as necessary. Having a budget will allow you to control your money rather than your money controlling you.
Minimize Credit Card Use
Credit card debt is an easy trap to fall into. The best way to avoid this trap is to avoid using credit cards altogether. If you like the convenience of a credit card, consider getting a check/debit card instead which are accepted at most places that accept credit cards. The difference is that the expense is automatically deducted from your checking account balance, which reduces your urge to spend more than you have. Be sure to track each check/debit card transaction in your checkbook register.
Pay Down Your Debt
If you have credit card debt or other debts, pay the maximum on your highest interest rate debts first and the minimum on lower interest debts. This will help you pay debts down faster.
Pay yourself first! When you pay monthly bills, write a check to yourself and put it in your savings account. If you get your paycheck automatically deposited, ask your employer about having a portion of your paycheck deposited directly to your savings account.
Know Your Credit History
Credit reporting agencies collect data regarding your credit repayment history and sell this information to lending agencies. If your report shows that you are late paying bills, have maximized lines of credit, or have bankruptcies or other collection activities, this will negatively impact your ability to get credit.
Consumers can obtain a free credit report once every 12 months from each of these three credit reporting agencies: Equifax, TransUnion, and Experian.
For more information, obtain your free Annual Credit Report or call 877.322.8228.
If you have been denied credit, you can get a copy of your report for free by contacting the agency directly. If you find incorrect information in your credit report, contact the credit reporting agencies. They are required to investigate the information within 30 days and delete the information if it cannot be verified. Your rights are further described in the Fair Credit Reporting Act.
Click here for a list of helpful books and websites to help you effectively manage your money.