Managing Money and Credit

Learning how to manage money the right way is an important step for individuals to take toward controlling their financial position.  Understanding where your money is coming from and where it’s going to, not only helps to manage a household budget but can make sure that an individual’s credit remains good as well as helping to improve credit and credit scores that are already weak.

One of the first steps toward financial control and sound credit management is to calculate your net income.  In order to improve credit and hence improve credit scores, the first step has to be knowing all of your sources of income after deductions, like income taxes and 401k, are taken into consideration.  This net figure ultimately determines how much money can be spent each month on living expenses and debt repayment.

The next step is to make sure all accounts are current or have current information.  Along with gathering and managing all current accounts, balancing the checkbook is a critical component in money management since it provides the information on exactly how much money is currently available to save or spend.  Prepare statements on all bills and debt and make sure the checkbook is balanced and up to date.

Create a personal budget is next logical step to managing money and credit.  A budget is an important tool to control spending, help manage debt and improve savings.  A budget can be a fundamental starting point to help you achieve your financial goals.  A budget is also a good way to understand what is important to you.  Items of consumption such as new toys and cars and furniture are nice but hardly important to our lives and relationships.  Determine what’s important in your life including credit, debt and relationships with a budget.

Once a budget is in place it times to take a close look at credit card debt and minimize the use of credit cards.  Always use your credit cards wisely.  The credit card rates on outstanding balances add up quickly and buying goods that cannot be paid for with current income is only going to make money management harder and stress levels higher.  Credit card debt is an easy trap to fall into.  The best way to avoid this trap is to avoid using credit cards altogether. 

Now its time to pay down any outstanding debt.  For those consumers that have credit card debt or other debts, one of the best approaches is to pay the maximum amount of funds available to the highest interest rate debts first and the minimum on lower interest debts to pay debts faster.  Call the credit card companies to make better payment arrangement and lower the interest rate to help solve your debt burden.

Now, establish a savings plan.  Try to set up an automatic withdrawal plan for forced savings, contribute to a 401K or deposit a portion of your monthly income into some kind of savings account.  Even a small amount will add up when it is deposited monthly.

Review and understand your credit report.  Obtain a credit report and become acquainted with your credit history. is the government mandated web site that lets consumers get access to one credit report from each of the three major credit reporting agencies annually.  In order to improve your credit and improve your credit score, it is important to know where it stands presently.  Repairing damaged credit can be easier than many people believe.  But it does require work and no matter how bad the starting point is, you need to see the credit report and credit history to know where to start.

If the credit report shows late payments, high balances and credit lines, or bankruptcies or other collection activities, this will negatively impact an individual’s ability to get additional credit, housing, insurance and many other services that involve credit.  Start now with good money management skills and fix as much of the credit report as possible to increase the credit score and credit profile.

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