Credit can be a fickle thing if when you don’t understand it many things can come about and bite you in the rear leaving you with a credit mess. The best way to avoid those messes or recovery after coming out of a financial mess is to plan your financial future and set some boundaries for yourself for a better, more solid financial future.
Planning for your future can look like a lot of things and should involve many different aspects, like living within your means, things you want to accomplish financially, what you want out of your future credit, how you will build and maintain your credit, and how you will set guidelines for yourself to avoid making common credit and financial mistakes. This article with touch briefly on each one of these to offer you more insight into how to plan for a credit-worthy future.
Living Within Your Means
What does this mean exactly, well it means not spending more than what you make each month. This is one of the hardest and almost impossible things for American families to do, especially when your household expenses exceed your income. Ideally, you need to be able to pay all your bills on time each month and still be able to buy amenities like food and clothing, while sticking some in savings. To live within your means can be making choices between an upgraded cell phone plan and one that just covers what you mean. It can be the difference between eating out or learning to cook and staying in. There are lots of ways to shrink your monthly expenses to live more within your means.
What Do You Want to Accomplish Financially?
This can accompany living within your means, because if you are just distraught over the situation and want to have more luxuries in life, then you simply need to earn more money. You should look at the life you would like to live and then estimate what it would take months to make that life happen. You then would need to put together a plan to meet those needs before you start living that way. This could mean seeking out more training in your industry, asking for a raise, changing jobs, or taking a second job. The important thing is to always stay within your current means, even if you are looking for a way to increase your income. Until you are making that higher income, it is not available to you.
What Do You Want Out of Your Future Credit?
Most will answer with buying a house, buying a car, vacations, college for the kids, and retirement. These are all great and should be goals depending on your family and personal situation, but all these things and those like them require decent to good credit and some planning to obtain securely. Think about the types of things you want in these areas and speak with professionals in the industries to see what it would look like on paper. This will give you a realistic sense of what it takes to get your credit to the point of being able to afford and finance the things you want.
Build and Maintain Your Credit
To build and maintain your credit you need to stick with the guidelines surrounding the living within your means section and that means paying your bills completely on time every time. This is not always possible but should be strived toward and if not met should be made up as quickly as possible to get yourself back on track toward building and maintaining good credit.
Set Guidelines for Yourself
It’s important to set some spending rules and good habits for yourself. Don’t completely deprive yourself this will only lead to failure and can have catastrophic results for your finances and future. Instead, set some ground rules with occasional indulgences and stick money aside in savings for the big rewards. Smart money practices will always win out over excess in the long run.