We know life is short (#YOLO) but if you don’t manage your finances responsibly, there is a good chance it will feel extremely long. The lifecycle of your finances includes your past, present, and future—your financial past, a ghastly financial specter reminding you of past spending mistakes; your financial present, a day-to-day scramble to keep your monetary ducks in a row; and your financial future, a looming question mark.
We’ve assembled some tips below for each stage of your financial life. You won’t need a crystal ball to put these plans into action, though a debt consolidation calculator might be helpful. Keep reading to find out more about financial fixes.
Erase Past Mistakes
Get Out Of Debt
Whether you spent too much at Target or on an authentic Fabergé egg, debt is debt. Debt you’ve accrued in the past can follow you around for the rest of your life, thanks to a pernicious thing called interest. If you continually carry balances without paying them off in full, your interest rate will increase.
Debt payoff methods like debt consolidation, debt snowball, and debt avalanche can help you reach that glorious debt-free status.
Boost Your Credit Score
If your credit score is fair or poor because of past financial flubs, don’t fret. There’s still time to redeem yourself and your FICO score. Here are a few ways you can give your credit score a needed boost:
• Pay Your Balance In Full: Paying your balance in full will show lenders that you’re a responsible borrower and help raise your credit score (not to mention help you save on interest).
• Always Pay On Time: The biggest factor of your FICO score is your payment history (35%). Making all your payments on time will improve your credit.
• Maintain A Low Credit Utilization Ratio: Your credit utilization ratio is the amount of credit you’re using compared to the amount of credit you have available. It’s recommended to maintain a credit utilization ratio of 30% or less.
Maximize The Present
Use A Rewards Credit Card
Using a credit card with rewards that fit your lifestyle can help you earn perks and cash back. Why not get rewarded for your everyday purchases? For example, if you frequently eat out, then a cash back dining card might be for you. Or if you travel often, look for a card with flight or hotel rewards.
Create An Emergency Fund
An emergency fund is a pool of money that you keep for a rainy day. It’s usually recommended to be 3-6 months of living expenses, although a year is preferred. To set up an emergency fund, consider something like automatic deposits from your payroll account. That way, you can just set it and forget it. You’ll effortlessly create an emergency fund and give yourself the gift of peace of mind.
Plan For The Future
Take Advantage Of Your Employer’s 401(k)
If your employer has a 401(k) match program, you should try to contribute the maximum amount. An employer match is when your company contributes up to a certain amount to your retirement account based on how much you’re contributing. If you don’t contribute the matching amount, you’re passing up free money for your retirement savings.
Create A Budget
Building a budget today can help you save money tomorrow. To create a budget, look at your post-tax income and compare it to your monthly expenses. If you have money left over that you can set aside for a retirement or emergency fund, that is great! If not, you may want to tweak your spending. Is your daily venti, iced, half-caf, three-pump vanilla coffee really necessary or can you cut that cost?
Future Financial Freedom
While you can’t erase your financial past, you can optimize your present and future finance. These tips can help bolster your finances and leave those ghosts of financial boo-boos in the past so you can look forward to future financial freedom.
