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In Touch With 21st - January 2014

How You Can Get Your Finances in Order


How You Can Get Your Finances in Order

It’s a question we all ask at one time or another: How do I get my finances in better shape and raise my credit score? The answer is simple: you need to change how you look at money, along with some of your spending habits. By doing things differently, you can get your finances on track for 2014.

There are several aspects to financial change:

1. Developing a budget

2. Paying attention to how you spend

3. Addressing your credit score

Create a budget

If you are serious about organizing your finances, start by creating a budget. This budget should start with your income and expenses; so you can understand the amount of disposable income your salary allows for each month. Simply put, if you don't know how much you have to spend each month, it will be almost impossible to make financially responsible purchasing decisions. Make sure that all of the information included in your budget is correct. If your budget is accurate and based on facts, it has a greater chance of succeeding than one based on estimates.

Planning on taking a trip? Significant birthday or anniversary coming up? If so, start saving in advance as this allows you to spread the costs over a longer time period making the payments less likely to affect your budget because budgets can be vulnerable to large expenditures. To help keep yours on track, factor in holidays and birthdays and the significant expenditures they may require in addition to your day-to-day expenses.

Pay attention to how you spend

The next time you find yourself considering a purchase, imagine how you will feel when the newness of the object has worn off, but the debt remains. Once this is taken into consideration, you can better decide how important it is for you to spend the money.

There is nothing wrong with occasionally treating yourself or someone else, if the money is there and it brings happiness. Make sure this is an exception rather than a regular spending habit. If you need to use a credit card to make this happen, it’s probably not the best idea at that time.

Fixing your credit

Pay all your bills on time. That’s the number one rule all people with good credit follow. No matter the size of the bill, pay it off. No bill is too small to ignore: a $100 store credit card payment will show up as delinquent the same as a $1,000 VISA bill would on your credit report, and can significantly reduce your credit score.

Exercise caution when deciding to co-sign for a loan. Be careful about co-signing a loan, especially for someone with whom you are romantically involved. Even if the relationship ends, you are still responsible for that debt.

It’s never too late to start over. This is the best of all. Even if you had bad credit in the past, it doesn't mean you can’t rebuild your credit. Open some secure credit cards and get back on track and pay your bills on time. Once you re-establish a good payment history, you’re credit score will rise accordingly.

Learning to save

Rebuilding your credit doesn’t mean you have to put your entire life on hold. With some modifications to your spending habits, cautious financial choices, and remaining disciplined with payments, you can make a positive change to your financial situation. When it comes to saving, the first step is always the hardest. But, once you take that step, it can be very rewarding.

Please note: This information is of a general nature for educational purposes only. It must not be taken as advice and does not signify an endorsement. 21st Century Insurance is not responsible for any injuries or loss incurred.

Sources: money.msn.com, mint.com; lifehack.org; thesimpledollar.com

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