It is hard to imagine life without a credit card? We need them to rent cars, reserve hotel rooms, place orders over the phone, etc. But how can we be financially responsible and still have a credit cards…….by having a plan. Your plan or budget, as some would say, is about allocating money each month for every area of our personal finance.
It should include:
• your income sources
• your debts
• your living expenses (housing, heat, etc)
These three items need to balance each other. You need to make sure that your income sources covers your debt and your expenses. If it doesn’t then you need to re-evaluate your spending habits and make some changes. Sometimes that may mean not buying overpriced coffee or eating out every lunch hour. You could pack a lunch and make coffee at home. It will be different for everyone. Once you have a clear picture of what your income and expenses are then you can go about creating a plan for building your credit.
Do you have an emergency fund set aside of at least $1000? Putting aside an emergency fund will help you cover unexpected costs verses using your credit card. Do you have unused items to sell? Check your basement and garage for things that you can sell to get that $1000 put aside quickly. Now you can increase your credit card payments to reduce those balanced which will in turn reduce your debt to credit ratio and better your credit score.
If you feel you are disciplined enough…… take out a small installment loan and make ‘on time’ payments to increase your credit score. The most important thing is to pay your bills on time. Let me say that again, ON TIME. IF you have a hard time remembering, sign up for automatic payments. This means one less thing for you to remember.
Stop trying to keep up with the Jones’ and reevaluate why you are buying what you are buying. Consider buying gently used items verses higher priced retail. You can get some great deals at Thrift stores, Ebay, or Craigslist. Be patient and shop for deals. Don’t live in the now, prepare for your future.