Managing your finances can be a very complicated task. Where do you start? I suggest starting with a budget. Sit down and write out what you think you should be spending your money on each month. Don’t forget to include recreation and savings. Our grandparents believed in saving 10 percent of their income. That’s not bad, but 20 percent would be better. Half that savings is going to get used up the next time you have an unexpected expense not on your budget, like a leaky roof or a trip to the doctor. If you are saving 20 percent then you still have some money going into retirement accounts after paying for that unexpected expense.
After you finish your budget sit down with your bank statements and figure out what you have been spending your money on. I think you will be very surprised. You will probably find that you don’t need to spend as much as you though on some expenses. You may also realize that you waste a lot of money on other, nonessential expenses. Now, use this information and your budget to reduce your expenses.
Are you being charged fees for paying bills late each month? That needs to stop right away. Setup a system for tracking when your bills come in and pay them as soon as you get them. Pick a set time one day a week to pay bills. That way you won’t forget to take care of this important chore. Review your statements carefully, including credit card statements and bank statements. If your interest rate is high on your credit cards then contact the lender and ask them to reduce the rate. If you pay your bills on time then they don’t want to lose you as a client. You may be surprised how quickly they agree to give you better terms.
Review your credit report at least once a year. You are entitled to a free credit report once a year. If there is inaccurate information on your credit report then be sure to dispute the error so that it can be corrected. Bad information on a credit report hurts your credit score which in turn causes you to pay a higher interest rate when you borrow money.