Tustin Finance

Build and Preserve Your Credit Score

Personal Finance to Improve Your Credit Score

Posts Tagged ‘budgeting’

How to Budget – Personal Finance 101

The key to successful financing is a budget. Even the most successful individuals work on a budget in order to keep track of where their money goes. It is important to be in charge of your spending otherwise your money will be in control of you. Budgeting is simply the task of determining what you need to spend money on and assigning each category a dollar amount for the month. They key to successful budgeting is to give every dollar a job. Leftover money creates gaps and opportunities for unnecessary and careless spending.

The first step of budgeting is to sit down with you spouse or partner to plan the budget together. Both parties need to agree on the budget in order to carry it out successfully. If one party feels strongly about one area of the finances, take the time to listen to why this is important and discuss all the impacts it has on the rest of the finances. Once you have assigned jobs for your money the next step is to keep track of every dollar you spend. Even if you use cash for something instead of a credit card, be sure to record the amount. It is likely that there will be surprises along the way and things you did not budget for the first 2-3 months you try this. However, budgeting does get easier and more accurate the longer you stick with it. Over time you will begin to see how valuable it is to live within a budget (and your means). This will also be true if you are saving for a vacation or other large expense. Set aside an amount each month for large expenses so that you can still budget accordingly when the month comes.

Another key component of successful budgeting is planning ahead. Even though Christmas only comes once a year, it is a good idea to budget for it monthly, or at least for a few months before December. This will also be true for quarterly expenses such as insurance, garbage payments, and other bills.

Living on a budget may help you pay all of your bills in full and time (including credit card bills) and may help you to pay down your debts faster. In doing this, you can start to build your credit score. While a credit score of 650 is the most common credit score, you should aim to reach a credit score of 700 or better. The higher your credit score, the easier it will likely be to be approved for loans such as a home mortgage.