Where to begin?
Money problems affect us all, no matter how much or how little we have. That’s why financial planning is so important. It’s hard to think about the future when pay day is a week away and the chequebook is empty. You can make your money stretch further if you learn to manage it carefully. You can make your money stretch if you:
- Know what you want to do with your money
- Know where your money goes
- Know how to keep your money longer
- Plan your spending in advance
- Know and keep within your credit limits
What’s Important to You?
Why do you spend your money the way you do? If ten people were given a $100 bill, they would most likely spend it in entirely different ways. Why? Because people are different and value different things. The deep rooted beliefs you have about what is desirable and good are known as values. Values grow from personal experiences. You have, and will continue to make choices based on your values. Values are not necessarily right or wrong; they express what is most important to you. Families set goals based on their values. A major reason why many couples argue about money often involves differing values and goals between partners.
Get a handle on your spending. Most people spend thousands of dollars without much thought to what they’re buying. Write down everything you spend for a month, cut back on things you don’t need, and start saving the money left over or use it to reduce your debt more quickly.
Pay off your highest-rate debts first. The key to getting out of debt efficiently is to first pay down the balances of loans or credit cards that charge the most interest, while paying at least the minimum due on all your other debt. Once the high-interest debt is paid down, tackle the next highest, and so on.
Expect the unexpected. Build a cash cushion worth three months to six months of living expenses in case of an emergency. If you don’t have an emergency fund, a broken fridge or damaged car can seriously upset your finances.
Get help as soon as you need it. If you have more debt than you can manage, get help before your debt breaks your back.
Creating a positive credit history
When it comes to credit history, there are three types of people:
- Those with a good credit record that has been established over a period of time.
- Those with no credit record, usually young adults and widows who have had no credit in the past.
- Those with bad credit history.
Pay your bills on time. Without question, this is the very best way to create a positive credit report. This means all your bills, including rent and utilities.
Don’t bounce cheques. If you don’t have money in your account to cover a cheque, don’t write it.
Think long term. Don’t be impatient. It takes more than a month or two to establish and build a solid credit history. If you are rebuilding a positive credit history, it may take some time before lenders are willing to give you a second chance. During that time, your financial dealings will have to be as clean as a whistle.
Apply for a secured credit card. With a secured credit card, you have to deposit a certain amount of cash into a savings account and pledge that amount as collateral against any balance you have on your credit card.
Avoid switching employers. Lenders like stability in employment. Being with the same employer for five years or more is a real plus when it comes to considering a loan application.
Avoid moving from rental to rental. Again, stability counts.
Set up a savings account as well as a chequing account. It’s one thing to have a chequing account. It is quite another to have some money in savings. Save something every paycheque, even if the amount is small.
Work hard to decrease your debt. Lenders like to see a decline in total debt as well as consistent, on-time monthly payments.