Most people don’t spend a lot of time budgeting. Online bank and financial services have made “checking in” on your accounts fast and easy, and all but eliminated the need to keep a record of what goes in and out. But with everything automated these days it’s easy to lose track of what bill gets withdrawn on what date, if the amount of your automatic deposited paycheck was accurate, or if your bank account has over-drafted for some reason.
When it comes down to it, successful budgeting is essential to building and maintaining good credit. It doesn’t have to take a long time, but by doing these 6 budgeting tips you can help give your credit a boost and stay on top of your finances.
1. Track your expenses
When it goes on the card it’s hard to realize how much you’re actually spending on fast food, gas, entertainment, and other daily expenses. When you use cash it’s much easier, but that’s not always realistic. So, at least a few times a year, sit down at your computer and go through a month’s worth of expenses, adding up how much you spend specifically on each category. Fast food and eating out, gas, clothing or other “fun” shopping, and then of course bills. Get an idea of what you spend each month – it might surprise you.
2. Don’t rely on credit
If you’re in the habit of transferring money over to cover overdraft fees or to simply have enough for a bill that’s going to come out, you’ve got a problem. Credit card companies love you for it, but you’re losing so much money in interest fees when your balance is put on a credit card or line of credit. Hopefully, after tracking your expenses you will see where your money is going and you can cut back in some places to lessen your dependability on credit.
3. Sacrifice to pay off debt
After taking a look at all of your bills, you may realize that you spend a lot to park close to the office, and over the course of a year you could probably take a vacation with what you spend on parking. Or maybe you’re realizing you’re paying a lot for car insurance when you have a near spotless driving record (and you can probably negotiate for a better rate). Perhaps you’ve kept the same insurance since your early driving years and haven’t looked into an upgrade. Whatever the category may be that surprises you, shop around or sacrifice some walking time to free up that money so you can apply it to paying off debt. Getting that debt utilization ratio down is critical to boosting your credit score, but you might have to get creative to get it there.
4. Focus on building a savings
When unexpected expenses come up do you automatically whip out the card? If so, your credit may be hurting for it. When you’ve freed up some money, resolve to start building an emergency savings fund so that those rainy days don’t turn into rainy weeks and months by pouring on your finances.
5. Prioritize due dates
Even if they come out automatically you should set a reminder in your phone to alert you either on the day of or the day before a withdrawal. This will give you the chance to quickly check your balances and make sure the money is there. This can prevent a lot of headache if, for some reason, the money isn’t and you’re hit with overdrawn fees from the insufficient funds.
6. Designate time for budgeting
All of these tips are great and will actually help you if you actually do them. You need to schedule a budgeting meeting with yourself, preferably once a month, to ensure you’re staying on track. Over time you will see the fruits of your labor as your credit score and savings increase while your debt and stress levels decrease. But you must be willing to sit down and give your time and attention to the task. The only way to find out if budgeting can really help you manage your finances and protect or improve your credit is by giving it a sincere effort.
For more budgeting and credit repair resources, check out our tips and tricks section.