A lot of people find budgeting and keeping a budget to be a daunting task. However, keeping a budget is arguably the go to way in order to get a handle on your finances overall. A budget is basically a financial plan for a defined period, from a monthly to yearly, which is known to greatly enhance the success of any financial goals.
How to keep a budget
- Calculate your monthly income, pick a budgeting method and monitor your progress.
- Allow up to 50% of your income for needs if your income allows this.
- Leave 30% of your income for wants, if your income allows this.
- Commit 20% of your income to savings, whether or not your income allows this.
Benefit of keeping a budget
- It provides you 100% control over your money
- It let’s you track your financial goals
- Budgeting will open your eyes
- It will Help you organize Your Spending
- Will help create a cushion for unexpected expenses
- Budgeting makes talking about finances much easier
- Having a budget allows you to save for a “Safety Net”
- Allows you to pay down debt quickly
- Budgeting helps you invest
- It allows you to live life better
Another reason it is good to keep a budget is so that you can establish credit. However, before we tackle how to build credit, we need to first understand what “credit” is, financially. According to thebalance.com, credit is the ability to get goods or services before you’ve paid for them with the promise to pay for them in the future. It is not spending money you don’t have which is what the system has taught you. It is crucial that this is the first understanding. It is equally important for us to understand what it means to have good credit, bad credit, and no credit at all.
Good credit is a classification for an individual’s credit history, indicating the borrower has a relatively high credit score and is a safe credit risk because they are diligent with paying their bills on time. Bad credit is a person’s history of failing to pay bills on time, and the likelihood that they will fail to make timely payments in the future. No credit means you don’t have any credit history, and if you have no credit, it means creditors don’t have a good way to predict how likely you are to pay your bills as agreed. Now that we have identified the various of credit, let’s see which ways a person can establish credit, in a good way.
How to establish credit
Standard Credit Cards
The easiest way to establish initial credit is to apply for standard credit cards are referred to as “plain-vanilla” credit cards because they offer no frills or rewards. They’re also relatively easy to understand. Other examples of this type of credit card are a typical department store credit card from Target, Dillard’s, Macy’s, Kohl’s or even a credit card from a service station like QuikTrip.
Some people may have to start with a secured credit card; credit limit is set to what you had to pay upfront or a reserved funds. This is a guarantee that if you fail to pay, then the reserved funds will be used to pay what you purchased with the credit card. The key to attaining good standing is to make sure you always pay the statement balance. In 6 mths there is a good chance, the card will be turned to a standard credit card.
Rule of Thumb is to avoid paying only the minimum payment. Not only is it a trap to get you to go over the limit and incur over limit charges but the cost of the charges end up to be multiple times what the purchases cost you.
Freedom Phoenix Tax Clinic 