To become financially responsible is not only making payments on time. It being prepared for future financial outcomes. If you get a major car brake down, do you have the funds to fix it, or would you use credit cards?
Remember that our needs are different than our wants. You need transportation to go to work. Do you need a car or can you take public transportation? If you need a car, do you need a luxury car? I’m sure not. Cars lose 30% or more of its value once you drive them out of the dealer. It is a big investment and in many occasions, we buy more than what we actually need.
There are different technologies and tools to help you track your money. You do not have to use them all, but the technologies that you feel comfortable using.
Also, personal financial software like Quicken can help you money all your transactions by connecting the software to your financial institution accounts. You can use smartphone apps like Mint, Clarity Money- Budget Planner, Daily Budget Original, Mvelopes, Spendee, EveryDollar, and many more.
Alternatively, you can use spreadsheets to create your own budget and track your finances. A good idea is to make a spreadsheet with all your income and expenses. Click the link to download the Excel Personal Budget.
Should I get a credit card?
A credit card is an important tool that provides useful benefits. Do not abuse it. Try finding a credit card with no annual fees and low interest rate. Many credit cards with miles, charge $75 or more in annual fees.
If you are starting to build credit or have bad credit, you can still qualify for a good credit card. Some banks may ask you for a security deposit of $200 or more. Some even report to the three credit bureaus to help you creating a payment history.
Credit cards are important when you are traveling. Car rental companies and hotels require credit card payments in case of any additional charges. Credit cards are pre-charge for certain amount until the final day of service.
Debit cards on the other hand, only cover for the amount on available your checking account, unless you have overdraft protection. For that reason, car rentals and hotels do not like debit cards and, when they do accept them, they hold a large deposit.
Monitor Your Credit Reports
Your credit report is not just a number. A credit is the history of your transactions and other important information that can be used to see your credit worthiness.
The credit score uses a numerical value between 280 to 850 and FICO 300 to 850. The higher the number, the lower the risk. The Fair Isaac Corporation (FICO) is different than a credit score. Some lenders might use different information, about the consumer, before extending credit.
Some website advertise free credit reports but, the only website authorized by federal law to provide you with a free annual report, it is https://www.annualcreditreport.com.
Also, some smartphone apps and websites are doing a good providing free credit reports and scores. They gives free credit report and scores which is paid by their advertisers. They shows financial products along the way, hoping you get a credit card, loan or open a bank account.
Here a few apps that gives you free credit reports, score and can help you with your budget:
- Credit Karma – Credit Karma is easy to use and 100 percent free. The app has easy to read credit history and scores from TransUnion and Equifax. Credit Karma has a nice feature about credit cards and loans approval odds. You can easily apply for the financial products with better approval odds.
- Credit Sesame – A great free app with nice interface and easy to use. It comes with credit tips and personalized goals.
- Mint – Mint is an app created by Intuit, the parents of TurboTax and Quickbooks. Mint is a powerful app to monitor your budget, which also includes a credit score section. Its credit scores feature is simple, if you just need to know your numbers.
Become Financially Responsible
Overall, to become financially responsible, set goals that you come accomplish. Some goals will require more time than others therefore, set up plan to find where you are and where do you want to be.
When making major purchases, do not jump into the item immediately. Have a plan in place. Think about, it is an purchase that you need or that you want? Do you need to purchase that particular item and at that price, or could you get another item at a better price? Do you need it now, or could you wait? How long can you wait?
Remember the time value money that “One dollar is worth more today than in the future”? One dollar received today, can be invested and could growth into $1.20 or more. While $1 dollar in the future is just $1 dollar.
In order to become finally responsible, follow the list below in any order and only focus on the ones that apply to your financial life:
- Know your income and expenses. Budget.
- Pay all your debts. Higher interest first.
- Do not use credit cards as loans.
- Save more, spend less.
- Save at least 10 percent of your salary for retirement.
- Create an emergency fund to cover your expenses for six months.
- Avoid banking fees.
- Additional salary increase and bonus, save them for retirement.
- Make a plan before big purchases.