Find Your Right Financial Track
Find Your Right Financial Track
No matter your age, there are a few things you should pay attention to where your finances are concerned. Keep reading for more information on how to keep tabs on your credit and make sure your money is working for you, not against you.
Your credit report and score is how the financial world sees you. A good report with a high credit score means you’ll have access to the best rates when buying a home or car or taking out a personal loan. It can also impact your insurance rates and whether you get that dream job. Forbes explains that your FICO score, which is a mathematical equation that defines your ability to repay debt, may also play a role in how potential partners view you as a long-term companion.
Your credit score is based on a number of factors including your debt to income ratio, length of credit history, number of accounts with a balance, and how often, if ever, you’ve been late on a payment. If your credit score is less than 600, it’s time to take steps to boost it to at least the 670 mark, which is considered good credit, according to Experian. You can increase your credit score over time by paying off outstanding debt and making payments on time. If you have little or no credit history, consider taking out a small loan and paying it back over the course of six to 12 months.
Calculate your assets
Your net worth is the sum of your assets minus any outstanding debt. Your assets include things like your home’s equity, investments, and personal and real property of value (boats, jewelry, artwork, land etc.). To get a picture of what you’re worth, you’ll need to determine your home’s value, total amount of money you have in savings, and the worth of your assets minus depreciation, the amount of money your property is devalued by time and use. For comparison purposes, the average 35-year-old has a net worth of $35,000. Business Insider offers more information on American net worth by age here.
If you find that your net worth is below average and your credit score could use some work, establishing a household budget can help. Start by determining your take-home pay and then calculate the amount of money you need each month to cover necessary expenses. Quicken Loans includes medical costs and food and utilities in this category, but it also includes living expenses, gasoline, vehicle upkeep and maintenance, education, and clothing. Once the “needs” are filled, allocate a portion of what’s left to compound debt payments, a portion to savings, and a small amount to discretionary spending for “wants” such as entertainment. Only after these things have been taken care of should you begin saving for travel or future educational expenses for your children.
Filling in the gaps
Your income may not be enough to cover your entire budget. That’s where people get into trouble with high-interest credit card debt. You can fill in the financial gaps by taking on a part-time job until you have a few debts cleared. You might also consider liquidating some of your assets to help you better manage your current financial situation. If your home mortgage or rent is more than 28 percent of your gross monthly income, it may be wise to move into a more affordable home. The same goes for your vehicle.
The ultimate goal of most working-age Americans is to have enough money to both live comfortably now and to retire without worry. It’s a tall order to be sure, but an achievable goal if you’re willing to watch your dollars and use common sense.