Keeping up with the Joneses usually means that you are spending way too much money on things you cannot afford. This ultimately leads to only one place – financial rot.
Although it feels good to make big purchases on new and shiny things, the bills that follow these purchases are no fun at all. On that note, here is a better plan for you to follow. One that will keep you in the good graces of the credit reporting agencies and lenders.
Make a Savings Plan
One of the best ways to beat financial rot is to make a savings plan and stick with it. I can hear the groans already coming from you, but these days it is a lot easier than you might think. Innovative banks provide tools to help you calculate how much you can save, and then they provide easy ways for you to do it.
Some even provide an app that allows you to manage your savings right from your smartphone. In the beginning, it will be difficult to get into this habit, but once you start doing it regularly and see your money growing, you will become a huge fan of it.
Understand the Interest and Loan Terms Before You Take any Loan
Remember that credit cards are also a loan. Credit card companies finance your daily purchases, and you pay interest on that money you borrow. So, every time you pay for your Starbucks Latte with a credit card, you are likely buying the most expensive coffee in the world when you include the finance charges you will pay.
Understand what you are paying in interest, and you will become more discerning. Using tools like an online loan calculator will help you to understand what you can (or can’t) afford to repay by helping you to calculate loan costs and payments over their life. Use them to become educated about what you are really getting yourself into financially.
ou can use this information to shop around and to talk intelligently to lenders. In the end, it will likely help you make better decisions about borrowing.
Make This Your Default Way of Operating
Some people treat the management of their finances, like losing weight. When they reach a point that things are out of control, they go on a diet and make some good changes until they can fit into their old clothes. They then start eating at KFC every day again and regain all the weight.
Well, this happens with your finances too. People go for a certain period where they are very careful with their finances, and they save a decent amount, only to stop and splurge their hard work.
You need to make smart money management your default way to operate and only splurge a little with spending once or twice each year. This way, you will always be in good financial shape.