It’s hard to save money when the price of everything is skyrocketing around us. From the price of food to the price of gas to the price of rent, things keep getting more expensive while we all make the same amount of money.
And because of this, it has never been more important to save money where you can. So today we have four simple tips that you can use to help you start saving money and improve your credit score.
Budgets are without a doubt the best way to gain control of your finances. It is all too easy to overestimate the amount of money you are bringing in every month and to underestimate the amount of money you are spending every month. Having an accurate budget can help you keep a finger on the pulse of your finances to ensure that you are never spending more than you are making.
Creating a budget is simple. It requires some time upfront to determine your income and your expenses, but once you have the initial budget figured out the hard part is over. After that you simply need to be alert about staying within your budget. Here’s how to get started:
Depending on your situation, this may be as easy as looking at take home pay (after taxes and deductions are taken out). But if you have a few different streams of income, this might be a bit more complicated. Do you have a side income? Rental properties? An inheritance? All of this counts as monthly income.
Fixed expenses are expenses where the amount due does not vary from month to month. Make a list of all of these types of expenses. Common fixed expenses include:
Rent or Mortgage
Car Payment
Cable Bill
Insurance Premium
Trash Collection
Internet
Phone Bill
Property Taxes
Childcare Expenses
Student Loan Payments
Streaming Services (Netflix, Hulu, Amazon, Etc)
Enter all of these expenses into a spreadsheet so that you can easily track them and change them as needed.
Variable expenses are expenses where the amount due changes from month to month. When trying to include these types of expenses in your budget, you want to calculate a realistic average. Looking at past bills and receipts from the past six months to a year will help you determine an average for each expense.
Groceries
Electric Bill
Parking Fees
Dining Out
Entertainment and Attractions
Home Maintenance and Repairs
Going through credit card statements is a great way to determine some of these costs. Getting a realistic average of these expenses is very important, as these are the categories where you might find it easiest to cut back on spending.
There are a lot of different models for budgeting, so you will need to determine what works best for you. And this can depend a lot on what your goals are for budgeting. Are you saving for a new car? Trying to pay off your mortgage? Want to loosen more money up to invest? These different goals may result in different approaches to your budget.
A commonly recommended budget is the 50/30/20 model for personal budgets. For this budget, 50% of your income is allocated for needs, 30% is allocated for wants, and 20% is put into savings.
Another commonly used model is the 70/20/10 model for personal budgets, where 70% of your income goes to monthly bills and everyday spending, 20% goes to savings, and 10% goes to debt repayment.
Make sure that whatever plan you choose is accurate and easy to track. An inaccurate budget will not do you much good.
See how your goals line up with your current budget. Are you making more than you are spending, or are you spending more than you are making? What places can you cut back on? Are there any expenses you can eliminate altogether? Can you unsubscribe from a streaming service? Can you cut back on dining out? Adjust your budget as needed to line up with your plan.
Budgeting isn’t the most fun thing in the world, but managing your day-to-day spending can really help your financial wellbeing in the future.
If you have a car loan, there’s a good chance that you are overpaying. But that can be easily fixed by refinancing your car loan.
Refinancing your car loan can help you in a few ways. If your credit score has increased or the market rates have decreased since your initial financing, you may be eligible for a lower car loan APR. This can reduce your monthly payments as well as the total amount you will pay. It can save you hundreds, even thousands of dollars over the course of the loan.
Refinancing your car loan will also allow you to change the repayment period. When you lengthen the repayment period, you are paying off the loan over a longer time so your monthly payments will be much less.
If you are looking to free up some money every month to help with your budget, refinancing your car loan is a great way to do so. Using a company that specializes in auto refinance can ensure that the process is quick and easy so you can start saving money today.
Your credit score is really important to your financial well being. And one of the most important components of your credit score is your credit utilization ratio. This is the ratio of how much money you owe compared to how much money you have available to you. This ratio should be less than 30%.
Let’s say you have three lines of credit open to you. You owe $1,000 on a card with a $5,000 limit, $500 on a card with a $1,000 limit, and $2,000 on a card with an $8,000 limit. Your total credit utilization ratio is the total of all your debt ($1,000 + $500 + $2,000) divided by all of the credit you have available to you ($5,000 + $1,000 + $8,000). Your overall ratio is $3,500 divided by $14,000, which is 25%.
But it is not only your overall ratio that matters. Your credit score takes into account your individual credit utilization ratios as well. While your overall ratio is 25%, your credit utilization ratio on your first account is 20%, on your second account is 50%, and on your third account is 25%.
Keeping your credit utilization ratio in mind is a good practice to get into. When paying off your debt, focus on paying off your high interest credit lines in order of credit utilization ratios. Paying off credits that have the highest ratios can help increase your credit score at a faster rate.
But even with day to day shopping, you should keep your credit utilization score in mind. If your overall ratio is high, try curbing your spending while you pay down some debt. If you know that one account in particular has a high ratio, avoid making purchases on that like of credit. Let your credit utilization ratios guide your daily spending.
There is a time to pay with cash, and there is a time to use credit. Deciding when to do what can help you maximize your savings.
Financial experts recommend using a credit card as a financial tool. You should use it when you can pay it back in full so that you can avoid the high interest rates and take advantage of the rewards.
Here’s when you should pay with credit:
When you have good cash back rewards in the category of your purchase. If you get 5% cash back on grocery store purchases, take advantage of that.
You want the added security of not carrying around cash.
Here’s when you should pay with cash:
When your credit utilization ratio is high and you need to reduce your debt, not increase it.
When you have a strict budget for something, such as vacation. Using cash will make it impossible to overspend.
When you haven’t been able to pay off your credit lines in full. If your new purchase will linger in your debts, you will end up paying interest and paying much more in the long run.
When there are added fees for paying with a credit card.
Being smart about when to use cash and when to use credit can help you avoid unnecessary fees and help you better manage your money.
Try using a few of these tips and see what works for you. Refinancing your car is a great way to save money every month and it is super easy if you use Auto Approve. You can get a free quote in minutes and our refinance experts can help answer any questions you may have. So don’t wait, start saving money today!