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Using a Personal Budget & Debt Management

Perhaps you have been in this situation at one point in your life, or know someone who has a similar experience. You have a steady job with a satisfactory income. You are confident enough about how okay your financial situation is, and you decide to apply for a credit card.

Next, you want to celebrate your independence by moving into a new apartment, purchasing a new car, among others. So, you decided to take out some loans to take care of those. Years later, you are still tied up with those loans you have made before, and what’s worse, you now have three credits cards, wherein you still have outstanding balances. What should you do?

The above mentioned scenario can be an example of very poor credit management. As a working individual, and an earner, you should always consider how well you make use of your resources. Also, getting a good credit score should be a top priority. When you become unaware of how much you have been spending, you risk falling into debt, and even damaging your credit score.

As you may know, your credit score tells banks, insurance [1] companies, and loaning agencies, how healthy your financial state is. The better credit score you have, the better chances of you getting approved for loans, better insurance quotes, and more. In order for you to maintain a good credit score, you should be able to manage your own personal budget.  How can you do that?

First, open a savings account. Whenever you receive your monthly salary, always see to it that you drop in a certain percentage of that amount into your savings account. It can be as little as $100 per month. When you set this aside, imagine how much you will have saved in a year or two?

The motto should always to “pay yourself first”, setting the monthly savings aside religiously, so that the power of compound interest and long term investing will assure you a comfortable retirement. Then pay regular monthly expenses and budget for food, gas and other necessary expenses. What ever is left over after that will be yours to spend guiltlessly each month!

When you create your personal budget, it entails a lot of discipline on your part. Though it may be tempting to make extra purchases for fun or leisure, you should strike a balance between what is wanted and what is needed. This helps you avoid overspending or even owing more money from others.

Next, try to collect all the bills that are unpaid. If you have several credit cards with overdue balances that have long been forgotten, why don’t you try to consolidate credit card debt? This means that you apply for a loan that will wipe off all the debt you owe to your credit card companies or card issuers.

The lender to consolidate credit card debt will be the one to determine a fixed payment scheme for your, with an interest rate and monthly due. This is a good alternative as compared to having to pay several card companies with different interest rates every month.

Proper personal budgeting and debt management is never far from impossible. Because you are working hard for your money, shouldn’t you be thinking hard about what you want to do with it? Always keep in mind that a stable financial status today will mean a more worry-free future!