The Importance of Organizing Your Personal Finances

In today’s complex, information-driven world, the importance of personal finance management can't be understated. Whether you’re leasing a vehicle, buying a home, starting a business, or otherwise asking for a line of credit, you’ll find out immediately if you’ve been carefully organizing your personal finances. Your potential creditor will get your credit score from the three credit reporting agencies (TransUnion, Equifax and Experian), which reflects the nature of your credit history.

Below are five tips that will help you maintain a high credit score and save you money in the long run:

Tip #1: Make Sure Your Credit Report Is Accurate

By law, each credit reporting agency is required to provide you with a free copy of your credit report each year. You can request them either by phone or through the agency’s web sites. When you receive your report, review it carefully and make sure it’s accurate. In most cases, errors or inaccuracies must be resolved between you and the creditor who reported it; the credit reporting agency does not have the authority to change any information on your report, but they can provide guidance for correcting any errors.

Tip #2: Make Sure Your Credit Report Stays Accurate

Now that you’ve ensured that your credit report is accurate, you’ll want it to stay that way. The easiest way to do that is to subscribe to a credit monitoring program. These low-cost, subscription-based services continually monitor your credit report and alert you (usually via e-mail) to any significant activity that might have negative consequences if left unattended. For example, if someone has stolen your identity, the reporting service will alert you to the thief’s initial activities so that you can take corrective action before the damage becomes too great.

Tip #3: Improve Your Personal Finances By Being On Time

Did you know that 35 percent of your credit score is based on how timely you make your payments? Even being just a few days late each month will count against you and can result in an decrease in your credit score. The best strategy is to make sure your payment reaches your creditor on the day it’s due – mailing it on the due date can count against you.

Tip #4: Keep Money In A Savings Account

While this may seem like an obviously good idea, its importance in organizing your personal finances can easily be overlooked. The main purpose of maintaining such a nest egg is to protect you in case of an emergency or if you should suddenly lose your ability to earn an income. Experts recommend that we should have at least six month’s worth of living expenses saved up at all times.

Tip #5: Don’t Pay More Than You Have To

Most of us work hard for our money and like to save it when we can, but sometimes we miss saving opportunities when we purchase something on the spur of the moment. It’s no secret that savvy merchants are always there to take your money if that’s the way you operate. The smarter, less costly way of obtaining goods and services is to develop the discipline to shop around and avoid impulse buying urges.

This concept especially applies to contractual services like satellite TV, telephone and Internet connection, which can be bundled as a package deal at reduced rates. The same also applies to auto and home insurance. In these cases and many more, the Internet provides a multitude of sites that make comparison shopping easy.

Following these tips might take some effort on your part, but it will be worth it in the long run. As the old saying goes, “It’s not how much you make, but how much you keep that counts,” so spend wisely!

Illustration by Billy Alexander