Financial Tips They Didn’t Teach You in School
Personal finance is among life’s most important topics, but that doesn’t mean you’re going to learn everything you need to know during your formative years. Luckily, it’s never too late to take advantage of new information. Here are five incredible financial tips that you probably didn’t learn in school.
- Your Credit Score Contains Five Important Components.
You probably know how important it is to have a good credit score, but do you know how it’s calculated? You’re not alone if the answer to this question is “no!” Many people are unaware that your credit score contains five components. They are:
- Payment history – 35%. Paying on time can make a big difference between having excellent and average credit. So make prompt payments a priority!
- Amount of debt compared to available credit – 30%. Keep your credit score high by borrowing no more than 30% of the credit any single lender has to offer you. It’s far better to owe small amounts on several cards than it is to max a single card to its breaking point.
- New debt and inquiries – 10%. Bunch inquiries together to reduce the impact. If you’re buying something major like a home or a car, inquiries are automatically bundled into one entry. For a mortgage, the timespan is 30 days; for an auto, it’s 14.
- Credit history – 15%. The length of your credit history matters. Keeping accounts open and using them for small purchases, then paying them off, can boost your score.
- Credit mix – 10%. It is important to use a few different types of credit, with installment payments such as a mortgage or auto loan being looked on more favorably than revolving credit such as credit cards.
- Always Read the Fine Print.
Before you sign up for a new credit card or loan, be sure to read the fine print so that you know what the interest rate is. Notice if the rate will increase at a later date.
- Investing is Something Nearly Anyone Can Do.
It used to be that most investing was for the very well-to-do. Today’s online investment companies make it easy for almost anyone to invest. As long as you can put a few hundred dollars aside to get started, it’s likely that you can begin putting your money to work for you. There are a number of new innovations available, such as robo-adviser tools that educate you while helping you make smart choices.
- Create a Budget and Stick to It.
Budgets are often painted in a negative light, but how else can you plan appropriately and keep track of where your hard-earned money ends up? Budgets take a little time to formulate, but at the end of the day, they help you meet your goals and prevent overspending.
- Credit Card Debt Should Be Paid Off ASAP.
On one hand, it’s important to have available credit and use your cards judiciously. On the other, it’s very important not to let your credit card debt get out of control, as you could end up paying hundreds per month on interest alone. Pare down debt as you work toward making other financial goals reality, and you’ll win in the long run.