• August 7, 2020

Adding financial fitness to your routine - Odessa American: Money & Finance

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Adding financial fitness to your routine

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Posted: Wednesday, June 10, 2020 7:01 am

(BPT) - If you’re trying to stay healthy, chances are you have a routine to boost your physical fitness. But what about your financial fitness? As with exercise, you can establish regular routines to help keep your bank account healthy — and increase your peace of mind.

What does a financial fitness routine look like?

1. Create a budget

This is probably the toughest, and most important, step in ensuring your financial health. When you set a budget, you need to take a good look at your income compared with your expenses.

List your fixed expenses (rent/mortgage, utilities, insurance, etc.) and other vital expenses that vary, like groceries. Don’t forget payments you regularly make toward debts like student loans or credit cards.

Knowing the expenses you must cover each month will tell you how much you have left for discretionary spending. But if you’re spending more than you’re taking in, you’ll have to find ways to cut down on expenses, and/or earn more income.

Keep a spending diary to track where your money is going. Review several weeks of your diary to spot common expenses you can do without, like little-used streaming subscriptions or impulse purchases.

Make sure to budget together with anyone you’re sharing your life and household with. Online budget tools can help you set up a workable system. Don’t be surprised if it takes you several weeks to get the hang of budgeting. Just like establishing a workout routine, it takes patience and determination.

2. Make saving a regular habit

Set up an automatic deposit from your paycheck into a savings account as soon as you can, even just a small amount. This will establish the saving habit without you even having to think about it.

Building an emergency fund to cover unexpected expenses or loss of income for a few months will not only give you peace of mind, it will also prevent you from overusing credit cards when a car or appliance breaks down.

3. Set goals

Whether you want to increase your 401(k) contribution, build your emergency fund or save for a large purchase, it helps to set a specific goal or two with measurable amounts, with dates for achieving them.

Post your goals where you can see them every day.

4. Do a weekly check-in

Every week, review how you’re doing on your budget. Did you overspend? If so, where did expenses come from, and were they things you needed? Your spending diary can help you find your weaknesses.

Ways to avoid temptation:

  • Stay off websites where you impulse shop
  • Cut up credit cards or keep them in a locked box that’s hard to get at
  • Post your financial goals where you’ll see them before spending, like a note in your wallet or near your computer

5. Use credit wisely

To improve your credit score or keep it in good shape, make sure to follow good credit practices:

  • Pay credit card bills on time, above the minimum balance due when possible
  • Don’t use more than 30% of your available credit
  • Make occasional small purchases on cards to keep the accounts active

There are actually several credit scoring models out there, and they weigh items in your credit history differently. Some scoring models scan your credit report at one point in time, giving a snapshot that’s limited in understanding your overall credit picture. VantageScore 4.0, which is one of the models often used by lenders, is different because it takes advantage of trended credit data newly available from all three national credit reporting companies. By capturing the trajectory of borrowing and payment behaviors, trended credit data provides a more precise, holistic view of consumer habits.

For a better understanding of how credit scores work, check out this article.

While you're working on your financial fitness, make sure to check your credit score at Your.VantageScore.com/free.

This article is not intended to provide any credit or financial advice or guidance or to recommend the taking of any specific action. This article is intended solely to describe the possible impact that an action may have on a credit score that is generated using the credit scoring models of VantageScore Solutions, LLC. The possible impacts described herein are based on hypothetical situations and the actual impact on a credit score may vary depending on various factors, including, among other things, a person’s actual circumstances and history.

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