Take control of your finances. Part III

about 3 years ago

Continued from Take control of your finances. Part II

If you have already taken a loan or received a credit card, the terms credit score and credit history will not be unfamiliar to you. You will know that every bank or credit card issuer reports its debtor data and statistics to one or more credit bureaus. So, when you apply for a personal loan or a new card, the issuer will have access to the credit bureau data, and will make an inquiry to your history, therefore, having a good credit score and a healthy credit history, more than a habit, is an obligation, is what tells the banks, It is what tells banks, dealers, insurers and issuers that you are trustworthy and that you can enjoy low interest rates and insurance premiums, and more and more companies are seeking access to credit data, from internet companies, cell phone companies and even funeral homes and gardens.

Here the management habits are simple, pay on time and do not get into debt for more than a third of your credit limits, in technical jargon this is called utilization ratio or debt-to-credit ratio, and 30% at most, or 40% is an ideal value, it tells the banks that you are someone responsible with your debt management.

We know that you are not gleaming with joy to manage and pay taxes, especially for millennials the tax filing and payment seasons, will be a real halloween, it is our duty as citizens and we can not evade it, but we can find ways to ease the burden, remember that the payment of income taxes both in the US and in most Latin countries is progressive, and is applied by tax brackets. We will pay between 10% and 37% of our taxable income, but not before applying tax credits and deductions, and this is where we must be very well documented.

Interest payments on mortgage debts, voluntary contributions to afores or pension funds, educational tuition payments, medical or funeral expenses, are all tax deductible, for our benefit, and if you are a candidate for any tax refund, use it wisely, negotiate your most expensive debt and invest it.

Just as there is a credit history, there will also be a health insurance history, and when you turn your back on a suitable health coverage, you are not only undermining not only your well-being, but also your personal finances. You will remember the cliché, better to have it and not need it, than to need it and not have it, because any medical emergency can cost you double or more the premium you dread so much. But more than that, there is the fact that the longer you delay in contracting it, the higher the premiums you will pay because of your age and lack of a record.

When it comes to health insurance, dive into the deepest research. What does the market have to offer? Compare and contrast, approach your employer's insurance, as it is usually less expensive, or if you are under 25, approach your mom and dad, and if you are a candidate for a government-subsidized insurance or receive some benefit to cover part of the premiums, don't think about it so much.

More than a habit it is an obligation, any unforeseen event such as a breakdown or major repair, an unexpected expense or job loss, will not leave you in a bad way if you create an emergency fund. You may wonder how much money to set aside for this purpose? Specialists and financial advisors agree that the ideal is at least enough to cover six months of personal or family expenses. If you spend about $2,500 a month, make contributions to your emergency fund until you reach the equivalent of $15,000.

Remember that 50 30 20 rule? Well, the first purpose you will give to that 20%, will be to create this emergency fund. Where to keep it? Neither in a piggy bank nor in a trust, the ideal will be a high yield savings account, because it is a money that must be in sight when it is needed, but remember, never resort to the piggy bank for something unnecessary.

Have you ever thought about your retirement? You will say, "What's the point if I haven't even reached my 30's! The sooner you think about your future the better, you won't be living on the indulgence of your children when you get old, nor exclusively on the unstable public pension system. So, save for your retirement and start now. But how much money should you put in your pension fund? According to the specialists at Fidelity Management and Research, when you reach 60 you should have 10 times your average annual salary in your retirement assets, and you should start before 30, with the equivalent of one year's income, going to three times that amount at age 40, 6 times at age 50, and at least eight times when you reach 55. And don't forget the tax advantage that pension fund contributions represent in terms of deductions.

Many people are pessimistic or anxious when they try to think about personal finances or money management in general, because unfortunately many of us did not grow up with people who applied proven financial knowledge in their lives. This is more than a habit to improve your personal finances, it is an attitude. Before putting into practice any of the habits described above, you must remove from your mind any negative placement associated with money, such as, for example, that you are greedy, or you are not good at it, or that personal finances are not your thing.

You will not achieve any change if you do not get rid of your negative preconception about money, the invitation is to a change of mentality, keep in mind that true poverty is the lack of opportunities, and outside there is a sea of them waiting for you.

I have just shared with you 13 habits that, if applied correctly, will definitely change your personal finances, I hope you take on the challenge of putting them into practice.

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