5 Money Management Skills That Are Essential to Improving Your Credit Score

Are you an impulse shopper who doesn’t know the meaning of the word “budget”? Does it seem like all of your friends are buying homes and saving for retirement?

The average American adult owes more than $65,000 in personal debt, with about 25% of that figure tied up in high-interest credit cards.

If you feel like you’re struggling to keep your head above water, this article’s for you. We’ll give you the inside scoop on money management skills and help you get started with repairing your credit score.

1. Budget for Fun

What do money management experts know that the average person doesn’t? They know that we’re never going to stick to a budget if we’re not having fun.

So as you’re starting to develop a plan to save money and pay off your debt, make sure that you take about 5% off the top for your own personal use.

For every $100 that you earn, put aside $5 for fun. That’s $50 on a $1,000 check. You might want to take a yoga class, take yourself out to a nice dinner, or join a local sports team.

If you’re a total shopaholic, look for online discounts and check out local outlet shopping malls. You’ll be able to get great deals without breaking the bank.

It’s up to you, but make sure that you’re taking care of your mind and soul, not just taking care of business.

2. Slash Your Grocery Bills

Surprisingly, Americans waste more than $150 billion worth of food every year. The average household of four wastes about $175 every month on food that they don’t eat.

Looking for ways to save? Consider buying grains and pasta in bulk: you’ll save on the cost of packaging. Many supermarkets also have discount bins for fruits that are overripe, which are perfect for those morning smoothies.

Another way to save is to go for “generic” brands, which are typically the same quality as name brands, but much cheaper.

Finally, freeze, freeze, freeze. Instead of letting leftovers sit in your fridge, package them into containers and stick them in your freezer. You’ll have lunches for work and you’ll save money on eating out.

3. Consolidate Your Debt

One way to get ahead while you’re paying off your debt is to transfer all of your credit card balances to the card with the lowest rate.

This trick also works with student loan debt: consolidating your loans will give you a lower interest rate.

Another way to get a jump start on repaying your credit card bills is to ask for a lower interest rate. If you have a solid payment history, you may be able to shave a few interest points off your rate.

If repaying your loans or credit cards would put too much of a dent in your monthly budget, consider talking with a credit counselor. They can often negotiate lower repayment rates and help you with the consolidation process.

4. Downsize Your Lifestyle

As you’re formulating a workable budget and consolidating your debt, look for creative ways to save money. How much is your cable bill? There are online television services that are either free or cost less than $15 per month.

How much is your phone bill? Are you stuck in a contract? You could save hundreds of dollars every year, simply by switching to a new phone carrier.

Do you find yourself spending too much on clothing? There are thrift stores and consignment stores in most towns that will help you get your clothing budget under control.

Another way to save on your monthly bills is to opt for automatic bill payment. Utility companies often offer a discounted rate to customers who pay online.

Take the time to figure out ways to shave money off your monthly bills. Even saving $50 per month would translate to $600 in savings per year.

5. Monitor Your Credit Score

It may seem odd to say that you should manage your credit score, but it’s an essential part of your financial life. There could be errors on your report that are dragging your score into the ground.

The first step is to request a copy of your credit score. Make sure that you recognize all of the accounts and that you know how much you owe.

If you have past due accounts, focus on paying those first. Again, you may be able to negotiate a partial repayment with debt collection companies.

Paying your bills online is a great way to establish credit if you don’t have any. Focus on keeping long-term accounts paid off in full, but don’t worry if you’re carrying a balance on a credit card.

Money Management Skills for Home Buyers

If you’re thinking of buying a home, you should start repairing your credit at least one year in advance. Take the time to learn more about the minimum credit score you’ll need to get a mortgage.

It varies from state to state, but, in general, you’ll need to have a credit score above 620. It’s doable, but you’ll have to edit your lifestyle and pay off old debt.

If you feel overwhelmed with debt, start small. Pay off a few small accounts and then start attacking larger ones. Again, credit counselors can help you make a plan that works with your budget.

Get Started on Saving for Retirement

As you develop your money management skills, you’ll be faced with some big decisions.

Do you really want to buy a home and pay for taxes and repairs? Or would it make more sense to rent an apartment or house?

While there is no “one size fits all” answer, you will want to save for your retirement. Talk to your bank about investment options and get started as soon as possible.

If you’re 30 years old and invest $200 per month in a portfolio that has a 7% return, you’ll have more than $400,000 by the time you’re ready to retire!

Looking for more info about saving and monitoring your credit? Check out our online toolkit. We’ve got expert advice and community forums that will help you get into the swing of successful budgeting!