This article really made me cringe. “68% of Americans Destroy Their Credit Before Age 30”. Specifically, 68% of Americans make “at least one major financial mistake” about age 30, which results in negative information on their credit rating. If you have financial information and a plan, however, you can avoid these problems- at any age.
The credit mistake may be overspending on credit cards or missing a payment on a loan. Some more serious issues are defaulting on a loan or having an account sent to collections.
Points to keep in mind
I’ve written about credit mistakes here. Keep these important points in mind:
- Some people are not aware of just how important their credit rating is. Credit mistakes can affect your ability to borrow- and the rate you pay on your loan- for years.
- In many cases, your credit rating issue is out of your control- at least to some extent. For example, you may face large medical bills from an illness.
- You need to check your credit report for missing information and data that is not accurate. Your lenders are not required to report all positive information about your account. If you pay off a loan or credit card, for example, make sure that your lender reports that information to each credit bureau.
Keep all of these issues in mind to maintain or fix your credit rating.
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Having a plan
Another step to avoid credit mistakes is to have a plan. If you need an outline, you’ll find a great one on Reddit’s personal finance page. Here are some steps for your plan:
- Budget: Create a budget and reduce expenses where you can. Here are some financial tools you can use for budgeting.
- Emergency Fund: Create a fund for emergencies. If you have funds to cover an emergency, you can avoid a mistake that hurts your credit.
- Pay down high-interest debt: To lower your total out-of-pocket interest costs, pay down your most expensive debts first.
- Become a disciplined investor: Once you start to fund your savings account, start investing. Use your company retirement plan, particularly if your employer matches your investment amount.
Use each of these steps to create a comprehensive financial plan.
A great example
So, what does smart financial planning really look like? This story about Ryan Broyles, an NFL player, is a great one. Essentially, this athlete lives on a $60,000 budget, even though he earns $600,000 a year.
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Ryan take a long-term view: He’s willing to bypass an expensive lifestyle, so he can create more wealth over his lifetime.
Have used any of these ideas? I’d love to hear from you.
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
(website and blog) http://www.accountingaccidentally.com/
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