Budget Sense

Have you ever thought your credit card spending was in check, successfully lowering your balance, only to suddenly face a surprise hefty monthly, semi-annual, or annual charge? For instance, this week I was billed $120 on my credit card for a domain name and website renewal that had slipped my mind. What’s worse, since I hadn’t remembered it, I hadn’t budgeted for it either.

These unexpected charges can really hit hard and catch you off guard, jeopardizing your credit card balance. It’s crucial to confront these surprises head-on, or your credit card debt will remain out of reach and take longer to pay off.

Anticipate and Allocate

So how do you deal with this issue of unexpected unforecasted hits to your credit card? You start by going over your credit card statements from the last 12 months.

You then make a note of any recurring monthly, quarterly or annual charges that are in excess of $50 (this amount could vary depending on each person’s situation, debt level, income etc) .

Next, determine whether you genuinely need or can cancel each charge. For instance, weigh the importance of an annual CAA/AAA charge of $120 against its necessity for you and your family. If so, keep it. What about an annual magazine subscription that you have been paying for years, but hardly have the time to read them when they come to your door? As you can see, these may be family decisions, but the time you spend going over these big and recurring bills will pay huge dividends in the long term, in terms of money saved and reduced credit card balance.

Once you have decided on what to keep and what to eliminate, take a moment to do a quick calculation of what you will save from all the charges you will be cancelling. This calculation provides a psychological boost, allowing you to visualize the results of your efforts and understand how they contribute to your improved financial future.

Lastly, mark your calendar or create a list with the dates of these monthly, quarterly, or annual charges to eliminate future surprises. It’s one thing to anticipate and allocate for these charges, but it’s even better when they’re not unexpected.

In the realm of personal finance, being proactive holds the key to mastering your credit card journey. By anticipating and allocating for unexpected charges, you’re not just safeguarding your budget but also taking charge of your financial destiny. Remember, the true power lies in your hands as you navigate the twists and turns of credit card expenses. With these strategies in your arsenal, you’re equipped to face any surprise with confidence, ensuring that your credit card balance remains manageable and your path to financial well-being is paved with foresight and control. So, take the reins, and let your proactive approach guide you towards a brighter and more secure financial future.

Ever been in so much debt, that the money you pay towards it is barely covering the interest? Think of a big forest fire, where emergency crew are barely able to put off one section, only for a new bigger piece of land to be taken over by fire, and it seems like you can never put it off, until you get more resources, or the weather somehow helps. In other words, even with big forest fires, there is the potential where nature could help, but no such thing exists to aid you in paying off your credit card debt.

The situation described above, where you are unable to make progress in paying off a credit card because most of your payments go towards interest, is commonly referred to as being trapped in a “debt cycle” . Another term you may have heard is “interest treadmill.” It can be a frustrating and challenging situation as the debt continues to accumulate, making it difficult to reduce the principal balance and make significant progress towards eliminating the debt. Here are some proven ways that can help you get out of this frustrating position:

1. Increase Payments: This would be one of the easiest and most obvious ways. First, look at how much interest is being charged each month and adjust and increase your payments accordingly. By making larger payments, you can tackle the principal balance more effectively, reducing the amount of interest accrued over time. In other words, you are trying to get ahead of interest, even if it is by a slight amount . For example, let us say your monthly interest is $500, and you are paying $600, meaning you are ahead by $100 per month. Yes, that is not nearly enough to pay off a big chunk in a short time, but it is a good start.
   
2. Prioritize High-Interest Debt: If you have multiple credit cards or loans, focus on paying off the one with the highest interest rate first while making minimum payments on the others. Once the high-interest debt is cleared, shift your focus to the next one, thus taking advantage of the popular snowball approach.
   
3. Consider Balance Transfer: Explore the option of transferring your credit card balance to another card with a lower interest rate or even a promotional 0% interest rate for a specific period. This can help reduce the amount of interest paid, allowing more of your payments to go towards the principal. For example, if you are paying $500 a month in interest, and you get a promotion of 0% interest for 6 month, then that would be $3k saved in interest, which would then go directly towards covering the principle.
   
4. Combination of adjusting Spending Habits and Income Increase: Take a closer look at your spending habits and identify areas where you can cut back or eliminate unnecessary expenditures. For example, do you have too many subscriptions? Redirecting those savings towards debt repayment can accelerate your progress and give you much needed confidence. You can also explore ways to increase your income, such as taking on a side gig, freelancing, or asking for a raise at your current job. But be sure to dedicate almost every extra cent you get towards the elimination of your debt. Be ruthless with it and don’t give it any chance to grow further.
   
5. Seek Professional Help: Finally, if things are not improving and debt becomes overwhelming and you’re struggling to make progress, consider reaching out to a credit counseling agency or a financial advisor. They can provide guidance on debt management strategies, negotiate with creditors on your behalf, and help create a feasible repayment plan. But again, this should be your last resort and that is why we put it last!

Remember, overcoming this situation requires patience, discipline, and a full commitment to managing your finances effectively. It may take time, but with consistent effort and a solid plan, you can break free from the interest trap and regain control of your financial well-being. And when you do, it will be one of your best achievements ever and the feeling will be amazing.

I think it is no secret that majority of people use their credit card rewards for travel and that is generally a good usage of these loyalty rewards. But a lot of people ignore or even fail to realize that, depending on their reward system, they can use their cashback to get ahead financially, be it to save money, pay down debt or buy registered products.

Let us use my RBC Avion Visa Infinite Card as an example: you get 1 point for each dollar spent, not including the occasional promotions where you get extra bonus points. You can then use these points to buy travel products at the rate of 1 for 1: or 100 points for $1 in travel money. You can also use your points to buy other products, including financial rewards, electronics etc, but at a lower rate of 120 points for $1.

With the math above, it makes sense to use your Avion rewards to buy vacation packages and other related products (flying, care rental, hotels etc) . But if you want to get ahead financially and don’t care for travelling that much, then you can use your points to buy RRSP, TFSA, and other financial products. For example, at the moment, I have enough points to buy $500 in TFSA or RRSP savings which goes along way these days.

In addition to my Avion Visa card, I have a Master Card from Tangerine Bank, which allows me to earn 2% in cashback in two categories of my choice, from a list of nine categories ( mine are Bills and Gas) and 0.5% for all other purchases. Despite not using it as much as I use my Visa, I still manage to accumulate close to $10-15 a month in cashback, or around $130-150 a year, paid to me on a monthly basis. I save this money and use it at the end of the year to make a big purchase, pay it towards credit card balance, or use it to purchase Christmas presents for family and friends.

As you can see, these credit card reward systems make using them more fun and rewarding. But at the end of the day, it is not useful if you are accumulating points and getting cashback at the expense of having a big balance which cost you a lot more interest every month. Take the time to assess and compare which credit card would work best for you, based on their reward system, assuming all else being equal. But more importantly, earning rewards should be the second priority to the primary one of ensuring your credit card balance is always paid in full. When you do that, these rewards become even sweeter and you actually beat the bank at their game!

There seems to be so many different creative approaches that people follow in order to pay off their credit card balance. We decided to come up with

$6,500 in credit card balance paid off in 3 months: using one simple strategy

our own in order to eliminate $6,500 in credit card balance. To begin with, it is not that we weren’t already making payments to reduce and even eliminate our balance. We were. In fact, we were often making hundreds of dollars in payments every month if not in the thousands. Problem was 2015 was unlike any other year. It was full of weddings and other family social events that cost us money. Then we had the biggest event of the year and our life: having our first baby and you know they don’t come cheap these days! And if these two things weren’t enough, of course, as a result of having the baby, my wife was on mat leave which meant she only got about 55% of her income. The government did start paying us a monthly benefit for our baby but we had decided that we wouldn’t spend any of it. Each and every cent since his first payment has gone towards an RESP account (and so has every dollar that relatives and friends gave us as gifts for his birth and baptism)

Needless to say, it was a year in which our expenses matched, and even exceeded our income, given all these things we had to deal with. By late September, I was growing tired with paying so much towards our credit card, yet we were barely making a dent into it. As I told my wife, we were taking one step forward, two steps backward.  For example, if we paid $300 towards the balance on Monday, something would come up on Tuesday and had to pay $400 for something or more than one thing (buying something for the baby, a bill that was due etc.) We had to do something about it. By October 1st, the balance was $6500, and we decided that we had to pay the full balance by Dec 31st, or just over $2150 per month. If Dec 31 was here and there was still a balance, we would use money from our savings to pay it off. The idea was that this would force us to pay as much as we can so we don’t have to take from our savings. It would also discourage us from putting any non-necessary expenses or spending on the card. As part of the plan, we also decided to stop putting any money into our savings account and direct it towards paying off the credit card instead. It didn’t make sense to put money in a saving account that pays less than 1% in interest while having a big credit card balance that charges us close to 20% in interest. This redirecting of money that would otherwise go towards saving to pay off the credit card balance, meant that we were now paying double what we were paying in the past.

And there you have it.  All it took was a commitment. But wait, there is more to it. A commitment alone is not enough, unless someone is very strong willed. As part of the commitment, I designed a simple spreadsheet (called it ‘VISA Repayment Plan’) to track our payment progress, starting from the first and middle of each month (i.e October 1st , October 15, Nov 1, Nov 15, Dec 1, Dec 15, and Dec 31) On each one of these dates, we would update our balance and beside it, we would put an arrow: up, down or no change, indicating how much our balance had changed from the previous month. It is amazing what a powerful and magical impact that one sheet of paper had!  We attached it to our bathroom door, so it was always in plain sight, thus reminding us of the task at hand. Just before Dec 31, our balance had been reduced to less than $1000 which we used our savings to pay off! So all in all, with little help from our savings, we managed to pay off $6500 in credit card balance in exactly 3 months. All in a year in which money was tight. As you can see, the main point here is commitment: if you have one, coupled with a clear timeline, and you stick to it, you will achieve your goal. You can apply this same principle to other objectives in your life such as ‘weight loss’ , ‘saving money’ etc.

The expenses never seem to end. But neither does my determination to lower my credit card balance and eventually make it

Taking one step forward and two backward will never help you pay off your credit card balance. You should have a clear plan, timeline and a real determination to pay it off…

disappear completely (balance of ZERO dollars!)

It has been a big struggle to keep our-myself and my wife-credit card balance under control. Just when you thought you have made some progress, comes a wedding or an emergency and you end up putting some or all of the expenses on the credit card. But the more unexpected expenses I get, which raise our balance back up, the more determined I get to bring it back down. It is easy to get discouraged when you are fighting what seems to be a losing battle at time, but it is important to stay focused and resolved.

In other words, instead of taking one step forward and two backward, I want to reverse that and take at least two steps forward and one backward.

Beside being determined and focused, it is also important to have a clear plan and timeline on how to lower or eliminate your credit card debt. Simply wanting to is not enough, especially not when your balance is in the thousands. My own balance, at least when compared to others, is not that big. It is currently sitting at around $3,600. But I don’t like to compare myself to others and give myself a false sense of hope. Just because my friend or cousin has a $20,000 credit card balance doesn’t mean I should feel good about myself for having only $3600 in credit card debt. Such comparisons may be helpful in making some broad generalizations but shouldn’t be used to judge how your situation is. It also works the other way. No need to compare your $20,000 credit card debt to someone else who only has $3,500 in debt or any other amount that is much smaller. It will just make you feel discouraged.

As long as you have a plan, a timeline and a strong determination to win, you should be able to win the battle against your credit card.

And last but not least, I noticed we have developed a pattern that is not very helpful in paying off our credit card balance. Basically, we are more worried about how much room we have left in our CC than what the balance is. In other words, as long as the available credit is enough to get us by or help us make that important purchase, then that all that matters, regardless of how big our balance is.  This is a very dangerous way of thinking about your credit card.

When you see the ‘minimum payment’ (MP) field on your credit card statement, think of it as your credit card’s way of making

Don't fall for the bank trap of paying only the 'minimum payment' on your credit card balance!

you feel good and not to worry. It is their way of telling you “Don’t worry, though you have thousands to pay us, you only have to pay us a fraction of it this time”

It sure makes some of us feel good, that things are not as bad as we thought they were. Let us say your credit card balance is close to $2000, a pretty heavy balance. If your CC company tells you that your minimum payment is only $30, you sure will think it is no big deal and that you can pay it. But problem is, these minimum payments are not there to make you feel good, even though it does help. It is a way for the credit card companies to get you further in dept and at the end of the day earn more interest money from you. Remember, the bigger and the longer your balance lasts, the more interest you will be paying.

It is a trap that credit card companies don’t want us to get out of, despite what they tell you or try to portray as trying to help you pay your balance.  The only good thing about making MP is that it is the limit at, or above which you won’t be penalized by the your CC company.

How is the minimum payment on credit card balance calculated?

There is no standard or universal formula for what the minimum payment is. Each credit card company has their own way of calculating it. Other factors that come into play as well include the balance, the interest rate, your credit standing etc. But generally speaking, the following formula is a good way to find out:

1-Find out your credit card interest rate: Let us assume this is the standard 18%
2-Find out your balance: Let us say this it is $2000

Based on the information above, your minimum payment can be calculated as follows:

($2000 x 18) / 100 =  $360 / 12 months =  $30           (18 is your interest rate)

or

($2000 x 0.18) / 12 = $30

-I generally prefer the second method but it is a matter of preference and what you are comfortable with.

How much should you pay?

Depending on each individual situation, the minimum payment can vary from person to person. If you are really struggling and can barely make a minimum payment, then by all means, that should be your maximum payment. Otherwise and if you are doing OK, it is best to at least double or even triple your MP. So if your MP is $25, try to pay $50 or even $75.  Another way is to alternate each month, with one month paying double your MP and tripling it next month and so on. This way, and assuming your balance doesn’t go up further, you will be paying your payment a lot sooner.

Another way to pay off your balance sooner is to commit to a specific timeline. For example, you can specify 12 months as the time you will need to pay off your balance and bring it to zero. The monthly payments – or those in between- will obviously be bigger but at least you will save on paying more interest.  To be specific, given a balance of $2000 and APR of 18%, you would need to make monthly payments of about $190 to eliminate your balance in one year. This would cost you only $201 in interest for 12 months. Compare that with making only minimum payment of $40 per month. It would take you some 20 years and $3,863 in interest!

So, make it a rule and a habit: when you see ‘MP’ on your credit card statement, just ignore it completely and instead, multiply it by 2 or 3 at least, if not more. That is the payment you should be making.

The following links are useful for helping you calculate your CC interest rates, minimum payments, balance etc:

• http://www.federalreserve.gov/creditcardcalculator/Default.aspx
• http://www.fcac-acfc.gc.ca/iTools-iOutils/CreditCardPaymentCalculator/CreditCardCalculator-eng.aspx

I have talked and warned about ‘impulse buying’ in the past and  recent bank polls re-affirmed and legitimized my warnings and fear: impulse buying is indeed killing the budgets of Canadians.  According to a BMO poll, Canadians spend an average of $3720 on impulse purchases, which include clothing, shoes, electronics and even food (possibly leading to another problem: obesity) Think about that amount for a second. It is a lot of money, probably more than what an average Canadian is able to save a year (assuming savings of 5-10% on a a net income of about $25,000) In other words, halving or eliminating impulse purchases could help those who couldn’t save before, to start saving thousands per year.

Men’s top 5 impulse purchases were the following

1-Dinning Out (53%)
2-Clothing (47%)
3-Books/Magazines (32%)
4-Shoes (29%)
5-Software/apps (26%)

For women, the top ‘impulse purchases’ were”

1-Clothing (66%)
2-Dining out (50%)
3-Shoes (48%)
4-Books/Magazines (44%)
5-Make-up (36%)

So what is exactly meant by ‘impulse buying’? Think of it as money spent on things that you didn’t need just a few moments earlier or at least not right away. It is the purchase you make as a result of passing by a shoe store and seeing a new style you like, but don’t really need because you already have a gazillion pair of shoes. Or that trip you make to McDonald with your coworkers to buy lunch even though your spouse or mom has already packed lunch.  In conclusion, it is a purchase decision that didn’t involve much thinking or time and was made on the fly.

We always knew how dangerous impulse purchasing really is to our pockets but this poll has cemented and legitimized this concern.  Canadian finance and government officials have been warning people not to take on too much debt or risk going the same downward path that the US and various European nations went through. We are constantly being told to tone it down with our debt and save more. But who is listening?  Recent surveys and polls are indicating that more Canadians have started to save money. But debt-to-income levels remain high and in fact approaching dangerous levels.

Needless to say, if an economy or a household wants to decrease the risk of a recession, depression or even bankruptcy, they out to lower how much money is spent on impulse as opposed to purchasing things out of necessity, research or need.

Ways to lower or eliminate ‘impulse purchases’

For some, impulse buying is not a big deal and may be able to deal with it with ease. For others-an ever increasing number of people-it requires more than that. It requires something akin to a therapy.

It starts by acknowledging that ‘impulse purchasing’ is a problem and one that is costing you a lot of money. Ensure that when you go out to a mall or with friends, to only take money that you know you will need and if possible, leave your debit and credit cards behind. Don’t worry, there won’t be an extreme emergency where you will need them right away.  While in a mall or a retail store, observe triggers that lead you to want to buy something. Is it a certain ‘for sale’ sign? is it because the item is featured in the middle of the store? Is it because no one else has it and you want to be the first? Once you identify these triggers, it becomes easier to deal with them and cut them out as a source of your impulse buying.

Another way is to literally take the money that you would otherwise spend on food on other things you don’t need, and set it on a side for one or two weeks. At the end of this exercise, count how much money you have saved, that would otherwise be wasted on ‘impulse purchases’ and then you will realize how much money you are burning.  It helps to physically and literally feel and see the money that you are wasting, for you to appreciate its value.

It also helps to start logging all your purchases and then go through them to determine what can be considered an impulse purchase.  And last but not least, don’t ignore the important of budgeting, the very core of every financial planning or strategy!  Look at your budget. It most likely has little room, if any, for impulse purchases. And if it does, be sure not to exceed it. Note: don’t confuse an ’emergency fund’  in your budget with money allocated for ‘impulse buying’!

In the last three years, dating back to the start of the global recession and the worsening economic conditions, we have been hearing a lot about bankruptcies. Both business and personal. Ignoring the ‘business’ side of things, when it comes to ‘personal’ cases of bankruptcies or being on the verge of sinking into one, a lot of people did find help, by using one of the many ‘debt consolidation services’ that have been popping all over the place.

What is a ‘debt consolidation service’ and when should you need one? better yet, is the service risk-free, and does it involve any ‘side effects’ so to speak?

What is ‘Debt Consolation Service’?

A Debt Consolation Service (DCS) is a method by which a mediator comes between you and your bank to ensure that you pay some of your debt, at a reduced interest rate, so as to avoid bankruptcy.  It is a process where your multiple high interest and unsecured debts are consolidated into a single manageable monthly payment, usually at a lower interest rate than what you were paying the banks.

The logic behind such an arrangement is that it is better if you (the consumer) pays some of the money owed to the bank than to declare bankruptcy where neither you nor the bank will gain.  When you declare a bankruptcy, your credit will be ruined and will take years to come back to normal and the bank will also lose on its own money that it lent to you.

So the DCS is sort of a middle man between you and the bank. Not to mention, it is a legal solution. But just because it is legal and viable doesn’t mean you should just run to use it. First, you have to know when you need to use it and what are some of its risks and side effects?

When should you need to use a DCS?

There are many signs that can help you in knowing when it is time to use a debt consolidation service. If you have lost your job yet still have to pay off multiple credit cards-and assuming your job search is not successful for a few months now-it may be time to talk to a conslidation service. If you are also noticing that you are missing your payments more often than usual, then that could be a sign that you are falling behind and need help. Getting lots of daily collection calls? that is another strong sign that things are getting out of control and in need of help. Finally, one other strong indication that you are in need of consloldating your many credit card debts into one is when when you start using your credit card to pay other credit cards or bills. If you start noticing some of these symptoms or similar to those, it may be time to consider DCS.

When are some of the risks and side-effects?

While DCS can be a great life-line, it wouldn’t come without some risks and side-effects. Where else in life could you get such sweet deals without having to pay for it some other way? First and foremost, your credit rating may be effected for the negative. As part of your repayment arrangement, you will also have to give up your credit cards and possibly other bank accounts.  Also, the service is only good for unsecured debts , those not secured by an underlying asset or collateral. In other words, you couldn’t use DCS to make your mortgage payments when you are not able to.

When we hear of Greece, images of beautiful beaches and islands come to  mind, if not all the great philosophers it gave the world. Unfortunately, as of late, hearing the word ‘Greece’ instantly brings images of people protesting in the streets, youth rioting in front of the parliament in Athens and other images of chaos.  The Greek debt problems have been so devastating that they are threatening the entire economy of the European Union and sending its shock-waves across the Atlantic, all the way to North America.

Personalizing Greece for you as an Individual

For an economy as small as Greece to be able to have such an impact on other global economies tells you the chaos the world is in.  But putting that macro-analysis of this whole issue on a side for now, let us focus on the micro version of it and how Greece’s economy and all its problems is a major warning to all of us as individuals.

How many times have we preached on this website about the important of budgeting, paying down your debt, saving and generally living within your means? A lot! In fact, it is not just this website. You hear it everywhere these days.  In his new republished book “The Wealthy Barber“, for example, author David Chilton stresses the need for these basic principles of finance for someone to be able to afford life or to make it to the next level and be wealthy.

In Greece’s example, the government has been operating on debt for years and they have finally run out of all money to the point where they could declare a default on their obligations at any moment. Europe has been called to bail their Greek cousins.  What went so wrong? lots of things, mainly the government and the people’s habits of operating beyond their means. I have lived in Greece and it is a lovely country with some lovely people. Greek people love to party and generally have fun. But so do most of humanity. I don’t know of anyone that will tell you “I hate fun.”  We all like to have fun, but at what expense? to have fun for 5 straight days and only work two days just doesn’t cut it.  Sooner or later you have to face the reality of your finances. You can’t expect to live a luxury life at the expense of the government forever.  That can only be possible in such places like Fantacyland or Dreamville.

North America-yes this includes Canada-should take Greece as a major wake-up call and get its act together.  Sooner than we may think, Greece’s debt issues may take its shadow across the Atlantic and blanket us here too.  But we do have time and can do something about it.  At least here in Canada.

How to protect from the Ghost of Greece?

Live within your means

First of all, and it is getting tiring saying this, it starts by living within your means and not beyond them. If you do live beyond your means, you may not notice the consequences immediately.  The fact that we don’t immediately feel the dangers of living beyond our means is one of the worst illusions of personal finance.  We think everything is OK until it is not and that is when it goes to hell in a basket. You have to recognize this: you don’t go from good to bad standing order immediately. In between, there usually is some calm before the storm. This calm is something to watch out for.

Save Money

If you don’t save your money it means you are either spending it all or paying some of it to erase your debt. Which also means that you are one paycheck away from disaster. Do yourself and your family a huge favor and put some money away from every pay for a rainy day. If you are turned off by the term ‘Rainy Day’, ok let us call it ‘major future investment’, be it a new car, a course, or even a mortgage on a new home.

Pay down your debt

To avoid being in the same situation that Greece is in, make sure your debt doesn’t keep piling. It is OK to have some debt but to let it pile on and on, then we’ll have a problem. You have to literally say to yourself “I have to stop my debt here and now” and act on that command! Paying down your debt will mean that you get to save all the interest that would otherwise go to a bank.

What have you learnt from Greece and what it got itself in? I hope a lot, if not, you could be the next Greece and that is not a good thing at the moment.

The financial world and the stock market have been rocked by the downgrading of the US credit rating by Standard and Poors.

Given the poor state of the US economy and the government’s recent infighting to reach a consensus regarding the debt ceiling in a short time, have all spelled an end to the United States close to 100 year of the maximum triple A rating down to a double A rating.

This is huge and unprecedented!

It is the personal equivalence of your credit rating being downgraded by your credit card company or bank, which as you may have guessed, results in harder and higher costs of borrowing to you.  This is exactly what happened to the United States and this can in no way be good for their already ailing and fragile economy.

So if this can happen to the United States, you can bet it can easily apply to you and me as individuals.  But what can you do to ensure it doesn’t happen to you? the short answer is, don’t go into debt and stay away from credit cards. The long answer? well let us go through a checklist:

• Live within your means: the US has been living beyond its means and budget for decades now, trying to fund two wars and lots more with borrowed money. Are you doing the same? are you spending more than you are taking in income? If you are, stop and change your budget right away!
• Eliminate your debt: Yes I know, it is getting tiring to have to hear this all the time, but that is the point! Sometimes we need to hear and read about something more than once or twice before we fully get it.  The US has so much debt, some government officials were thinking as far as defaulting. Yes, the United States was thinking of defaulting! What is this world coming to?
• Save Money: When you don’t have to spend your money on paying back your debt and the interest on it, you will have money to save and invest.  And when you have money saved, the future will no longer be as scary or uncertain, even in the unfortunate event of losing your job.  Saving money will help you not just for that rainy day but also to make big purchases such as a car, new furniture or even the down-payment on a new house.
• Pay your bills on time:paying your bills on time is easier when you have a job. But even if you don’t have a job, you should still make it a priority to pay your bills on time. If you are unable to, speak to the company and find alternative arrangements.  Paying your bills on time will not just save you from paying interest. More importantly, it will help you in maintaining a good credit down the road, which will come in handy when buying a house or car.

If you want to be seen as very trustworthy in the eyes of financial institutions, you have to start treating money with a little more respect and care.

You may look at the concept of ‘credit rating’ as your resume to the financial world: they will judge whether they should borrow you what you need-and how much interest to charge you-based on what they see on your financial resume. So be sure to polish your financial resume.

Needless to say, applying the above will help you maintain a good credit rating and that will make it easy to buy that new car or house in the future.  Furthermore, having a good standing credit history will help you stave off bankruptcy which is the last place you should think about, let alone get to!