A recent study found that most Americans cannot cover a $400 emergency without going into debt. Such worrying statistics reinforce the view that most people aren’t as good with money as they like to believe. Having a firm grasp on your finances is crucial to building a life of your dreams. For instance, it increases your chances of getting the best mortgage rates in Guilford when you need to buy a home. Here are some proven ways to help gain a improve your financial standing:
Tread carefully with upgrades
Keen to maximize earning per customer, marketers employ every trick in the book. They bombard you with enticing offers to get an extra $10 or $20 every month. At first glance, that might not seem like a lot, but in the long run, the money adds up.
You must fortify yourself against the sweet-sounding upgrade on your car, mobile phone, TV, or even computer. Hang on to your old phone or car as long as it’s working just fine, and you will save a considerable amount of money in the end. Spending an extra $20 for these four items adds up to $80 a month or $960 a year.
If you’re in a financially shaky ground, you can’t afford to spend money on such items. Forgoing upgrades lets you save money each month and put it to better use. In this case, you can set the $960 towards paying off your mortgage early or saving for a down payment. You can also use the money to pay off your credit card, pad a savings account, or even pay off your student loans. Keeping a phone saves you from a phone plan’s contract, which allows you to move to a cheaper operator.
Create and follow a budget
It would be a mistake to think that only frugal people create and follow a budget. A budget only tabulates your income and expenses to give you a clear picture of your financial status. It offers insights into spending habits, which is crucial in cutting out bad habits.
When planning to buy a home, a budget is instrumental to your success. It lets you understand how much money you can put towards purchasing the house. As a mortgage is an additional expense, you must be sure that you have enough money left over to cover the monthly payments. Most people who run into trouble with their mortgage payments tend to overlook this crucial step.
Create a rainy-day fund
Most Americans being floored by a $400 emergency is a clear indication that they don’t have an emergency fund. Such fund lets you handle just about any crisis without going into debt. Experts recommend that you save up at least six months’ worth of living expenses if you’re a single income household.
For a two-income household, a three-months’ emergency fund will suffice. Such a fund provides a soft-landing spot in the unfortunate event that you lose your income. It means that you can cover your monthly bills without encountering severe financial hardship or taking on debt.
You must improve your money management to realize your dream of owning a home. A solid financial background is necessary to qualify for affordable mortgage rates. A low-interest rate lets you build equity in the home quickly and increase your net worth.