Building Strong Financial Habits After Acquiring Large Debt
I’ve talked before about how I dislike much of the financial advice out there because it assumes that your debt is the result of irresponsible spending. Most people I know are in debt because of two things: education and home ownership. We are in a world where these things are touted as important status symbols and steps toward success, but they are not accessible for most people.
But being in debt, even when it’s not the result of irresponsible spending, can make it difficult to build up healthy financial habits. Whether it’s because you don’t feel you have enough of a buffer to save, or you’re putting all your energy into paying down loans, you may not have taken the time and resources to really invest in your financial future. Below are three ways you can build strong financial habits today.
Assess Your Credit
If you haven’t looked at your credit score and credit report, you should. Your score will tell you how easy or difficult it will be to secure future credit lines. Your report will allow you to make sure that your score is based only on your actions and that you haven’t been the victim of identity theft or clerical error.
If your credit score is low, there are lots of steps you can take to raise it. The first step is to make sure you’re paying bills on time. Next is to lower your debt. These are likely steps you’re already taking. Another effective way to raise your credit score is to obtain a secured credit line. This is basically a debit card, but it allows your bank to see that you can make regular payments reliably. Resist the temptation to pay it off every time you use it. Instead, keep a low balance and pay your bill consistently. This will show the reliability needed to raise your credit score. Taking these steps, in just a year your credit score could see improvement.
Know the Value of Your Belongings
Many financial advice articles recommend selling your belongings. Indeed, you should measure whether or not your possessions are more valuable to you when you have them or when you have their monetary value. Embracing some level of minimalism is a smart financial move. But before you sell off your valuables, make sure you know their worth so you get a fair price. Sometimes the most valuable items can be a bit difficult to sell for their full value, but there are lots of tricks for dealing with hard to sell items.
Finding out the value of your belongings can be as simple as doing a couple internet searches or as in-depth as consulting an assessor. If your possessions have maker’s marks and dates on them, you’ll want to do some cursory research to see if they’re valuable. It’s sometimes surprising what is worth money. Certain soda bottles have sold for hundreds of dollars on ebay because of defects in the glass or historical interest.
Streamline your Bill Payments
When you’re focused on paying off or staying out of debt, it can be easy to lose track of what payments you need to make. Luckily, trends in mobile billing and payments have moved heavily toward automation. You can not only automate almost all your payments, but there are apps that allow you to see those scheduled payments in one place. It’s easier than ever to streamline your bill payments and make sure nothing falls through the cracks. Just be sure to still manually review your income and expenses at least monthly, so that you can notice any inconsistencies. One time my bank failed to waive the usual fee for my account which I get free through my work. If I hadn’t done a regular review, I may never have noticed. Luckily, it was an obvious mistake and once pointed out to them, they refunded me immediately.
Another way to streamline your bill payments is to consolidate your loans. This is basically making a new loan combining your old ones. You can often get a lower interest rate this way, and it lessens the number of bills you need to keep track of. Of course, you’ll want to research any company you consider working with. You can check out this comparison of debt consolidation companies to help you start figuring out if consolidation is right for you and if so, what company might be the best fit.
These are just a few ways to build strong financial habits. Do you have more tips? Share in the comments!