In order to be in a position to pursue your dreams, you need to have your financial basics down. The most important of these is your ability to pay bills on time. The key to accomplishing this is to stay organized.
The importance of paying your bills on time cannot be overstated. Late payments negatively affect your credit score, which determines how much and at what interest rate you can borrow.
There are many different ways to pay on time, and different tactics work for different people. My favorite way is to set up automatic payments. This can usually be done online and with your credit or debit card. However, sometimes this isn’t an option or is not the best tactic, but there are other methods. One is to pay a bill, either online or in the mail, as soon as it is received. Another is to pick a time– once a week, twice a month, whatever works– and pay your bills then. You can even set a reminder on your phone if that will help you. If you choose this tactic, make sure you put your bills in a designated place, such as a shoebox, a drawer, or a bag.
Another key to being able to pay your bills on time is budgeting. If you spend too much and you can’t afford your bills, you are in trouble. The key to avoiding this is getting a sense of how much you are paying per month, and making sure you always have that available to you. However, if you are just getting ready to pay your first set of bills, be liberal in your estimation of what the bills will cost you. Worst case scenario, you have a bunch of extra spending money left over.
Some people prefer to set up a detailed monthly budget, and that is great, but for those of us who don’t the bare minimum you need to do is have a general budget where you make sure you always have enough money left over for your bills and to put toward your savings. A nice simple budget is the 50/20/30 rule. Where 50 percent of your income is reserved for your bills and living expenses, 20 percent is put away toward your savings for your various financial goals, and 30 percent is your flexible spending money.
In my next posts, I will discuss more AIER pointers that will help you with other financial basics, including managing your checking account and knowing what papers to save or toss, as well as a little more about credit scores. Remember, financially, organization=success.
For more information on setting financial goals, as well as a variety of other topics, check out AIER’s Start Here digest. Dedicated to helping young people set their “life strategy,” the Start Here digest is a great resource for high school and college students interested in getting their financial lives on track. Best of all, it’s free!