Oct 31, 2017

Financial management is hard. Wait. Scratch that. Financial management is only hard when you don’t know how to do it. The course of managing your daily expenses may be fraught with problems. There’s no denying that. On the other hand, managing your finances properly also offers you tons of opportunities. You just need to know how to go about it and know that it’s never too late. 

Here are 5 financial truths you wish you knew earlier:

1. Biweekly mortgage payments

Your monthly mortgage payments can take a big chunk out of your paycheck, which is annoying but even more so, it’s expensive and sometimes even unmanageable. Rest assure, there’s a solution: make biweekly payments instead of monthly ones. And while double payments may sound absurd, hear us out first.

Biweekly payments have two advantages. First, paying less twice a month somehow feels more bearable than paying a big sum once a month. Secondly, and more importantly, paying twice a month can dramatically decrease your interest. It’s the easiest way to pay your mortgage early. 

2. What makes up your credit rating?

Your credit rating is everything in the financial world. It’s almost an identity. Yet, statistics suggest that 60 percent of the people are unaware of the factors that affect your credit rating. If you have a poor credit score, it would be almost impossible for you to secure good terms on a mortgage, loan, or credit card.

Your credit score is based on a wide variety of factors. Some of the most important factors include, but are not limited to:

  • Payment history: Any record of late payments reduces your credit score
  • Public records: Declared bankruptcies or judgments 
  • Length of the credit history: The longer the better
  • Inquiries: The number of inquiries on your credit history.  

3. Late payments on credit cards

If there’s one thing you can do to raise your debt and ruin your credit history at the same time, it is to be late on your credit card bill. If you pay your bill after the due date, it reflects poorly on your image. Credit card companies don’t like that and as a result, end up  doing one or both of these things:

If your payment is 30 days past the due date, the credit card company reports to the credit bureau. After 60 days past the due date, they can even raise your rate. And there’s always the threat of the late fee. The smart move is to pay on time.

4. Your home locks matter

Imagine you enter your house to find it has been broken into and you’ve been the victim of a theft. Not to worry, you wonder, I have insurance against such incidents. You approach the insurance company and they reject your application. Why? Your locks didn’t match their guidelines.

Yes! The nature and quality of the locks in your house are important. Some insurance companies recommend standard locks to be installed. If not, they can refuse your claim. 

5. Even wealthy people need a budget

One of the most damaging misconceptions is that when you’re wealthy, you can do pretty much whatever you want. Sure, if you’re Bill Gates. If you’re not, you need financial management. You need a budget. 

In fact, we could even argue that rich people need a budget more than an average person. Average people realize that the financial situation may be tight and they need a cap on the spending. When you’re insanely rich, you can be removed from that reality. Why else do you think so many rich people file for bankruptcy?

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