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By Phoebe Smith

Easy decisions you can make to help with your finances

I have been a banker for over two years now, and in that time have learned a lot about many different financial situations that people are going through. With the prime rate currently rising and expected to continue to do so, it is important to begin thinking of ways you can set yourself up for success financially. "Present you" needs to look out for "future you", and I hope to help you do that.

1. Take steps to build your credit score to above average as soon as possible. Your credit plays such a huge roll in everything that you do in being an adult, whether you are 18 years old or 60. However, the younger you are it is fortunately/unfortunately easier to set yourself up for a financially sound future of course. So the first thing that you need to do if you haven't already, is establish what your credit score is. There are so many websites that will do this for free, and the majority of banks with online banking options offer a product through their sites to help you. Once you are able to see where your score is, you can begin taking steps to raise your score, or maintain it. These websites break down your score into categories, showing you where and how you can begin to improve your credit score. In my experience, your credit score can change quite drastically over the course of 6 months. So, making payments on time, freeing up some of your revolving debt, and refraining from opening up more accounts for over a few months will eventually make a big difference, and it is very satisfying to see!
And if you're worried that checking your credit score is going to "pull your credit" and actually cause your score to go down, you can let that thought go. These websites are designed to do only a "soft pull" on your credit score, so it will not have any negative effect at all. You should check your score weekly.

2. You need to prepare for future financial needs that will exceed your current budget. Something that I see constantly is people coming in to apply for a loan or line of credit because they need money right away. These events unfortunately don't always happen at a good time, and other things going on in a financial situation can prevent people from qualifying for a product. The answer isn't simple, but it is this: you have to try to get these products in place before you actually need them, while you are in a qualifying situation. This means while you are working full-time and have money coming in regularly. It isn't something that you are probably thinking about while everything is going well in your life, but it is so important to have a safety blanket for the future. A savings account full of money of course is the ideal answer to any future financial need, but for a lot of people that isn't an option. The nice thing is that there are a lot of products out there that are free to have that you don't need to use right away.
For example, if you are a home owner you should try to see if you can get a home equity line of credit. A lot of banks will offer these for free, you don't have to ever use it, and they have a significantly lower interest rate because they are secured by your house.
Other options to think about if you don't own a home are low interest credit cards that typically have a higher limit that you don't need to use right away. Of course, the amount of available credit to you in either of these situations is dependent on several factors (credit included), but it is good to still have some money available to you if you need it. You can activate the card and put it away in a safe place where you won't be tempted to use it until it is necessary.

3. Consolidate revolving debt. This one is circumstantial, but if you have debt in multiple places, doing this will improve your budget and help you to save money across the board. There are a lot of credit cards out there that banks offer to do what we call a "balance transfer" of your current credit cards with 0% apr for the first 6 months to a year. Everybody with multiple credit cards carrying balances should try to utilize this option. I have personally just recently consolidated 4 of my own credit cards onto one with 0% for the first year. I also chose to cut up the new and old credit cards so I can focus on paying the amount off without accumulating more debt. Before you apply for anything though, check your credit score to make sure you're in a position where you would more likely qualify for this option. Credit unions tend to be a bit more forgiving in the credit aspect, so that is always a good place to start if you are unsure.
Again I am going to bring up the home equity line of credit for debt consolidation as well because of the lower interest rates they have. Paying off anything that has high interest is painful and counter-productive to you, so don't do it if possible. Use the safety blanket and help yourself get out of debt. You won't regret that.

4. Don't start with an accessible savings account. This is a personal preference, but let me explain my reasoning. I was never given a large amount of money to put in a savings account by my parents or grandparents. I am not someone who is at this moment making a lot of excessive money in my life. Every dollar I make (and then some) seems to have it's use currently, so the option of saving money doesn't really exist. I have tried saving many times, and have found that I end up needing the money that I try to put aside for one thing or another. So, if you are someone in that same kind of position that I am (more common than you would ever believe), a certificate of deposit (CD) is a better option for several reasons; You cannot access the money that you put into a cd for a chosen amount of time without receiving a penalty. You gain quite a bit more interest with a CD than you would a standard savings account. You can have multiple CDs with different chosen balances that expire at different chosen times so you are consistently putting money aside, even if it is in smaller amounts. The interest earned on savings accounts is so little right now and I find them highly overrated.

Whatever your financial situation may be, there are always things that you can do to improve it. Certainly what I am suggesting in these steps may not be applicable for everyone, and I do understand that. That is why it is important to get the advice of a financial expert who is aware of your current standing, so you can have tailored advice given to you. Remember, aim to gain financial stability first, and then you can start setting higher goals for yourself.

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