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5 Reasons Why You Should Work on Improving Your Finances

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Being financially buoyant is something that most of us desire. However, like most things in life, it takes persistence and discipline to get to a point where you’re comfortable financially. There are so many ways that you can benefit when you decide to make a serious decision about improving your finances. Whether it’s by paying off some of your debt, working on borrowing more responsibly to improve your credit score or creating extra streams of income to create greater security, these are all great ways to start. This article will explore five different reasons that working on improving your finances is worth doing.

Mortgage

If at all you’ve been thinking seriously about becoming a homeowner one day, then you must know that having good credit is essential. A FICO score is the first thing a mortgage lender will check to determine if you qualify for a loan. Seeing as a mortgage plan is more or less a bank loan which helps you pay for your home over a period of time instead of all at once, a good track record when it comes to borrowing is essential. If, for instance, if you want to put a 3.5% down payment on a home, you’ll need a credit score of 580 plus. If you have a credit score between 500 and 579, you’d have to pay 10%. There are, however, ways to borrow if your credit score isn’t so great but the amount that you’ll be paying in interest may be crippling. It is, therefore, a good idea to work on your finances if you happen to have lingering debt and a poor credit score. You can do this by checking how much you’re owing to on a website such as Experian. You can then contact the people you owe to see if you can agree on an affordable repayment plan. If you’re lucky, they may even offer you a significantly reduced one-off payment.

Business Loans

Thousands of people are starting up businesses every year. If you’re also considering starting one, then you may need a loan depending on the nature of the business you’re considering and how capital intensive it is. One of the ways to raise capital when starting a business is by taking out a loan to help get you started. However, before a bank will give you a loan, most of the time, they will look at your credit score as a deciding factor, similar to mortgages. If you chose to try an SBA loan program, on the other hand, the requirements to take out a loan vary. In most cases, however, if you have no financial track-record you’ll need some form of equity. To make life easier, it is, therefore better to try and maintain a good financial standing. Even if you aren’t thinking of starting a business now, you may want to in the near future, so you should ensure your finances are in place beforehand.

Investments

For those who already have a great credit score and are on top of all of their debt, you may be thinking about what you can do with your money. If you’re thinking along the lines of investments, then you could put serious thoughts into putting money in stocks. Before investing, you’d need to do your fair share of research and see what stocks are lucrative as well as the ones that are trending. You could check a site such as Financhill which is used by many investors to gather such information as well as investor news alerts. Beware of stocks that seem too good to be true when buying stock as when a stock appears to be a bargain, it’s usually because other investors have identified a serious problem in that business. In terms of the cost of stock, it varies depending on the stock you buy. It is recommended, nevertheless, that you should have a couple of thousands of dollars on ground. You should also factor transaction fees into that cost and see how much they are before investing so that you ensure you have enough. It is possible to start with as little as $5, but the more you invest, the greater your chances of making more. You also want to have security stash in case things go wrong. Overall, it would be difficult to have the opportunity to invest without first having healthy finances.

Car

Buying a car downright can be expensive. Unless you have thousands of dollars saved up to buy one, then you may want to take out a car on finance. Getting a good deal without good credit, however, could be a major challenge. This is because like mortgage and business loans, it is likely that your credit score will be used to determine whether the loan will be approved or not. Similar to the other loans, the lower your credit score is, the higher the interest will be as well as the amount you have to pay back on a monthly basis. It is possible to get a car on finance without good credit, however, you’d be limited in your options and it may not be the most practical repayment plan depending on your income. A car is a necessity in most cases and you’ll never know when you may need a new one, so it’s a good idea to make sure you credit is decent before the need arises.

Rainy Days

Irrespective of how organized you are, rainy days are often inevitable. Unforeseen expenses often occur that you have little control over that may require you to spend varying amounts. In order to avoid needing payday loans or borrowing from family or friends, it’s always good to plan ahead for a rainy day. You can do this by saving a certain amount of your income every month so that you always have a pot of money hidden somewhere when you need it.

Financial freedom is the ultimate goal of many as it gives you flexibility as well as options. It isn’t always easy to get to the point where you can boast of a good credit score, lucrative investments and owning a home. However, with discipline and learning to effectively manage your finances, it’s possible.

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