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5 questions to ask about money

By: Louise Mosqueda0 comments

Money management is an essential skill to learn. It’s the difference between having enough cash for purchases like car finance and not being able to pay the bills at all because you decided that a beach holiday is more important.

Over the past three decades, Australian household debt has risen significantly because more and more people are relying on credit cards. No matter how old we get, it’s always important to keep things in perspective. That’s why you shouldn’t be afraid to ask questions about your finances. After all, the best way to learn is to ask.

By being aware of the areas, you need improvement on can help you handle your funds better than before. So, here are some questions to ask about money to help you on your journey to better money management:

  1. What is the best way to track my expenses?

With so many bills to pay, it can be challenging to keep track of where your money usually goes. Some people don’t even make it a priority. To them, if they manage to get through the month without a late notice, then they’re doing well. However, keeping track of your expenses can give you a clear understanding of where your money is going. It can be a useful tool for monitoring your bills for any unexpected charges that you can easily dispute with one phone call.

Budgeting and keeping track doesn’t have to be hard. There are two common ways to track your spending: a spreadsheet or through a smartphone app.

  • Spreadsheet. You can either use a spreadsheet or a piece of paper and list down everything that requires attention. Remember to put the amount next to each listed item, and the due date if applicable. Then cross off each item once paid.
  • Smartphone apps. For the more tech-savvy, you can use a budgeting app. There are plenty of budgeting apps available. They can help you keep track of your spending and alert you if you’re going overboard.
  1. What is a credit score?

A credit score is a numeric rating that creditors use to assess how trustworthy you are in making payments. This score directly affects your ability to get approved for car finance, and thus your ability to buy a car or opening new lines of credit. If you:

  • Pay your bills on time and avoid defaults; the better your credit score will be. Being on top of your payments tells the lenders that you are reliable and can pay back the money you owe. There’s also the advantage of lower interest rates that you can potentially secure.
  • Don’t pay your bills on time, the worse your score. A history of debt has the opposite effect on your application. Lenders will be hesitant to approve applications for finance upon seeing your credit score. There is still a chance for approval, but you might have to deal with higher interest rates because of the risks involved in giving you a loan.

One final thing you should know about your credit score is that it is negatively affected every time a lender checks it when you apply for a loan. That is why it’s not ideal for applying for multiple loans all at once. Do it one at a time, until you get the go ahead. There are plenty of advantages to keeping your credit score spotless. For example:

  • Better approval rates. When your credit is poor, lenders will be cautious when assessing you. But when you have good credit, there is less deliberation, and you have an improved change for approval.
  • Enjoy higher credit limits. Credit cards often have credit limits. With a good credit score, you can enjoy a more significant credit limit, allowing you to buy more with your card.
  • Freedom of choice. You can freely choose which lender to do business with, whereas those with bad credit have limited choice when applying for finance.
  1. What is good debt?

From the outset, all debts are terrible, but it isn’t the case. Good debt varies from person to person, but they are often car loans or home loans that you use to pay for the necessities. They help you acquire what you need while you pay back the loan little by little over time.

Debt often becomes “bad” when you continuously fail to make the payments, partnered with interest rates and the dreading penalties.

  1. How much should I set aside for my emergency fund?

Being able to pay your bills is essential, but you should also have enough to help you get through unexpected expenses. Unexpected expenses can vary from emergency car repairs to a sudden redundancy. An emergency fund can help you get through the hard times. Start building an emergency fund as soon as you start a job. Set a goal and work on it over time. A safe amount would be three to six times worth of your monthly bills. It should be enough to help you get through the tough times. Just remember to rebuild your funds once you’re back on your feet or whenever you can without a second thought.

  1. Do I need a side gig?

If the money you earn through your full-time job can’t cover all of your expenses or if it’s preventing you from building your savings, then you might want to consider getting a new job. However, it’s not always something you can do at the drop of a hat unless you have a side gig. People take on side gigs for a variety of reasons, either to keep them busy or to help them earn more money for their finances.

Part of what makes side gigs so appealing is that you can do them during your free time. There are also plenty of side gigs to consider. You can either sell crafts online or offer your services through websites like Upwork. It’s just a matter of knowing what you can provide to your potential customers.

By being smart and proactive, you can handle your money way better than you do in the past. It’s all about asking the right questions and doing something about the answers you get. Best of luck on your journey!

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