Personal Finance Tips that you Should Ignore

 

If you want strong credit, it is essential to keep track of your finances. Your credit report records your financial behavior and helps you track it. It's easy to identify and correct the root causes. Your credit report can be reviewed at least once a year to improve your credit score. However, focusing on your credit report alone won't help build your finances.

While your credit score is the most important indicator of your finances, other indicators can be used to assess financial habits. Traditional financial advice may seem safe, however, it is important that you realize it might not always work.

Keep reading for 3 great personal finance tips that you can't ignore.

Your credit score is affected by loans you take out

This myth could end up costing you thousands, over the long-term. Many people will tell you to not pay your credit card balance. You must carry the balance from month to month in order to maintain your credit score. This is the worst thing you can do.

The most important thing is how credit cards work. Each month, you receive a statement from your credit card. Unless you have had a lot of debt, the current and statement balances are almost always the same.

If you make only the minimum monthly payment, your credit report will not show a late payment. However, your credit score will not be negatively affected by this. You will still owe interest on the unpaid balance.

The interest rate on credit cards can exceed 20% APR. This could mean that you end up spending more over the long-term, which could lead into a debt trap. It is best to not cut corners on your credit card balance.

Loans taken can affect your credit score

 Credit bureaus take into account many factors when calculating credit scores, including credit mix. Multiple credit types are better than one. It's better to have multiple credit types (e.g. credit cards, student loans, and auto loans) than one type of credit.

This is why some people don't pay their personal loans and other loans. Credit card debt is also bad. This means that you end up paying higher interest long-term than if your loan was paid on time.

Cutting your expenses is the only way to save money.

Spend less than you earn to improve your financial health. If you need more money, it makes sense to reduce your spending.

Apply for Online personal loan in Mumbai

This is a great idea in theory. In practice, it's difficult. While it is sensible to reduce expenses wherever possible, it can be difficult to sustain if you cut your budget and eliminate any non-essential costs.

Read More: Don’ts while Applying for a personal loan

Financial responsibility is the key to financial health. You'll soon be unhappy if you don't eat out, take your family on summer vacations, or buy a morning latte. You might even lose your budget and fall back into old ways.