How to Feel More Confident With Your Money

This article originally appeared on The Avocado Toast Budget.

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Here at the ATB, we are all about budgeting in a way that works for you and finding realistic ways to feel more confident with your money.

How to Feel More Confident With Your Money

Now that 2020 is (finally) over, here are ways that you can start to take hold of your finances and build confidence with your money in 2021.

Write down your short, medium and long term financial goals

I’m a big believer that you don’t need to stress over how to maximize the value of every dollar you come across.

Much of personal finance is behavioral and relies on us finding value in how we navigate our money!

Because of this, I found it incredibly helpful to sit down and brainstorm short, medium and long-term financial goals to decide what I wanted my money to do for me.

Write down your short, medium and long term financial goals

Here’s how I break it up:

Short-term goals – less than two years

Medium-term goals – 2 – 10 years

Long-term goals – 10+ years

Feel free to dream big!

We want to make realistic and attainable goals, but we also want to allow ourselves to dream about what we really want our lives to look like, and how our money plays a role in that.

Get to know your credit score

Wanna know a secret? I avoided my credit score for the longest time.

Turns out, once I finally faced my credit score, I became more empowered to understand how my credit score affects my finances and what I could do to change it.

While free resources can give you a ballpark estimate of your credit score, that score isn’t very useful and certainly isn’t what creditors see!

Knowing your true score, and seeing your credit reports from all three major credit bureaus, gives you security and control over how to navigate your credit score going forward.

While it can be daunting, credit plays an important role in our lives from renting, to car insurance, to mortgages, to career opportunities and more.

That’s why it’s important that you stay informed of what your credit actually looks like that’s why I signed up for ExtraCredit’s free trial

Set up automatic savings

Automating your savings is LIFE CHANGING.

Setting up automatic savings is often referred to as “paying yourself first” because you are prioritizing saving money for Future You.

There are tons of different savings goals that you can put this money toward, but the important part right now is to set up automatic savings so you can set it and forget it.

Trust me—you miss that money a lot less if you never see it in your account in the first place.

If you have automatic deposits at work, it’s super easy to add a savings account and have a certain % or dollar amount go into that account every month without it EVER hitting your checking.

In my opinion, this is the best way to go. Out of sight, out of mind.

You’re way less likely to touch this money, and you’ll be shocked at how much it grows over time!

If this isn’t an option for you, you’re not out of luck. You can set up automatic savings transfers into your savings account from your checking account through your bank.

Find a budget that works for you

Here at the ATB, we are all about budgeting in a way that makes sense for you and your life.

Budgeting doesn’t have to be stressful and restrictive. It should actually be freeing and allow you to feel more confident and in control of your money!

There’s no one right way to budget, and there are TONS of different types of budgets depending on your income and financial goals.

Personally, I use a zero-based budget which allows me to track and decide where every single dollar I have is going.

If you have big savings goals, low income or high debt, I definitely recommend checking out a zero-based budget.

Learn how to increase your credit score

Your credit score has a bigger impact on your life than just determining your eligibility for loans.

Credit can impact your ability to rent, job opportunities, car insurance rates and more.

Once you know what your credit score is, it’s important to understand what makes up your credit score, and what steps you can take to increase it.

There are five factors that influence your credit score:

  1. Payment History
  2. Amounts Owed
  3. Length of Credit History
  4. New Credit
  5. Credit Mix

Payment History makes up 35% of your credit score, so it is the most important factor.

ExtraCredit gives you the ability to report rent and utility payments, adding new tradelines to your credit profile. Adding payment history to your credit file. 

And if you need help working to repair your credit, you can also use the Restore It feature to get an exclusive discount from a leading credit repair company. Remember: your best credit score is an accurate one.

Understanding how to increase your credit can take a lot of stress out of your finances and help you feel more in control of your credit future. 

Make a debt payoff plan

I paid off $20k in CC debt in less than a year, and in order to do that, I needed a concrete plan of how I was going to tackle my debt.

Prior to that point, I had just been throwing a little bit here and there, hoping that my balance would eventually decrease.

Shockingly, that never happened.

Once I decided to use the debt avalanche to tackle my credit card debt, I was able to calculate how much extra money I could throw at my debt every month in order to make progress toward my debt free goal.

With this method, I paid the minimum payments on all of my debt except for the one with the highest interest.

With the highest interest debt, I put any extra money I had toward paying that down.

This gave my money more of a purpose than just throwing extra money here and there at my different debts.

It was also reassuring and motivating to see the loan amount decrease drastically as I threw the extra money I had towards it.

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