Everyone needs money in order to survive, so earning a paycheck is a necessity. Accruing wealth over time is even more important, as this is what allows you to eventually purchase a car, among other things both essential and luxurious. Saving money can be tricky, however, especially among so many temptations. Here are a few tips to help you grow your wealth in order to afford the car you want.
Your Credit Score
Credit is an incredibly important aspect of your personal finances, but it can be hard to conceptualize without some experience. A low credit score can prevent you from doing some pretty important things in life, such as auto financing, and your credit score suffers from late payments on things like rent. On the other hand, taking on this kind of recurring payment is engaging with the credit system and can have not only negative effects, but also positive effects. For example, using a credit card strategically is a common method of increasing one’s credit score. This is done by using the credit card only to pay for things for which you already have plenty of money to afford. This allows you to create bills that you can easily pay each month, thereby boosting your credit score. Loans and financing are important for buying a new car, so working on your credit score early and often is a crucial part of long term financial security.
Your Savings Account
The savings account is the single most important element of your personal finances, because it’s the single best way to build your wealth over time. While you can certainly save money in your checking account or even in cash, a savings account provides the key advantages of manually saving money. For starters, a savings account cordons a portion of your money off from other wealth stores. While this is a small barrier when you need your money, it still serves to trick your brain into largely ignoring it while it continues to grow, and this psychological aspect of savings can otherwise be a major stumbling block for people. Moreover, savings accounts gain interest periodically that allows your balance to increase not only actively, but also passively. The interest your account gains is tied to your balance, usually 1% or less. While this is an insignificant percentage, it will increase as your balance increases and can become much more substantial with your continually growing balance and even as a result of previous interest.
As mentioned above, saving money often runs counter to basic human psychology. Another way to make up for this deficit is to more closely observe your spending. By keeping a running tally of your spending, you can visualize ways that you can reduce that spending and create a budget that can help you do just that. Start by simply taking notes on your spending to establish your current monthly spending, and then you can start trimming the fat. For example, buying food and paying your rent and utilities are necessary expenses and should take priority over luxury spending such as your hobbies or fast food. However, even those necessities can be taken care of in a more cost effective way in many cases. Buying off brand products and using less electricity, for example, can reduce these costs handily. Your budget can be used to put a hard limit on recreational spending, but eliminating it outright can cause more problems than it solved by creating a detriment to your mental health that can lead to a more intense rebound down the road. Included in your budget should also be a portion of each paycheck that can go into your savings to ensure that you are depositing a substantial amount into savings on a regular basis.
The numbers game that is personal finances can be difficult for the average person to wrap their mind around, but that’s nothing to be ashamed of. Instead, you should address your weaknesses with cold, hard data that can simplify the complex. Using these tips, you’re prepared to build a life for yourself by boosting your credit and saving your money.