Budgeting 101

Good credit makes it easier to keep your finances on track. When you get your credit report, be sure to check it carefully, since up to 20 percent of reports contain errors.

As you enter retirement, your finances become dependent on savings, Social Security, and other income streams. Start planning early and create a budget plan that will support the retirement lifestyle you want.

Pets make our lives richer and more fun. They also impact our budgets. Your pet will need food and other supplies, as well as pet insurance and regular visits to the vet. Build all that into your household expenses.

DON’T APPLY FOR ANY NEW LOANS
While you’re working to improve your credit score, don’t apply for any new loans, financing, or credit cards. Any time you do, the prospective lender will do a “hard pull,” a credit check that indicates you’ve asked to borrow money. Every hard pull lowers your credit score, and those pulls stay on your credit report for about two years.

LOWER YOUR UTILIZATION
Another quick way to boost your credit score is by reducing your credit utilization, the amount of credit you’re using compared to your total available credit. As long as your utilization is under 30 percent, it won’t have a negative effect on your credit score; if it’s over 30 percent, your score will drop.

Here’s how it is calculated: if you have $15,000 in credit card debt and $25,000 in available credit, your credit utilization would equal 60 percent. The best way to reduce that ratio is to pay down your debt without racking up any new charges. You can also reduce it by increasing your available credit, but that can backfire if you end up charging more or if it requires another credit check.

If you do find mistakes—and there’s a good chance you will because at least 20 percent of all credit reports contain errors, according to the Federal Trade Commission (FTC)—notify one of the credit reporting agencies right away by certified mail (there’s a good sample dispute letter along with a list of all the information you should provide on the Federal Trade Commission website at www.consumer.ftc.gov or at myFICO at www.myfico.com).

Get Your Cred Back

Bad credit can cost you money—and grief—in several ways, making it even harder to get your finances back on track. When your credit score comes back as fair or poor, you’ll pay higher interest on any credit card or loan that you can get, making every dollar you borrow more expensive. On top of that, poor credit can keep you from getting a job, an apartment, utility hookup, and even life insurance.

Whatever your emergency savings goal was before, consider doubling it. Look back on how quickly you ran through it when the last disaster struck. If you expected it to cover three months of expenses, did it? If your prior savings didn’t stretch as far as you needed it to, you may have underestimated your crisis needs. Now you know how much it takes to get through a financial disaster, and you can make a better backup plan.

Saving more aggressively might keep things a little tight right now, but you’ll be very thankful when you’re ready to retire and you have a substantial nest egg to rely on.

You’ll need to replenish your financial safety nets before you can begin taking strides toward the goals you had to deprioritize during the crisis.