Autumn foliage may not be the only thing turning from green to red. Did the summer or back-to-school season take a toll on your credit score? Now that fall is here, it’s a good time to focus on your credit score and credit usage.
Put in some work now so you (and your credit score) will be in better shape for the budget-stressing holiday season ahead. Otherwise, debt from the summer and fall can snowball into holiday spending, leaving you in a financial blizzard you don’t want to get buried under.
Start with an honest assessment of recent spending. Gather your credit card and bank statements from the last three months and review them all together. Add up monthly and total spending in categories like entertaining/dining, clothing/personal items, transportation/travel, and interest/fees.
Now look for patterns. Did you go out to eat a lot? How much was spent on clothes or makeup? What did that spur-of-the-moment weekend trip really end up costing? How much was paid for late fees, penalties, and interest? The numbers may surprise you.
This is important because monthly credit spending directly affects your long-term credit score. Missed or late payments might seem like a one-time thing, but they have lasting negative consequences on your credit score. It’s easy to overlook fees and interest when estimating in your head how much something costs, but it all adds up.
No one is that fond of the “B” word, but it is key to understanding where your money is going every month. If you have one, good for you! Look at your gut-check spending numbers and see if you need to adjust the budget. Are gas and transportation costs accurate in your budget? Are you listing out and making solid payments on all your credit cards every month? Carrying high balances on multiple accounts can affect your credit score.
If you don’t have a monthly budget yet, make one ASAP! List out all the must-haves and how much you spend every month: housing, utilities, transportation, etc. Next, list credit cards and other debts by account, along with how much you need to pay on each every month. Finally, list out discretionary spending, spending you can cut back on: entertainment, clothing, travel. Knowing WHERE your money is going is a must-have for deciding HOW you can spend smarter.
It’s hard to budget accurately when you are on the go, and the budget is written down at home. Technology can really help you get a grip on your spending. Try a budgeting or spending app on your smartphone. See if your bank or credit union offers a free app.
Look for one that can sync up with your checking/debit account(s) and credit cards. That way, it can automatically capture purchases and alert you as you spend. Having an accurate running picture on hand, in your phone, can be a huge help when making decisions in-store or online.
Once you have found an app that works for you, set a weekly calendar reminder on your phone or in the app to review spending and see how much you have left to spend for the month. If you can afford it, set aside a little each month to save automatically.
Get creative and find ways to cut back on expenses. Think of it as finding forgotten money. Who doesn’t love that feeling when you find a $20 in an old coat pocket?
Seeing the Santa explosions in stores before Halloween can be annoying (ugh!), but now IS the time to plan how much you can spend during the holidays.
Now that you have a holiday spending guide, keep an eye out for sales. You can get good deals on gifts starting now. And you can spread out the gift spending, so it doesn’t hit your credit cards all at once in December.
One final – but very important – to-do this fall: Stop beating yourself up if your credit score or finances aren’t perfect. Give yourself credit for recognizing the challenge and taking action. Now that you have an accurate picture of where your money is going, use it to motivate yourself and get back on track this fall.