3 FAQ’s About Building Your Finances You Need To Know

There are so many questions when it comes to finances. Sometimes it can be difficult to answer them all at once or to answer all of the variations. Financial blogs and articles help, but sometimes the easiest way to answer multiple questions is through one on one conversation. As I cannot talk with all of you at once, let’s go through some common FAQ’s.

1. How much car should I buy? What is considered good payments?

Getting a vehicle is great, and in many cases a necessity. However, how much you are willing to spend is a great question. You definitely want to consider your income. If you are making $50,000/year, you should not have a car payment more than $200/month. Considering you will have other bills and expenses, a large car payment can impede your ability to be financially sound. Ideally you want to keep your debt to income within 35-40%. For those who don’t know, your debt to income is your monthly credit obligations divided by your monthly income. For example: $50,000/26 paychecks = $1923 is divided by $200 car payment + $500 rent = $700/$1923 =36%.

2. When should I start saving for retirement?

NOW! Yes, you can start saving for retirement right now. The earlier you can get started the better off you are going to be when you are older. Better yet, if you have the ability to sit down with an adviser to plan out your retirement, do it. They will be able to use different models to better suite your current and future status. Do not wait till you are older, or when you think you are going to be making more money. Every little bit will help you.

3. How do I improve my credit score or how do I start building credit?

You can start building credit once you hit 18 years old. When you turn 18, you can apply for a secured credit card or in some cases get a normal credit card with a small limit. Use it as if you were using cash, and don’t over spend on it. Gradually you can build up your credit, and can potentially get a car loan or a mortgage to help solidify your score. If you have damaged credit, your first action would be to check to see what the negatives are and see if you can get them removed. From there, you can go through the process as if you were new to credit again. Start small and work your way back up. Eventually you will be able to build a good standing with your credit.

Answering different questions at once certainly helps to knock out some bigger topics. Although my answers are somewhat generic, I know them to work through my own coaching sessions with people. What sort of questions do you have that I can provide some answers/opinions to?