Netflix and Save - Relationships that improve your Credit

Financial skills you need to start with… …save up an emergency fund, your friends and family won’t have financial power over you.

Once a recent graduate told me his parents were his emergency fund . Sounds good, right? Don’t worry about saving, just turn to your parents if something goes wrong.

The thing is, once your parents lend you money, they probably will have something to say about how you spend it. They might withhold it until you agree to move closer to home. Or they’ll have opinions on whether you’re allowed to take a trip when you haven’t paid them back yet. In short, you’re back in the role of “teenager”, and they might ground you until they get their money back.

Same thing applies to loans from friends. If you ask to borrow money from a friend, they might start eyeing your Instagram feed with skepticism. You went out to a nice dinner? Donated money to someone’s half-marathon fundraiser? You may even find yourself avoiding your friend so that your financial decisions aren’t scrutinized.

The best thing to do is to save up three to nine months of expenses in a savings account, so that if you have an emergency, you aren’t asking for loans and giving your friends and family the steering wheel to your life.

…create a budget, you’ll be viewed as confident instead of flaky.

When you don’t know how much money is coming in and out, it’s hard to say no to friends and family when they suggest dinner, a trip, or a Secret Santa gift pool. Your gut might say, “I feel like that is too much for me,” but without hard numbers, you’ll either end up saying yes to something that will ding your bank account, or you’ll end up hemming and hawing and finally weakly saying no, leaving your friends or family with the feeling that you’re flaking on them.

But once you create a budget that accounts not only for your income and expenses, but financial goals, you can reference it and confidently say whether or not a dinner or concert tickets are feasible. And you can give a good reason. “I’m saving up for holiday presents right now,” or, “I could go if we choose a less expensive restaurant,” sounds so much better than, “I don’t think I can because it’s too much money.”

…pay off your credit card debt, you can say yes to more activities.

Credit card debt has a way of snowballing. Blame it on compound interest, which adds more and more to the balance, leaving you stuck making payments on interest instead of paying for a weekend away.

Say for example that you have $5,000 on your credit card with an interest rate of 19%. If you make the minimum payment only, you’ll have to pay $200 per month for 11 years. It adds up to an additional $3,000 you have to pay off on top of the original $5,000 you spent! You could have used that money to go to Vegas for a bachelor party or taken your niece to Disney World. You could have had 20 romantic dinners or upgraded to a better resort on your honeymoon. The possibilities for experiences you could have had with your friends and family are endless.

Therefore, pay off your credit card debt as soon as possible, and free up your budget for fun activities with your friends and family.

…get a plan for your debt, you won’t have to lie anymore.

In a survey out this year, 43% of Americans with credit card debt said they would feel judged by family members and friends if their loved ones knew how much credit card debt they had. This fear can interfere with building healthy relationships. Lying about your financial situation and what you can afford can lead to feeling less committed and close in a relationship, or even anxiety and depression.

But if you can create a plan for paying off debt, and share it with the people closest to you, then you’ll create a stronger relationship. The bonus is that you might reach your goal faster, with them cheering you on!

…build up excellent credit, you’ll be more likely to have a long-term relationship.

Sharing accounts with your spouse can make it easier to build a life together – buying groceries, paying the gas bill, planning a vacation – but only if you both can be trusted with each other’s money. In fact, a 2015 study showed that people with healthy credit scores are more likely to commit and stay committed to relationships.

Your credit score is an official measure of how good you are at making on-time payments on loans and credit, which is crucial if you want to share accounts with someone. For example, if you want to purchase a family mobile plan to save money, one of you has to make the monthly payments, or else the other will be hounded for the balance. If you want to open a credit card with your partner and they have bad credit, the interest rate will be higher, and your own score could be dragged down if they miss a payment. It’s hard to build a life with someone who can’t be trusted to pay bills on time.

Instead, make sure to carefully monitor and build your credit score through responsible credit and loan management. Once you’re ready to share a financial account, you can pull a credit report and show it to your partner with pride. (And get them to show theirs, too!)

…build up your savings, you won’t be a slave to your job.

If you don’t have any savings, then you might feel like you can’t afford to assert yourself at your job and risk being laid off. If you absolutely cannot lose your job, then that can interfere with your family and social life. You’ll feel like you can’t use all your vacation, that you need to stay late and work all the time, or that you can’t stay home and take care of a sick family member.

By all means, you should work hard, but a financial cushion can give you the means to say, “I can’t stay late, it’s my daughter’s recital tonight.”

…get in the habit of living within your means, you can set goals with your partner and reach them.

No long-term relationship can flourish without sharing financial goals. Whether it’s paying for a wedding, saving up for a trip, putting a down payment on a house, or simply thinking about retirement, you and your partner will have dreams for how you want your life to look – dreams that can be torpedoed by a partner who frequently overspends.

So don’t overspend now thinking you’ll “settle down” later. Set up automatic transfers from your checking account right after payday into your savings account. It will come in handy later when you decide to have a baby, want to book a trip to Alaska, or are ready to renovate your kitchen.

You might have noticed how all these concepts interweave and affect each other. No financial skill exists in isolation – paying off debt leads to better savings, for example – and no relationship is immune from financial stress. If financial problems are interfering in your relationships and you’re not sure what to do, GuideVine can help you find the right financial advisor to get you on the path to a healthy relationship with your money.


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