and build your savings account too

Having good credit is like having a goose that lays golden eggs.  You will be able to trade the golden eggs for goods and services once the goose keeps laying eggs. But, there comes a time when the goose stops laying these golden eggs and you get into financial trouble.

To be able to continue purchasing goods and services without getting into financial difficulty, you must understand the concept of “inflows and outflows.” Inflow or income measures how much money is received at a fixed time in the year. It could be monthly, weekly or any period of time. Outflow, on the other hand is the rate at which you spent the money received for that period.

If you balance the inflows and the outflows, you will be able to maintain your lifestyle and not incur debts. Your credit rating will be in good standing with all your creditors.  Your credit rating will be sound.

To maintain this balancing act there are a few habits you must develop so you can learn how to have good credit. 

The first habit you must develop is to treat money as a cherished item and treat it with respect. Put a very high value to the preservation of it. Imagine that it is like the golden eggs from the fictitious goose.  Before you attempt to purchase anything, ask yourself at least three times if you really need the item.  If, on the third time you are convinced that you need the item, then you probably really need the item so you purchase it. But, do not cheat yourself by falsely believing that you need the item when you are really do not need it.  Do not deceive yourself. Be objective and serious about practicing this habit.

However, you should practice this habit for every purchase you want to make, especially major ones, if you want to maintain a good credit standing with your creditors.

The second habit you must develop is to establish a budget for your inflows and outflows. You must not exceed the inflows. Ideally, you should have some income left over for savings.  This should always be the plan. Once you exceed the inflows you will begin to have financial difficulty. The third habit you must develop is to make your payments on time if you purchased the item on credit.  Once you make your payments on time your creditors will not charge you interest and your credit worthiness will be intact.

The fourth habit to develop is to conserve your money by getting a discount on the price of the merchandise you want to purchase when the opportunity presents itself, especially if you are paying for it with cash. When you practice this habit you will have more available inflows to purchase other items or to deposit into your savings account and build your financial reserves.

Developing these few habits will set you on a course to manage your money more effectively and efficiently.   When you do this diligently, it will become second nature in you and you will be proud of yourself of your new money management skills.  You will have learned how to have good credit in good and bad times.