Good Credit Score Optimal Debt Payment

I love money management. One of my friends spoke to me today and he was messed up with a hefty credit card debt. It is interesting to know that they are working couples, they own a new home, they own a BMW. Still they find it difficult to manage money the right way. Here is what I told them 1) Paycheque always goes to savings account - If you ahve not opened a savings account do it today. With a simple phone call many banks help you set it up without any delay. typically you make nothing out of checking account. Savings account with internet only FDIC insured banks can be as good as 1%. Make it a point to link your paycheque with savings account to start earning money from day 1 2) Home Bills come first - Bills related to residence can be your rent or your own home. Pay your home rent, home loan mortgages on Day 1 of every month. If you have an automated payment system always link these payments with your savings accounts. Banks for automated payment from savings account. However, typically six transactions per month will be allowed from savings account. Be careful with this as one time extra fee can be as high as $20 to $35 depending on your bank 3) Pay zero interest on your bills - Even though you may not be having loans other than your mortgage main problem is with procrastination when it comes to paying bills including insurance bills, credit card minimum payment or full payment depending on you are currently running 0% APR etc. Pay bills on first day you get the statements. This is where most people miss.Say you get your statement generated on 17th of May. You can start paying from May 17th and you should have paid before June 17th. Most people procastinate which will eventually lead them to pay at a higher interest rates (Varies as per credit card providers). They loose lot of money in interest. So, never procrastinate. If you prefer to save interest for next one month, stay organized. Have a gmail alert set to notify you of payment one week before due date. This will help you earn money for 3 weeks. Ultimate goal is to avoid splurging of money 3) Budget your earnings - Have an excel sheet. Even if you make $10,000 per month it is a good habit to maintain monthly budget. I personally recommend google docs excel as this is often associated with gmail and we can utilize all features of this, maintian it easily 4) Spendign track - This is a fun exercise you can try for 3 months to see difference in your attitude. Make a note of each and every penny you spend on different tasks. This even includes $1 you spend on laundary. This good book keeping habit helps you do a review on end of every month. This will have a check on your spending 5) Cash spending improves discipline - In all my money management  posts I've been insisting this. If you spend in form of cash rather than in the form of a credit card you will spend carefully 6) Give priorities on Expenses - See if you can postpone some expenses like car repair, oil change, change of electric boxes in garage etc. Prolong it as much as you can. Don't over press yourself. Spread expenses acoss months 7) Have good investment habit - It is mandatory to save 10% of your gross salary (minimum limit) on a monthly basis. This starts with your 401K retirement if your employers sponsors one, HSA for your medical expenses, IRA, Roth IRA etc. If you are self-employed have plan to save in self-employment IRA. To get to know the savings amount have meeting with your auditor beginning of the year 8) Pay high interest loans first - Let me bring in a simple case study before I explain this. Say a person pays 4% in home mortgage he can claim refund on interest paid towards mortgage. This is a glittering stuff often overlooked by home investors. Though you get 50% refund, you lose 50% towards interest. If you have an option to make in excess of that pay interest. Otherwise finish mortgage as soon as possible Same does apply to car loans, credit card debt also. IF you calculate over period of 5 year the interest you save would snowball to help you pay another mortgage in full. I've given simple analysis of 15 year versus 30 year home loan mortgage to help you save money