Confucius is a wise man. He said that no matter how long a journey will become it always begins with a single step. This is the same attitude that we need to take when it comes to our own personal journey towards financial independence.
The first thing we need to take care of is having good credit. It is a very good foundation on which to build. It affects a lot of the things you might want to do later in life like buying a home, getting personal loans, or even getting a job.
I Think, Therefore I Have Good Credit
The best way to build good credit is to think about every detail. I mean, EVERY detail. Every detail includes the when, the where (like department stores), and the how. By thinking about all the details, you set yourself up to become very knowledgeable and are less likely to make mistakes that can lead to bad credit. I call this the philosophy of credit.
Less Is More
One of the best ways to keep good credit is to use only a little of it. This minimalist approach benefits you in two ways:
- You are more likely to be able to pay off your balance in full every month
- It shows future lenders that you know how to live within your means
Keeping your balance below 30 percent of your limit is best but if that is more than what you can afford to pay off every month, then you are in danger of drowning. It might be smarter to go lower than 30 percent. Trust me, I’ve seen it firsthand and it is not pretty.
Time and Space Continuum
Well, just time actually. When it comes to good credit, we need to only concern ourselves with time. More specifically, timeliness. That’s right. Those due dates on credit card bills are numbers that must be adhered to at all costs because if you do not, then those late payments negatively affect your credit:
- You end up with a lower credit score
- It shows up on your credit history and stays there
- You get charged with a late fee
- Your APR might increase (this has been happening more lately)
- Other credit cards might raise their APRs too
It just makes more sense to pay bills on time. I suggest automating payments of your credit card bills for less hassle.
Philosophy and The Art of Credit Maintenance
I have already explained why it is a good thing to think (and think some more) about every detail of your credit. Now the last thing that must be done is to maintain your good credit. One way to know how your credit is doing is by checking one of the three credit bureaus: Experian, TransUnion, and Equifax. By knowing exactly where you currently stand with regards to your credit, then you are better able to maintain it.
This is only the first step but financial independence is a journey that is worth taking. Imagine, when you get to the end of the 1000 miles, the last thing you will have to think about is money. To not have to worry about money… Then you can have time to really philosophize.