Basic money choices: a checklist

If you take care of the basics they will take care of you - and you will keep more of your money. Your financial health and credit rating can improve over time by following these steps.

1. Lighten up expenses. Pay basic household expenses first, in full. Check your expenses each month by balancing your checkbook. If you find you are spending more than you can pay down in a couple of pay periods, cut back.

2. Take care of bills right away. Paying every bill when it comes in will help you avoid expensive fees or penalties, plus improve your credit. Missing a credit card bill deadline, even by a day, can increase your interest rate.

3. Get rid of high-cost debts. If you charge expenses on high interest rate credit cards, pay them down as fast as you can. Don't just pay the minimum balance - pay as much as you can and avoid extra purchases, until the debt is gone.

4. Don't max out your credit cards. A generous spending limit on your credit card doesn't mean you should keep charging! It may feel like it is your money - but it isn't, you're borrowing from the credit card company. Maxing out your cards hurts your credit rating, and increases interest rates on that debt.

5. Pay the monthly bill for your goal. Decide how much you can afford to spend on your goal. Then put the money aside every month, just as you would to pay any other important debt, such as the rent or the electric bill.

6. Remember your goal before you spend. Before you make a purchase, ask yourself: "Do I need it or is it just nice to have? Will it get me closer to my goal?" After handling basic expenses, try to spend on things that will help you achieve your goal.

When the dream finds you:
Serena's story

  Do you have to pick a goal before you start using your money to make money? No, as Serena discovered. If you get ready to find your dream, it just might find you.
  Serena liked to keep her living expenses low, so she had some money left over from every paycheck. She did not have any particular goal in mind at the time.
  "I started putting extra money into a savings account, thinking I would use it later for something fun," Serena said. "Time went by, and I didn't spend the money, so I looked into ways to make more of a profit on it." She found some low-cost investments and kept putting money aside.
  "It was just amazing how fast it built up," she said. "Pretty soon I had $50,000."
  Eventually, Serena met someone special: "I felt really good about being able to bring some money of my own to the relationship," she said. Serena and her spouse combined their reserve money, and made a big down payment on a nice house by the shore. They even had enough left over for a sailboat. The couple fell in love with sailing, and a new dream was born. Now Serena says: "Someday we'd like to retire and live on the boat."