Disclaimer: This post was sponsored, and paid for, by Intuit. All opinions are my own.
In case you missed the post where I aired out all my financial dirty laundry, I’ve partnered up with Intuit for the launch of their new free financial management tool – Turbo – and their #RealMoneyTalk campaign!
In the last post, I mentioned how we don’t need to be ashamed of our financial mistakes. They are all learning experiences and we can overcome them. Our shame and fear around money all too often prevents us from taking steps to improve our financial health. I asked blog readers and social media friends to share some of their own #RealMoneyTalk so we end the stigma of money shame together.
Here are some of the responses that came in:
And here’s an awesome video from the #RealMoneyTalk campaign – you can check them all out here!
In this post, we’re switching gears a little bit. Now that we’ve taken the shame out of our financial mistakes, it’s time to talk about what we can do to fix them.
It all starts with awareness…
The first step in achieving financial health is awareness. We did the first part already by admitting what’s going on. The second part is actually looking at the numbers.
Can I let you in on a little secret?
I used to hate numbers. I avoided them at all costs because I was terrified of what I would see. I had to learn how to befriend them over time.
At the end of the day, numbers give us a picture of what is actually going on. Once we have the information then we can create a roadmap. It’s just data that can help us make better decisions. Nothing more, nothing less.
One of those sets numbers is your credit score…
Truth be told, your credit score is probably the financial number you hear about most. Many people believe these three digits are supposed to signify your overall financial health based on the length of your credit history, your payment history, your credit utilization and a couple of other factors.
Here’s what you need to know about your credit score:
Good credit score = lower interest rates when you need to take on debt (credit cards, mortgages, auto loans, etc.)
Bad credit score = Higher interest rates. In other words, you end up paying more money. Or, you can just get denied.
But, your credit score doesn’t tell the whole story…
Between commercials and constant articles about improving your score, you may be inclined to believe that your credit score is the only measure of your financial health. It’s not. It’s actually just one component and it’s arguable as to whether or not it’s even the most important one.
That’s why, in addition to your credit score, there are a couple of other numbers you need to know. They include:
- Your income: Can’t figure out very much unless you know what you are truly earning.
- Debt-to-Income Ratio: How much you owe vs. how much credit you have available.
When you know these two numbers in addition to your credit score, you can have a better picture of what’s going on financially and create a plan to improve.
Here’s an example from my own life:
You can have an excellent credit score and still be broke. I know because I’ve been there.
A few years ago, I had a 750 credit score but wasn’t earning enough money to pay for basic living expenses. Now I have both the credit score and the income for my desired financial goals.
That’s why a set of three little digits simply isn’t enough of an indicator of your overall finances.
By the way, the reverse is also true. Your income alone isn’t a good indicator of your health because you can in debt up to your eyeballs – meaning you have far less money than you should.
Were you aware of debt-to- income ratio?
Aren’t sure about your overall financial health? Here’s how to get started in five minutes…
Intuit’s latest free tool, Turbo, measures all the major numbers you need to get a clear picture of where you stand financially. It tracks your credit score, your debt-to-income ratio and your verified income as you report it to the IRS.
All you have to do is sign up for a free account here and input your information (don’t worry, it’s safe!). The entire process takes all of five minutes. If you’re a TurboTax customer, you can import your information from there!
From there, Turbo will give you an overall score based on the numbers so can truly know where you stand. Once you have the numbers, you can use their personalized insights to make a game plan to improve. They’ll even tell you how you’re doing compared with other people your age.
For example, I currently have more on my credit cards than usual because my living expenses have gone up. According to data aggregated by Turbo, my income is great for my location and age, but it still needs to improve to keep up with some major life changes that occurred in 2017. Now that I can clearly see that, I know I need to improve on increasing my income in the coming year.
If you’re ready to change your finances for the better in 2018, it’s time to start looking at these three important numbers. Join me over on Turbo to get started.