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Want to Finish Rich and Still Drink $5 Lattes?

A lot of personal finance gurus claim the road to wealth does not pass a Starbucks drive thru. I wholeheartedly disagree. Trying to get rich by cutting a $5 latte from your spending is like trying to dig a basement with a shovel. It can work, but it is painfully slow.

Instead a faster, less painful way is to focus on the bigger ticket items. Negotiate like crazy on major purchases like cars, homes and appliances. It is much easier to save hundreds or even thousands of dollars by tackling the larger purchases.

A smart way to ensure your large purchases do not take a bite out of your budget is to build and maintain an excellent credit rating.

Unless you plan to pay cash for everything you will need to borrow money at some point. A high credit score will ensure your big ticket items cost you as little as possible.

Don’t get me wrong. Skipping the Latte’ can save you money, but the difference between a 650+ credit score and a 540 credit score is substantial. In fact, it can be as much as $64,000 over 25 years. That adds up to over 12,000 lattes! (see chart)

How good of a credit score do you need?

A credit score of 700 or higher should ensure you qualify for the cheapest money for credit cards, loans and mortgages.

How do you find out your personal credit score?

It is possible to get a free copy of your credit report from Canada’s two largest Credit Reporting Agencies, Equifax and Transunion. You will have to search the website to find the number to call. Alternately, you can purchase your report online and have instant access.

Avoid websites offering “free” credit reports. Many of these sites offer a free credit report under the assumption you sign up for a monthly subscription service. It is possible to cancel the service once you have your free credit report in hand, but make sure you know what you are signing up for and how to get out.

The credit score has quietly become the standard test of your financial intelligence. Long gone are the days of acquiring a loan based solely on reputation or your past history with your bank. It is important to not only understand how credit works, but how to improve and maintain your score.

In an upcoming series I will examine the all important Credit Score how it works and give you tips on how to negotiate everything from mortgages, to mini-vans.

Next week: The A, B, C’s of Credit

For more insights on mortgages and money visit http://www.scottpeckford.com