Financially savvy people aren’t special — they’re just like you and me except they’re making better decisions with their money. These people are saving regularly, tracking where their money goes and much more. The best part is you can be just like them by making a few small changes to the way you manage your finances.
Use these tips and ideas to get your finances in order and become a financially savvy person.
They Keep a Written Budget
Your budget is all about awareness, and if you want to make the best decisions for your finances, this is critical. When you keep a budget, it’s hard to avoid the fact that you’re overspending each month or just getting by with your subpar paycheck. Ultimately, however, it’s empowering:
“Best of all, you can direct your money where you want it to go. You get to decide what you want to save and how much you will spend on expenses like groceries,” says Tracie Fobes of Go Banking Rates.
Get Savvy: Your budget doesn’t have to be complicated or hard to track. Use a budget app if that’s easier, or simply keep track in a spreadsheet. The numbers you want to look at each month are:
- Total income
- Total spent
- Breakdown of monthly bills
- Total saved
At the very least, this will give you an idea of whether you’re living within your means, which is another habit of financially savvy people.
They Live Within Their Means
It’s hard to live within your means, especially in the age of social media when we’re seeing the best and brightest parts of everyone’s lives — lavish trips, new clothing —and we want it all too. Yet living within your means is one of the most important steps to being financially savvy.
When you spend more than you’re making, especially when that spending goes on a credit card, you start to dig yourself into a financial hole. With interest rates sky high, you end up owing much more than you spent.
Get Savvy: Do a simple calculation of how much you make, how much you owe for bills each month, and what you have left over for spending. Find alternatives for expensive purchases, subscriptions and others that will fit better in your budget. For example, perhaps your €75 monthly gym membership isn’t doable, but a €30 subscription to have access to on-demand fitness videos is. Make that switch.
They Save as Much as Possible
Two-thirds of people who graduated from university will never pay off their student loans, not to mention the fact that 40 per cent of households earning more than €100,000 said they were still unable to live comfortably, as reported by Independent.
However, financially savvy people always save something, even if it’s just €10 each month. The key is to get into the habit of saving, so when you’re making more money, you’ll already be in the habit of saving each month or each pay period.
Get Savvy: Another easy (and important) way to save is to get your pension set up. Check out this guide from Portafina about the differences between state, private and company pensions to determine the best option for you.
They Learn More
Financially savvy people are always trying to learn more about personal finance and budgeting: “You can do that by reading a new finance book every year or every six months. Taking a trip to the finance section of your favorite bookstore or searching for books online can help you discover a new world to optimise your finances and increase your money muscles,” suggest experts at The Finance Bar.
Get Savvy: Sign up for emails from well-known personal finance experts, allowing financial tips to land right in your inbox. MakeUseOf has a great list of subscriptions to check out from MoneyUnder30, DailyWorth and more. If you’re struggling with a specific issue, like saving or investing your money, look for resources specific to that.
They Plan Ahead for Spending
Instead of spending when the urge hits, stop to consider how you could save by waiting or finding a less expensive option.
“What can set you apart as a savvy spender is planning for a splurge by looking ahead for savings opportunities. Perhaps that means vacationing in the off-season when rates are lower, or renting a house at your destination and cooking for yourself instead of dining out at every meal,” suggests PurePoint Financial.
Luckily, this is easy to do for anyone. It doesn’t require any fancy apps or tools—just the ability to stop, think and plan ahead.
Get Savvy: Add all one-time purchases and plans into your budget on a quarterly basis so you can start planning ahead for them. For example, if you know you’re going on a trip with friends in two months, start putting away extra money now, while spending less than you normally would to make more room in the budget.
Be Financially Savvy
Use these tips and suggestions to become more financially savvy. Slowly but surely you’ll save more, spend less and feel better about every purchase you make.