Being financially savvy means you make smarter money decisions that impact your current and future finances. Unfortunately, with the ongoing financial crisis and high inflation rates, being money-smart is no longer a nice-to-have quality but an essential one for survival.
So, how financially savvy are you? Discover the most common habits of financially savvy people so that you can adapt them to your life. These tips can also help build the foundation of a robust financial future.
1. Live Within Your Means
For most people, getting a salary raise means upgrading their lifestyle to match their new salary range. However, doing this could prevent you from achieving financial freedom in the future.
Instead of upgrading your lifestyle, you should aim to live within (or beneath) your means. For example, if you earn €2,500 a month, you should aim to spend €2,000 or less on your living expenses. That way, you still have enough left to allot for your savings or investments. On the other hand, you could be buried in debt if you spend €2,500 per month or more. Therefore, living paycheck to paycheck is something you should avoid at all costs.
2. Always Looking for Deals
If you need to buy something, do not settle for the first item you find locally or online. Always invest time to research other options to be able to compare prices. If you have any coupons or discount codes, use them to shop in stores where those codes are applicable.
Any discount or deal you can get can go towards your savings. Plus, it gives better value for money because you can get the same item for a lesser price. Financially savvy people never pay full price for an item.
3. Good at Budgeting – And Sticking to It!
One of the most important qualities of a financially savvy individual is budgeting. They do not make decisions without planning, and this is where the budget comes in.
A budget is an essential tool to manage your finances well. Align your budget with your short- and long-term financial goals. However, creating a budget plan is only part of the process. One's ability to stick to that budget is crucial for success. Budgeting is simple and convenient. However, it takes recognizing your priorities and focusing on those when it comes to spending your money.
4. Saving and Investing
You need more than just frugal living if you want to adopt the habits of financially savvy people. It would help if you also focused on growing your savings and investments.
Therefore, set aside a percentage of your monthly income to put into your savings and investment accounts. Choose a high-yield savings account to maximize your money's growth. Meanwhile, investment accounts help you beat the inflation rate.
5. Looking for Extra Income Sources
If you have a fixed amount of monthly expenses (even when trying to live frugally), and yet you still live paycheck to paycheck, it's best to look for additional income sources. Finding an additional income source is the best way to ensure that you have enough money to use towards your savings and investments for the future.
You can take advantage of several side hustles, which pay hourly. These side hustles allow you to earn income in your free time.
6. Monitoring Credit
A financially savvy individual is also diligent in monitoring their credit report. Any errors on your credit report can hurt your credit score. Therefore, you must pay extra attention to monitoring your credit to ensure that you are correctly charged for all transactions.
7. Seeking Financial Advice
One of the essential habits of financially savvy people is the desire to continue learning. Therefore, they always seek financial advice from experts. They aim to learn more ways to grow and preserve their money to beat inflation and achieve financial freedom. The knowledge from financial experts informs their financial decisions to ensure that they can thrive financially or retire early.
8. Planning for Retirement and/or Risks
Speaking of building financial freedom, financially savvy individuals also plan for their retirement. It's never too early to start building your retirement fund. Financially smart people take advantage of the time to ensure that they have enough to live off when they retire.
At the same time, they also plan for risks and rainy days. An emergency fund is set up so they will have enough money to survive unexpected events, such as a medical emergency or when laid off from their job.
9. Using Logic, Not Emotions When Managing Money
The last and most important habit of financially savvy people is that they know how to separate their emotions from money. They use logic instead of emotions when making important financial decisions. They are not easily swayed by advertisements, which means they don't spend money on unnecessary things.