This post was most recently updated on August 3rd, 2022
By definition, a financially savvy person is one who is skilled at managing credit, expenses, and other important money matters. And even though this could mean different things to different individuals, the goal is likely the same for most – maintaining healthy personal finances and being able to achieve your financial goals. If the same is true for you as well, here are some simple yet effective ways you can become more financially savvy:
Track your expenses
Staying on top of your regular expenses is one of the best methods for managing your finances. Gather your bank statements for the last couple of months and see where your money is going. Along with rent, utilities, and other necessities, pay attention to the smaller expenses that may be piling up each month. This can give you an opportunity to cut costs and save some money in the process, whether that means canceling a gym membership you never use or noticing you’re paying for several streaming services unnecessarily. Rethink your expenses and reduce them wherever possible to enhance your finances.
Learn how to budget
Once you have a better understanding of your expenses, you can then move on to creating a suitable budget. This will encourage you to stop overspending, live within your means, and potentially save some funds for any larger expenses you’re planning in the future. While budgets can come in various different forms, the 50/30/20 rule seems to be favored for personal budgeting, in which you spend 50% of your income on needs like housing and bills, 30% on wants such as entertainment, and 20% on savings. If this rule doesn’t work for your personal needs, financial management apps like YNAB and Mint could also be of great help.
Always compare loans
Whenever you’re in need of a personal, online, or another type of loan, it’s always recommended to shop around and find the best possible rates, terms, and solutions for your needs. For example, a lender like MoneyMe is quite popular in Australia, encouraging a number of consumers to decide on them without much further consideration. But if you look into the MoneyMe competition and compare loan options with other lenders, you may be able to find similar loans that come with lower fees and more favorable terms. Comparing financing solutions is key to better money management.
Invest in your savings
Whether you’re planning on purchasing a new home, traveling the world, or simply ensuring you’re covered in case of unexpected circumstances, savings are crucial for good financial management. That is why it’s advised to set some money aside each month and put it towards savings, both an emergency fund to save for a rainy day and a classic savings account for fulfilling any dreams or goals you may have. Don’t forget about retirement either. The sooner you begin saving for this part of life, the more comfortable and secure your future will be.
Try to pay off debts
Although debt may be an unavoidable aspect of life, it’s the most significant factor preventing individuals from living a more financially comfortable life. For that reason, you should aim to minimize or completely eliminate debt as much as possible. This is often done using two common debt-reducing methods. The first one is debt avalanche, in which you make minimum payments on all your debts regularly, and then use any remaining money for the highest interest rate debt. The second is debt snowball, where you begin by paying off the smallest debt in full before moving on to the next smallest one.
Managing your finances efficiently can be a complex and challenging task. Follow the advice above to brush up on the basics and become more financially savvy.