8 Money Habits of Financially Smart People
Money advice can sometimes be confusing. Many of us learned about money from our parents, and unless they’re stock market whizzes, it might seem like getting ahead is a mystery. However, the habits that distinguish the wealthy from those who struggle to make ends meet might not be as complicated as you think. Carefully tracking your money—and even small changes to your daily routine—might help you see an improvement with your finances.
Here are some useful tips for those looking to become financially savvier.
Spend less than you earn
This may seem like an obvious step, but you might be surprised by how many people are living beyond their means. If your income exceeds what you spend, then there will be something left over to save for a rainy-day or cover emergencies. Spending more than you earn also means going into debt and potentially piling-up problems for yourself in the future.
Maintain and keep to a budget
Spending less than you earn could be a lot easier if you track where your money is going. Keep a careful check on your finances by preparing a budget—listing all your expected earnings and expenses, and then comparing your actual income and spending against it regularly. If you’re planning to make a large one-off purchase, it’s easier to see if you have enough money to cover it if you know that things like your mobile phone bill or funeral insurance premiums are due that same week.
Never buy anything on impulse
Buying something “just because” can sink a carefully planned budget. When shopping, make a list before you go and stick to it. Don’t allow yourself to be tempted by special offers or discounts on things you weren’t planning to buy that day. If you are thinking about purchasing something on a whim, ask yourself two questions first: Do I really need it? And can I afford it? If the answer to either question is a no, it’s best to walk away and maybe do some comparison shopping to see if you’d really be getting a deal.
Cook at home whenever you can
Eating out in a restaurant can be expensive compared to making a home cooked meal. Not only are you paying for the food, but the restaurant will also be billing you for a share of their overhead—employee salaries, rent, utility bills and more. Even the price of things like takeaway coffees and buying lunch at work will be marked up, even if they’re still relatively cheap. You can usually eat at home for a fraction of a price, and potentially more healthily as well. Investing in a good travel mug and packing leftovers for lunch could also help you save more in this area.
Avoid unnecessary service fees
A few dollars here or there for service and convenience fees can add up fast. Take a look at your past spending and see if there are areas where you could be more careful. Paying bills on-time avoids late fees or expensive reconnection charges. Only using your credit card if you intend to pay off the bill in full at the end of the month can help you avoid interest charges. Linking automatic payments to a bank account instead of a credit card and only using your bank’s ATMs could help you save even more money.
Buy a used car
Cars are status symbols for many people. Even if you’re not into high-end, luxury models, you might still feel the need to own a new car. However, a set of wheels that gets you safely from point A to point B doesn’t necessarily need to be new. A pre-owned car could be just as reliable as something that’s brand new, depending on the make and model you choose. Proper maintenance could help extend the life of your car even further and help you avoid potentially costly problems later.
Maintain an emergency fund
Life is unexpected, and there are any number of events that could potentially set you back financially. An emergency fund might make it easier to get through tough times, such as unemployment, a car accident or serious illness. A common recommendation is to keep an emergency fund able to cover three to six months of living expenses to fall back on. It might be tempting to borrow from this account for fun purchases, but only tap into it when you have a real emergency.
Save for Retirement
Having enough to be able to live the same lifestyle once you retire is a concern for many people. Generally, the earlier you can start saving, the better. No matter how much you earn, it’s smart to get into the habit of putting a little money aside each month for your retirement. If your employer regularly contributes to your retirement fund, find out if they’re able to match any extra money that you put in. You could also decide to boost your retirement savings by putting all your savings towards this goal for a set amount of time (such as three months every year) or depositing all work bonuses into a retirement account.
Final Thoughts
Spending and saving your money wisely could make a big difference is how you live your life. Simple steps like budgeting and avoiding fees could set you on the right path when it comes to managing your finances.
