5 Habits of Financial Savvy People
Financially savvy folks aren’t special — they just tend to make good decisions with their money and budget. Although it may seem impossible to catch up financially or just pay off your debt, the financial principles you need to know are actually fairly simple. Follow these five strategies and tips to become more fiscally savvy and secure.
They Keep a Written Budget
Your budget is all about awareness, and if you want to make the best decisions for your finances, this step is critical. When you keep a budget, it’s hard to avoid the fact that you’re overspending each month or just scraping by with your current paycheck. Ultimately, however, budgeting is empowering: It can help you take control of your own finances, plan for the future and achieve your long-term goals.
Get Savvy: Your budget doesn’t have to be complicated or hard to track. Use a budget or banking app for more automated budgeting, or simply keep track of your finances 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 can afford your current lifestyle, which we’ll discuss below.
They Live Within Their Means
It’s especially hard to live within your means in the age of social media when we’re seeing the best and brightest moments of everyone’s lives — lavish trips, new clothing and expensive dinners — and we want it all too. Comparing your finances to others becomes a slippery slope if you try to spend money to keep up with other people or become unhappy with your own lifestyle. 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. After you include interest rates and other fees, you end up owing much more than you originally spent. As a result, paying off your balance becomes much more difficult.
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. You should always aim to maintain a frugal lifestyle even if your income increases down the line. That way, when you’re making more money and know how well you can live on a small budget, you can put all the extra money towards your savings.
They Save as Much as Possible
A recent survey found that roughly 24 percent of Americans can’t pay some bills or can just make a partial payment in a typical month.1 Saving for the future may seem far less important if you’re not able to make ends meet today. However, financially savvy people always strive to save something, even if it’s just $10 each month. The key is to start good saving habits as early as possible in life. Not only can you let your interest grow, you’ll have more time to take advantage of frugal habits.
Get Savvy: Another easy (and important) way to save for the future is to set up a retirement fund. Check out this guide from the U.S. Department of Labor about some of the most popular retirement accounts to learn more about your options.
They Stay Informed
Financially savvy people tend to continue their education throughout their lives. They stay up-to-date on financial news and keep a close eye on their overall fiscal health. Regardless of your current knowledge level, there are many ways to keep a pulse on your finances and the world around you.
Get Savvy: Sign up for emails from well-known personal finance experts, allowing financial news and tips to land right in your inbox. Or, you can head to your local library for free personal finance books and resources. If you’re struggling with a specific issue, search for information specific to that topic. Here are a few good options to get started:
- Podcasts: So Money is an award-winning, all-around great podcast about practically any personal finance topic you need to know. For something a little different, Planet Money gives you a fascinating, big-picture look at the economy and how it affects our day-to-day lives.
- Apps: Personal finance apps like Credit Karma can give you a quick and easy look at your overall credit health while you’re on the go, available on iOS and Android.
- Financial News: This financial news aggregator is a convenient way to find recent news and articles from leading outlets and websites.
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. Thanks to the internet, you can do a quick search for any item to make you’re getting a good price. Savvy savers are less likely to spend on frivolous purchase — soon, you may find that the instant gratification is less satisfying than reaching your long-term goals.
That doesn’t mean you won’t have room for fun in your budget! You just need to consider what’s important to you, and adjust your budget to accomplish what you want in life.
Get Savvy: Add all one-time purchases and plans into your budget on a quarterly basis so you can start planning ahead and saving 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.
1Parker, K., Menasce Horowitz, J. and Brown, B. (2020). About Half of Lower-Income Americans Report Household Job or Wage Loss Due to COVID-19.
The information in this article is provided for educational and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial, legal or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.