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What does it mean to be financially savvy?
Being financially savvy means to be aware and careful with your finances. We won’t say it is easy, because it isn’t. In modern day, we have to really juggle our finances to make sure that we always make ends meet. However, it is not just about making ends meet all the time, we have to be careful without money in general. Creating savings is a great way to do this, making savings means that we can have a safety fund in case anything does happen.
In emergencies, savings can really help, and we have to create savings by being financially savvy. Doing so also means that we are prepared if we ever need to take out a loan, we are aware of our credit and minimize our debt so that we may be able to avoid needing to take out a loan in the future.
We can save ourselves a lot of grief and trouble in our financial lives by simply being more aware and sensible about how we manage our money.
Thinking about loans and credit.
Chances are that at any point in your life you will need to take out a loan or apply for credit. No one wants to end up having to borrow money, however, sometimes it simply cannot be avoided, and we have to borrow money.
When we borrow money, lenders will look at our credit score and credit history to see if we are a reasonable applicant for a loan. They do this to see how risky lending to us will be. If we are financially savvy, our credit score and history should be appealing and could get us a loan with a lower interest rate.
Similarly, we may be able to avoid taking out loans such as CreditNinja’s personal loans. Personal loans can be used for anything, but they are typically saved for personal affairs such as higher education, home repairs, new appliances, or vacations.
If we are financially savvy, we should have accumulated some savings, and these savings can replace a need for a loan, so we can avoid that debt. Financial savvy also means to know when you have no choice but to take out a loan and when you can push something back until you have saved enough money.
How to be financially savvy
Now you have a better understanding of what it is to be financially savvy, we know that this is something that will appeal to you, and so, we have five tips on how to be financially savvy.
#1. Learn how to budget.
Budgeting is very important. It is not about just knowing how much your bills are, how much your utilities are, and how much you have left over each month. It is also about being careful with how you designate your money.
A budget will help you to understand your spending habits better, then allowing you to designate what is unavoidable such as; food, utilities, and rent, then set aside an amount of savings, then, finally, be able to set aside a month for things you want.
A budget should not be restrictive, and it should not force you to stop buying things you like. Instead, it should simply make you aware of how much you spend, and help you to restrict unnecessary spending and put more into your savings.
#2. Review your habits.
Financially, we all have a personality. Meaning, we all have different spending habits, so before you begin working on your budget, it is great to identify how you spend money. Figure out if you are a super saver, a super spender, or somewhere in between the two. Knowing this will help you to identify your spending habits and understand your weak points so that you can work on them and become a better saver and spender.
You should review your spending via a regular ‘financial date’. Look at your spending decisions over the last month and see if they are sustainable. Figuring out if you are an emotional spender will also be useful in helping you manage your finances better in the future,
So many of us are, we just find it hard to admit it to others and ourselves.
#3. Think about any debt you may have.
Do not be tempted into thinking that all debt is bad debt, student loans and mortgages are not bad debt and are a fact of life that we simply have to deal with. However, there are short-term debts, such as personal loans and such that can be expensive and will often lead to serious trouble if you are not careful. You can also end up in a circle of debt if you are not careful enough.
#4. Think about the long term financially.
Do not make your spending plans just for the here and now, or for the next few months or even for the next year. A financial plan needs to be viable for the long term. You will always need to be financially savvy, and so make your plans for the long term.
The sooner you start to plan for your long-term future, the more chance you have of enjoying perks of compound interest.
You have to think of making investments, or opening a savings account with a decent interest rate. Long-term budgeting and financial care will lead to better things in the future.
#5. Consider making savings.
Even a little savings can be a lifesaver on a rainy day. It doesn’t need to be hundreds or thousands of dollars every month, but little can be more when the money is needed. You may end up needing it if one of your household appliances breaks down, or if you have to take out a loan, your savings can help you look more financially savvy to lenders, a little is better than none at all.
Saving can make your money stretch further, although it’s not the only way, it sure does help.