Habits of Financially Savvy People
1. Live within your means
One important step to your monetary success is to devise a plan and budget. How much do you have coming in? What are your ongoing monthly expenses? What are your short and long-term goals? Once you have these questions answered, it’s easy to carve a path for spending and investing wisely. Need help keeping track of expenses? There are a variety of apps and spreadsheet templates that can help you stay on track to financial prosperity.
A financially savvy person also lives within their monthly income by finding cost-effective alternatives to necessities. For example, we can all agree it's fun to drive the latest car, especially if the lease or loan payments are within your budget. But if you're concerned with your long-term finances, we recommend opting for a car you can buy with cash, or less luxurious vehicles you can pay off more quickly. That might mean selecting a model that's a year or two old, as new cars depreciate when you drive them off the dealer's lot.
The same goes for purchasing a house. Just because you qualify for a higher loan does not mean that you are obligated to use the full amount. Try finding a mortgage level that allows you to continue saving for future goals, which might be an early retirement or funding college for the kids or grandkids.2. Look for deals
People with growing bank accounts still know how to splurge, whether that means going on a luxurious vacation or fine dining but you don't have to pay full price to get the best experience. To continue to save money wisely and set yourself apart as a financially savvy spender is planning for a splurge by looking ahead for savings opportunities. Perhaps that means vacationing in the off-season when rates are lower, or renting a house at your destination and cooking for yourself instead of dining out at every meal. It is possible to attend popular concerts, performances, and amusement parks while still saving through discounts and coupons. Or, you can be financially savvy by avoiding premiums for services that are available for free. Try keeping your money in high-interest savings accounts to offer better returns without the associated fees.
3. Never stop saving and investing
If you want to know how to be financially savvy, you have to be disciplined. Something that many savvy savers do is put way a portion of every paycheck to meet their short-term and long-term goals. Always take what you need for living expenses, while putting away enough to save for your future. There are many other opportunities to save besides traditional savings accounts, too—like maintaining your cash in a high yield savings account. We advise finding accounts that deliver savings rates above the national average. Finding an account to help reach your savings goals is easy online, and several services offer comparison tools to assist your search.
Other opportunities include a 401(k). If you have one set up, you should always take advantage of company matching funds, which is a great way to automatically put money away. Another beneficial tool is a Roth IRA. This provides tax-free growth and qualified withdrawals making for an excellent long-term savings option too!
As you save, you can also invest. Although the stock market fluctuates and sometimes takes major hits, it has historically delivered an annual 7% return on investment. Instead of taking one large sum of cash each year to invest, automatically move money from each paycheck or on an automated schedule directly into the investments, so you don't even have to think about it. This "pay yourself first" approach is a great way to learn to live with the cash you have available while still saving and investing.
4. Monitor your credit
You may already know that credit scores impact your interest rate when applying for a mortgage, car loan and even a credit card. But if you want to be savvy, we recommend checking your credit reports each year – using one of the free services like AnnualCreditReport.com. You can pull reports from all three major credit agencies, and you will want to ensure that your personal information and reporting provided is accurate. If there are mistakes, alert the agency to correct your report. This data is used to generate your credit score, and the higher the score, the better the rates available to you.