Learn how to get smart with money and achieve your financial goals with these simple and effective tips and tricks.
Who does not wish to have more savings, less debt and more freedom to spend your money.
And if you are on this page, this post is for you!
Here I’m sharing with you some tips and tricks on how you can get smart with money and achieve your financial goals and freedom.
Whether you are a student, a professional, a parent or a retiree, these tips can help you make better financial decisions for your financial goals.
Tip #1: Set SMART financial goals
SMART stands for Specific, Measurable, Achievable, Relevant and Time-bound. And a SMART goal is basically a clear and realistic statement of what you want to achieve financially and by when.
For example,
“I want to save $10,000 for a down payment on a house by December 2023.”
This goal is specific as it states the exact amount and purpose of saving, its measurable as it can be tracked and evaluated, achievable as it is within your reach and resources, relevant as it aligns with your values and priorities, and time-bound because it has a deadline.
Setting such SMART financial goals helps you stay focused, motivated and also accountable. It can also help you plan your budget and track your progress.
Tip #2: Budget wisely
Continuation from point #1, many of us know what a budget is. It is basically a plan that shows how much money you earn, spend, save and invest each month.
And to create a budget, you need to:
Calculate your income: This is the amount of money you receive from all sources such as salary, wages, tips, bonuses, interest, dividends, etc.
Calculate your expenses: This is the amount of money you spend on all categories such as rent, mortgage, utilities, food, transportation, entertainment, etc.
Calculate your savings: Amount of money you set aside for your short-term and long-term goals such as emergency fund, retirement fund, vacation fund, etc.
Calculate your investments: This is the amount of money you put into assets that can generate income or increase in value over time such as stocks, bonds, mutual funds, real estate, etc.
Once these are calculated, check for yourself which is greater — if your income is more than your expenses, then you have an excess or a surplus. If your income is less than your expenses, then you have a shortage or a deficit.
Ideally, you will want to have a surplus so that you can save and invest more money.
And to achieve a surplus or reduce a deficit, you need to increase your income or decrease your expenses.
Tip #3: Pay off debt
Whilst Debt can be useful when used wisely and responsibly but it can also be harmful when it accumulates interest and fees and affects your credit score and financial health.
Its best to keep a close tab on your debts and to pay them off, you can:
List all your debts: Write down the name of the creditor or the person or institution you owe money to, the balance amount of money you owe, the interest rate and the interest you’re charged, and the minimum payment due each month.
Choose a repayment strategy: Every debt needs a repayment strategy and so you need to decide which debt you will be paying off first and how much extra money you will need to pay each month to clear off dues.
Normally there are two popular strategies that many people opt for:
1. The snowball method: This involves paying off the smallest debt first while making minimum payments on the rest. Once the smallest debt is paid off, then you can move on to the next smallest debt until all debts are paid off. This method can actually help you build momentum and motivation.
2. The avalanche method: This method involves paying off the highest interest rate debt first while making minimum payments on the rest. Once the highest interest rate debt is paid off, then you can move on to the next highest interest rate debt and so on until all dues are cleared. This method can help you save money on interest and time.
Make extra payments: You need to pay more than the minimum payment each month on the debt that you are focusing on. And you can do this by using your surplus from your budget, your income from any side hustle, tax refund, bonuses, etc.
Tip #4: Save smartly
Direct savings are the only clean and debt-free way which can help you achieve your financial goals, prepare for emergencies and enjoy life.
But indeed it doesn’t come easy with our load of expenses!
And to save smartly, you can consider following options:
Have an emergency fund: This is a savings account helps you cover at least three to six months of your living expenses in case of an unexpected event such as job loss, illness, injury, car repair, etc. Having these funds handy can help you avoid using debt or dipping into your other savings when faced with a crisis.
Have a retirement fund: As the name suggests, this is a savings account that can provide you with an income when you stop working. It can help you maintain your lifestyle and enjoy your golden years. Look up into the best fit retirement fund plan for your country and start earmarking your savings in it.
Have other savings goals: Many of us miss this type of savings but these are equally critical which can help you achieve your short-term and long-term goals such as buying a house, going on a vacation, starting a business, etc. You can consider to save for these goals by opening a separate savings account for each goal and setting up automatic transfers from your checking account.
Tip #5: Invest wisely
The fifth and final step to getting smart with money is to invest wisely.
Many worry about the future the moment they hear about the word investments and stock markets. But in reality, Investing is the act of putting money into assets that can generate income or increase in value over time.
There are various ways of investment but to invest wisely, you need to:
Get the basics right: Basics are key! Before you actually start investing, learn about the different types of investments such as stocks, bonds, mutual funds, ETFs, etc., and how they work. Learn about the concepts of risk, return, diversification, compounding, etc., and how they affect your investments.
Choose an investment strategy: Its not wise to just start investing blindly. Its best to decide how much money to invest, how often you will invest and what kind of investments you will invest in. You also need to decide how involved you want to be in managing your investments — whether you will be actively involved in it or passively involved by outsourcing it to an investment firm.
Monitor and adjust your investments: This is key! You have to make sure to periodically review your investments and make changes as needed. Keep a watch and rebalance your portfolio regularly to maintain your desired risk and return levels.
In summary, getting smart with money is not rocket science!
It is a matter of being cautious, time-bound, managing your debts wisely and coupling it with investments to build your savings.
Follow these tips and tricks, improve your financial situation and achieve your financial success!
Drop in your comments if you have any other suggestions on how we can manage savings smartly.
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