What does it mean to be financially smart? :For some people, it means being able to buy mansions and private jets. For others, it simply means being able to afford the basic needs and wants and retire comfortably.
Ultimately, though, being financially smart means learning how to be good with money. For example, making more money each month than you spend on bills, groceries, and other necessities.
Sadly, however, nearly 63% of Americans live paycheck to paycheck and have very little (if anything at all) left at the end of the month. We’re here to teach you some simple tips on how to avoid this stressful lifestyle. Keep reading for a quick guide on how to be financially smarter.
Live Below Your Means
The best way to be financially smart is by ensuring you’re bringing in more money each month than you’re spending. As noted above, most people are barely scraping by, living paycheck to paycheck.
This is because they borrow too much money for things like cars, houses, and other loans. As such, they have a hard time keeping up with the payments, which increases their debt to income ratio.
Living at or above their means is one of the most common financial mistakes people make. If you live below your means, however, you’ll have money left over at the end of the month to save or invest in your future. Read this article to learn about other mistakes to avoid.
Use Credit Cards Wisely
Credit cards aren’t necessarily a bad thing. They don’t have to be scary or expensive. If you can learn how to use credit cards wisely, you can increase your credit score and get awesome cashback rewards.
The key is to use your credit card for everything. However, you must pay it off at the end of each month. This keeps your balance low and helps you avoid costly interest fees.
Never max out a credit card. A maxed-out credit card is difficult to pay off, is terrible for your credit score, and will cost you hundreds of dollars a year in interest payments.
Start Investing Early
Being financially smart means learning how to plan for the future. You need to start investing in your retirement and future wealth now. If you’re in your early 20s and are making minimum, start investing in a Roth IRA or some other retirement plan, even if it’s only $50 a month.
These funds build up over time and earn interest based on the amount you’ve invested (and the economy). If you start investing now, you could easily be a millionaire by the time you retire.
Put Yourself on a Budget
For most of us, learning how to be good with money means putting ourselves on a strict budget. Otherwise, we get carried away with impulse shopping, borrowing money, etc.
Design a budget around your basic needs. Give yourself a predetermined amount each month for the necessities, bills, and other financial obligations. Allow yourself a small allowance for nonessential spending like eating out, shopping, etc.
Most of your money left after bills, however, should go into savings, investments, and debt repayment.
Looking for More Tips on How to Be Financially Smart?
As you can see, being financially smart mostly comes down to learning how to manage your money. Do your best to stay out of or eliminate debt, live below your means, and invest in your future.
And if you’re looking for more finance tips, be sure to check out some of our other articles while you’re here. You can also check out the current trends in the stock market to help with investment decisions. Our website is here to help you improve your financial situation, now and in the future.