We all want to be as financially smart as possible in life. This will put us in a better position for the future as well as make our current life that little bit easier. After all, we have all had times in our life when we have spent money a bit recklessly and came to regret it later on. Sometimes things can seem like a good idea at the time, but when it comes to a bit further down the line we need the money for something else that could have been much better spent. It could be that you have your HVAC unexpectedly break down, or a vacation comes up that you would love to go on. If you find that you are always living paycheck to paycheck it is important that you sort your finances out and ensure you are well prepared for anything that might happen. Here are some top tips for being more financially savvy.

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Always have emergency savings

When it comes to being financially savvy, you need to have emergency savings in place just in case the worst were to happen. There are always things such as roof tiles needing replacing, the fridge breaking down or something that you weren’t expecting to go wrong that needs you to pay for it. Early pandemic is a great example of a gut check for needing an emergency fund. People were getting laid off, there was tons of uncertainty, and even though thankfully I maintained my employment, I was very thankful to have it.

Try to put aside a little each month into a completely separate savings pot that you only touch in the case of emergencies, this way you are ready should you suddenly need to pay out for something. Start with $50 or $100 each month and build up to $1,000. Having $1,000 is a big mental milestone to start giving you peace of mind. From there save up 3 months worth of expenses and then finally 6 months. Why a separate account? That way you’re much less likely to touch it for things that feel like emergencies but really aren’t but it’s still close enough to use in case of a real emergency.

Set yourself a budget

Budgeting is a great way to be more financially savvy as it means you never run out of cash. I always say that if you don’t know where you’re going in life and the progress you’re making, you’ll never get there. A budget is a roadmap and guideposts to make sure you’re heading in the direction you’re trying to go. A budget allows you to set aside what you are going to spend each month and you could even divide this into categories such as for clothes, going out and for food. This way you know what you are spending on what and where you can possibly cut costs down too. It is also a good idea to pay all your bills at the first of the month so you know what is leftover after. After laying aside your spending you can also lay aside your saving and investing money too. Whether it’s $50 or $100 or something higher like 10 or 15%, a budget gives a name to your dollars and although you may not stick to the plan perfectly, little by little you’ll have a better grasp of your money and finding yourself spending less and saving more!

There are lots of budgeting tools out there ranging from the high tech (Mint.com, EveryDollar) to the lower tech (YNAB or even a spreadsheet). Each has it’s pros and cons so find the one that works best for you!

Save & Invest

Once you’ve got a good plan for how you’re using your money you’ll want start saving and investing it. Although savings accounts are the safest place for your money, the interest paid is quite low. Even a high yield savings account like the ones I have are only paying 0.4% interest. Inflation this year was around 5% so technically I lost money with it sitting in a savings account. The other avenue you’ll want to look at is opening a brokerage account through a Fidelity, eTrade, TDAmeritrade or one through your bank if they offer it. I recommend keeping it simple and boring; invest in low-cost index funds. I’m in $VTI as my choice. Index funds offers good diversification, an average return and low fees.

Once you’ve got that figured out, another way to be more financially savvy is to look into alternative currencies such as to Buy Crypto – which is one of the largest alternative currencies out on the market. Be sure to do your research and find out more about them before delving in but they can be a very cost-effective way of spending and making money, particularly if you decide to invest. Other more complex investments include real estate or stock options. Of course the more complex the more risk so be sure to balance your portfolio with riskier and less riskier investments!

These are just a few top tips that should help you to become more financially savvy. The sooner you start to implement these, the much better you will feel both in the present and going forward. Being financially savvy is something that you should always continue to work on as there are always improvements to be made. What are some top tips you like to follow when it comes to being more financially savvy? Let us know in the comments below!

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