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Four Ways to be Smarter With Your Money

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Being smart with your money

We all want to live a comfortable life that’s free of financial burdens; but to achieve this, we need to learn how to be smart with our finances. Often, this means being able to budget and manage debts effectively, as well as exploring different investment opportunities in order to grow our wealth.

There may be some areas in which you’re already smart with money, and others that could use a little improvement. To give you additional tips, here are four simple practices that may help you become more financially savvy.

Have multiple savings pots

savings account

Having one savings account is beneficial, but having multiple is even better. For example, you may have one pot for your retirement fund, one for your children, and one that you put towards holidays. By separating them in this way, it becomes much easier to see exactly how much money you’re putting towards each of your financial goals at any given time. This transparency can make it easier to set budgeting goals, and can make financial planning much simpler.

Plus, having multiple savings accounts with different providers means that you can take advantage of new account deals and different interest rates. For a top tip, consider making the outgoings to your savings account an automatic transfer – this way, you don’t have to remember to make the deposit each month, and you’ll quickly see your money grow.

Invest wisely

investment options

Investments can help to grow your wealth significantly, although that growth tends to happen slowly when you go after the safest, smartest investments – these are the opportunities that preserve and grow your money over time without a high risk of potential losses.

Popular options include certificates of deposit (CDs) and bond funds. A CD requires you to lock away a lump sum of money with a bank or credit union for a predetermined period of time – in return, you get a higher, fixed interest rate than you would with a savings account. A bond fund is essentially like investing in stocks, but your investment is pooled together with other shareholders and spread over multiple assets. A bond fund offers you a more diverse portfolio, which significantly lowers your risk of losses.

Use credit responsibly

responsible borrowing

Credit cards are a great money management tool, particularly if you’re looking to build your credit score, receive cashback and rewards, or want a greater level of purchase protection. However, it’s important to use credit responsibly, as not doing so could result in financial hardship. A low credit score can make it harder to get a job, take out a mortgage, or even rent a home.

Once you get yourself into credit card debt, it can be hard to get out of it. To ensure you’re using your credit account responsibly in a way that won’t negatively impact your credit score, you’ll want to limit the amount cards or loans you take out, and always make sure that you’re paying the amount owed off in full each month. In fact, of all the factors that go into calculating your credit score, 35% is down to your payment history, and 30% your accounts owned – so you’ll want to ensure you’re on the ball when it comes to the accounts you have and how much you owe.

Don’t forget to always read the terms and conditions of any credit option you’re considering, even if it means setting some time aside to break them down or go over them with a financial advisor. It’s crucial that you understand any financial product you sign up for, so as not to land yourself in trouble further down the line.

Plan ahead

financial planning

Each of these smart money tips has something in common in that they all require plenty of planning in advance. In fact, allowing yourself the time to financially plan is key, as no spur-of-the-moment savings account, investment or credit account is likely to prove beneficial.

Being smart with money means being careful and strategic, as even the most savvy decisions you make won’t be helpful if they’re not appropriate for your financial goals. For this reason, you should always begin with identifying your short and long-term aims, and clearly identify the steps you need to take in order to achieve them. Most people will have more than one or two financial goals and it’s likely you’ll need to take different actions for each of them. 

Be mindful of doing too much at once, as this could backfire and leave you at risk of financial losses and a less-than-optimal credit score. For the best results, take it step by step, and ensure at each stage that the decisions you’re making are in line with your overarching financial goals.

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