Tips to become Money Savvy

“The fastest way to go bankrupt is not to track your expenses.” This saying aptly describes the importance of tracking your expenses. Financial discipline begins at an early age, much before you start earning. Also, if you can’t keep a tab on your expenses, you will likely fall into a debt trap.

Record your expenses daily. At month end, review the items where you have spent the most: food, clothing, entertainment, debt repayment, etc. Check if you have spent within the limit or you went overboard. If you have gone overboard, check the expenses you could have avoided. This will help you inculcate financial discipline and control issues such as shopping addiction.

• Identify your “needs” and “wants”
Often, we spend money on things we don’t need and by month end, we may have spent more than our income. Monitoring expenses will shed light on how the money is being spent; for example, subscriptions such as gym, library, etc. that are no longer needed ought to be stopped. You may discover that you could save a large amount of money by cutting down spends on what you don’t need.

• Focus on your financial goals
One of the ways to track and limit expenses is to set your eyes on financial goals. Your goal could be buying a new car, saving for an emergency fund, paying off your debt, planning a vacation, or anything else. To achieve these goals, it is necessary to track your expenses, so you stay within the budget and invest a pre-determined amount regularly. If you have a loan to repay, ensure that you are repaying the debt every month as planned. Once the debt is repaid, you can plan for other financial goals and invest accordingly.

Tracking your expenses is the first step in becoming money smart! Then comes the part where you start limiting expenses. Finally, start investing the saved amount to achieve your short-term financial goals such as higher education or vacation, and long-term goals such as retirement planning and buying a new house. That’s one way to achieve financial independence!