Financial literacy is an essential factor in achieving financial stability and financial security. Knowing how to save, invest, manage debt, and plan for retirement are vital to being smart with money. With the cost of living continuing to rise, having sound knowledge of personal finance has become critical to ensuring a well-planned and comfortable life.
Statistics show that those who are financially literate are more likely to have higher net worths than those who don’t have financial literacy. According to recent studies, individuals aged 55 and over with high levels of financial literacy had an average net worth of 4 million dollars compared to individuals with low literacy levels whose net worth was only 1 million dollars. This data proves how important it is to be informed about basic finance principles.
It can be challenging to be financially literate if you don’t know a few unspoken tactics. These are beyond the basic principles of saving, investing, and budgeting. Here are some of the best financial management tips everyone is not talking about often.
Leveraging Loans
Financially-savvy people are leveraging loans to help them eliminate more significant debts. Loan levering involves accepting longer repayment terms and reducing the size of the loan itself, allowing debtors to make more manageable payments over the life of the loan. This can be an excellent way for borrowers to improve their overall financial health and help them pay off their debt faster and more efficiently.
One way borrowers can leverage loans is by consolidating all their unsecured debts into one big loan with a lower interest rate. For example, if a borrower has four separate credit cards with $3,000 balances each and an average interest rate of 20%, they could consolidate those four cards into one loan with an interest rate of 10%. That would reduce the total amount of money owed and give the borrower a more extended repayment period – often up to seven years or longer – to repay the loan. This could save them thousands in interest payments while making it easier to stay on track with their monthly debt payments.
Another way financially savvy people use loans to leverage themselves out of debt is by finding a legal money lender in Singapore with flexible and affordable loan repayment plans. These plans can enable borrowers to pay off their debts gradually and with lower interest rates, helping them to become debt-free in the fastest way possible.
It might take a while before you learn how to use loan leveraging to your advantage. Taking the time to understand this tactic will be beneficial for your financial health in the long run.
Building Two Emergency Funds
The consensus around emergency funds is to set aside a certain amount of money — typically three to six months’ worth of expenses — for unexpected costs or emergencies. While this is sound advice, financially savvy people know that having two separate emergency funds can be even more beneficial.
The first would be the typical emergency fund reserved for emergency payments such as medical bills, car repairs, and other unavoidable expenses. The second should cover non-essential items like vacations, big purchases, or renovations.
Having two separate reserve funds prevents you from depleting your emergency fund on unnecessary purchases and ensures access to money when you need it most. It also helps by allowing you to hold off on significant investments until the timing is right. If you wait, you can often get better deals or discounts.
In some cases, people might have more than two separate reserve funds depending on their financial goals. For instance, parents might set aside money for college tuition, while a retiree could have a separate fund reserved to cover retirement-related expenses.
Couponing
Couponing is a great way to save money on everyday items. Financially-savvy people are looking for coupons and discounts that can help them save more money in the long run.
By finding deals online, signing up for email notifications, or downloading apps, savvy shoppers can stay informed about all the latest sales and promotions. Coupons are also available in newspapers, flyers, magazines, and stores.
When used strategically, couponing can result in significant savings over time. For example, buying multiple items with one coupon or using a combination of coupons when purchasing products can maximize your financial protection. It’s also important to remember that some stores offer double or triple coupon days from time to time, which can be an excellent opportunity to save even more.
Being smart with money is not just about budgeting and investing wisely; it’s also about finding ways to keep your expenses low. Couponing is just one of the many tactics financially savvy people use to stay ahead of the curve.
Final Thoughts
Following these tips and staying informed on the best financial strategies can ensure a secure financial future for yourself and your family. Becoming financially literate will take effort, but the rewards are worth it. With some knowledge and dedication, anyone can make wise decisions about their finances and set themselves up for success.
