10 Habits of Financially Smart People

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We all have that friend who is financially savvy, saves for a rainy day and has enough funds to do what she has set out to do - be it travel, furthering her studies or buying her dream house. What's her secret? Well, wonder no more 'cos here's a checklist of the 10 habits of financially smart people.

1. They have a budget

Having a budget makes it easy to monitor and control your spending. Start with the sources of income and put in the necessary monthly expenses i.e., home and car loans, and savings. The amount left over is your discretionary spending.

2. They minimise their debt

Credit card debt can quickly escalate into a big sinkhole you can't easily get out of. This is why financially smart people operate on this mantra: "If you can't pay it by cash, you don't really need it." They only use the credit card when they are certain that they can pay it off in full every month.

3. They have a plan to get out of debt

If they do have credit card debt, they work out a plan to pay off that debt first, since it is the one with the highest interest rates. After that is cleared, they will then whittle down the other debt on their plate. They are willing to sacrifice expensive meals out or holidays just to settle their debt because incurring those unnecessary expenses will just pile on the debts, not make it lighter.

4. They automate their savings

The best savings plan is the one that you don't have to think much over - because it's automated. What you don't see being set aside monthly from your salary, you won't miss. And you'll be pleasantly surprised at the nice nest egg you've accumulated afterwards.

5. They invest regularly

Financially smart people know that it doesn't cost much to regularly invest in diversified investments such as unit trusts, and because it's diversified, it will eventually override the market fluctuations. Similar to the benefits of automated savings, they'll be happy at the fruits of their labour in the long-term.

6. They take advantage of tax incentives

Every October, financially smart people will pay close attention to the tax breaks they qualify for in the country's budget announcement. They know that they can significantly save or benefit from these incentives such as the PRS RM3,000 yearly personal tax relief, which helps lower their taxes while beefing up their investment amounts.

7. They invest in themselves

In terms of assets, financially smart people know that they are the most valuable income-generating asset. As such, they are constantly improving their skill sets, financially knowledge, self-development and fitness so that they can enjoy life to the fullest and give their best in all that they do.

8. They save for retirement

Financially smart people are not interested in enjoying short-term pleasures at the expense of their retirement goals. They regularly contribute to their EPF savings (if they are self-employed) and are also investing in their retirement fund.

9. They have long-term goals

Their financial plan exists because financially smart people ultimately want to achieve their long-term goals - be it getting their dream holiday, house, car, children's education or whatever they set their sights on.

10. They have the discipline to achieve their goals

At the end of the day, financially smart people appear to have all that they ever wanted, but it is thanks to their discipline, careful planning and delayed gratification working hard behind the scenes.

After reading through this list, you may realise that you did not score 10 out of 10. Relax, we're not perfect but we can also get our finances into better shape. Which points do you think you need to work more on? Contact us today, we can help!