6 Ways to be financially smart

A smart budget is one that doesn’t overextend your means. Start by calculating your total monthly income. Include not just the money you get from work, but any cash you get from things like side-hustles, alimony, or child support. If you share expenses with your partner, calculate your combined income to figure out a household budget.

• You should aim to not have your overall monthly spending exceed what you bring in. Emergencies and unforeseen occasions happen, but try to set a goal of not using your credit card to cover non-necessary items when your bank accounts are low.

 To understand how to best pay down your debt, you first need to understand how much you owe. Add together all your debts, including credit cards, short-term loans, student loans, and any mortgages or auto financing you have in your name. Look at your total debt numbers to help you understand how much you owe, and how long it will truly take to pay it off.

Debts like credit cards tend to have higher interest rates than things like student loans. The longer you carry a balance on high-interest debts, the more you ultimately pay. Prioritize paying down your highest-interest debts first, making minimum payments on other debts and putting extra money into your top debt priorities.

• If you have a short-term loan like a car title loan, prioritize paying that down as quickly as possible. Such loans can be devastating if not paid off in full and on time.

 Savings tends to be easier when you know what you’re saving for. Try to set a goal, such as building an emergency fund, saving for a down payment, saving for a major household purchase, or building a retirement fund. If your bank will let you, you can even give your account a nickname such as “Vacation Fund” to help remind you of what you’re working toward.

A savings account is generally the easiest place to put your savings if you are just starting out. If you already have solid emergency fund and have a reasonable amount to invest, such as 1M, you may consider something like a fixed deposit account. Fixed accounts make your money much harder to get to for a fixed period of time, but tend to have a much higher interest rate.

• Keeping your saving separate from your checking account will help prevent you from spending your savings. Savings accounts also tend to have a slightly higher interest rate than checking accounts.
• Many banks will allow you to set up an automatic transfer between your checking and savings accounts. Set up a monthly transfer from your checking to your savings, even if it’s just for a small amount.