Learning practical money skills can help you manage your money better so you can reach your financial goals faster. Here are some skills to help you with budgeting, money management, and making better financial decisions.
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In this article:
- Being Financially Literate
- Setting Small and Realistic Goals
- Living Within Your Means
- Being Actively Involved with Your Finances
- Earning by Doing Your Passion
- Learning When to Take Risks
- Earning More Money Where Possible
- Being Optimistic
- Investing at a Young Age
- Solving Problems
- Keeping Your Investment Fees Low
13 Must-Know Practical Money Skills for Life
Knowing your own weaknesses is a crucial life skill. The ability to objectively evaluate one’s skills and capabilities is important in any aspect of life.
How can this relate to your financial situation? Self-awareness can help you understand your bad money habits and learn how these can affect the choices you make.
This gives you a better perspective and helps you strategize to avoid making poor choices.
One simple way of improving your financial self-awareness is to have a spending journal. You can also ask a trusted friend or relative on what financial areas they think you can improve on.
Once you know where you’re struggling, your first instinct might be to fix these deficiencies. That might require too much time, effort, or both.
Instead of focusing too much on fixing your shortcomings, it may be more beneficial to delegate difficult tasks to professionals. This can also minimize the risk of making costly mistakes.
For example, if you’re unsure about how to grow your money, there’s no harm in consulting a financial advisor.
- Don’t time you can spend on your work or business to research all investment options available. A professional can help narrow down your choices to the best possible options for your budget and needs.
- You can also decrease the risks of losing money in the long run since an advisor has more experience and expertise when it comes to financial matters.
3. Being Financially Literate
Knowledge is power, and it helps us make fewer mistakes and reach our financial goals, whatever the circumstances are.
Being financially literate changes one’s perspective on managing money — how it’s made, spent, and saved. No matter how big or small your finances are, financial success is grounded on how well you make financial decisions.
This includes understanding your personal income taxes, how to balance your checkbook, budgeting, investment, and knowing who to approach for big financial moves.
You don’t need an M.B.A. to figure out these things. Even basic financial education will suffice.
- Learn from free financial literacy lessons online.
- Read blogs and books
- Ask advice from your banker.
4. Setting Small and Realistic Goals
We all want to earn more but merely dreaming about it won’t make it a reality. To make more money, you have to do the work by taking small steps to help reach your goals.
Successful people focus more on smaller things. Small tweaks to your daily life and daily habits can ripple and compound to a big difference to your annual earnings.
5. Living Within Your Means
One aspect of financial success is managing your cash flow in relation to your expenses. To gradually save up, you need to earn more than what you spend.
This requires you to be aware of your expenses and to focus on setting and adhering to a strict budget.
6. Being Actively Involved with Your Finances
Financially successful people live by budgets and keep track of their spending. A portion of their income also regularly goes to several types of investments.
They’re on top of their monthly expenses and pay bills on time. Emergencies are also accounted for in their financial planning.
Take control of your money. Don’t let it control you.
7. Earning by Doing Your Passion
Finding a way to earn from something you’re really passionate about brings you both internal and financial satisfaction. One thing that ties some of the richest people is they genuinely believed and loved the product, skill, or service that made them successful.
Having a passion for something helps you persevere despite any obstacles that come your way. It can also motivate you to work harder and earn more.
8. Learning When to Take RisksLearning not to take a risk is a risk in itself. Companies and individuals who resist are far more likely to fail than those who adapt and take their shot.
If you wish to be successful, it’s time you get out of your comfort zone and adapt to the current demands of the world. However, make sure your risks are well thought out and not just spur-of-the-moment decisions.
9. Earning More Money Where Possible
Successful people know what they want, set goals, and act on opportunities that bring them closer to these goals. They’re also well aware that saving alone (and clipping coupons) isn’t enough.
Financially successful people look for ways to increase their income. With the right mindset, there’s a lot you can accomplish in a day.
Do you have a hobby or skill that can help you earn a few more dollars a day? Then, make use of them.
Tutor or teach someone a skill you’re really good at, sell items you don’t need, sublet your apartment, be an Uber driver at night. The list goes on.
10. Being Optimistic
If the way to success were easy, we’d all be successful.
You have to remember that past victories don’t necessarily guarantee success. To become truly successful, you have to keep learning and stay optimistic.
11. Investing at a Young Age
In this Business Insider article, the CEO of Clif Bar & Company, Kevin Cleary, said he wished he knew the power of investing during his earlier years. He went on to explain how in his younger years, he had more time to learn about investing and fewer expenses.
He admits that saving is important but also believes that while he was busy putting money in the bank, he missed the opportunity to leverage his savings by not investing earlier.
12. Solving Problems
Jeff Bezos, Amazon’s CEO, learned the importance of being a problem-solver from his grandfather. He told CNBC how he spent his summer days at his grandpa’s and witnessed how self-reliant his old man was. He eventually adopted the skill.
If you think about it, businesses are all about solving a customer’s problems. Having the knack for coming up with solutions is an important ingredient for success.
13. Keeping Your Investment Fees Low
Billionaire Warren Buffet is a firm believer of keeping investment fees low as written on his annual letter to shareholders. Doing so keeps you away from active traders’ money-losing strategies while being able to invest more over time.
His advice is to not spend more than 0.15% on management fees per year.
Behind every success are skills and habits carefully developed and learned through the years. Becoming wealthy does not just happen, you have to start somewhere and work hard to get where you want to be.
May this list of practical money skills help you out on your journey to having the best retirement life possible.
What are other practical money skills you know of? Share them with us in the comments section below!
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