Everyone knows the basics of personal finance management—budgeting and saving. However, very few of us rarely use these basic financial skills. Many people often go through their life without proper planning of their finances, until a rainy day strikes. When you are unprepared, everything can only go downhill from there. The best thing to do here would be to follow the Boy Scouts motto, “Be prepared.” How to do this? By managing your hard-earned money well and mastering a few financial skills. Managing money does not require you to be a math whiz. It is very simple to learn and acquire a few useful financial skills. You just need to have self-discipline and self-control. Being organized also helps when it comes to making prudent financial decisions. Here are a few financial skills to master for everyone. Once you have learned these skills, put them to practice and watch your savings and wealth grow!
- Build some wealth: One of the basic tenets of personal finance is that you ought to save enough to tide over an emergency situation. Yes, saving is important. Also, it is equally important to build wealth, which is one of the most important financial skills to master. Saving is often considered as a short-term or mid-term goal, while building wealth can be a long-term goal. This will not only help in ensuring a comfortable future but also prep up for your retirement. Get in the habit of making sound investments. If you are unsure, consult a financial advisor to know the best ways to build your wealth.
- Keep track of your net worth: Knowing your net worth will keep you motivated. It is not only empowering but also quite a smart move. You will always know where your hard-earned money is going. Take out 10 minutes at the end of each month to track your savings, expenses, and investments. Check how far along you are on your wealth-building goals.
- Refrain from impulse shopping: With online shopping and sales all around, impulse shopping is a habit that has not spared anyone. Becoming a smart shopper has now become one of the essential financial skills to master. Whenever you feel impulsive about buying something, think whether you need it. Master the art of classifying your wants and needs. It is okay to indulge yourself by buying something you want, but ensure that you have enough funds without breaking into any of your savings and investments. A habit that might work—wait for about a day or two before you buy anything major based purely on impulse; this way, you may not want to buy it anymore. Also, make a shopping list when you visit the supermarket so that you will not be tempted to buy that box of premium dark chocolates.
- Know how to negotiate: Learn a few basic negotiation tactics. Often, you can get a product or service at a far lesser price than the price tag, if only you ask the right questions. Make a habit of asking the best price a seller can offer, whether they are flexible with the prices, and if they are willing to take how much you are offering. You can save a lot when you negotiate.
Know how taxes work: Be aware of your tax situations. You have invested in funds and worked toward building your wealth and retirement funds. Now, you need to know which accounts and funds are taxed, tax-free, and tax-deferred, and you need to know how much tax you need to pay. Also, understand how tax credits and deductions work, and check whether you qualify for any credits and deductions. This will help save more and you can avoid paying unnecessary taxes. Learn how and why the IRS penalizes. Get the help of a software or an accountant to learn how to file taxes.