10 Smart Spending Tips To Become Financially Literate

Written by: CashAdvice Staff


Money is everything. It decides what house we are able to buy, what food we are able to east, and impacts virtually every other decision we can make. More specifically, the more of it we have, the more freedom we have to make certain choices. Having said that, it’s unfortunate that the majority of people are not as financially literate as they should be. One contributor to this is the fact that talking about money is seen as taboo in most households. As we can see from this reality, how is someone supposes to become more financially literate and responsible if they can’t even talk about it in their own home? In fact, this is one of the reasons people talk about the wealthy as the 1%. If anything, that 1% of wealthy people are the ones who talk about money more freely than anyone else. Nonetheless, there are ways to become more financially literate. Out of all places to start this process, it starts with building smart spending habits. Once someone knows how to wisely allocate their money, the rest of the wealth building process becomes easier. This includes being able to save money, diversify it, and even building enough wealth to the point where you can give some to people in need. With this in mind, let’s discuss 10 smart spending tips to become financially literate.

#10: Talk About Money! Don’t Make It Taboo
When it comes to becoming a financially literate person, one of the first things that have to be taken care of is to eliminate the stigma of talking about money in the household. The fact that it is seen as taboo is one of if not the main reasons that financial illiteracy is a generational plague for families. Moreover, while talking about money is not necessarily a smart spending habit specifically, what it does is open up your mind to make more rational financial decisions. That said, it all starts with having honest and open discussions about our financial situations and how to improve them.

#9: Pay Yourself First
One of the first tips that new or young income earners receive is to pay themselves first. This is mostly due to the fact that receiving your first income check is such an exciting feeling. Many people feel like they have to spend it in celebration. Well, as you can imagine, that is one of the worst things one can do financially. As a good rule of thumb, the first thing to do with a paycheck is to save a percentage of it first. That’s what paying yourself first means. After that, the rest of the money should be allocated to necessities such as bills. Anything left over from those responsibilities could then be spent on anything you want. 

#8: Focus On Paying Off Debt
Becoming financially independent is probably the most important goal any income earner strives for. Speaking of which, one of the quickest ways to achieve that is by focusing your income on paying off debt. As far as smart spending habits are concerned, focusing on paying off debt will allow you to be strict with where your money is going. In other words, it reduces the chances that you will spend money on unnecessary wants. As an added bonus, being debt free can be one of the most stress relieving feelings and, it can open up your financial situation to opportunities that can help it grow.

#7: Spend On Necessities First, Wants After
As you might have guessed already, one of the most important smart spending tips to follow is to spend on necessities first and wants after. Worth noting, necessities, in this case, do not mean bills or other similar expenditures. Those are absolute necessities that can’t go unpaid. What necessities mean in this example are things such as a bed, maybe a reliable car, or other commodities that you really can’t live without. After these expenses are taken care of, then you can spend money on things such as a television or a new phone that are mostly added bonuses.

#6: Set Up An Emergency Fund
Setting up an emergency fund is perhaps the most responsible smart spending tips one can follow. While this tip itself is also not a smart spending habit specifically, it does contribute to smart spending habits after the fact. A reality that most people have to deal with financially is that if anything can go wrong, it will go wrong. There is no such thing as a perfect financial situation. However, making sure that you are prepared when things go wrong is only going to help you become more financially literate and wealthy at the same time.

#5: Create A Financial Goal
One step that can’t be ignored on your way to becoming financially literate is to create an achievable financial goal. Most likely, this goal will require you to save for something that is going to motivate you to spend wisely. This could mean saving up for a new house or car, or anything along those lines. For that matter, it could even be as small as saving up to buy a new pair of shoes. Whatever your financial goals are, making one will keep you in check and will make sure you spend your money in a smart way.

#4: Create A Budget
Creating a budget is both one of the most talked about yet overlooked smart money spending habits of all time. In other words, while people know how obviously important and beneficial it is to create a budget, they ignore it because of the responsibility of constantly checking on it. Well, sorry to say, if you want to become financially literate and grow your income to the best of your abilities, creating a budget is something that is going to have to be done.

#3: Consider Saving With A Partner
Another overlooked smart spending habit is saving up with a partner. The way this contributes to smart spending is that it holds both parties accountable for saving money instead of spending it on unnecessary things. This tip is most often effective for couples that want to combine their monthly incomes. However, this can be the case with a friend or fellow family member as well. That being said, things can get a little tricky when deciding who the item saved for belongs to. However, if that can be sorted out beforehand, this is one of the fastest was to save money.

#2: Don’t Forget About Cash
If you are serious about becoming financially literate, don’t forget about spending with cash in hand. The reason this is a great smart spending habit is that there is something upsetting about handing over your hard earned cash to someone for something. Because of this, it might make you think twice about spending on something that you’re not supposed to. In addition, it also gives you more leverage when it comes down to negotiating for something.

#1: Be Patient
Lastly, it is very important to be a patient income earner. Even though it can be hard to not hold on to your money, other than having to spend money on necessities, it is much more beneficial to save patiently. Even if you don’t know exactly what you are saving for, having that money piled up may end up being one of the best financial decision you ever made. 


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