3 simple ways to become money-smart
KEY TAKEAWAYS:
✔ Your money IQ is a measure of how much you know about budgeting, borrowing, and savings.
✔ It’s easy to boost your money smarts simply by learning something new. Start with one topic, like what is budgeting, and then explore more.
✔ Learning more about money and how to manage it can help you reach your financial goals faster.
Your money IQ is a measure of how well you understand things like why budgeting is important, how to build credit and borrow better, and overall how to keep more of the money you make. The good news is that most of what you need to know about managing your money starts with some simple ideas that you can put into practice right away.
Budgeting basics
People who are good at budgeting know that saving money and getting ahead comes down to spending less than you earn. Let’s start with the basics.
1. What is budgeting?
A personal or household budget tracks your everyday expenses and compares them to the money you make. In simple terms, the money coming in (income) has to be more than the money going out (expenses). So here’s how you can start to become a better budgeted:
Money in
If you can find a way to make more money, like taking on part-time work or getting the training you need for a promotion or a better job, that’s great. You’ll have more money coming in. And if you don’t increase your expenses or spending, you’ll be able to start saving. Learn more about how smart budgeters save money.
Money out
People with a high IQ for budgeting know that money only goes so far. If you want to keep more of the money coming in, you have to limit the money going out. Start by tracking everything you spend and look for ways to lower costs. Many Canadians have embraced the latest trend of loud budgeting to gain the support of friends and family on their mission to save money.
To learn more about budgeting, check out this quick read on how to build a budget in four easy steps or search online for the top-rated best budgeting apps in Canada.
2. Improve your borrowing IQ
There are two basic types of credit, or ways to borrow in Canada: “revolving” and “fixed-term”. Both can be useful financial tools when used properly. Understanding how they work can help make you smarter about borrowing. Let’s look at each one:
Revolving credit
The most popular types of revolving credit are credit cards and lines of credit. They provide a set credit limit and you can spend any amount up to it. As the amount spent gets paid off, it becomes available again. Savvy spenders with a good credit score use credit to get what they need and they don’t overspend, avoid carrying a balance, and pay at least the minimum amount on time. Consider these four ways to pay your credit card off fast to improve your credit IQ and increase your credit score in Canada.
Fixed-term credit
Personal loans, auto financing, and mortgages are examples of installment loans that include a specific amount to be repaid over a set period of time (the term). It’s called fixed-term credit because the amount of each payment is fixed and determined by the amount you borrow and the interest rate you pay. A fixed-term loan is a great way to borrow money with regular fixed payment amounts that fit your budget.
Keep going! Learn more about how to manage revolving and fixed-term credit with these tips. Explore now.
3. Become a savings master
Once you’ve built your budget and have started to track your spending, the next step is to master your savings. Start small by setting aside a little bit of money from every paycheque. Once this becomes a habit, set a savings goal for either something or someday and increase the amount that you’re putting towards your goal. Your savings will gather momentum and you’ll start to see your dedication paying off. Plus, you’ll enjoy the sense of security that comes with having some money in the bank.
Congratulations! You’ve boosted your money IQ
By taking the time to read this article, you’ve learned some tips that can make you smarter about money and help you create the financial future you want. Bookmark goeasy Academy and come back often to learn more about budgeting, using credit, saving money, and borrowing to build your credit.
Disclaimer: This content is intended for informational purposes only and does not constitute financial advice on any subject matter.