Are You a Smart Spender? 7 Habits of Financially Fit Consumers

You probably think of yourself as a “smart spender.” 

Most of us do. It’s comforting to imagine that you have a firm grip on how you spend your hard-earned money. It gives you a badly needed feeling of control over an important part of your life in a world that doesn’t often allow that control.

The question is, are you lying to yourself?

You might be. Truly smart spenders — people who qualify as financially fit consumers — share some characteristics that aren’t particularly common in the general population. The good news is that it’s easy enough to be like them if you follow their lead.

1. They Spend Less Than They Earn

This might be the most important money management rule. It’s simple enough: Send out less than you take in. 

A fuller rendition adds another clause: “Spend less than you earn and save the rest.” 

Take your pick. Any way you slice it, the takeaway is clear as day.

2. They’re Comfortable Using Technology to Make Financial Decisions

When was the last time you balanced a checkbook? Or even wrote a check, for that matter?

Times are changing, and the tools we use to manage our money are changing along with them. Truly money-smart consumers are comfortable putting new tools to use as they prove helpful — whether they’re third-party programs like Goalswell, a financial empowerment app backed by Andrew Nikou and OpenGate Capital, or bank-built tools like mobile check deposit and automated savings transfers.

Why not join these with-the-times folks and see what financial technology can do for you?

3. They Save a Lot

How much of each paycheck should you save?

Five percent? Ten percent?

Try again. The dirty little secret shared by most smart spenders is that they don’t really spend all that much. They save a great deal of what they earn: 30 percent, 40 percent, sometimes even more.

Their trick is simple. They set aside only what’s needed to cover necessities like groceries and rent. Then they save whatever they can — and by “save” we mean short-term savings and longer-term nest egg-type investments alike. The tiny fraction of gross income left over is the icing on the cake, to be used for purchases that truly give joy.

4. They Can Afford to Stop Working for a Few Months (Not That They Would)

About those short-term savings: For really smart spenders, they’re fat enough to offset months if not years’ worth of expenses. Indeed, one mark of financial self-sufficiency is the ability — not necessarily the desire, but the ability — to stop drawing a paycheck for a few months (or longer) without setting back one’s long-term financial plan.

5. They Max Out Their Retirement Accounts

If their income allows it, that is. The maximum one can contribute to a 401(k) account is a whopping $19,500 per year as of 2021; even the smartest spender might not hit that when they’re only pulling down $30,000 or $40,000. Reaching the $6,000 annual IRA contribution limit might be an easier lift.

6. They Invest Mostly in Equities

Risky? Sure, in comparison to your savings account. But have you checked that account’s interest rate lately? Over spans measured in decades, the stock market consistently offers better returns than fixed income, annuities, or just about any other asset class you want to compare it against.

7. They Have Alternative Investments, But They’re Not Weird About Them

The stock market’s superiority notwithstanding, smart spenders are sophisticated enough to recognize the importance of diversification. They allocate a small portion of their considerable savings to alternative investments that less sophisticated and/or less financially fit folks never bother with: cryptocurrency, real estate, even art.

There’s More to Good Health Than Physical Fitness

Being in good physical shape feels great. You can exert yourself longer and more intensely without tiring. You feel better at a baseline. You probably sleep better.

But physical fitness is just one aspect of overall health. Most of us know that mental health is just as important to our overall well-being as our cardiovascular and gastrointestinal health, even if we don’t discuss it as openly.

Financial fitness is crucial too. It might not directly strengthen your lungs or lower your triglycerides, but it sure improves your quality of life. Just as a sustained exercise and wellness regimen keeps your body and mind in good working order, careful attention to your personal finances makes everything else — managing your personal needs and wants, maintaining your relationships, ordering your life and career — a little bit easier.

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