What is smart spending?

This article includes tips, suggestions, and general information. We recommend that you always do your own research and consider getting independent tax, financial, and legal advice before making any important decision.

This article will explain how smart spending can help manage income more effectively, reduce unnecessary debt, and boost savings.

Set saving goals

A savings goal in and of itself is not enough. The right saving goal is accompanied by choosing the right type of savings account.

There are various types of savings programs, each designed to help reach different goals:

• Basic savings account. This is ideal for short-term goals, like a vacation, offering easy access to funds with minimal restrictions.

Tips to spend smarter

Smart spending begins with learning how to create and maintain a personal budgeting strategy that helps track income and expenses effectively. By following these practical tips, individuals can learn how to spend money smartly.

Track your spending

Monitoring income and expenses is crucial to understanding spending habits. By regularly tracking expenses to see where money is going, it becomes easier to identify unnecessary costs and adjust spending habits accordingly.

Categorise your expenses

It's important to categorise expenses into groups such as rent, groceries, and entertainment. This approach makes it easier to identify which areas can be adjusted to meet financial goals. Money management apps can simplify this process by automatically sorting and tracking expenses and providing an overview of spending patterns.

Prioritise needs vs. wants

When budgeting, it’s important to differentiate between what's needed (essential expenses) and what's wanted (non-essential purchases). While it can be challenging, making a hierarchy of needs is an important part of learning how to save money. These include rent, utilities, and groceries, which should be covered before money is allocated to wants.

Explore different budgeting strategies

There are various strategies for learning how to budget.

• The 50/30/20 rule recommends allocating 50% of income to needs (such as housing, utilities, and groceries), 30% to wants (like entertainment and dining out), and 20% to savings or debt repayment.

• The 60/30/10 rule adjusts the percentages by allocating 60% of income to needs, 30% to wants, and 10% to savings or debt repayment. This strategy may be more suitable for those with higher fixed costs, such as housing or childcare.