8 signs that indicate you are smart with money

Anybody at any income or asset level can practice financial discipline and smart money habits. Are you smart with money? We look at the eight signs that may indicate you are.

Key takeaways:

• People who are good with money are aware of their finances. They create budgets so they can be on top of their income and track their expenses;
• They're making saving and investing part of their routine; and
• Planning ahead with short and long-term financial goals, indicates you’re ahead of the game.

Anybody at any income or asset level can practice financial discipline and smart money habits. You just need to plan carefully for the future, invest and save regularly, and use finance professionals or tools for guidance.

In this article we look at some of the main signs that could indicate you’re smart with money.

1. You have a budget

People who are good with money are aware of their finances. They create budgets so they can be on top of their income, track their expenses and ensure they aren’t living beyond their means.

Budgeting also enables you to be in full control of your money.

If you can stick to your budget even when your earnings have increased—as opposed to spending more—you’re doing really well as this will help to build wealth.

2. You make saving and investing part of your routine

Those who have a good relationship with money aren't waiting for a pay increase or a bonus to save or invest—they're making it part of their routine and using whatever money they have now.

As a general rule of thumb, it’s good to save at least 20% of your income each month for short and long-term goals, emergency funds, retirement and investments.

How much you choose to invest depends heavily on your income and investment goals, so before you invest, make sure you know how much risk you can take on and the time frame for when you’ll need the money.

For example, if you’re in your 20s or 30s and saving for retirement, you can generally take on a little more risk in exchange for higher returns because you won’t need your money for several decades.

For those in their 40s or 50s, their investment time frame for retiring is much shorter. Therefore, they won’t be able to take on as much risk.

3. You're planning ahead for your future

Those who are good with money are planning ahead rather than living for today.

Whether you're saving to buy a home, pay for your children’s education or ensure you have enough saved for retirement, setting clear financial goals is important.

This means being strategic with your planning. You want to have short-term goals which can take around one to three months to achieve. This may include things like paying down credit card debt.

Then there’s long-term goals—saving for a home deposit or your retirement—which require a lot more money and regular attention.

4. If you’re in a relationship, you’ve spoken to your partner about money

If you and your partner have regular conversations about your financial situation and future, you're ahead of the game.

Understanding each other’s general attitude towards money, and being clear about your financial goals, can help to build a strong foundation.

If you’re planning a wedding or starting a family, you may need to agree to cut back on expenses and reduce your debts to start saving.

You may also have assets you want to protect, like property or super. Having a financial agreement which sets out how your assets and money will be divided if your relationship breaks down, is a good way to ensure you won’t lose what’s important to you.

5. You have emergency funds

Having a solid reserve of cash that you can tap into in an emergency goes a long way.

If you have an unexpected expense, such as an urgent car repair or medical bills, having money that is immediately available means you don’t need to charge the expense to a high-interest credit card or take out a personal loan.

6. You’re willing to invest in getting financial help

A person with a wealth mindset knows that an accountant, money coach or financial adviser, is going to help them increase their wealth or further grow their assets, and potentially their income.

If you value the experience of experts in other aspects of your life, don't discount it when it comes to managing your life savings.

A financial coach is not just someone who helps with investments. Their job is to help you with every aspect of your financial life—savings, insurance, tax, debt—while keeping you on track to achieve your goals.

More importantly, they can answer questions like:

• What age can I stop working and retire?
• What strategies can I use to build my wealth?
• How can I reduce my tax?

7. You’re saving for your retirement

Having a plan in place for your retirement is a good indication you’re financially prepared for your future, even if your retirement is decades away.

Adding more into your super on a regular basis, can set you on the right path to achieving the lifestyle you want when you’re no longer working.

And even if you haven’t started putting money away for retirement, considering what you want your retirement to look like is a step in the right direction.

8. You look for other income streams

Many people who are good with money diversify their investment portfolios with other assets, such as rental properties to generate passive income.

Even if you aren’t able to own multiple properties, there are other rental opportunities that may provide another source of passive income. Some ideas include renting out a room in your home or renting out your garage or car spot.

Bottom line: Whether you're saving $25 or $2,500 per month, anyone who's good with money knows how to work with the wealth they have. Discipline is key and with it you can build the financial future you desire.

Important information: This document has been prepared by IOOF Investment Management Limited (IIML) ABN 53 006 695 021, AFS Licence No. 230524 as Trustee of the IOOF Portfolio Service Superannuation Fund ABN 70 815 369 818 (Fund). IOOF Employer Super is a Division of the Fund. IIML is part of the Insignia Financial of companies, consisting of Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate. This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial adviser and seek tax advice from a registered tax agent. Please obtain and consider the PDS and the Target Market Determination (TMD) both of which are available for consumers to better understand products before making any decision about whether to acquire a financial product. Information is current at the date of issue and may change.