16


SAVVY

All too often, the mere mention of ‘finances’ and people get a look of panic or glaze over. But it really doesn’t need to be that way. Being financially savvy needn’t necessarily mean you have to struggle desperately to understand everything (in a world that is incomprehensible to you) or immerse yourself in something that you find interminably dull. This is just about having a grasp of the basic principles and knowing what you can do to stay ahead of the game.

Test your ‘savviness’

What is APR and what does it really mean?

Well, if you said it’s annual percentage rate, you’re right but do you know what that really means? If you said it’s the actual cost of the loan, including interest, fees and charges, you are savvy. And you’ll know it’s important to know that, so when one loan looks cheaper than another you won’t get overexcited, sign up and suddenly have a bunch of additional costs coming your way.

‘Store card’ vs ‘credit card’ – which is better for you?

Well, most store cards have a more expensive APR than credit cards and many are double what you’d pay if you used a credit card. But you may believe you can definitely pay off the store card immediately. In this case, it may be beneficial to take a store card that offers a promotional discount and use this benefit. The fact is, though, the stores know 90% of people who intend to pay off the debt straight away don’t.

Which is the better deal: £1000 cash now or £1 now which doubles every day for 14 days?

Well, if you took the £1000 now you’d be better off today than you would with the 14-day deal but worse off at the end of the fortnight. What a difference a day makes and what a difference a year makes too, especially on repayments! The financially savvy know this and they don’t get caught up in the idea that a lower monthly repayment looks sexy because they spread the term over a couple of extra years. They look at the whole picture and make informed decisions on the whole amount to be repaid.

Your five-point guide to becoming financially savvy

  1. Don’t be afraid to ask what may seem like a dumb question when people are asking you to invest in a financial product, use a payment scheme or take a card they are selling to you. Don’t buy until you are happy.
  2. Read the financial pages on websites and in newspapers, and read books. There’s a mass of information. Interestingly, some of it conflicts, but by reading it you’ll know what feels right for you and quickly form your own opinion.
  3. Ask yourself ‘what if’ questions. What if I saved for this? What if I didn’t buy it at all? What if I shopped around, where would I start? What if I got someone to invest in this with me?
  4. Hang out with people who are financially savvy. You become like the people you spend most of your time with. Have some really good questions up your sleeve when you meet with them.
  5. Start telling yourself you are financially savvy. Most people are comfortable with telling themselves they are ‘thick’ when it comes to money. Guess what? If that’s what you keep telling yourself then that’s what you’ll become.

Becoming financially savvy isn’t difficult, but the benefits are vast. You’ll get better deals, you’ll be more effective with your financial management and you’ll build your cash confidence.

BRILL BIT

As American financial expert Suze Orman says, ‘It’s better to do nothing with your money than something you don’t understand.’ Make it your mission to understand, at least the headline principles!

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