A financially savvy person to me means someone who is knowledgeable (not necessarily in all money matters) and in control of his finances. To be financially savvy means having to accomplish a certain set of financial goals and activities. For example
• Establish a system for proper financial housekeeping
• Implement a consistent savings and investment program
• Continuously learning (self-improvement) about financial matters
• Periodically evaluate net worth standing and make appropriate financial decisions
• Establish a plan for retirement
• Establish a financial budget or spending plan
• Purchase adequate insurance coverage
• Make investments to ensure money growth
• Make a Will and/or estate plan
Depending where a person stands in his life situation, for example young and single, young and married with no kids, married with young kids, a single parent or a mixed-generation household, will definitely influence his financial decisions and activities.
A young and single person may place more priority on establishing financial independence while enjoying life at the same time. A single parent with young kids must ensure there are sufficient amounts of health, life and disability insurance. In addition, the single parent can write a Will to select a guardian for the children who will take care of them upon his/her demise.
Older couples with no dependents at home may focus more on having adequate financing for retirement. They should also review their financial assets and estate plans.
A financial savvy person cannot be rigid and instead must be flexible to adapt to different phases or changes in his life situation. What are the main life situations he has to contend with?
#1 Age
Is he a young adult (18 – 24 years old) or a mature middle-age person (45 – 54 years old)?
#2 Marital status
There are only four categories, single, married, separated/divorced or widowed.
#3 Employment status
A person can be fully employed (or business owner), is working part-time or unemployed.
#4 Household situations
For example
* There are no dependents
* There are children (preschool, elementary, secondary or college)
* There are dependent adults (in-laws, grandparents)
#5 Life events
For example
• Birth of a child
• A career change
• Major health problems
• Divorce
• Retirement
• Death
Lastly, the person’s values (ideas and principles) will also influence his financial decisions. It does seem like a whole lot of considerations to evaluate, don’t you think so? We may not make the correct financial decision all the time and making mistakes are all part of learning to be better. We just try our best under whatever circumstances we find ourselves to be in. After all, each one of us has just one life to live.
Jacquelyn is the co-author of the books “Teaching Your Kids About Money” and “Top 93 Personal Finance FAQs in Malaysia” with KC Lau. Jacquelyn is the pseudonym used by Amy Sipagal.
