Financial Literacy
Are you worried about your finances? Do you wish to know how to better manage your money? Are you curious about how to grow your existing money? Then you have taken your first steps towards developing financial literacy.
What is financial literacy?
Financial literacy is knowing how to manage your money. It involves the small, daily tasks of balancing your income with your expenditure and long-term plans for your financial goals.
How to be financially literate
The first step to being financially literate is knowing that your finances need managing, whether you earn a little or a lot. With proper financial management, you can grow any amount into a large amount. To do this, you have to know the tools available to you. Whether it is to buy some necessity or to achieve a goal requiring a large sum, it is important to be careful with the money in hand. Usually, financial management comes with earning more than you spend so you should try to find employment that allows you to pay for your requirements.
If you are not employed, you should find a way to meet the minimum financial commitment. To do that, you need to have a budget. Note down all your expenses each month and your income. Keep a margin for any unexpected expenses such as medical or transport. Also, it is a good idea to have insurance. It will buffer you against some of these unexpected costs. To stay on top of your bills, you have to make sure you that you note down all your expenses, and keep track of how much of your monthly earning remains.
The next step is to know what is available in the market to help you grow your money. What savings account give you the most interest? What credit card, when used responsibly, will help you get better deals? What accounts or products will help you increase your money for you to create a little nest egg for your future’s safety? One important thing to remember is that you must stay within your budget without worrying about how others are spending money. It is your responsibility to make sure that you spend your money wisely.
Elements of financial literacy
- Creating a budget that works for you. This means that you factor in what you need to do and what you want to do. There is no point ignoring entertainment or friends. That will backfire if you do.
- See if you can reduce your costs. Is there a place you can cut some unnecessary or exorbitant costs? Shop around for better deals on anything you have subscribed to. Sometimes, our costs can be reduced drastically by changing our subscriptions to another partner with a better deal.
- Track your spending for a given time period. A month or even two will help you see what you are spending on, but longer-time data will give you a better picture. You can track both your expenses and income.
- Is there a way to increase your income? Can you take a different/better/second job? This is not for everyone but is an option to consider if you need money.
- Learn about all tools available for you. Look beyond banks, try financial institutions, investment companies, and bonds by the government. But be careful about where you invest. You have to really consider the options, talk to people, and consider the benefits of each before you decide.
- Understand compound interest, which can exponentially grow your money the longer you keep the savings/investment going.
- Debt is an important part of managing finances. Try not to get into personal debts if you are not sure about your ability to pay back, but if you are taking loans, do so after carefully weighing all your options. Debt can be a very valuable tool as long as you know how to stay ahead of it.
There is no need to worry about money if you can plan well and stick to that plan. With a little bit of control, you can grow your money and live comfortably.
