Financial literacy means how to make financial decisions. Money comes in and goes all the time, the essence of being financially literate is to know how to spend the money that you earn. If you are not wise with spending money, you might go broke. Financial literacy means the acquisition of knowledge that allows you to make well-informed financial decisions. The usefulness of financial literacy is to teach people how to generally spend their money, from saving to investing and to creating budgets.
What is the Essence of Financial Literacy?
The purposes of financial literacy are to help you use your money in the right way, get all you need, prevent extravagant spending, and also make the right investment choices.
Financial illiteracy will only lead you to make extravagant and poor money-spending choices. Therefore, financial literacy is valid. Everyone hates being broke, financial stress is inclusive.
Being financially literate is knowing when to plan and execute the monetary aspect of your life, when to lend or borrow, and how to invest your money and settle your bills. Financial literacy prevents you from running into bankruptcy.
How Do I Become Financially literate?
If you want to be financially literate, all you need to do is to learn some proper money management skills;
- Create a sustainable budget
- Make sure to handle your bills
- Pay back your loans
- State a clear difference between your wants and needs
- Always invest wisely and invest in businesses that you’re 90% sure will yield more profit.
- Have a tight grip on the value of money
- Check the situation of your credit card frequently
Learning how to be financially literate takes a lot of time and dedication, it cannot be magically done.
You need to be committed. Being financially literate will help you in the long run. It is vital to know the routes to take to save money. Financial literacy helps you with financial management.
What is the Importance of Financial Literacy?
Financial literacy helps you make informed financial decisions, it helps you set goals concerning your savings and also achieve them.
The main goal of financial literacy is how to manage your finances and resources wisely.
Being financially literate entails a lot, for instance, someone who is financially literate would know that if his monthly income is $4000, he should know that his monthly expenses should not exceed $4000 and that he would go into debt if it does.
Another person who earns the same amount and has gotten to a more advanced level of financial literacy would also know that he is supposed to save some percentage of the $4000 for future use and for unforeseen circumstances.
Can I take courses to help me gain financial literacy skills?
Absolutely! you can take courses to help you gain or improve your skills in financial literacy, some courses are available on Udemy, Coursera, and other learning platforms.
Why Should you become financial literate?
- It helps you save money
- It helps you invest wisely
- You are assured of proper management of funds
- Your expenses are decreased
- You are no longer anxious or worried about the financial aspect of your life
- The lending and borrowing aspects of your finances are kept on track
- You start to make healthy decisions, sort your bills, put your needs above your wants, handle your investments, etc.
Topics under Financial literacy include;
- Savings
- Budget
- Interest
- Debt
- Smart Spending
- Bank account and Security
- Business
- Earnings
- Discretional Spending
Some Steps to Take When Starting Your Journey
- Explore and understand your income
- Look deeply at your retirement plan
- Set your short and long-term financial goals
- Set up an emergency savings/insurance
- Spend wisely
Disadvantages of Financial Illiteracy
- A financial illiterate would make fewer saving plans
- You would also have little or no investments
- You would have very poor financial management
- Increased spending
- Loads of debts
- Improper use of credit cards
- Financial anxiety
- Higher chances of going bankrupt
Conclusion
In conclusion, people often confuse their savings with financial literacy, knowing how to save money doesn’t validate you as a financially literate individual. Your full ability to properly utilize your income and your savings is what makes you a financially literate person. You also need to know how to make healthy financial decisions.
Frequently Asked Questions
I don’t earn a lot, how then do I save?
You do not need to earn a truckload of money before you can save some, cut out a reasonable percentage and save it.
Why was the ideology of financial literacy invented?
Studies and facts about the financial plans of random citizens of the US showed that if proper money management plans are not made, you might end up losing money as soon as you earn it.
Why should I save?
Save to invest and save money also, for unforeseen reasons.
