Financial literacy, a literal superpower
WITHOUT A CORRECT UNDERSTANDING of something, decisions made about it rarely yield tangible results.
This is also true for money and the literacy that surrounds it.
Called “financial literacy,” it helps us understand and apply good money management skills in the short and long term.
Financial literacy is the ability to understand and use a variety of financial skills, such as managing personal finances, saving, investing, and budgeting.
Money management helps us build a strong relationship with our income and savings. It is the foundation of our relationship with money.
Once we understand the fundamentals, policies and financial conditions, we will be able to manage our daily finances successfully.
This could include the ability to create budget plans, track expenses, calculate interest on savings and loans, manage credit card bills, and plan for retirement.
Although financial literacy is important for every freelancer or business, a lack of financial literacy can be seen everywhere, even in the most developed and advanced countries.
Many people do not even know the basic financial terms and are therefore forced to make financial decisions without fully understanding the results.
Sometimes these decisions can lead to financial losses.
It takes time to become familiar with all aspects of financial literacy. So, the sooner you start learning about it, the more benefits you will get.
As consumer habits and financial products change, so does financial literacy. However, many consumers have little or no understanding of finance.
They don’t know how credit works and how it will affect their financial well-being for years to come. Lack of financial literacy is one of the main reasons why so many people find it difficult to save and invest money.
Budgeting, debt management, saving and investing are the most important and common aspects of finance.
Here’s how financial literacy affects these aspects of finance:
Budgeting is a life skill that equips us with the financial knowledge necessary to manage our money effectively. Keeping an eye on our spending habits is one of the main factors in budgeting. Flawless financial management will help us create an effective financial plan.
An effective financial plan helps us monitor our expenses, eliminate unnecessary ones, and create opportunities to spend wisely. This saves us more money in the long run.
The main rule of a budget is that your income must be greater than your expenses. Keeping tabs on your expenses and income will help you save more money.
A well-structured budget will help you plan your short, medium and long-term expenses. It allows individuals to save money effectively. Thus, no one has to sacrifice their future goals for their short-term needs.
Therefore, a budget is important for financial security and freedom.
If you are starting a new business or have a low income, budgeting is a must.
Debt is borrowing from banks or other lenders. It basically involves spending other people’s money.
For example: If you borrow from a bank or other lenders, or use a credit card for your expenses, you will be in debt.
Debt management is one of the most important aspects of financial literacy.
Let’s be honest, there will be times in life when you need to borrow money.
Not everyone is able to buy a new house, a new car or pay school fees.
Sometimes the only way out is to get a loan or borrow money. But the most important thing is to recognize the difference between good debt and bad debt.
Also, it’s a good idea to avoid bad debts as much as possible. Only take on a bad debt when there is no other option.
Good debt involves borrowing money for your major living expenses, such as buying a home or paying your school fees. Bad debt involves borrowing money for unnecessary luxuries, such as an expensive car, clothes, and gadgets.
So, understanding the difference between good debt and bad debt will help you avoid debt pitfalls. Financial literacy helps us identify the difference between these.
Saving money brings us financial well-being, good cash flow, a balanced present and a secure future.
To create wealth, having a budget and a financial plan is important. Changing your lifestyle and changing your spending habits will help you save money. Here are some of the things you can do while saving money.
Financial literacy helps us find the gaps to save money. Ultimately, this will lead us to a brighter future and faster achievement of our goals.
Investing means that instead of throwing your money away in a savings account, you can get higher returns by investing some of it.
Investing is enjoying a secure and happy life by generating and increasing wealth.
It’s about moving your money to the most profitable places, where you can get a big return in the future.
Your investments could generate additional income each month. This paves the way for the creation of a new source of income.
Popular investment options include buying stocks or investing in stocks, funds, gold, and real estate.
The main objective of investing is to create opportunities for wealth growth and to create a secure future.
Financial literacy allows us to understand how to use our savings to generate additional income.
Having a good understanding of financial literacy means having the knowledge and confidence to manage, save and invest money with precision.
Financial newsletters are one of the best ways to learn about financial literacy. Reading financial newsletters will help you improve your financial and financial management skills.
You could learn next-level financial strategies from financial experts.
Social media is one of the best places to improve your financial literacy. Many internet finance gurus share effective financial strategies on YouTube, Facebook and Twitter.
All the skills you have acquired are useless if you do not implement them.
Start by tracking each month’s income and expenses with a spreadsheet and make a budget plan accordingly. There are many mobile apps available in the market that you can use.
If you’re a total beginner, there’s no better way to learn the basics than from an expert.
Experts can answer all your questions and give you advice and strategies based on your current financial situation.
Financial literacy is one of the most important skills that every individual should start learning.
It can literally be a superpower once understood.
* Jesse Schiceya is the Managing Director of Cylon Accounting.