A Great Start: Understanding Financial Literacy

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Understanding Financial Literacy will enhance our knowledge to become a successful person. It also gives us wealthy ideas and strategies that will change our way of living into a better life. To understand these topic, here are some definitions came from trusted sites that might help us:

According to Investopedia, “Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing. Financial literacy is the foundation of your relationship with money, and it is a lifelong journey of learning. The earlier you start, the better off you will be because education is the key to success when it comes to money.” When reaching a certain point of our lives, there will be a time where we will deal with our own money, budgeting, spending, and paying whatever we must pay. Someday, we will have our own jobs, earning money for ourselves or for the family. For starters, it will be difficult to manage our finances, especially if we don’t even know to strategically spend it, or budget it to be simple. This where financial literacy comes in, the ability of a person to manage his/her own finances. This teaches the person to be careful on what he/she spends on, prioritizing on what to spend his/her money and creating a future with investing on different things that will be beneficial to the person. If the person is financial literate, then we can assume that person is properly budgeting and spending his/her money on the right way. With that said, the person will less likely encounter financial problems because the person knows how to use his financial skills to solve the said problem. There are different ways on how to be a financial literate, practice your budgeting skills, prioritize your bills, avoid spending on your wants and with those things you will be financial literate in no time. 

According to Cleartax, “Financial literacy refers to the ability to understand and apply different financial skills effectively, including personal financial management, budgeting, and saving. Financial literacy makes individuals become self-sufficient, so that financial stability can be accomplished. “In our lives, we encounter a lot of problems, it can be about different things, but we also encounter money problems as time goes by, we encounter this time to time and sometimes we just can’t control it. Being financial literate can save you from those kinds of situations, as we know, financial literacy is a skill that lets you use your financial skills to manage and plan your finance. An example of financial problem is having a debt, now a debt can grow unexpectedly huge if you don’t pay it and keeps borrowing. Now being a financial literate, you can use your skills in managing your finances to solve this problem, to solve this, you will budget your expenses so that you can have little extra money to pay the debt, yes it can be slow, but you know in time you will pay it off. Another possible solution is prioritizing important things rather than the things you want, instead of spending it on useless things, you can rather pay your debt using that money. Now that you encountered that kind of problem, in the future you will be more prepare if you encounter it again, you now know strategies on how to solve it. 

Want more information? Visit https://www.investopedia.com/terms/f/financial-literacy.asp and https://cleartax.in/g/terms/financial-literacy 

According to Annuity Organization, “Managing your money is a personal skill that benefits you throughout your life – and not one that everybody learns. With money coming in and going out, with due dates and finance charges and fees attached to invoices and bills and with the overall responsibility of making the right decisions about major purchases and investments consistently.” There will be a time where we will earn our own money. This is that start of our relationship with our own money, budgeting, spending, and tracking your expenses will be part of your life from that point on. Now, as time goes by you will learn skills and strategies to spend your money well, this is what we call financial literacy, which means that you know how to properly plan and spend your expenses that come in and out in your life. It is one’s responsibility to manage their finances properly or else they will encounter financial problems in their life, that is why we must learn financial literacy, not everyone has the chance to learn these skills. Those who doesn’t learn and practice their financial skills will definitely have a hard time on managing and planning their expenses, their excessive spending will cost them their budget and will lost control of their priority bills. This is the importance of financial literacy, it can save you from your financial problems, it will make you properly manage your finances, you will be self-sufficient in the future. With that said, we can see how financial literacy impacts our lives, it evolves our financial state in a much better situation when it needs. 

According to Ramsey Solutions, “Financial literacy is the possession of skills that allows people to make smart decisions with their money.” We know that being financial literate is important to us, it enables us to have different kinds of skills and advantage that we can use in our current situation or for our future. Now there are different kinds of skills that financial literacy activates. These skills we help you manage your finances, solve your money problems, invest for the future and more. Now let’s talk about the skills that financial literacy enables on us. Budgeting, this skill is the vital and will be a huge part of your finances, budgeting is a way of saving and planning your expenses therefore saving more money in the process of spending it. Saving, sometimes there are left over expenses in our wallets, now instead of spending that on the things we want rather save it or deposit it in your bank account. Saving money is beneficial to you in the long run, it’s like a long-term reward. With unexpected situation that arises, you know that you have some saved up money to spend rather spending your main expenses. Saving also means that you have emergency funds when situation calls for it. Tracking your expenses, with your skills you can track a whole week or month of spending, therefore in analyzing it, you know what things you don’t need so you can cut it out of your budget. These are the basic skills that you can learn if you practice financial literacy, there are more skills that you may discover as you practice these.

According to The Balance, “Financial literacy refers to myriad skills you might call on when making a choice about what to do with your money. Some of them are basic—like how to add and subtract the money you earn, spend, and save—while others involve a complex combination of calculations and risk assessment. Financial literacy doesn’t only mean of saving your money and budgeting, this also tackles of analyzing and making important decisions on what to do with your finances. When we earn money, we have the choice on where to spend it therefore making decisions for ourselves, and these decisions can either make your finances grow or sink it in the ground. This is the part where your decision-making skills comes, we know that prioritizing your expenses is also part of this decision but there is unexpected situation that requires quick decision from you. Now when making decision about your finances, you have to ask yourself, will this help you in the long-term, how much will this affect your budget, what benefits, or gain will I get when I spend my money on this and more questions like that. These questions will help you determine if you should pursue that decision. As I said before, this decision can affect your finances, it can be negative or positive, and it’s up you to make the decision. Before making decisions, especially if it a big decision, like buying a car or house, you must make sure that you calculated everything and assessed any risk or benefit that you may get when you decide to do it. That shows the part of decision-making in your financial management.

Want more information? Visit https://www.annuity.org/financial-literacy/ https://www.ramseysolutions.com/financial-literacy/what-is-financial-literacyhttps://www.thebalance.com/what-is-financial-literacy-5120435

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