Improving your financial literacy may sound a little like homework, but it needn’t be hard work. In fact, with these helpful hints, you may even enjoy the process. Of all the skills that you’ll acquire through study, finessing your monetary understanding may be one the most valuable.
During your lifetime you’re likely to engage with a wide range of financial products, these may include student loans, credit cards, mortgages, mutual funds, and annuities. The better your financial literacy, the more effectively you can manage your money in the present, plan, and sustain any debt you acquire. Read on for some simple steps on how to improve your financial literacy.
Why Financial Literacy is Important
Recent studies highlight why financial literacy is so important, to individuals, and at a societal level. A lack of skills and understanding in the area can result in ineffective spending habits, expensive borrowing trends, and poor debt management. Poor credit ratings and bankruptcy are two other consequences influenced by a lack of economic understanding.
In addition to the skills, you can acquire through your own study there’s also an industry of professionals offering debt solutions that respond to financial literacy, like those you’ll find at www.FreedomDebtRelief.com.
How to – The ABC of Financial Literacy
Acquiring Accounting Skills – You don’t need to know everything there is to know about personal finances; there are industry professionals dedicated to assisting you with this. However, knowing the basics of money management empowers you and assists in debt avoidance and solutions.
The financial literacy skillset can be broken down into five key competencies. These are earning, saving and investing, spending, borrowing, and protecting. Literacy can be best defined as learning to hold all five in harmony with one another. Knowing your gross versus net paycheck is the core component of earning. What do you have left after taxes and other contributions? Protecting is a vital, and sometimes neglected aspect of personal finance. It refers to you are engaging with the appropriate insurance products, taking measures to prevent identity theft or other scams, and planning for your retirement.
Budgeting Basics – One of the most constructive ways to improve financial literacy is to ensure you’re engaging with relevant and understandable information. This education can be delivered in multiple formats but should include guides, programs, or online training tools that that advise people on the basics of budgeting. Having, and sticking to, a budget, is central to controlling your finances and preventing financial hardship. Your budget will evolve as your life circumstances change, accommodating events such as college, buying property, marriage, and family.
Create Credit Confidence – Even with the best budgeting skills around, you’re likely to need to borrow money at some stage in your lives. Being financially literate should best prepare you for this process. You’ll want to have worked to secure a good credit rating, or to have it restored, and you’ll have thoroughly researched your borrowing options to make sure you’re not overloading yourself or signing up to unfavorable terms. Failure to engage financial literacy when accessing credit can lead to debts that get in top of you, and potential bankruptcy. The golden rule is to try and avoid all methods of high-cost borrowing. You’ll always have to read the fine print, but in general terms, high cost borrowing often comes in these forms:
Payday Loans
Pawnshops
Auto Title Loans
Refund Anticipation Loans
Rent-to-Own Shops
If you’re concerned about your accumulating credit card or other debt, remember there’s always assistance available. A large component of financial literacy is knowing when to reach out for help and the sooner you consult with a debt relief specialist the better.
So, there you have it, the ABC’s on how to improve your financial literacy and why it’s so essential to living an abundant life.
