Personal Finance Literacy
Personal finance literacy has recently become the talk of the town because of the alternating financial trends all around which require awareness of the masses.
Currently, personal financial literacy is taken into serious account for the first time in many decades. This is because the financial uncertainty recorded among individuals during this time period is at its peak. Several new risks are about to unleash themselves as capitalism grows.
- Personal finance literacy stands for the idea of being educated about financial affairs and to control them more efficiently.
- It is important that you are able to come up with a flexible budget that can accommodate all your needs along with saving. The 70/30 rule works well.
- Invest wisely after confirming the credibility of an organization and never follow suggestions with a blind eye.
- Personal finance literacy enables you to understand the financial world and the actors needed for its management.
Growth of Capitalism & Its Influence on Individuals
Capitalism has grown as a full-fledged monster swallowing up conventional finance totally. Now, you need money not just to sustain life but to deal with the risks of the future. This is because the growing dangers of capitalism have created an insecure atmosphere where hundreds of people become victims every single day and lose their jobs.
So, now, the rainy days run along with the normal ones. This is why people are becoming awakened and have started to focus on the concepts which can keep them safe in the long run.
Personal Finance Literacy
When you read it for the first time, it appears as a simple concept where you are educated about financial matters. However, there is more to this simple-looking concept.
Personal finance literacy is, “enlightening and educating oneself about all the financial trends, the principles of budgeting, the basics and details of investment and all the necessary details about your credit-dependent life.” It is an attempt to make people aware of their financial responsibilities and to encourage them to make sound financial decisions.
Units of Personal Finance Literacy
Personal finance literacy stands as a concept with the help of certain units. If one of them is left incomplete, the structure would consequently be weak and unusable in the future. So, let’s aim to complete this puzzle of units by finding the units first.
Budget is the key component or the heart of personal finance literacy. You find out the tactics to maintain your income and expenditure balance side by side. When you learn about making a perfect budget, you are not shaping your present on the basis of the overall expenses but you are saving a portion from your income for the “uncertain future” which is a much-needed thing.
- Saving Plans
If you are on to the saving, the next need is to deduce a fitting saving plan. For this purpose, you again need to consider your savings. Once you have considered the amount which you have saved, seek out some workable plans over reliable business platforms.
You can also consider insurance for that purpose because the different types of insurance can assure you of your financial independence when you need it most.
Investment plans are always the best ones to go for. An investment plan can help you make a profit of your saved money if it’s done wisely. Once again rely upon genuine investment plans. Don’t rush all at once. First, find out the terms and conditions, then decide.
- Credit Score & Debts
It is also essential for you that you have a mental note about your debts or payments which are still needed to be made. Keep your credit score perfect between the range of 700-800. This measure can save you from bearing the burden of additional debts. Once your debts are cleared, you have no additional headache and hence you can save more securely.
Other than these four units of financial literacy, we have deduced certain other factors which can influence you in your quest of acting over personal financial literacy in the perfect fashion.
Exciting 8 Factors About Personal Finance Literacy
Though personal finance literacy is a wider concept, yet, here we have discussed those admirable features which can help you understand personal finance literacy not just as a concept but as a way of life.
- Personal finance literacy calls for your personal understanding and mentality.
- Make decisions that follow time and wisdom.
- Never go for multiple investments. Gradually become self-sufficient.
- Prepare clear documents of your assets.
- Prepare a flexible budget.
- Don’t trust in a blink of an eye but rather take your time to understand a business or an investment.
- Minimize the habit of obtaining loans
- Keep a check on your monthly expenses.
Maintain a Positive Mentality
A positive mentality helps you to save a number of your problems. If you are positive, then you can easily handle challenges. This is the basic characteristic of personal finance literacy. You need to have positively set goals.
Once you are positive about saving, you will find yourself automatically going in that direction. Don’t take personal finance literacy as a chain that binds you but take it as an opportunity that makes you fly high.
Make Timely & Wise Decisions
Personal Finance is a tricky concept. Not everyone can be on the same page while they are sharing their experiences. So, always use your own mind to decide. Never go for whatever suggestion you receive.
This is because others would not be able to understand your financial situation as effectively as you can and therefore they can be either wrong or right. It’s best that you observe your financial situation keenly and then hit the strike at the right instant.
Many people are hyper-excited about making progress in their financial life. The biggest mistake they commit is that they start investing in multiple ventures all at once, so as to minimize risk. But, to correct you, this is not a deflection from risk, rather it puts your income in danger. Always take one step at a time and this is not what we say.
The financial experts say that when you are into so many projects, the risk becomes doubled up. If the market is going down, then the chance is that you will be bankrupt completely. Once you have invested in one single venture, take some time and understand the market. After that, progress further in the direction in which you wish to proceed.
Documentation of Assets
All your assets are not considered legal until you have proved them legal. This is achieved through official documentation. It is very necessary for personal financial literacy that you have already documented every single asset of yours for future use. This helps the financial sectors as well as law enforcement agencies to be sure of the validity of the overall income you possess.
Prepare a Flexible Budget
Budget is a significant part of personal finance literacy. Once you are in the process of preparing a budget. Make it easy for you to follow. Don’t overburden yourself with excessive savings or spend blindly on unnecessary items. Create a balance. Adopt the 70/30 principle to make it more smooth and workable.
Take Your Time
A number of people who want to invest in ventures or business projects, quite often end up investing in wrong projects or fraudulent ones in most cases. This is because they are not educated enough to doubt the credibility of the business or the agency.
Therefore, it is important for you to invest right when you understand all the conditions fully and have gained the credit report of the venture where you are investing. This one step can save you from possible misery resulting in the near future.
Minimize Taking Loans
We all hate taking loans but unfortunately, we have to take them for one of the other purposes throughout our lives. Once the loans are taken, a new fear starts building up in us and that is the heightened interest rate and our inability to pay our loans at the exact time. So, why not minimize taking loans?
When you minimize this habit through spending wisely and saving throughout. You would not be needing the condition of taking multiple loans and paying them altogether.
Keep a Check of Monthly Expenses
Personal finance literacy also calls for the need to take a look at all the places where you have spent your hard-earned money. Check whether you are spending it on doing the monthly grocery or are you spending it on watching a movie or going on a bonfire along with your friends. You can take the help of several finance tracking apps as well.
Yes, all of that partying and enjoyment is essential of social life but don’t make a habit out of this, or else things will get hard on you. So, always create an extensive list where you divide all the places wherever you have spent money throughout the month.
Personal finance literacy doesn’t stand for a random concept but it calls out to the detailed idea of spending, saving, and investing your money at all the right places. Once you are educated about your finances, you are able to track the financial uncertainties and tribulations easily and pass through them unharmed by merely the aid of your financial wisdom.
The author is a software engineer by profession. Writing and reading both works as his prime passions. As an engineer by profession, he understands the market demands and knows the irregularities of the financial world. Being a geek, he prefers financial independence and is active in writing on financial affairs for a very long time. While contemplating upon the changing financial scenarios, the topics of discussion fluctuate but his clarity in expression never fades.