Financial literacy aims to help people establish a good foundation of their knowledge and understanding of the basic, and maybe more complex, financial concepts. Through this, you will be able to handle your money in a better and efficient way. Expanding your financial vocabulary will allow you to see money from a different perspective rather than merely being a medium used in spending. However, this doesn’t only revolve around knowing money terms, facts and statistics. A part of being financially literate is the ability to make the right financial decisions to achieve the right outcomes.
Financial literacy allows you to be able to understand significant issues such as emergencies, debt, investments and the like. This skill will help you look more towards finding a solution that will bring the most benefit, rather than an answer to resolve the issue regardless of the consequences.
With that being said, how can you be financially literate?
Work on your emergency fund:
One of your top financial priorities should be your emergency fund. An emergency fund will be sheltering you from possible problems that may make a significant impact on your finances. For example: having to pay for unexpected medical bills. Typically, an emergency fund should be worth at least 3 to 6 months of your living expenses. You can start by working on a smaller goal. Maybe about a month or two’s worth of expenses, and then build up or complete the fund after getting rid of other obstacles keeping you from spending.
Get rid of debt as soon as you can:
Saving up isn’t that hard of a task. But what hinders it from growing is debt. Debt is the main factor financial progress takes a longer time. Luckily, different methods can help you pay off debt quicker such as the snowball method wherein you pay off the debt with the smallest balance and work your way up to the largest until it’s cleared. Admittedly, paying off debt won’t happen immediately, especially when there are finances to prioritize. However, your best bet is to pay off debt as soon as possible to avoid any further complications with your finances.
No time is the wrong timing when it comes to saving for retirement. With a retirement investment already prepared, you are most likely to have a good future ahead. Various options are available to help you start on your retirement investment. Put at least 15% of your income towards retirement; that way, you will still have enough money to go towards paying off other debts.
Build your wealth:
Financial literacy doesn’t merely mean facts and numbers read from the books and the internet. The main goal of being financially literate is to be capable of dealing with money wisely. This means to be able to set proper priorities without having to take away anything “fun”.
As long as you have your financial priorities in proper order, and look towards building your wealth in the long run, there would be no need to take away too much of the things you enjoy.