In school, we are taught math, reading, and writing, but there are holes in the education system when it comes to financial literacy. Financial literacy is the knowledge and understanding of personal finance. This means that a person has learned how to manage her money, and she also knows how to save, invest and plan for her financial future. The majority of people graduate from college and have no idea how to manage their personal finances. Because of that, they end up making a good income but living paycheck to paycheck. Financial literacy can improve any budget no matter how small. In the following paragraphs, you will learn some simple steps that you can take to improve your personal finance situation.
Make a Budget Now
One of the first steps that you must take in order to be financially literate is to make a budget. Some people are opposed to budgets because they believe them to be too rigid, but the truth is that a budget is just a plan for your money. When you budget your money, you are telling your money what to do instead of letting your money tell you what to do. Your budget gives every dollar a job.
Get an Emergency Fund
When an emergency strikes, you do not want to be without money. The majority of emergencies require money, so you want to have at least a few thousand dollars in the bank in order to cover your family if there is a need.
Get Out of Debt
Debt is the bane of the American family’s existence. Debt is like a huge load that the majority of Americans carry on their backs. Debt is scary because it makes slaves out of everyone. Most people who are in debt have a mix of student loans, car loans, mortgages, consumer debt, hospital bills and payments to direct online lenders. Even though these lenders can help you when you are in a bind, debt is what is keeping you from an abundant life. Make a plan and pay your debt off. The snowball approach is preferred by savvy financial gurus. With this model. You pay your debt down by paying your smallest debt first and then working up to your larger debt.
Avoid Needless Purchases
While you are trying to get out of debt and save money, you have to be sure to avoid purchasing things that are not needed. The things that you need to live are food, shelter, and good relationships. If you have those things covered, you are doing better than most people in the world. That does not mean that you cannot ever splurge, but it means that you have to add the splurges to your budget, and you must only spend the amount that your budget allows.
Invest for Your Future
After you are out of debt and you have a fully funded emergency fund that is about three to six months of your family’s expenses, then you can afford to splurge more often. This is the time when you should start investing at least 15% of your income in retirement accounts. This would also be the time when you should start saving for your children’s college as well.
Always Keep Track of Your Money
Financial literacy is not as difficult as some people may make it seem. All that you have to do is watch your money and control how and when it leaves your bank. You should try to stay out of debt, be responsible when it comes to keeping up with payments from credit cards and direct lenders online, and practice saving in order to build a worry-free financial future. Save your money, invest, and watch your wealth grow. We all have the ability to have an abundant life. It just requires steady and well-thought out financial decisions. Financial literacy is a must if you want to be in control of your destiny.