We all have this question at one point of time in life. “How do we learn to make good financial choices?
The answer to this is - By Building Financial Literacy. Having a strong sense of financial knowledge and the industry trends not only helps in improving financial decision-making skills but also to weigh the options in a critical manner with the help of financial facts and concepts.
Here are a few ways having financial literacy can help in your daily lives:
1. Making informed decisions on the three main financial buckets:
a. Recurring fixed expenditures such as debt, payment, insurance, investments, taxes, utilities, etc.
b. Daily Lifestyle expenditures such as food, entertainment, clothing, short-term purchases, etc.
c. Future planning expenditures such as emergency funds, medical treatments, vacations, asset purchases such as car or home, retirement planning, etc.
2. Allocation of Budget
Having a clear understanding of financial concepts gives you a realistic view of knowing the estimated costs of things and expenses that you might have planned. This helps you determine the portion of savings that you would want to keep aside and thus, creating and allocating a budget becomes a simpler task. Regular budgeting can also help you when you get financial increments and can hugely impact your lifestyle expenses as well as personal goals to keep them on track.
3. Monitor Inflow and Outflow
With financial knowledge, it is easier to track the inflow and outflow of income and investments. If you are self employed, then managing cash flow and liquidity can be a huge challenge. Here’s where entities like Get’em in Business (GIB) - a financial firm based in Malaysia helps with global investment reviews and monitoring of investments and financial assets so you can stay on the right path of growing your finances. They also help businesses with consultation regarding evaluation of their performances based on their financial achievements and goals.
4. Creating Multiple Sources of Income
In today’s world, creating multiple income streams can get you a long way to achieve your lifetime financial goals. People do not stop at retirement, they do have a plan B which helps them create a continuity of income even after their retired years so that they can continue to live a good and comfortable lifestyle when they do not have a full-time job. The only way to achieve this is by starting early and updating your financial knowledge on a timely basis.
The Bottom Line:
Apart from the important points discussed above, financial literacy includes the understanding of how to che
Financial literacy includes understanding how a checking account works, what using a credit card really means, and how to avoid debt. In sum, financial literacy has a material impact on families as they try to balance their budget, buy a home, fund their children’s education, and ensure an income for retirement.
A lack of financial literacy affects people in developed or advanced economies, as well as those who live in emerging or developing countries. Consumers in advanced economies also fail to demonstrate a strong grasp of financial principles that can help them understand and negotiate the financial landscape, manage financial risks effectively, and avoid financial pitfalls.