Financial literacy is the possession of the knowledge and understanding of financial matters. Financial literacy often entails the knowledge and ability to make logical and well reasoned decisions pertaining to certain personal finance areas like real estate, insurance, financial investments, savings, tax payment and retirement planning. Added to these is the ability to understand financial concepts like compound interest, financial planning, advantageous saving methods, consumer rights, currency rates, economic trends and time value of money.
There is a great deal of respect that goes to a financially stable woman, who is able to provide for herself, irrespective of what the people in her life are able to provide for her. Such women become role models and occupy a place of respect in society. Their voices and opinions are valued and appreciated.
Signs of lack of financial literacy include;
- Not having a budget, a goal or a plan.
- Excessive spending.
- Living on debt.
- Not having emergency savings.
- Borrowing for the wrong reasons.
- Not investing for the long term.
- Ignoring insurance.
- No retirement plan
- Pressure from social media and friends.
How to improve your financial literacy
- Create a personal monthly budget:
Your budget is the foundation of your financial health, and it’s pretty easy to get started. A budget allows you to view, adjust, and set spending limits. It is important for you to differentiate between needs and wants, so as to prioritize the expenses that matter.
- Start an emergency fund:
Experts recommend setting aside at least three months’ worth of basic living expenses in case of an unexpected financial burden like a layoff or large medical expense.
- Make a plan for retirement:
It is important to get aside a savings account towards retirement. If your company has a savings plan towards retirement, you can find out more about it and pursue it. You can also invest wisely, to get passive income overtime.
- Make a plan to get out of debt:
If you’re caught in a cycle of debt, making a plan to pay it off can save you thousands of dollars in interest.
- Determine your credit score and learn how to improve it:
Access your free annual credit report. Review the report for errors and determine if your credit score needs improvement. Improving your credit score is another way to save money on interest.
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