Do you struggle to meet your financial obligations every month? Do you sometimes address your financial shortfalls using credit cards or loans? If so, then you probably understand the frustration and stress associated with financial planning. Your personal finance may sometimes get a bad rap, and leave you thinking it’s complicated, boring or both.
But understanding your financial status and living within your means can help you to live a healthier, happier and maybe more prosperous life. Below we dive into the meaning of financial literacy. We will run through essential techniques you can use to improve your financial literacy.
What Is Financial Literacy?
Financial literacy is the ability to know how finances work. It’s to make better choices of how you can handle and allocate your money. It sounds simple, but it covers many areas. However, once you learn your basics, you will understand that choices are everywhere, provided you have a proper budget.
What Do the Statistics Say?
Many people are still not aware of financial literacy. The research shows that 33% of adults worldwide and 57% of adults in the United States are financially literate. According to the research, most people who lack financial literacy are faced with difficult conditions.
For example, when the overall income is more than the expenditure. Such a situation may affect your present and future standards of living.
How Financial Literacy Improves Your Life?
Adults go through various life transitions and changes. However, keeping your financial lifestyle in the track can help you tackle them effectively. Here are the seven essential ways financial literacy improves your life:
1. Reduces Stress
According to an American psychological association survey, money is one of the significant causes of stress for many people. Stress affects your outlook and mood, and can sometimes cause chest pains, headaches, and other health issues. Financial literacy can relive you from this stress.
2. Frees Up Time For the Things You Like
When you are better positioned to control your finances, you will spend less time sorting out your bills or calling out for your debts collectors. You may also not work for long hours, and thus spend the extra time with your family.
3. Financial Literacy Improves Your Relationships
Money is the core cause of relationships friction and divorces. You will probably improve your relationship and get rid of the small money quarrels if you and your spouse decide to be financially literate.
4. Helps You to Recognize Frauds
Financial literacy can prove you from losing substantial amounts of money, primarily when a fraudulent scheme targets you. Knowing how to identify these tactics can help you to take essential steps to protect your financial security.
5. Keeps Organized Your Finances After Retirement
Every adult should live a comfortable life after retiring; to enjoy the fruits of their hard work. Proper financial literacy can help you to stay within your budget, save, and even keep your financial assets in an organized manner.
6. Helps to Search For Assistance Needed
People sometimes shy out, feel embarrassed when asking for financial assistance from a consultant or their loved ones. However, understanding your financial priorities and what you need most, can help you to stay financially afloat.
7. Teaches You How to Cope
The life transitions can affect your financial capability. They, however, help you to learn new ways of dealing with the challenges should they recur in the future.
How to Improve Your Financial Literacy?
- Keep a budget – this is the fundamental method of promoting your financial literacy. A budget keeps your money in track. Also, it helps you to keep a paper balance between your income nod expenditure. A budget tracker can assist you in maintaining your budget.
- Read financial materials – there are many financial books available today. They include online financial blogs or library textbooks.
- Listen to financial podcasts – you can get more than 15 recommendations for a few seconds when you listen to podcasts in your car.
- Talk to others – it’s important to seek help from your family members or financial consultants if nothing seems to add up in your financial life.
Financial literacy improves your life more than your dollar bills. Understanding your finances better can improve your relationships, your health and general quality of life.
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2. Kristina Zucchi (2018). Why Financial Literacy Is so Important. Investopedia. Available at https://www.investopedia.com/articles/investing/100615/why-financial-literacy-and-education-so-important.asp
3. Susan Shain (2016). How Financial Literacy Will Improve Your Well-Being. Self Lender. Available at https://www.selflender.com/blog/how-financial-literacy-will-improve-your-well-being
4. (2017). This Is How Financial Literacy Can Improve Your Future Health. CBHS. Available at https://www.cbhs.com.au/health-well-being-blog/blog-article/2017/07/31/this-is-how-financial-literacy-can-improve-your-future-health