Fundamentals of financial literacy
Fundamentals of financial literacy.
According to statistics, most of the many users live "from paycheck to paycheck." People believe that the main reason is low income. But such an opinion is erroneous. Often, even those who have high profits take out loans that cannot be repaid for years. All this is due to the lack of financial literacy among the majority of the population.
financial literacy. What is it?
Financial literacy is the ability to properly distribute income and expenses, that is, manage cash flows and increase your capital.
Without understanding the important foundations of financial literacy, it is impossible to achieve material well-being and financial stability.
Financially literate people remain calm even in moments of crisis because they have an airbag, that is, a reserve cash reserve.
Despite the fact that most of the many users understand that it is important to know about finances, citizens still make mistakes that lead to a lack of financial stability. This is confirmed by:
- More than 50% of residents have recently kept money at home. Because of this, their capital does not increase.
- More than 50% of citizens do not know how to use financial services.
The Importance of Financial Literacy in Life
Every second believes that financial literacy is not so important for life. One of the reasons for this is that its fundamentals are not taught at school, and people begin to read books on economics only when they enter the corresponding specialty at the university.
But in reality, financial literacy plays an important role in a person’s life for several reasons:
- It helps to find ways to make a profit without drawing up an employment contract. Even educated citizens are poorly versed in passive income. By learning financial literacy, a person gets acquainted with dozens of other ways to earn money.
- Raising social status. The percentage of people who are financially literate is not so great. Therefore, those who understand this industry stand out from the crowd. After all, they can not only manage capital, but also analyze the situation on the market.
- Crisis resilience. Financial literacy allows you to stay calm in times of economic instability. A person develops a mindset that contributes to achieving success even in critical situations.
Where can I learn financial literacy?
Schools and universities do not yet have short courses on the basics of financial literacy. Therefore, those who want to achieve material stability should independently look for ways to learn.
For beginners, it is better to use one of the following methods:
- Lecture attendance. The demand for financial literacy courses is growing, so the number of seminars on this topic is increasing. Now you can sign up for classes online or go to trainings organized by an expert in person. When choosing courses, you should pay attention to the reviews of previous students and the competence of the teacher. It is better if the lecturer is a graduate in economics and finance. Classes are suitable for those who prefer learning under the supervision of a teacher.
- Reading of books. When choosing materials for study, do not stop at textbooks. Most of this literature contains information that is applicable only to workflows. Books on family budgeting, effective business management are suitable. It is better to start with the following literature:
- A. Goryaev, V. Chumachenko "Financial literacy";
- Robert Kiyosaki "Rich Dad Poor Dad"
- Benjamin Graham The Intelligent Investor.
Those who continue should pay attention to the books:
- Robert Schiller "Irrational Optimism";
- Warren Buffett "Essays on Investments, Corporate Finance and Company Management";
- George Soros Alchemy of Finance.
- Formation of financial habits. Regardless of how a person began to improve literacy, he should regularly perform the following actions:
- Having received any type of income (salary, rent, profit), invest 10% of this amount.
- Live within your means. This means that it is not worth taking out loans for the sake of buying an expensive foreign car or a new smartphone model.
- Maintain a financial plan. To budget for a specific period of time (week or month), you can use a spreadsheet or install an application on your phone.
- Seek help from financial advisors. You should not thoughtlessly invest in a project, it is better to ask an expert to select a suitable company for investment.
Skills of people with financial literacy
People who have been trained in the basics of financial literacy have skills that are not typical for other citizens:
- Financial planning and cost accounting. A financially literate person always plans in advance spending for a month. In addition, he has savings and an investment portfolio that allow him to avoid force majeure.
- The right attitude towards money. Most people depend on finances, but in order to achieve material stability, you need to get rid of this. A literate person knows how to manage capital, money does not control it.
- Working with financial institutions. Increasing income is impossible without interaction with brokers, banks and insurance companies. A financially literate person knows what services these organizations provide and seeks help in a timely manner.
- Investment of funds. To increase capital, you need to make money work. To do this, you need to invest a part in order to start receiving passive income from it.
Summarizing the information presented, it turns out that every person who wants to come to material stability must be financially literate. This will help books and thematic courses online and offline. Knowing how to allocate capital, you can start receiving passive income, and competent management of the family budget will reduce spending.