Ways to be financial literate: Easy steps

We all come across the term financial literacy, maybe by someone in your family, college, office or some other place. But do you know what exact financial literacy is?

Financial literacy is a life skill and is one of the best investments you can make in yourself. Being financially literate you will possess the ability to use your skills and knowledge to make informed and right money management decisions. In short, financial literacy is the ability to understand money and knowledge about how to spend, save borrow and invest wisely.

Being financially literate, you will be able to prepare for unexpected emergencies and help you make correct decisions so that your money will work for you even when you are asleep.

Easy steps to be financial literate

Financial literacy is for everyone and your belief in the statement is the first step towards financial literacy.

Familiarise yourself with the jargon, research the terms that you cannot understand to gain a better grasp of what they mean.

The next step is to start with basics like budgeting which includes every single penny earned and spent. In the process, you know that the means of earning are constant but you can reduce your spending by prioritising the needs over wants. You may see people saying that budgeting is a useless exercise but there is no better way to understand your income and expenses.

After this, you should learn about how to save your hard-earned money which will become handy in a financial emergency and protects you from borrowing and taking loans at high-interest rates.

Post knowing the ways to save you should learn to art of investing in a wise manner for which you should have to understand the basics of investing, especially compound interest. Understanding and investing with the benefit of compounding will provide good returns on return, which is a path towards wealth creation.

These were the basic steps of your journey of being financially literate and after you have started with these steps you can take your literacy to the next level. The next step is you will have to start reading more and more about financial literacy as nothing is better than reading for the purpose. It can be done by reading the finance section of the newspaper, browsing the internet, use budgeting, saving and investing apps, attending the financial education workshops on personal finance and then put your learning to practical use. These steps will help you in improving your knowledge of personal finance and being financially literate.

Benefits of financial literacy

It helps people of all age groups and income levels to save, invest and keep debt under control.

It impacts the quality of life and helps in investing for a comfortable retirement.

It protects you from financial pitfalls like payment of higher transaction fees, higher interest on loans amid others which may make you fall into the debt trap.

It helps you to make smart spending and teaches you to prioritise needs over wants, spend wisely with credit cards and stop wastage of money.

It keeps you away from falling prey to fraudsters as financially illiterate are easy prey for fraudsters.

It brings financial stability and freedom in financial terms.