Most of us are working hard just to be able to earn enough money. Some people even opted to have more types of income streams just to earn more. We are trying our best to the point that sometimes it is affecting our health and even our precious time.
Unfortunately, all of those efforts and sacrifices will not be worth it if we cannot fully maximize those earnings. If we do not know how to fully utilize our hard-earned money.
To be able to fully maximize the usage of your money, you must know how to properly use it. And how can you properly utilize it if you do not have enough knowledge on how it works?
That’s where financial literacy comes in.
So, what is financial literacy and why is it important?
What Is Financial Literacy
Basically, it is understanding how money works. Your knowledge of handling money that can result in reasonable financial decisions. Managing your monetary resources in the most effective and efficient way.
Financial literacy includes knowing how to properly manage your finances. From how to make a budget, saving money, paying your debt, income protection, making money work for you, and finding the best investment that suits you.
“Possessing the skills and knowledge in financial matters to confidently take effective action that best fulfills an individual’s personal, family and global community goals.”
Financial literacy definition developed by National Financial Educators Council
Financial decisions that you make in every single day of your life is influenced by your financial intelligence. The higher your financial IQ the more effective and efficient you manage your money. The more successful you will be in the financial aspect of your life.
If you want to increase your financial IQ, you should make an effort in reading books, watching videos, attending seminars, and listening to podcasts. Invest in yourself by increasing your financial IQ.
Importance Of Being Financially Literate
Ensures financial stability and security
Since you are already aware of how money works, you can manage it now properly. You will already understand the basics of finances. There are financial terms that you are now able to grasp what they mean.
You are already following a certain budgeting method that suits you. Eventually, you can start saving money and invest it so that it will continue to grow. The money that you saved can be used later on when unanticipated events come into your way. You will no longer be confused about how are you going to produce money to pay your hospital bills in times of accident or illness. Or how to support your family when you lose your job.
Being financially literate, you will also know how to properly build a solid financial foundation. A good financial foundation is important so that when financial struggles come into your life, you will have a greater chance of subduing it.
Becomes wiser in investing
The higher your financial intelligence, the wiser you handle your money. When it comes to investing your money you are confident where to put it. You will know where to invest and not to invest your money. You can easily spot what investment suits you.
Remember, when it comes to investing no matter how high is the potential gain you can have you should understand it first. Do not invest immediately just because many people are investing in it. Make a calculated risk first.
The best way of avoiding “scam investment” is being financially literate. You can formulate questions and evaluate the answers. You can spot if its to good to be true.
Breaks and avoids the shackle of debt
If currently, you have many liabilities, with proper knowledge and application of the things you learned you can eventually get out from debt. You will know the tricks in paying your financial obligation faster and sooner then you will have a debt-free life.
And if you do not have debt, for now, that’s good news. But let’s not wait that the time will come that you will be indebtedness before you will take any actions. Being financially literate, you will know what are the reasons why people are trapped in debt. Being aware of the causes, you can already take precautionary steps.
Sets Financial Goals and Attain It
You will realize in life what will be your financial goals. You can establish both short-term and long-term goals and make a plan on how to attain those goals. With proper execution of what you learned, achieving those goals will be more attainable.
Your financial goals depend on what you prioritize in your life. If you think that having a Php 2 million invested in stock is more important than buying a brand new car, then do it. Or maybe you want to treat your family for a vacation. Do it, as long as you planned it carefully.
Manages Well Every Peso
You will learn the right way of using your money. Differentiating “wants” from “needs” is an easy task already. You only spent your money on what really matters and in align with your financial goals.
As long as you continue thinking where your money should go, every peso you spent is a well spent. You take command and in full control of your money. On the other hand, if you are financially illiterate the money will control you instead. Your money will wander and at the end of the day, you will also wonder where your money went.
Learn How To Make Money Work For You
Which do you prefer, you personally work to have money or the money itself will work for you and multiply?
If you prefer the first option, then you belong to the group of people who enjoys working 8 hours a day or even more. Who loves to wake up every day to work for other people. You believe that the best way to have money is to earn a degree and find a good job. There is nothing wrong with, it is your personal choice.
But if you want the latter choice, then you can achieve this through being financially literate. Who knows that working hard alone is not the best way but working smart too. You will discover different investments in which you can make money with less effort.
Protects Your Money
Remember what I said before regarding on “scam investment”? Unfortunately, there are still many people who still fell on “get-quick-rich” method. They fell for that trap since they do not possess the right knowledge on how to identify if it’s a scam or not.
With the right knowledge regarding investment, you can easily point out if it’s really true. Every time you want to invest, you can make a calculated risk thus reducing the chance of losing your money.
Be Wary Of Many Choices
Have you experienced being overwhelmed for many choices? Stuck up on what phone model to buy? Cannot make a choice on which shoes you should wear? This could be a problem, especially there’s no one to guide you.
Too many options can be very confusing. This holds true when it comes to investing. If you are not well versed when it comes to financial literacy, you will be confused in many choices.
Increasing your financial IQ makes it easier for you to decide what to choose. You can even plan ahead on what investing to take in the future. A decision that really fits what you want.
Final Word
Financial literacy is very important that you should not take it for granted. You should invest in yourself by increasing your financial intelligence. Read books, watch videos, listen to podcasts and attend seminars. If you think that it is costly try ignorance.
Your ignorance can cost you more money than buying those financial books and attending seminars. Without the proper knowledge, mishandling your money is already an assurance.
Through being financially literate is the only way to achieve your financial freedom. You may think that you do not need it yet. You are wrong, the right time to start is NOW.
Now you know what is financial literacy and why is it important, what will be your next step?