What is Financial Literacy?
This is the power to understand and effectively manage your personal finances. It involves budgeting, saving, investing, diversification of income streams and managing debt. The benefits of financial literacy are beyond measure. They include:
- Financial independence.
- Better decision making.
- Improving confidence.
- Long term financial stability.
- Protection against financial exploitation.
- Wealth building through investments.
Introduction
Most schools do not teach children about the meaning of personal finance, how to be financially literate and even how to attain financial freedom.
There is a certain power to young women that know how to manage their money habits. The Financially literate women are always able to make informed decisions about themselves and achieve independence on how they make their choices. They radiate confidence.
Steps to Financial literacy
1. Set Smart financial goals.
The next step, after understanding the meaning of financial literacy, is to set both short term and long-term financial goals. They should be Specific, Measurable, Assertive, Relevant, and Time based.
Break your financial goal into smaller steps. It could be using charts, money saving spreadsheets, budgeting templates or anything that works for you.
Having smart goals that you can track is a good money habit, as it keeps you accountable and motivated.
2. Practise budgeting Basics
Take control of your money by creating a budget that works for you. Tracking your income and expenses, will make know where your money is going and in which areas can you save. Here are examples of budgeting rules:
50/30/20 : 50% Needs ( Bills, Rent, Food)
: 30% Wants ( entertainment, and shopping)
: 20% Savings and Debts
70/20/10 : 70% Bills and Living Expenses
: 20% Savings and investments
: 10% Debts
80/20 : 20% Savings and Investments
: Anything else
Warren buffet an Investor quoted ,” Do not save what is left after spending, spend what is left after saving and investing.”
3. Learn new skills and upscale constantly
If you’re not planning on scaling up your skill, it means that you’re preparing for failure. You should always be open to learning more things about your career, the Internet and AI.
Rather than having 2 to 3 jobs. Have a main source of income and spend the rest of the time learning new skills, like how to make money online and starting an online side hustle.
Tools like AI are growing and will be greatly utilized in the future. It is best to start now when the train is still boarding.
4. Diversify your income
A smart money goal does not involve you depending on one income. To acquire financial freedom, start having better money habits, by having different sources of how you earn.
If you have a 9 to 5, start looking into online side hustles. Take for instance a gynecologist could create an ebook on health practices for the female body. If you earn from TikTok or YouTube, create a course or a book on how to make money online. So many different examples, find what works for you.
5. Start investing early
Rather than having all your savings in the bank losing value, start investing and increase your savings. This could be through buying stocks, investing in real estate, cryptocurrency, anything. Read financial literacy books on investing. Always consider the risks and gains. Do not invest your money on one things, diversify.
6. Manage your debts
Pay off your high interest debts first. Make sure to always make a small fraction of your debts monthly to avoid penalties or a bad credit score.
Get rid off the credit cards spending habits and avoid borrowing money for unnecessary expenses.
Retail therapy should not be paid for with loans, please. Once you start, this is a habit that you can’t break easily.
7. Create an emergency fund
An emergency fund will definitely be of help anytime in the future. Having an emergency fund for at least 3 months or more is important.
Start small and gradually build up.
Bottom line
Being financially literate as a young woman, basically involves you understanding your money, how you spend it, practicing good money tips and constantly improving.
Social effects on money habits are a big factor in making people misuse their finances. Read personal finance books and be mindful of the people around you.
Do not overspend trying to help others or trying to please them. Live according to your means. While shopping with your friends, stop focusing on their plates and try to shop as them, knowing that it may have an impact on your finances.
To acquire the best money habits for financial success, consider starting from learning personal development skills and set your goals intentionally.
