Remember that exhilarating feeling of solving math equations and problems at school? Well, not everyone does. As confusing, exciting, and brilliant as our time in school might be, we’re faced with a simple problem: few, if any of us have the necessary skills to make it in the real world.
One particular set of constantly evolving skills is called financial literacy. The fact that you could figure out what X is doesn’t translate to being able to plan your retirement or invest in real estate.
Your ability to handle your financial present, past, and future without feeling overwhelmed is what will help you build a financially stable and independent existence. Mastering the art of taxes, figuring out a way to earn more money, and all the way to saving up wisely are just some of the many components of financial literacy.
What’s more, you’ll be the one to teach your kids how to prepare for the financial aspects of life, too. Here are a few helpful, practical ideas you can use to develop these essential skills and simplify your life immeasurably.
Learn how to manage debt
By the time most of us start working, we’ve already accumulated some debt from our student loans, and not to mention mortgages if you’ve chosen to buy a home for you and your family. If you’ve decided to start your own venture as an entrepreneur, that means that you might have applied for a business loan, too.
These goals might all work in favor of your future and quality of life, but you need to know how to get out of debt in the most efficient ways possible for your specific situation. There is no one-size-fits-all for everyone, hence the need to learn as much as possible and adapt your approach according to your needs and capabilities.
Talk to your bank to determine the best repayment plan for your loans. Make sure that you understand the interest rate (and any possible changes that go with it). Consider paying off the smallest loans with the lowest interest rates first, to get a head-start, and then create a plan that will enable you to get out of debt in a controlled way, to protect your livelihood.
Find ways to increase your earnings
As the digital revolution rushes forward changing our lives, you might as well take advantage! During the pandemic, and similarly difficult crises, you can preserve your financial health (and your peace of mind while you’re at it) by branching out online. With so many options available, you can make more money while investing little time and effort.
In fact, you can make money online to switch to passive income over time, as well, since many online opportunities have this advantage. Setting up your own blog, affiliate marketing, building an app, or developing an Instagram presence can be effective ways to grow your earning potential.
You can also teach and tutor online, both on your own website or you can join an existing school. Either way, working online has become a creative way to build your financial stability.
Master the art of saving money
Being frugal takes practice, especially if you’re accustomed to borrowing from family and friends when you hit a rough patch. One core financial literacy skill revolves around tackling different money saving challenges that are causing you to spend much more than you need to.
It’s not enough to just open a savings account and let it do its magic. Make sure you know how to properly budget with your monthly income and start allocating your available funds to different aspects of your life.
Start setting aside a fixed sum at the beginning of each month, or automate the process with your bank – this makes it harder for you to back out. Look for more affordable local stores and dining options and do your best to cut your expenses and put the extra cash away. It’s the little things that can make an accumulated major impact on your life and help you value your earnings more than ever.
Teach your kids to save up, too
Since school isn’t going to help much in this department, it’s up to you to teach your kids to save money in smart, creative ways. There’s no need to turn it into a chore, but rather a fun, exciting project they can take on as early as possible.
The sooner they understand how to handle their pocket money, the easier it will be for them to transfer those same skills later in life when they need to save up for a trip abroad or a course they’d like to attend.
In teaching your little ones this invaluable skill, you’ll create a positive atmosphere in your home where saving money isn’t a stressful job, but a great opportunity to use it in smart and meaningful ways in life.
Set a clear budgeting strategy
In case you’re an entrepreneur, running your business takes financial acumen, too. Some of the same tips from your life can help (such as managing debt and maximizing savings), but you also need to develop additional core money practices that will make your business profitable for the long haul.
If you’ve started planning each month so that you can save up, this is your chance to also start creating a thorough budget for your life and your business.
A proper budget calls for the right monetary goals, such as determining how much money you want to make in your business, what kind of health insurance you want to invest in, and the like. Choose realistic, manageable budget goals and milestones and start using your money to achieve them.
Make use of the right tools
Another way you can use digital to your advantage is to look for different apps and software tools designed to help families and professionals manage their money. Different goals call for different tools, so you might need to use an expense tracking app if you’re looking to save up from your current salary.
On the other hand, if you’re managing intricate business processes such as accounting and invoicing, then you need reliable billing software to help you simplify and track the process. No matter the type of your business (such as selling products online or offering services), you’ll find that using such tools can save you both time and money and allow you to keep your books in order.
Plan for your silver years
From your social security, 401(k)s, all the way to any other investments you’ve made over the years, your money today should work in favor of your future. Retirement planning should start as early as possible, so that you can greet your silver years with your mind at ease and your bank accounts filled to the brim.
With the right retirement plan, you can secure your healthcare, home, and any other needs you anticipate in your old age. This kind of security should be built in your youth, so the sooner you begin, the wealthier you’ll be as years go by.
Over to you
Your financial independence and stability both rely on your financial literacy. These are not the type of skills that can stagnate. Keeping an open mind, continuously looking for ways to make smarter money-related decisions and learning how you can adapt will help you expand your skill set and grow.
Not to mention that slowly developing your financial literacy will help you manage your money smarter so that you can focus on other, more profound areas of your life and growth.