All money is a matter of belief! - Adam Smith
Financial literacy incorporates the ability to count your money and evaluate the benefits and costs associated with your financial decisions. And as Robert Kiyosaki said, “We were not taught financial literacy in school. It takes a lot of work and time to change your thinking and become financially literate.” Well, here’s the perfect opportunity to check your financial situation and skills. April is recognized as the Financial Literacy Month – an ideal way to celebrate and explore intelligent tools and solutions like DrySign by Exela, that empower individuals during these rough economic times. On 9 March 2004, the U.S. Senate passed a resolution designating April 2004 as Financial Literacy Month. Since then, organizations have focused on promoting special events and circulating financial information throughout the month to help individuals become more informed about the importance of financial education.
What is Financial Literacy?
The definition of financial literacy varies, but with one central theme – financial wellness. Financial wellness empowers you to earn enough money to take care of your immediate and future needs without stress. Financial literacy educates you about having the necessary financial skills and knowledge to help make sound financial decisions that lead to financial wellness. Financial literacy is defined as “the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial wellbeing” by the United States Treasury’s Financial Literacy and Education Commission.
Financial education is often misunderstood to be intimidating; filled with complex terms and concepts. However, this is a misconception; financial literacy is within reach of everyone. Financial literacy empowers you to be capable of making major financial decisions such as planning for retirement, paying off debts, saving for a bright future, and many more. As per the U.S. Financial Literacy and Education Commission, there are five principles of financial literacy. Dive into the principles mentioned below that can help you establish a healthier financial situation.
- Earn:
Before your start spending, investing, or saving, it is imperative to know how much money you make. Understand your earnings and benefits to make the most out of what you have.
- Save and invest:
We all know the importance of saving or investing, but it is hard to spend less than you earn without any financial goals or targets. So plan your future goals, such as buying a house or retirement planning, create a budget, and start saving for it.
- Protect:
Once you have specific future financial goals and savings for the same from your hard-earned money, it is crucial to protect that money. For a secure financial condition, you need to take steps to safeguard yourself in case of fraudulent incidents or unexpected emergencies. These steps might include reviewing your bank accounts and credit card statements regularly, accumulating an emergency savings fund, keeping passwords and documents safe to protect against scams and identity theft, and buying the right insurance policy for your financial needs.
- Spend:
For developing healthy financial habits, you must start planning your personal budgets. Once you start tracking your daily expenses, you will be able to categorize them and create a budget for your needs to get better financial stability.
- Borrow:
At some point in life, several people out there might have to borrow money to cover significant expenses such as home, property, or a car. Borrowed money can also be used for any reason like to pay off student loans or credit card debt. So, borrowing doesn’t have to be a bad thing if you know how to compare loans and maintain a healthy credit score.
Also Read: https://drysign.exelatech.com/blog/how-e-signatures-can-optimize-internal-processes-business-case
Why is financial literacy important?
If paying your bills before they are due, getting things you always wanted in your life, investments to foolproof your future plans, volunteering and donating to nurture your inner self, and having a well-balanced life matter to you, then yes, financial literacy is important in your life. Unfortunately, many people out there don’t care about their money until it becomes a financial emergency. Do we really want our lives to head that way? Of course not; all of us wish to maintain financial wellness.
The COVID-19 crisis has incorporated several new challenges and vulnerabilities that the world needs to confront. Even in the United States, people are seen with poor knowledge of earnings, savings, expenditure, investments, and long-term financial planning. According to a survey by Bankrate, many adults feel the pressure of financial issues that could be avoided with some basic financial knowledge. Only about 4 in 10 Americans have saved enough money to spend on an unplanned expense of $1,000. Prices are escalating at the fastest pace in nearly 40 years, and several U.S. adults feel that inflation inhibits their ability to save money. 49% of the surveyed people said that the inflation is causing them to save less for unplanned expenses. The recent Fed data demonstrates that total household debt rose by $333 billion in the fourth quarter of 2021. Credit card balances augmented by $52 billion, while student loan debt contracted by $8 billion. These statistics demonstrate how crucial it is to have financial education for living a financially healthy life.
Unfortunately, just as the world was beginning to find its financial balance, the current, horrific Russian invasion of Ukraine is escalating entire financial sectors that have already been reeling since the past couple of years. Furthermore, due to this grave situation, inflation has increased in the United States at rates not seen in the last 40 years. In addition, the conflict and ban placed on Russian oil imports by the United States have created a massive impact, on already escalating fuel and energy prices. Therefore, every American household needs to learn how to combat inflation to offset the adverse impacts of these rising costs. The past few months have seen turbulent markets, decade-high inflation, geographical tensions, and much more. However, we still have the opportunity to improve our personal financial knowledge, manage our expenses, and make our money work harder because it is never too late to start.
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