Becoming successful in life is not simply about working hard and earning money. You must know how to effectively use what you earn to grow your wealth and elevate your living standards. With sufficient knowledge and understanding, you can avoid overspending, taking on too much debt, and wasting your hard-earned money.
Understandably, managing your finances is a vital skill to progress in life. In this article, we help you relook at your financial priorities and provide seven essential tips to become financially literate.
According to studies, nearly one in two adults in the US is financially illiterate. A staggering number of Americans are in debt, live paycheck-to-paycheck, and are anxious about their future.
You can avoid many of these situations by acquiring financial knowledge. Here are simple yet profound ways financial literacy can help you build a more secure future:
- Setting financial goals
Without clarity on your financial ambitions, you could pursue money and spend it in an ad hoc manner. But when you are financially literate, you are able to define short- to long-term goals and adopt a more focused and systematic approach toward earning, saving, and spending.
- Budgeting day-to-day expenses
By learning to prepare weekly and monthly budgets, you can plan your daily expenses within what you can realistically afford.
- Managing debt
Making larger installment payments, settling high-interest debt, and similar measures can help minimize debt and fast-track your way to financial freedom.
- Utilizing financial products and services
From different bank account types to payment and borrowing options, you get to make better use of a range of tools and products available to manage your financial position.
- Improving financial decisions
For example, when you are taking a loan, you will know how to assess different borrowing options, rates, and terms and gain a deeper understanding of the implications of taking each path.
- Saving and investing money
Financial literacy will equip you with the skills to analyze savings and investment options and multiply your wealth. For instance, you can evaluate fixed-income products against high-risk instruments to select a route that fits your financial goals and risk appetite.
- Planning for retirement
You can, for instance, calculate the necessary retirement savings and start putting away money early into Individual Retirement Accounts (IRAs), pension plans, and other investment products to plan for a comfortable retired life.
7 Tips on How to Become Financially Literate
If you are considering sharpening your personal finance knowledge, there are several options for achieving financial literacy.
The tips we have listed below are particularly suitable for those new to this area, as well as individuals who have gained some exposure to finance-related topics.
1. Sign up for a course
Although formal education may require a substantial investment, it is the most effective approach for structured learning.
In a classroom environment, you get to interact with experienced teachers, ask questions, and seek clarification in person. It also allows you to learn with like-minded individuals with aspirations, ambitions, and goals similar to yours. This could be beneficial in keeping you motivated and encouraging you to remain on track.
Before you enroll, compare a few courses for program content as well as teaching and assessment techniques. Check lesson schedules to ensure you can accommodate them with your existing obligations.
If finding the time to follow a formal course is a challenge, look for online programs offered by universities and colleges.
2. Read blogs, websites, and articles
From Investopedia, NerdWallet, and The Balance to Wise Bread, Well Kept Wallet, and Mr. Money Mustache, there are a range of online resources to help you get up to speed on financial knowledge, trends, and techniques.
Many are free, although a few may require a monthly subscription to access their premium content. Some are run by media and financial organizations that ensure high-quality content to educate readers with concise and easy-to-digest articles.
You can also find popular blogs by individuals that offer insightful posts. These can often take a less formal format with more relatable real-life examples.
3. Invest in books
If you enjoy reading, you can accumulate a wealth of knowledge from Rich Dad Poor Dad, The Psychology of Money, The Intelligent Investor, The Millionaire Next Door, and similar best-sellers.
From the importance of setting up emergency funds to the best techniques for diversifying your income streams, these books can introduce you to invaluable concepts and money mindsets for financial success.
4. Watch videos
If you don’t enjoy reading, you can still enhance your financial knowledge with the help of personal finance videos. YouTube, in particular, has plenty of them.
Graham Stephan, Nate O’Brien, The Financial Diet, and Debt Free Millennials are some of the popular ones for you to check.
5. Sign up for financial newsletters
Robinhood Snacks, Side Hustle Nation, The Nomad Capitalist, and various other sites offer insightful newsletters that provide regular updates on important news, trends, and topics, such as earning extra income and stock investing tips.
6. Follow podcasts
Podcasts can often provide deeper insights into a topic than regular YouTube videos. They are excellent for on-the-go learning, too.
There are several interesting podcasts on personal finance, including The Ramsey Show, So Money, and The Clark Howard Podcast.
7. Find a coach
A personal finance expert can help you define your financial goals and guide you toward long-term financial stability. They can equip you with the necessary tools, techniques, and knowledge to let go of money-draining habits and adopt powerful practices that can transform your life.
Leadar is a useful resource for finding an experienced financial coach. However, check LinkedIn profiles and review references before you make a selection.
Final Thoughts
If you want to pursue financial mastery, you must surround yourself with people who inspire you. There is much you can learn from their personal experiences and expertise.
However, accumulating knowledge won’t help you achieve your goals if you don’t take action. So, remember to practice what you learn. You may not always get everything right at the beginning. But don’t be discouraged. Put your skills to practice in small, deliberate steps.
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