How to improve your financial literacy

What is financial literacy?

Financial literacy is broadly defined as understanding and applying financial skills like budgeting and investing. Skills like learning how to create a monthly budget, saving for your long-term goals, and using credit cards wisely fall under financial literacy. By improving your financial literacy, you’ll better understand how to manage your money effectively. Tracking your spending and investing in the stock market might seem daunting, but a solid foundation in financial literacy makes these important tasks do-able.

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Why is financial literacy so important?

Strong financial literacy makes managing money easier and helps stop preventable financial issues. Improving your financial literacy can even help you be better aware of potential fraud or scams, as you’ll pay more attention to the money going in and out of your accounts. Moreover, you’ll be able to establish a better relationship with your finances and reduce money-related stress.

• Understand your spending habits. By creating a budget to track your expenses, you’ll have a better understanding of your discretionary spending. Financial literacy can help you create realistic guidelines for your budgeting. For example, the 50/30/20 plan divides your take-home pay into three categories, recommending you spend 50% of your income on necessities, 30% on discretionary spending, and save 20% towards your financial goals.
• Repay your debt faster. By understanding financial literacy, you can choose the best plan to pay off your debt and look into refinancing options. Financial literacy can also help you find the lowest interest rates to avoid accruing interest in the first place.
• Save for retirement. While financial literacy helps you save for short-term goals, it’s especially important when planning for retirement. Improving your financial literacy will give you a better sense of how much you’ll need to save and where to invest your money.

How can I improve my financial literacy?

Improving your financial literacy doesn’t require expensive consultations or formal education. Follow these simple tips to help you get started on your financial security journey.

Create a realistic budget

Before you worry about the more complicated details of financial literacy, start by creating a realistic monthly budget. A detailed budget helps you better understand what you’re spending your money on and allows you to decide what areas you can cut back on. Personal finance apps and other digital tools make it easy to view and organize your expenses.

Use free online resources

Take advantage of any tools offered by your bank, credit union, or workplace. From budgeting tools to credit score monitoring, free resources can help you better understand the financial landscape. If you want to learn more about investing the money you save, explore popular finance blogs on the topic.

Learn how to improve your credit score

Understanding your credit score and the impact of bad credit gives you a clearer picture of your financial status. Your credit score impacts many important financial decisions, from renting an apartment to applying for a loan. A good credit score opens the door to greater financial flexibility, while a poor rating makes managing your finances more challenging. Check your credit score online for free and explore information on how you can improve your rating.

Enroll in a financial literacy course

If you’re feeling overwhelmed by the amount of financial advice online, try a more structured way to learn about personal finances. From free online courses to college classes, there are many ways to learn the basics of managing your money, creating an emergency fund, and saving for your short and long-term goals. Investing time into your financial literacy journey can strengthen your commitment to your financial goals.

Meet with a financial advisor

For more complicated financial literacy questions, try meeting with a financial professional who specializes in the area you want to focus on. Financial advisors can help you organize and budget your personal finances or create an investment plan for your retirement.

Budgeting, saving, and investing your money doesn’t have to be complicated. By improving your financial literacy, you’ll be able to manage your money and plan more effectively for the future.