Tips on Becoming Financially Literate

Many people have the goal of becoming financially independent, which requires one to have a basic level of financial literacy. Financial literacy is knowing (and understanding) all financial concerns in your life, such as budgeting, banking, financial planning, and financial management. Admittedly this does seem like a lot, especially at first.

However, as with anything in life, there are tricks and guides to help us achieve our goals. There are hundreds of helpful guides online coaching people on the basics of financial literacy. Here are some points to get you started on your personal finance journey.

Research

The first step in any educational process is to take the time to do some research. Research can come in many forms, from reading helpful articles to listening to financial podcasts. Alternatively, there’s always the classic - reading personal finance books.

Many will find that it is a combination of all of these methods that will work best for them. To get started, consider signing up for a financial newsletter or two. These will provide you with daily tips - tiny changes that make the transition feel more approachable.

Utilize Financial Management Tools

Technology has made it easier than ever to handle one’s finances. Financial management tools and apps can help take this further by giving people more control and insight.

These tools can go beyond the obvious. Yes, a banking app will also make monitoring and managing your finances easier. But there are additional apps available, especially for those trying to improve. These days, money management apps can track your spending, make recommendations on where to save money, and even calculate your net worth. All with the click of a button!

Rethink Your Spending Habits

Now comes the hard part, for most people at least. It’s time to assess your spending habits. As mentioned in the previous section, apps are available to do this for you. This is an excellent tool as it is impartial. It has no emotional attachment to your purchases and will calmly lay out how your weekly and monthly budgets look (and how they should look).

Create a Budget

The next thing one should do on their financial journey is to establish a budget. This can be tricky, but it is easier if you’ve already taken the time to slim down frivolous spending. Look at all the recurring expenses in your life, such as bills, groceries, gas, etc. All of these items create the basis of your budget. They are the minimum which will be spent each month. Once this amount is understood, it is easier to decide what to do with the rest (most financial experts would suggest at least some form of investment, such as a 401(k) or mutual fund).

Know Your Credit Score

The idea of a credit score can be intimidating, especially as many people don’t understand what can and cannot affect their scores. Take some time to understand how credit scores work, including how they’re calculated and what changes affect them.

Signing up for a credit monitoring program can help protect against fraudulent charges. Doing so comes with the added benefit of always being aware of one’s credit history and score.

Ask for Advice

There’s no shame in admitting that you need help. As such, never feel afraid to ask for help. There are many options available when seeking advice on financial literacy. One could opt to lean on their network, obtaining personal anecdotes from friends and family. Alternatively, there’s always the option to seek out a financial advisor. Unfortunately, this costs money, but paying for an expert’s time will almost always be worthwhile.