Hello Readers!
Today is a] hands-on and helpful blog about my tips to become financially literate!
What do I mean by financially literate? Financial literacy is "is having the knowledge and understanding of financial principles to manage money in a wise, and effective manner." It's knowing how your money is being saved, spent, and managed. Financial literacy seems like a big scary thing, but it's really not. Simple tricks and tips that I recommend below will really help you to think of your finances in a different way, and hopefully manage them more effectively. I know looking at finances and personal budgets can seem overwhelming for people, and scary, but the end goal of being confident and secure in your finances is totally worth it.
People tend to think that talking about money and finances is gross or weird or awkward, but I promise you it isn't. It shows professionalism and respect to do so with others, and being financially literate will help you feel more confident about this. Check out my easy tips below and start building them into your daily routine with your friends and family to make sure you can be more financially literate.
1. Know your net worth
Net worth isn't just for rich celebrities but can be applied to everyone. Knowing your net worth can help you to feel more confident in your skills and finances. Your net worth is made of assets and liabilities. An asset is "anything you own outright that can provide future monetary value." Examples of assets include your car, bank account value, and real estate you own outright. Liabilities, on the other hand, are "is anything of monetary value that you owe to somebody else, whether that be a bank, organization, or individual." This could be a property you're renting or a car you bought on loan. To calculate your net worth, you just do the following calculation:
Assets – Liabilities = Net Worth
Don't worry if your net worth is negative. Many people have a negative net worth. You can make your net worth more positive by getting rid of liabilities, such as paying off debts.
2. Understand your income
Understanding how much you earn for your income, as well as the types of income you may have, is important in being financially literate. There are many types of incomes. Active income is when you perform a service or a job for someone and get paid for it: "active income can come in the form of commissions, hourly wages, tips, or a salary.". Passive income, on the other hand, is what everyone wants where you do little to earn your income. "Some good examples of passive income are investments that earn interest, selling a digital info-product or course, and owning rental properties." Switching your active income to passive income can be helpful in making you more money, but be sure you fully know what you're doing before this happens.
3. Saving money
Putting away a certain portion of your income is just a good habit for anyone because it increases your savings and helps to build your wealth. You can save your money by putting it in a normal savings account or in other investment funds with different interest types and rates.
4. Know the different types of interest and what they do
Unfortunately, the stuff you learned in math class about interest rates does actually apply here. Knowing the different types of interest and the rates you can get will help you determine if you want a loan or to make an investment, or what type of bank account you can get. Reading up on interest and researching what you want will help you to become more financially literate
5. Know your credit score and ways to improve it
Knowing what your current credit score is will help you to find ways to improve it, as well as better understand what you need for a loan. Improving your credit score can happen in many different ways, but the easiest way is to make payments on time and keep up with your credit. This is where budgeting and research can help.
6. Have proper life insurance
By this one, I don't mean going out and getting life insurance you don't need. Life insurance comes in many different forms, and knowing what type of insurance is best for you will help you to become more financially literate. For example, you may need fire or flood insurance if you're a homeowner. Knowing what insurance you currently have and what you may need for the future can help you to better prepare and capitalize on your own wealth. If you're curious about the different types of life insurance, you can get a consultation here.
There are obviously wayyy more tips about financial literacy, and it's good to read everything you can about becoming more financially literate. Know that your finances will always be a work in progress, but by being mindful of your spending, saving, and managing, you can easily boost your wealth and help lower the stress about your finances.
Until next time,
Katie
Sources:
https://bethebudget.com/financial-literacy/?utm_medium=social&utm_source=pinterest&utm_campaign=tailwind_tribes&utm_content=tribes&utm_term=742074090_30239182_294477
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