Financial Literacy and Personal Finance
You need to recognize the true potential of money, you should know what money can buy and what money cannot buy. You also need to understand the value of money, understanding the value of money means you know when to use money and when not to use it. You need Financial management skills
Financial Literacy for Financial Management
On March 12, Florida Legislature passed a bill that made “Financial Literacy Class” mandatory for high schoolers.
Financial Literacy Class is a program that aims to teach people about the things like how to manage funds, how to save, how to invest properly, how to make a financial plan, how to plan a budget, how to improve your credit score, how to pay off debt or loan, etc. In fact, Financial Literacy Class is a program about money management that also includes buying insurance policies, building your net worth, planning for retirement, etc.
Are they actually effective?
There has been a lot of research on whether these programs actually help people or not and the studies have discovered that there is a “positive correlation between financial literacy education and financial behavior” A 2002 study by the US Department of Treasury found that those who received financial education saved more and had more bet worth compared to those who did not receive any financial education.
Where can you attend Financial Literacy Class?
If you are interested in learning about financial management, you can look into Udemy. Udemy offers a lot of courses on financial education. When you are enrolling for the course make sure you join a course with the highest ratings and reviews. On Alison, you can attend free courses on financial education. Other platforms to consider are Coursera, Edx, etc.
Financial Management: Correlation between saving and investing
Do you know what the main difference between a rich guy and a poor guy is? Well, whenever the rich guy has money, he will invest, and when the poor guy has spare money, he will save. This might not be true in all cases, but this is what happens in most cases.
Rich people can take a risk of investment, whereas poor people look for financial security without taking a risk, therefore, they save.
There is a correlation between saving and investing. You can save to invest or invest to save. Sometimes investing will save you money and sometimes saving will become your investment. Let me exemplify.
You buy a house (you invest). You move to your own house and stop spending on rents (saving money on rents).
You put your money in a fixed ban deposit (saving), after the end of the fixed deposit term, you will receive your principal along with the interest on your deposit (return on your investment).
Saving can help you in difficult times, for example, if you have saved, you will have money when you need it for an emergency; however, you can grow your assets and improve your net worth only when you invest.
One of the best ways to build funds for investment is by saving money. You save money for some time and then invest it.
How to Manage Your Personal Finance When You Have Debt
You need a good income source to stop borrowing, you need saving in order to stop borrowing, you need to cut your expenses to stop borrowing. There are a lot of things you can do to stop borrowing. However, for a lot of people borrowing become very important to run their lives as they cannot live just with the money they generate. For many low-income families, borrowing becomes necessary even for basic necessities like food, housing, medical bills, education, etc. Sometimes borrowing can be very useful and even might be profitable in the long run. For example, if you borrowed money to add an extra room to your house, and if you rented the extra room and make extra money, the borrowing will be profitable because you were able to generate income from the borrowed money. Likewise, when you borrow money for education, this can also be considered a good strategy because education will help you generate income in the future and you will easily clear the debt once you acquire a degree. Burrowing money for investment can also be considered a good idea especially when you are paying less interest compared to the return on your investment. You see borrowing is not always bad.
First published on Trendri, in author's name
Easier said than done. But what about those people who se earning is enough for their daily needs or even lower than that. Can they be able to save? I don't think so.