With knowledge and information, you can make better decisions – this is true for all things in life, money included. Your financial wellness depends on your understanding of money.
Most of us believe that our money troubles would be over if we earned a better salary, won the lottery, or married a rich man or woman. Sadly, that is not true. The thing that will help solve money problems is to make better money decisions, and you can only do that when you understand money better and use that knowledge to change your money habits. This is called financial literacy.
What is financial literacy?
In simple terms, it is knowing how to manage your personal finances, specifically when it comes to debt, savings, budgeting, and investments. When you understand each of these elements and use that knowledge to inform your money decisions, you are on your way to financial wellness.
Let us take a quick look at all four.
Debt is money you spend that isn’t yours. It can be a loan or a credit card. Good debt is money you borrow with which to improve your life, such as buying a house, getting an education, or starting a business. Bad debt is when you borrow to buy things you either don’t really need, such as more clothes, or when you borrow to get through the month. The latter is the quickest way to get yourself into a debt trap, where you have to keep borrowing to pay off last month’s loan. Your single biggest financial goal should be to clear debt and to live debt-free as far as possible.
Here’s what you must understand about debt management before you take out a loan:
Savings is money you put aside every month. Your first savings goal is to build up an emergency fund so that you don’t have to go into debt if something unforeseen happens. With your emergency fund in place, you can start saving for specific goals, such as a family holiday, home renovations, clothes for the new season, tyres for your car.
Here’s what you must understand about saving:
Budgeting is nothing more than having a plan for your money. When you draw up a budget, you decide how to spend your money. Your budget must show exactly how much you earn and exactly how much you spend. Once you know this, you can start making decisions about allocating your money differently, for example, by spending less on going out and saving more to reach a goal.
Here’s what you must understand about budgeting:
Investing means putting money away for the long term, for example, in a retirement fund. Investments are the only way to build wealth because they grow in value over time and because your money starts to work for you.
Here are a few tips on investment for you to consider:
How can you learn more about money?
Financial wellness is possible for every one of us. Start improving your financial literacy today and set yourself up for the future.https://www.bayportsa.com/information-centre/ Go back