If we are really serious about this freedom in life then “Financial Literacy” is one of the ways by which we can achieve freedom in life, especially in terms of finances.
This financial literacy is very much necessary for people who are earning money and taking care of the liabilities of the family. It is not enough to be able to speak the language of financial literacy. You can learn more about financial literacy by searching the definition. is called financial literacy”.
You get lot many such definitions of financial literacy but if you simply want to understand then…..
The component of financial literacy
Five key components to financial literacy. They teach you how to manage your finances in the best way. If you learn, practice and implement these five components then money will start working for you.
Know your money closely
We should be very much aware of even our single rupee which we have saved and invested somewhere.
Generally, we do not know very basic things about our money like…..
- How much money do I have as on today?
- How much money do I have in which bank or Institution or Scheme?
- How much earning per month I am getting from my investments?
- How much corpus of retirement do I have?
- How much cash is available to me for my any emergency needs?
- How much money I have invested in Real Estate Properties and what is the present value?
- How much monthly Rental income I am getting from all my Real Estate Properties?
- How much gold, Silver …..etc I have and I kept where?
- What is the present value of gold, silver?
- What is in my bank Lockers?
- Who are the nominees of my investments?
- How my Spouse or Successor will come to know about my money & investments after me?
- If I am having all the details then I can plan my investments properly and get good returns.
- Where is the personal info of mine & my family members like PAN, Aadhar, Passport, Driving License, birth certificate etc. ?
- What are the credentials of my accounts like user ID & password and how I can keep this in safe custody?
These very basic pieces of information we do not know correctly and even do not know what the right way to get it is. Many times we forgot the investment made which we have done for a long tenure.
Another funny expect is that we are completely relying on banking or investment portals/ websites and on those online platforms many times we see that we are not able to access our own account due to server down or forget credentials or sometimes showing wrong information. We don't keep any records of our investments so we can accept the information that is provided by online platforms.
This shows that we are not very knowledgeable about our own money.
This is the first step in financial literacy.
Spending behaviour – We tend to save randomly, without knowing our spending habits. This lack of information about our spending habits can lead to us not being able to save the money we want.If we understand our spending habits well, then we can make changes that will allow us to save money that can be invested in assets or schemes.
To understand your spending habits, track your monthly expenses for at least three months. If you do that then you get to know where your money is going and you can stop the wastage of money where you are overspending.
Understanding your spending behavior is very much necessary as this will tell you how you can stop wasting your money and can able to save as much which you can invest in any scheme or asset to get a return on investments. The return on your investments will provide an easy income that will supplement your regular income.
This effortless income will increase over time so that it surpasses your regular income.
3. Savings –
When you become aware of your money and investments using the “Know Your Money Closely” method, you will be able to see how much income you receive from your investments each month. Once you see every upcoming month due to your regular saving, monthly income by investments increasing then it will give you the motivation to enhance your monthly effortless income by more n more savings.The second one is if you understand your “Spending Behavior” then you can easily stop wastage of money and can able to save more which you can invest to enhance your monthly income by investments.
4. Investing –
5. Protection of money These options can multiply your money quickly, even if they are not always the best. You must understand that you have a greater risk of losing money if you invest in higher returns.
So always keep your financial investment portfolio balanced where you can able to invest in secure, medium risk and higher risk investment options so if you lose something it should not impact your investment portfolio.
Protection of money is a very much important aspect of “Financial Literacy”.
These five components of “Financially Literacy” will help you lot to face any financial crisis in life and it will keep you stable and sustain your life in a crucial time.From our childhood till the start of adulthood, no one is educating about “Financial Literacy” which can very much help us to live life with ease.
We should understand that in the present time money has created its own importance and you need money to sustain life first and then to live life comfortably. If you are serious about achieving freedom in your life, “Financial Literacy” is the best way to do this. I am Vivek Rai, a blogger. I am Vivek Rai, a blogger. My goal is to help people live a peaceful, graceful life and to guide them in how to invest their valuable time and money so that they don't have to work for it.
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