Financial literacy is empowering. It reduces financial stress and aids in achieving your aspirations. 
Financial literacy may seem complicated, but when you break it down, it’s all about planning for the future by using the following actions: earn, budget, save, invest, borrow, and protect.
Before you can manage your finances, you must understand the money you’re earning by calculating your monthly net income. Write down your monthly salary. If these vary, calculate the average monthly income you receive. From there, deduct all your fixed monthly expenses. Knowing your monthly net income will help you understand how much you can spend and save for the future.
Although it may seem like a nuisance, budgeting is one of the most powerful financial skills to have. A common budgeting tactic is the 50-30-20 rule. This rule of thumb is a simple way to instill positive money habits, as it requires 50% of your income to go towards needs, 30% towards wants, and 20% towards savings and paying off debt. No matter your income, budgeting effectively allows you to achieve your financial goals.
Everyone knows saving is important. However, it can be hard to save if you don’t know what you’re saving for. Set clear financial goals so that you have something to work towards. There’s nothing more empowering than working towards and achieving your dreams. For example, if your goal is to buy a home, figure out how much house you can afford. Once you understand this, you can assess where you stand and create an achievable action plan.
Setting aside money to save is great, but if you want to see your money grow, it’s important to invest. Rather than keeping your money in an account that earns less interest than inflation rates, you can earn greater returns by investing. The amount you invest depends on your situation, but never invest more than you can afford. There are various ways to invest for the short and long-term. Regardless of how you invest, it’s important to start early, as time is your best friend.
To increase or maintain a healthy credit score, you must borrow. This could be in the form of a credit card or loan. From interest rates to job opportunities, credit score has a great impact on life. Having a healthy score lets you qualify for better interest rates, which can save massive amounts of money in the long run.
Lastly, protect yourself from identity theft and fraud. Scammers and hackers will go the extra mile to steal your information for their own financial gain. Safeguard yourself by monitoring your bank statements, transaction history, and credit report.
Financial literacy and empowerment go hand-in-hand. Having even a basic understanding will increase your financial security, enable you to pursue your goals, and help you become a wise decision-maker. Money can be a complex topic, but by understanding financial literacy, you can achieve any goal you set.
For more information, Goodwill offers training and certifications in budgeting and personal finance.
by Craig Foster, Marketing & PR Manager