How To Become Financially Literate – Ultimate Guide 2022

Financial Literacy is essential for everyone. Whether you are a teenager, adolescent, young adult, middle-aged person, or senior citizen, you must know everything about financial literacy.

Interestingly, in the US, only 28% of the people are financially literate as per the recent finding based on the CFSI survey of more than 5000 Americans.

Financial literacy is an umbrella term. It includes a lot of topics that every person needs to learn. Starting from budgeting, personal finance management, and investing to banking, you need to know everything to manage financial issues.

Financial literacy is essential. If you don’t know how to save and invest money, no amount of money can be sufficient for you. As we are seeing a continuous rise in inflation, only investment can help.

What is Basic Financial Literacy?

As the term indicates, basic financial literacy means you have understood the basics of financial management and relevant aspects of it. Don’t worry; you need not undergo a course on commerce or finance to learn the nitty-gritty of financial management.

When you become the basic financial literate, you can make smart choices and be able to make better financial decisions. Basic financial literacy means knowledge of paying bills, investments, saving, and debt management.

It is only through your financial literacy that you can transform your life and become financially stable.

What Does It Mean To Be Financially Literate?

Being financially literate means you will be better able to set your financial goals, you can manage your debts effectively, understand all relevant aspects of credit cards, pay bills timely, and know the right avenues for investment.

The main problem is you won’t learn financial literacy at school. It is only through informal learning and practical experience that can make a person financially literate.

To be financially literate is a life-long journey. You must continue to learn more and enhance your awareness of money-related issues.

Benefits of Financial Literacy

You feel more confident while making money-related decisions.
Your perspective on financial issues changes.
Become aware to avoid debt in life.
Reach your financial goals and accomplish them.
You won’t feel financial anxiety.
Understand the right avenues to invest.
Set your retirement goals in advance.
Financial literacy can help you stay safe from financial fraud and rash decisions.

How To Achieve Financial literacy On Your Own

As mentioned above, only practical experience can make you a prudent investor. Completing a certification course on financial literacy is not feasible. The realm of investment keeps on changing. You need to continue to upgrade your knowledge to act smartly and achieve financial literacy on your own.

1. Read personal finance books

If you are a new investor and on your way to accomplish achieve financial literacy, reading personal finance books is the best idea. The more relevant books you read, the faster you grasp the hidden connotation of personal finance.

You don’t need to rush. Take things easily. Initially, spending around 2-3 hours per day on finance-related books can help. You can read some of these personal finance books to get started:

Clever Girl Finance—Bola Sokunbi
Spend Well, Live Rich—Michelle Singletary
The Financial Diet—Chelsea Fagan and Lauren Ver Hage
The Money Manual—Tonya B. Rapley
Your Money or Your Life—Vicki Robin
Broke Millennial Takes On Investing—Erin Lowry

2. Subscribe to Magazines and Online Newsletters

Don’t miss out on subscribing to relevant financial magazines and online newsletters. You can simply visit some of the best financial online magazines and subscribe to them. As soon as you find the latest newsletter of any online financial magazine in your inbox, read it completely.

Some of the popular financial magazines are Financial Times, The Wall Street Journal, Investopedia, Fortune, Bankrate, Student Loan Hero, and Entrepreneur among others.

3. Listen to Money Podcasts

Money podcasts are trending now. Young adults and senior citizens love listening to financial podcasts and enhancing their knowledge about personal finance and wealth management.

The best thing about listening to a financial podcast is you can hear it while doing household work or official duty. For busy people, reading articles and books is not always easy. In such cases, you can quench your thirst for personal finance-related information via listening to podcasts.

Here are the top five financial podcasts you can listen to:

So Money with Farnoosh Torabi
Your Money Briefing
ChooseFI
Robinhood Snacks
Marriage Kids and Money

4. Use social media

On social media, you can easily get connected with financial experts on Facebook, Twitter, and LinkedIn. You can follow their advice and investment-related tips to grow your wealth.

5. Take a Financial Literacy Course

If you don’t have any idea about personal finance, getting registered for a financial literacy course can help. You can enhance your knowledge and learn a lot of essential information about personal finance. Most of these courses are available for free, but some sites charge subscription fees for online modules.

6. Use Financial Management Tools

Using the appropriate finance management tools, you can easily manage your finance and wealth. It helps you effectively manage your financial resources and grow your wealth. Keeping a tab on financial blogs can make you more aware of the financial management tools and prudently manage your personal finance.

7. Break Your Consumer Mentality

Most of us have a consumer mentality. We need to avoid it. Wherever you go, you will see big-big banners, advertisements, and billboards. Brands compel us to buy this and that. And that’s when we unknowingly fall prey to conspicuous consumption. You need to start buying things that you need and ignore the rest.

8. Learn How to Budget

When you become financially literate, you’ll learn how to budget. By making a proper allocation of the home budget, you will be able to spend your salary or income properly. The first step to making a budget is by tracking your monthly income and expenditure.

Set your financial goals: long-term goals and short-term goals as early as possible. Short-term goals help you achieve finance-related goals within 12 months. And long-term goals take more than a year to fulfill—it includes retirement, savings, and bank deposits.

9. Understand Your Credit Score

Credit score plays a key role in accomplishing financial literacy. If you pay your bills and clear debts on time, your credit score will increase. When your credit history is reliable, you can easily take loans from banks or financial institutions. A credit score varies from 300 to 850. As a prudent investor, you need to keep a tab on your credit report. If your credit report doesn’t reconcile with your actual transactions, you can talk to a financial expert for legal options.

10. Understand Loans

Loans are liabilities. It is important to stay debt-free throughout life. The first step is to pay off the loan, which has a maximum interest rate. When this debt is cleared, you can focus on clearing other loans.

11. Get Your Math On

To be financially literate means you should have good calculation skills. Learning some basic formulas relating to commercial arithmetic such as compound interest, simple interest and others can help.

Moreover, you can also use spreadsheets or MS Excel software to calculate certain formulae instantly.

12. Secure Your Future

The very purpose of being financial literate is to secure your future. You have to think about your retirement plans in advance. There is actually no point in planning your retirement when you are days away from your actual retirement.

If you are above 50, setting retirement goals is necessary. You shouldn’t delay anymore. It includes a lot of things like calculating your monthly expenditures, grocery needs, medical expenses, house rent and others.

You have to consider investing your fund accurately in the right avenues, which can generate good returns and can make you financially stable in your retirement days.

13. Talk to a financial professional

Getting in touch with a financial professional is the right solution to understand your monetary needs and investment purposes. Whether you want clarity in your long-term goals or short-term objectives, only a qualified financial expert can help.

In Conclusion

Financial literacy grows with age and experience. It is practical in nature. If you don’t invest your funds properly in the right avenues, your earning potential will suffer. At the same time, you need to understand how to clear your debts and loans without paying a lot of interest on it.

Improving your credit score and enhancing your credibility in the market is another significant factor that matters a lot. Thus, if you start taking control of your wealth early, the better will be your investment strategy.

The best time to start your journey to becoming financially literate is now. Don’t wait. Indulge into the pool of personal finance now and enhance your knowledge about financial issues.