Struggling with your finances? Dreaming about financial freedom? Becoming financially literate is probably the first and most crucial step you must take in order to achieve your financial goals.
In today’s digital world, there are countless ways to misspend your income and mismanage your finances. At the same time, however, there are new tools to help you and more knowledge than ever on how to get your finances straight.
Let’s see some helpful strategies to aid you in becoming financially literate below.
Understanding Financial Literacy
The first step to becoming financially literate is to understand what it means. Financial literacy is not some arbitrary quality, nor is it a degree you can get from some college. Instead, it’s an ongoing effort to keep up with financial developments and be able to make informed financial decisions.
Global researchers have identified three core concepts in the heart of financial literacy: interest, risk diversification, and inflation. Let’s see them in more detail below.
Interest, Risk Diversification, and Inflation
Interest represents payment from a borrower to a lender on top of the amount borrowed. In simple terms, interest is a fee you pay your lender when you borrow money.
Risk diversification refers to financial actions made to spread risk to numerous fields in order to ensure that negative results in one field will not impact the other fields. In simple terms, it is the concept of not having all your eggs in one basket.
Inflation is the increase of prices over time. In simple terms, inflation means that a dollar today costs more than a dollar tomorrow. Inflation increases the cost of goods and services because it reduces the purchasing power of currencies.
Exploring Financial Terms
Whether you are young and just starting out on your financial journey, or you just want to expand your financial knowledge, it’s important to understand how money works.
For example, most jobs pay you money in monthly paychecks. Paychecks come with a proof of income, or a pay stub, which outlines the specifics of your payment for every pay period. Not sure what’s a proof of income and a pay stub? Check out PayStubs.net.
Moreover, there are numerous online resources you can consult to expand your financial literacy. Our blog is a great place to start for general financial knowledge and helpful tips.
You may also want to check out MyMoney.gov for a comprehensive glossary of technical terms and official advice from the US government on buying your first home or investing in your 401(k).
Want to Become More Financially Literate? We Can Help!
We want to help you on your journey to become financially literate. With this article, you have taken the first steps, so come on in and explore more!
Our goal is to empower people to achieve financial freedom through frugal living and smart financial choices. Our website includes helpful guides, blog posts, how-tos, and general financial advice to empower you to make sound business and lifestyle decisions that will lead you to financial freedom! So, come on in and get started today!