Most finance related problems for an individual begin due to lack of proper financial knowledge and inability to manage one’s finances well. Add to that half baked knowledge about investment avenues and resulting poor investment choices, and one would find him or herself in deep trouble. Among the several other resolutions taken by individuals every single day each year, one strong and determined resolve should be to increase their financial literacy. This will help them in stabilizing and even improving their financial strengths, which has become even more important, given the unstable economy and recessional situation.
Financial literacy can make individuals who earn significant income today and those who do not, yet, understand that a mere ‘paycheck to paycheck’ existence cannot sustain them forever, least of all in case of a rainy day or in times of adversities. It was observed that most of the college graduates and even professionals do not understand the importance and potential of financial literacy, who have no idea how grave their situation can be if they are caught up in midst of a grave contingency or dire emergency.
Working on improving one’s financial literacy
Small yet steady steps taken by an individual can work a long way in improving his or her financial brainpower. Thorough understanding of current and potential financial assets makes one ready to face the uncertainties of future, instead of being at the mercy of monthly paychecks and loans. Recognizing and understanding the different investment avenues and making the best investment options work is the best way of ensuring that one is amply equipped for handling any uncertainties encountered in the future.
Tips for strengthening financial literacy
Here are a few guidelines which can be followed for strengthening financial prowess:
Getting over the disinterest/dislike towards financial management – Managing finances can be an unsettling task for several individuals, and there are many people out there who conceive it as an impossible chore. Overcoming these initial barriers and overcoming the initial misgivings can bring in considerable progress. Thinking of it as a useful approach for the future might help one get along with the learning process initially.
Taking a slow, goal-oriented approach – let’s face it – no one can become a finance wizard in a single day. Instead, a lot could be learnt if only one takes it slow and steady. Beginning with simpler topics like simple interest investments, mutual funds etc is a good idea. Learning one topic at a time and progressing gradually to a more complex investment plan would keep the frustrations and misgivings at bay.
Seek professional help – There is no denying that nothing beats learning the tricks of the trade straightaway from the experts themselves. Seeking help from professionals does help one a lot in gathering insight into different principles and strategies on otherwise complex subjects like hedge funds, budget allocation, types of funds etc. Taking help in selection of the right investment avenues and forms will prevent one from making inept investment decisions. Choose an expert stock broker or financial planner for professional help.
Learning from mistakes – Perseverance is the key to expertise in financial management. What is preached in theory might not be feasible for practical application – failures are but stepping stones to success in case of financial literacy as well.
Keeping track of news and developments – Financial literacy requires one to follow all the news regarding financial laws and constitutional changes, so that he or she can determine how the changes influence them, if at all. Staying ahead and keeping a track helps one to make sound financial decisions.
Choose to save – Learning the basics of financial management is one thing, but it is quite another thing to actually going to the extent of investing on their own. Learning to draw and implement budget plans and cost sheets, debt management, stock trading and buying shares, retirement planning etc. is important for one to be able to prove him or herself to be financially literate.
Financial literacy – The importance of investing
Investing is a matter which most people ignore completely and others procrastinate exceedingly about, regretting it later in times of contingencies and adversities. There are others who believe that investments are meant for professionals, experts or the meticulous crowd. The truth, however, is that anyone can and should learn how to invest safely in the right manner. Before setting off to make investment plans and work out strategies, one should understand that the basic premise behind investing is not to grow rich or wealthy – it is just so that one is able to maintain their current lifestyle as it is today in the coming years as well, with the inflation and fuel costs rising steeply every year, and with thousands of companies closing down every year.
Where to Invest / Save?
Contrary to the common misconception, investing is not very difficult, and the risks can be eliminated through systematic planning. Some of the easy investment avenues are as follows:
Stocks are literally portions of companies that one can buy. A 10% shareholding would mean that you own 10% of the company. Investing in growing companies through stocks and shares is an art that is best acquired slow and steady, with adequate professional advice and instinct.
Gold trading at bullion markets is one of the surest yet riskiest methods of making sound investments. The yellow metal is prized and respected by millions of people across the globe, and its easy tangibility and liquid nature make it all the more attractive. Gold trading can lead to stable increase in overall wealth and other personal assets.
Forex trading or foreign exchange trading on the other hand deals with fluctuations of a currency. One needs to keep track of the developments and changes in economic and political scenario of different countries and speculate the changes in their currencies accordingly herein, so as to be able to make money through the speculation.
Managing personal finances
Efficient debt planning helps in managing personal finances in a better manner, which enables one to invest better. Minimizing credit card debts, careful scrutiny of the loan repayments and other installments, dragging oneself out of the crucial cycle of EMI payments is important for one to be able to save more for the unforeseen rainy day.