Being financially educated brings success. Control over your money helps to make better decisions and can change the quality of your life. There is no age limit to learning, but starting as early as possible is better.
Savings, budgeting, debt, investments, credit, and banking are the foundations of finance. Learning these things will make you book-smart and money-smart. No matter how financially educated you are, there is always room for improvement.
Sudden changes in financial laws and policies can dramatically change your financial situation.
Reading these seven tips will be a great place to start your financial education for a better quality of life.
1. Knowing the Basics of Personal Finance
Knowing the basics of personal finance is the beginning of your financial literacy. You need to divide your earnings. Study more about banks, budgeting, saving accounts, retirement funds, tuition funds, and trust funds.
Self-education is important because it helps you to understand different types of savings, self-budgeting, funds, dangers of having an irrevocable trust fund, and relevant safe investment.
Terms and conditions are always changing. Policies get renewed. It is very important to keep an emergency fund for that reason. It’s a financial plan for facing an uncalled situation.
Knowing these factors will give you a head-start for a quality life.
2. Financially Educate Your Family Members
Start informing your family members about the advantages of financial literacy. It will reduce the burden on you. Different opinions will open additional doors. Never set financial goals alone.
Engage your family members with different financial management tools. Include them in the planning. Let them understand the importance of budget, expense, and savings.
You are offering a better choice to your family by educating them about finance at an early stage. Take it as an investment. Your children will learn the value of cash. Allowing them to have a better life and success should be your top priority for a quality life.
3. Securing the Credentials
Identity theft has become a huge issue. About one and a half million cases were recorded alone in the United States. Thieves have stolen almost fifty billion US dollars from helpless Americans.
Do these steps for better security:
- Always use strong passwords.
- You should never give out the card’s PIN.
- Keep track of the account’s transactions.
- Periodically change passwords.
- Contact the bank as soon as you see a suspicious change.
- Don’t use unsecured public wifi.
This may seem irrelevant, but the Federal Trade Commission has issued a red alert. Securing identity is now a big part of financial literacy. Countless families have gone homeless or under huge debt. You should not ignore this, especially when you want financial stability and quality of life.
4. Choosing the Best Type of Account
You need to choose which type of account suits you best. You basically give the bank your money. The bank makes a profit out of the money and shares an interest with you from the invested money.
A Savings-account is typically an interest-bearing account. It’s a long-term conditional account where you deposit money in it. The interest rate is low, but it’s free of risk. It is the most sensible account option for any family. There is some money withdrawing limitations on it, but banks are flexible. This is an excellent financial step for short-term goals.
There is no limit for money deposits and withdrawals for Checking-accounts. The interest rate on this account can be close to zero. People generally use checking accounts for their regular spending.
High-yield accounts offer higher interest rates, but the risk factors are also high. If the profit is high, the loss can be high too.
5. Should I Go for a Debit or Credit Card?
Debit cards are issued on the checking/ current accounts. Whatever the money in that account is yours. You should always consider having one. Banks have working hours and a limited time frame for cash withdrawal. Having a debit card in your possession gives you the window for cash withdrawal even after banking hours.
Getting a credit card can be a bit problematic. Banks do not offer credit cards if there is no credit history. Having a credit card can be advantageous for emergency cases. Basically, you are borrowing money from the bank for a little interest in return. Always have a security deposit for the credit card.
6. Start Creating a Budget
Your expenses should not cross what you are earning. That is why you need to start creating your own budget. You can use Excel, budget mapping tools, or scrap paper for it.
List your earnings separately. Divide your expenses into two parts. Things you need to pay for every month go to fixed expenses. Electricity bills and phone bills are fixed expenses and essential spending.
There are products that you can survive without. It goes to disposable expenses. Fast food and luxury items are your disposable expense and non-essential spending. Budget-failing can happen often times of mixing up the essential and non-essential spending.
Save money from disposable expenses. That is the smartest choice.
7. Invest Your Money
Smart Investment is the best way to increase the quality of life. Investment is risky but also a great way for financial success. You can invest your money into:
- Stock Market.
- Cash-deposit-interest.
- Bonds.
- Exchange-Traded Funds.
- Mutual fund.
- Equity fund.
- Real-Estate.
- Hedge Fund.
- Tangible Resource industry [eg. silver, gold, coal]
You should always consult with licensed professionals for legal advice before investing. The industry is safe, but a wrong decision might dip your financial status at the bottom.
The investment industry is highly complicated. Self-education can be a great start but consult with a legal advisor and always go for safe investments.
Conclusion
You cannot become money-smart overnight. These seven tips cover the major financial aspects that you need in life. It is the beginning of better life choices. Take your time and read through more of these things.
Financial education is a life-long pursuit. It will keep evolving. Sometimes you will get rewarded and sometimes you won’t.
Trying to change the bottom line for the top is the purpose of financial literacy. Quality of life will improve gradually.