Photo Credit: AAUW, 2022
For years now, I have witnessed how community organizations manage their cash flow to create opportunities and achieve their objectives. These organizations keep track of their investments, expenses, assets, sources of income, and even day-to-day regular cash spending. Yet, such knowledge is not emphasized at the individual level, in local and early childhood education. To achieve certain goals in life, cash may one way or the other appears to be a root solution. And a skill that can be taught widely but can only be learned subjectively through experience and unique to each person; financial literacy.
Financial literacy means having the necessary information, skills, and knowledge related to different financial aspects that’ll allow you to take practical actions and decisions. It can leave you financially growing and stable throughout your life even outliving you and the generations to come. I have learned that knowing how to manage your money, loans, and investments is the key pillar in becoming financially literate. But all this can’t simply be learned theoretically and understood; one has to get practical with it. Financial literacy needs character. It requires discipline, focus, persistence, consistency, critical analysis, and thinking, all of which sum up respectively to bring positive results needed.
It’s never too early to start taking charge of your finances. Based on my research and personal experience, here are the three ways to manage your personal finances:
1. Money Management
If you don’t want to be stuck in bad financial situations often then you should really put a track on how you use the money you get from either work or as a gift. Without a detailed plan and management on how to use your money, it is very easy to find yourself spending paycheck to paycheck and it just couldn’t get any riskier than this.
In managing your money, consider the following tips:
Never live beyond your means. Outline your necessary needs with a budget to cover them first. If necessary, set aside a fixed amount of money to spend on recreation as it's important to ease your mind while making sure it doesn’t cause you to run out of funds.
Take a portion of the money you get and put it in savings. This requires discipline and consistency that comes in very handy in case of a financial emergency. It makes sure incidents of emergency do not set you back financially and jeopardize your plans. Having knowledge of bank interest rates might help you choose your savings bank account wisely so that you put your money in a place where it grows exponentially with time.
2. Debt and Loan
Debt isn’t always bad. When securing a debt or loan, it is wise to analyze the terms of payment and the organization/person you’re getting it from. All these can either be a drawdown or a level up. If the conditions of the debt or loan will not cause you to compromise your financial situation then it's okay to have it.
Borrowing an amount of money that you may not be able to repay on time is one of the mistakes that one should avoid. It is a hanging chance or luck to put you in a bad spot for getting more loans. However, it may even become riskier to borrow money to invest in ventures that haven’t been successfully done before.
On the other hand, when giving loans to friends or any other parties, use money from a separate section in your personal finances set aside for assistance. Using money that is for your personal needs for such purposes would cause a challenge since most of the time money may not be paid back on time. Having funds set aside to assist others, if needed, allows you to think freely and be healthy about your money.
With such an approach, you’ll be able to avoid emotional pain. Nothing hurts your finances more than bringing emotions into it. And emotions are somehow inevitable when you want your money rolling back into your financial plans. This can make you lose focus and vulnerable to making bad financial decisions.
3. Investing: Taking the leap
There isn’t truly any better way to achieve financial freedom than to partake in investing. Taking a risk to invest not only unfolds one character but also helps an individual navigate money management.
In personal finance investment, you can initially start by finding something you love doing or want to change around you. Start off with research. Along the way ‘’stay hungry, stay foolish’’, retain the curiosity and eagerness to learn and listen from those doing better than you in the field you’re trying to invest in. Sometimes beginnings are never smooth, you may differ from experts in the specified industry. Yet, it is always wise to grasp the advice and pick what works for you, work hard on it because absorbing a lot of information often leaves one in confusion and inaction as a beginner.
When you lose money while investing, do not try to avenge it, you might only lose more. Look hard within yourself and see where you went wrong, was the problem technical or psychological? Find ways to fix it so that it doesn’t happen again and always keep your head up and push forward.
Financial literacy is surprisingly interesting. It allows one to explore and achieve lifetime goals. In the journey of financial literacy, do not look for validation outside yourself to start doing something. Sometimes in our lives, we’ve been programmed since early childhood to seek validation and less of a push in self-belief to do something. If you feel it in your gut, do it.