According to the Milken Institute, financial literacy is particularly important in the United States,where individuals are solely responsible for their financial security. Although only 57% of Americans considered to be financially literate, it’s never too late to grow your financial knowledge. Consider it an investment in your future!
What is financial literacy? Financial literacy refers to a person’s understanding and effective use of different financial skills, such as budgeting, managing debt, building credit, andsaving. Having the knowledge and confidence to make informed decisions about your finances helps you stay on track with your short-term and long-term money goals.
Let’s discuss practical strategies you can put into action to start building a strong financial foundation:
1. Create a monthly budget
With this step, you can live within your income, prioritize saving, and begin to meet your financial goals today and in the future. Creating a budget allows you to compile your income and expenses in one place, giving you a clear view of them.
You’ve told your money that you’re in charge by creating the budget; now, it’s time to walk the walk and show your money that you’re in charge by sticking to it. We know this is easier said than done, so here are a few tips from Dave Ramsey on how to stick to the plan:
- Don’t set unrealistic goals that set you up for failure. Be realistic as you set up each budget line.
- Plan your meals.
- Check your social calendar to allow the proper amount of money. - Think weekly.
2. Emergency savings and long-term savings
Let's face it—life is unpredictable, and emergencies can strike at any time. Emergency savings create a financial buffer to keep you afloat in times of need. The money you set aside for emergencies shouldn’t be tied up in a long-term investment fund; it should be quickly accessible. That said, the account should be separate from your daily bank account to avoid the temptation to dip into its reserve. This can be crucial and is worth the conversation.
It’s all about being prepared. Long-term savings help you reach the goals you plan to achieve. As you set aside money for long-term savings, suddenly, that house, retirement, orlife-long aspiration is within reach. Long-term savings pave the way to your dreams.
3. Monitor credit scores and understand how credit works
Although we do not do credit checks at VIVA First, this is still an important step for you to take control of your finances and be informed. By monitoring your credit score, you can keep yourself accountable for maintaining your credit score to be its best, correct inaccurate information, and protect yourself from identity theft or fraud.
Credit matters because it affects your ability to get a loan, housing, insurance, and more. Therefore, it’s important to know it works so you know how to protect it. This is an essential part of reaching those goals we mentioned earlier.
In a complex economic landscape,financial literacy can empower us. By mastering this skill, we can navigate financial struggles, take opportunities, and ultimately, gain peace of mind.With each step forward in financial literacy, we get closer to making our dreams a reality.
