Money is involved in almost everything we do in our daily lives. We work at our 9-to-5 jobs to earn money because we have so many things to spend it on. Most of us barely get by on our monthly income, making it seem like we are working for money instead of making our money work for us.
This is why financial literacy is important. Learning about money and understanding how you can make it work for you, instead of the other way around, will help you reach your financial goals quicker.
Learning about your finances can only start with the right mindset. Most people are afraid to tackle money issues because it is a sensitive subject that is tied up with their personal habits. If you want to save money, you need to accept the fact that you have to sacrifice some personal conveniences and luxuries to start saving.
Instead of treating your finances as a boring subject or a scary one, try to look at it with an attitude of curiosity. This is the only way you can start learning. Don’t be judgemental, just be curious about yourself, your money habits, and the possible ways you can make your money work for you.
Here are 5 ways you can start learning and improving your financial literacy.
1. Learn and Talk About Your Money
The first thing you need to do to learn about money is to become aware of how you spend your own money. Start tracking your daily expenses in a notebook, a spreadsheet, your mobile phone; whichever way is convenient for you. Do this for a whole month and before the month ends, you will already see a pattern on what you spend your money on. These are your spending habits. Based on these habits, you can start learning ways on how you can better spend your money.
Tracking your spending also helps you identify your attitude towards money. Do you have a poverty mindset or do you think about money like rich people do? Most people have a poverty mindset. Learning about your finances and having a plan of action will help you develop a wealth mindset.
Another habit you can develop is to be comfortable talking about money. Talk to other people about how they spend their money. Do they follow a budget? Has their budget worked for them so far? You might even find a buddy who you can learn from or who can help you stick to your money goals.
2. Make A Budget and Follow It
Once you’ve identified your spending habits, it’s time to make an evaluation. Look at the items you are spending money on and categorise them. Identify which are your major expenses. From there, identify which are the most important ones; the ones you need and can’t live without and which ones you can do without. Those items you can do without are your “money leaks”. You are spending money on these items unconsciously and these may be bigger items than just your cup of coffee from your favourite cafe each morning.
Based on this general category of your needs and your money leaks, create a budget. Your budget should help you plan out how much money you must allot for the important items on your list and how much you can spend on your money leaks, if there is extra money for them in your current monthly income. This way, you don’t feel deprived but you can control how much you can indulge in your favourite luxury – not every day but maybe once or twice a week will allow you to save some money.
Try to follow your budget for at least 3 months and adjust it accordingly until you create a budget that works just right for you. Then follow it each month while keeping track of your spending and your savings. This will help you discipline yourself so you can manage your money better.
3. Create Long-Term Money Goals
After learning and adjusting your spending habits, it’s time to create long-term financial goals. How do you plan to spend your money a year, 3 years from now? Having extra money tucked away in our savings account often inspires us to take up our buried dreams that we’ve kept in the back burner because we needed to earn thru a day job. This is the starting point of how you can make money work for you.
Write down how you want to spend your money in the next 3 years and even 5 years. Are you going on a travel adventure? Do you plan to put up your own business? Do you want to buy your own apartment? Do you want to study again and take up that course you really wanted to take in college but had to give up to follow your parents’ advise?
Write down your dreams and do your research to figure out how much money you will actually need to make that dream a reality. Once you have the figures, then you can start learning new ways to not only save more money but to make your money grow.
If one of your major goals is to get out of credit card debt, write it down and see how you can adjust your spending to pay it off as quickly as possible.
4. Learn and Start Investing
Now that you have a clear idea of how much money you have, how much you are spending and saving and how much money you need for your financial goals; it’s time to start learning about investing. If a maid can do it, you can too!
Unfortunately, financial literacy is a subject not taught in schools but here are some of the topics that you should start learning to improve your knowledge and skills in handling your money.
- Personal Finance Lessons You Wish You Had Learned in School – Part 1
- Personal Finance Lessons You Wish You Had Learned in School – Part 2
Investing is not only saving more money, it means creating wealth. One of the most convenient way to start growing your money is to enroll in your bank’s investment program. Be sure to ask your bank about it and learn how your money can earn from their program.
You can also consult a professional financial adviser who can help you decide on the best investment tool suited to your current situation and financial goals. This way, you are already growing your money while you are looking for other ways to earn more.
Be sure to check to see if you are ready to start investing. In the meantime, stick your budget and keep saving.
5. Keep Learning On How to Make Money Work For You
There are tons of resources about investing online and there are many books that you can read too. We have compiled some of the basics for you in these articles:
- Why You Should Invest in The Stock Market
- Bonds vs Stocks vs Funds
- Make Compound Interest Your BFF Not Your Worst Enemy
- How to Cope with Inflation
You can get more financial wisdom from these articles but be sure to read the books yourself:
There are many resources that you can easily access to improve your financial literacy. As you learn more and enhance your personal money management skills, you will eventually get the opportunity to learn about financial instruments that you can use to increase your wealth.
You can read books, watch online videos and listen to podcasts about financial management or about investing tools that you are interested in. You can also take courses to help you learn about finances. Just keep on learning as much as you can so you have a better understanding of what works for you.