Financial Literacy and it's Components

What is financial literacy? 

Financial literacy is having the knowledge and skills to manage your money effectively. The goal is to make informed decisions so that you are able to grow your bank account and net worth over time. This is NOT an overnight process.

Components of Financial Literacy:

1. Earning Money

You should always have a rough estimate of how much money you take home monthly, before AND after taxes. You should also know what tax bracket you sit in. 

2. Budgeting Money

You HAVE to track how so that you are able to adjust your spending habits to your financial goals. Your budget should be broken down into broad categories for better insights. You can use mint for your personal budget.

3. Saving Money

You should save at LEAST 10% of your income. Break your savings into different accounts:

- Fun Money

- Emergency Savings( 3-6 months of expenses minimum)

- Retirement fund

- Investment fund

- Big Purchase Fund(car, home, etc).

4. Borrowing Money

You should constantly review your credit report to keep your credit score in good shape(670+).

The ⬆️ the credit score, the ⬇️ the interest (APR) will be for loans and credit cards that you might open up. 

5. Investing Money

Before you make any investments, DO YOUR RESEARCH. How will the investment work?

What is the ROI? Over what period of time?

What are the risks of this investment? 

Does the return outweigh the risk?

Who are you investing with? Are they credible?

6. Protecting Money

Don't get caught slipping

- Turn on 2-factor authentication to protect your accounts

- Keep your passwords/login info in a secure place

- Review bank statements to minimize mistakes and identity theft

- Beware of pocket watchers.

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