Financial literacy is the capacity to understand and apply different financial skills to handle both the individual's and organization's finance effectively. In other words, financial literacy is the knowledge and awareness of knowing how money is being made, invested, and saved, as well as the expertise and abilities to make decisions using financial tools.
Being financially literate helps you to make better money management choices that ultimately contribute to a financially stable future. Additionally, it also helps you to preserves the assets you and your loved ones have built up. Although financial literacy addresses the common financial issue such as budgeting, spending, and saving, it can also include more complicated issues such as investment, taxation, interest rates, and overall financial planning.
Based on the National Financial Educator Council's report, it concluded that poor financial literacy and poor handling of personal finances is the main cause of the financial problem. To be precise, the study surveyed among 1,500 U.S. adults who said that they lost $1,230 in 2018 on average due to a lack of proper understanding of basic household finance issues. Likewise, nearly 20% reported that failure to understand their finances cost them $2,500.
On the whole, the lack of financial literacy in 2018 cost Americans a total of $295 billion. So this report immediately dragged our attention, leading us to develop an automated personal finance managing app- The Luna. Although financial literacy is required for organizations too, the app has the primary focus to manage the individual finance. Using the app, the user can easily get control over their personal finance on their fingertip.
Here are the three main components you will need to focus on to develop your financial literacy. It won't always be easy to learn these things but, with a little practice, it will help you for a lifetime.
Saving is clearly an essential part of ensuring a stable financial condition. Yet, most individuals don't give this dimension as much attention as they should. It is easy to neglect something like retirement because it seems too far away in the future. Learning to save early will help you acquire the experience, practice, and skillset you may need throughout your entire life.
Many youths do not believe they can afford to save. This may be because their spending is too high. Moving towards a goal is crucial here and there is a need for individuals to recognize that paying themselves first rather than spending extravagantly is of great benefit. Although the bills will always be knocking your doors, you can still make some savings with practice, diligence, and patience.
One of the most important aspects of remaining on top of your finances is the creation and maintenance of a budget. Without adopting a plan, it's hard to keep yourself responsible for where your money comes from and what it 's going toward. So learning the budgeting fundamentals is where any financial novice must start.
Making a budget helps you to get control over your money. Once they come, you can set aside funds for big bills, and prepare investments to meet your goals for income. Furthermore, budgeting requires a setting up money goals. In particular, working out on why you want to do a budget will help you to decide where you want to spend the most or vice versa.
Paying debts if you have any is one of the other ways to be financially literate. If you have taken some form of a loan, you need to try to pay off the debts as early as possible. Doing this would allow you to spend the surplus money that you are paying as interest. Also, settling debts also improves your credit score, allowing you to get loans at a lower rate in the future.
On the other hand, if you stay debt-free then you will be able to save money for retirement. Likewise, being debt-free will reduce the burden from your mind. With this, you will improve your self-esteem, results, and suffer from fewer illnesses. Additionally, It will also improve your productivity and will increase your paycheck.
As mentioned above, the Luna app has the best use when managing personal finance. To make you financially literate, the app allows you to manage and track your personal finance at your fingertips. To be more specific, the app allows you to connect all your credit/debit cards and monitor all your transactions in real-time. With this, the user can easily monitor if the expenses are according to the budget or not. Also, you will have a clear idea about where you have been spending most or vice versa.
The app can also be used when you have to split shared expenses with your friends, family, or partner. Besides, the app also helps when you have to settle up debts with friends or family. In simple words, using the app you can easily lend money from your loved ones and pay them back whenever you feel like. Everything is automated as users never have to get tense over complex maths or keep remembering who owes what to whom.
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