Empower yourself with financial literacy

Imagine Mohan, a decently salaried individual who's living in the luxurious city of Bangalore with everything up to standard. He really does enjoy the work he is doing, and he sends a small portion of money to his parents, and he just spends the rest of the money on luxurious things.

One day he met with an accident, and it was the end of the month, and he really didn't have a single penny in his hand. Even though he recovered, he wasn't able to pay the hospital bill. No friends helped him, and it was his parents who sent money to him.

Now you might be wondering why I am discussing this example here. Did you get any insight from this example? Think for a minute, and then continue reading.

So, many situations like this have crossed your mind by now. If Mohan were financially literate, he wouldn't have made this mistake.

What is financial literacy?

What's the benefit of learning ABCD if you don't know how to read? Similarly, what's the use of the money in your pocket if you don't know how to use it?

Financial literacy is nothing but the management of money. It teaches us how, when, and where to use money.

It provides a gateway on how to utilise the hard-earned money in a variety of ways so that our present needs as well as future needs are addressed.

Why is financial literacy important?

Are you a salaried person? or a businessman?

How much is your monthly salary? or profit?

What are your expenses?

Do you have any savings?

Have you thought about emergency funds?

If you say "yes" to the last 2 answers, I would probably say you are financially literate. But have you really thought about it, recorded it, and budgeted it?

That's where financial education is important.

What's the major problem?

If we were educated about the importance and need for finance, life would have been easier, right?

But just like they don't teach about mental health, teaching finance is also not considered important, but it really is!

As a result, even though there are various alternatives to finance, people do not usually invest in any of them due to the fear of losing money. If they do invest, they may end up with losses.

Now what's the main problem with that fear or loss?

Lack of education, isn't it?

What's the solution?

Is there any problem without a solution? People have found medicines to cure even cancer, haven't they?

So this problem also has solutions, which I will be listing below:

1. Watching online education classes.

2. Seeking professional help

3. Reading the newspaper.

4. Reading finance blogs.

Some of the tips to achieve financial literacy

Go by the rule:

Learn-Earn-Budget-Invest-Borrow-Reward

I would like to elaborate on this rule by giving an example.

Take Mohan from the example I provided at the beginning of this article. Mohan, after his accident, met CMA Anitha, one of his friends from Bangalore. After hearing about the incident, Anitha asks him to enroll in her recent course about financial literacy.

After enrolling, Mohan comes to understand the techniques of money control, like the 50:30:20 rule.

As he starts to allocate the expenses for his month, he comes to understand that his luxury items cost him a lot. He realizes the fact that by reducing the luxury expenses, he could invest the amount in some funds, through which he could later get more returns. He also understands the importance of insurance, which would have helped him meet his medical expenses and his vehicle expenses.

Now, I guess you could see the difference. Now Mohan is a different person, isn't it?

One of the techniques that I discussed in the example

50:30:20 technique

This technique tells us to apportion 50% of our earnings to our needs and obligations. 30% of our earnings go to fun and entertainment. 20% of our earnings go to savings.

There are various techniques for money control and its management. The right application of knowledge or professional advice would help us manage our finances without overspending. I hope by now you've come to know the basic ideas of what financial literacy is. I hope you can make the best decisions about your finances so as to enjoy the present without being anxious about the future.

Authored By

Sumaya

Finance Content Writer

CMA Semi qualified

Bcom graduated