How to Master Basic Financial Literacy
According to a recent study, almost half of the working population in the UK – some 18.5 million adults – lack the skills they need to manage their money correctly. That means one of the first steps to financial freedom starts with some careful study to build skills to become financially literate. Here's how.
What Does Financial Literacy Mean?
Financial literacy refers to the idea of an individual being fluent in the various areas related to personal finance. It is a term that can include mundane everyday tasks like figuring out how much change should be due for a purchase, all the way up to more complex financial tasks like managing investments in the stock market, real estate, and in startup businesses. For the average person, though, understanding basic financial math and day-to-day money management is a great start.
Begin With Mathematics Skills
As with any other area of study, becoming financially literate is best accomplished by starting with the basics and working your way up. A great place to start is by brushing up on basic mathematics skills. Head over to the National Numeracy Challenge to take advantage of the free resources there to improve your ability to work with numbers. There, you'll pick up some real-world numeracy skills that you'll be able to use every day – like figuring the right tip for a waiter that's done a great job serving you when you dine out. Those skills form the basis for a solid financial future, so take your time and become an expert.
Hit the Books
As the statistics demonstrate, adults in need of personal finance skills are everywhere. For that reason, experts in the field have written countless books on the subject designed to turn a novice into a personal finance superstar. You should make it a practice to read the ones that catch your fancy, and add the best lessons from each to your arsenal of financial skills. Together, they make up a valuable library of information that should be able to cover virtually any personal finance situation you find yourself in.
Take a Bookkeeping Course
Even if you become adept at math, maintaining your personal finance means understanding how to keep track of your money, not just count it when it's being spent. That means you're going to need to build up your bookkeeping skills, so you can keep accurate records of your finances over the long term. Today, online learning portals like CoursesOnline offer plenty of accessible, inexpensive book-keeping classes you can take in your spare time, right on your home computer.
They'll cover everything you need to know about recording the specifics of your financial dealings. You'll learn the right terminology, best practices for record keeping, and even how to keep a detailed ledger to track household spending to the smallest detail. Sign up for one today so you can start tracking your money down to the very last penny.
Learn How to Create a Realistic Budget
Tracking expenses is one thing, but to be proactive about managing your money, you will need to know how to create a forward-looking budget to maintain control of your bottom line. The good news is that it's easier than ever to start doing that. Head over to our handy budget calculator and input your financial specifics, and it'll help you put together a starter budget in mere moments. Then, you can go over your income and spending to see where changes might be in order.
Embrace Personal Finance Apps
Now that you have all of the basic financial literacy skills mastered, a great next step is to start using a personal finance app . Doing so will give you continued opportunities to learn via helpful, situation-specific financial tips. You will also gain much greater real-time visibility into your spending, which is helpful in making sure that you keep to the monthly budget that you've created. Once you're able to do that, you will be well-prepared to move on to learning about more complex and advanced financial skills.
If you've made it this far, you should be well on your way to basic financial literacy. You should have all of the skills you need to:
- Perform the mathematics involved in everyday transactions
- Keep track of your spending and keep accurate financial records
- Create a realistic budget to help you live within your means
- Monitor your finances in real-time to find more opportunities for saving
The most important part of the process, though, is the one that happens after these steps. It's the part where you embrace learning more financial skills to extend your ability to manage your money. That way, you'll know how to invest whatever savings you manage to achieve by taking control of your finances – and be on your way to true financial freedom!
Andrew joined Choose Wisely 5 years ago, originally working in a design capacity to make sure the website was simple to use. Most notably he worked with the Consumer Finance Association to design the comparison table of choice for High-Cost Short Term Finance products.