Financial Literacy: Areas You Should Be Knowledgeable About

Tommy Wyher  |


In the past a large amount of financial knowledge that many people came from people’s parents. This led to many people making unwise decisions as they were not taught how to manage their money. Now with the internet there is no longer an excuse for people to plead ignorance for their poor financial decisions. Taking a proactive approach towards educating yourself about finances is important. It is possible that a person might increase their quality of life simply by saving a few extra dollars a week. The following are areas of finance that all people should be knowledgeable about.

Investing

People look at investing money like a gamble but an educated investment is far from a gamble. The investment can come in many forms whether it is putting money in your 401K or purchasing an income property. Understanding that your money in a savings account is not appreciating at the rate it could be is important. Even something as simple as investing in a bond or mutual fund is better than keeping money sitting around. Make your money work for you but you have to set investment goals to understand which route is best for you.

Credit Score

Your credit score is important whether you want to believe it or not. This can impact your ability to get loans, credit cards, and can even impact your security clearance for those in the military. The best part about credit is that you can start improving it by paying loans on time and taking care of delinquent payments. Many people do not realize that even their different forms of insurance take a look at credit to see if you are likely to file any claims. Even your water or electric company utilizes a credit check to see if a deposit is necessary or you pay your bills on time. Start improving your credit today as it is far more important than most people think.

Mortgages

Understanding the mortgage process is important for nearly everyone as most people want to purchase a home for themselves at one point or another. The lender is going to check your income for the last couple of years along with your credit. They do this in order to make sure that you will not default on the loan and to determine the loan amount that you qualify for. The best piece of advice is not to take the maximum amount offered as this can impact the rest of your life negatively with all income going towards the mortgage.

Budgeting

Creating a budget is important for everyone as understanding where you are spending your money can point out spending habits that need to change. Putting together a reasonable budget is important as you do not want your quality of life to suffer trying to save a few extra dollars. When putting this together you might find that there are magazine or software subscriptions still being deducted that you thought you had canceled years ago! If you are having trouble putting together a budget visit a financial planner as they can shed light on how much you should be spending in certain areas of your life.

Financial literacy is extremely important and can allow you to avoid making mistakes even if you are young. Take the time to do some research and read one article about financial health a day. Within a few months you might learn that you need to be managing your money in a much different way.

DISCLOSURE: I do not have any financial interests in any company or stocks mentioned in this article.


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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