WHAT IS FINANCIAL LITERACY AND WHY IS IT IMPORTANT?

Being a responsible lender, we, at ExpressCredit, feel it’s our job to share with our clients and a wider community everything we know about finance and managing money.

Unfortunately, these essential topics are rarely covered at school. It takes some learning, practice and trying it on your own to get good at it.

So, the first question that comes to mind is “What is financial literacy?”

Financial literacy is the ability to understand the pros and cons of money-related decisions, weigh the costs, and make confident and informed choices.

We all know that retail is facilitated by credit. It is a normal practice for most of us to borrow money to finance our current and longer-term needs. We borrow money in form of student loans, credit cards and different consumer loans to cover emergency expenses or finance significant investments like land, home, or car…

The truth is that, like many other things, a healthy financial future requires time, patience, research and some education.

For example, a financially literate person knows, if they take home P5,500 per month, they cannot spend more than P5,500 each month without going into debt. Someone with a better understanding of finances might be familiar with the 50/30/20 budgeting rule (spend 50% on your needs, 30% on your wants and save 20% of your income) and aim to set aside P1,100 per month for unexpected expenses or holidays.

Hopefully, by now you have an idea of what financial literacy is and why it is so important. Now is the time to take the first steps and start learning the skills for building a better financial future.

MAKE A COMMITMENT

By now, you know that your actions and your attitude towards money is what drives your habits. Firstly, you need to make a realistic commitment to yourself and your family to make sound financial decisions. You should turn it into a habit. In other words, you shouldn’t adopt a budget and stick to it for one month only. To make it work, the commitment shall be longer-term.

ASSESS YOUR FINANCIAL SITUATION

Examine all your finances ─ from your earnings and savings to spendings and borrowings. It will help you to understand your financial decisions and think of ways to take control over and improve. It is important to be as open and honest with yourself as possible as. This assessment is a very crucial step, see it as a fundament brick for your financial literacy journey.  

CLEAN OUT YOUR FINANCIAL CLUTTER 

You need to eliminate the clutter so you can focus on improving your financial situation. Get a notebook, create an Excel spreadsheet or download an app where you can organise and re-group all your outgoings. Once listed, go through all the items – you might notice you have subscribed for services you don’t really use or even conclude of spending too much on nice to have items.

And don’t forget, if you need help on the way, ExpressCredit is here for you!

More articles will follow.