What is financial ignorance? Are you financially aware?
To be financially ignorant is to lack the knowledge & skills required to make sound financial decisions. Many people are ill-equipped to make crucial personal and family financial decisions. Stress & hardship always abound where there is financial ignorance.Financial literacy is an individual’s capacity to gain more knowledge by reflecting on the critical consequences of financial decisions. Financial literacy is the confident understanding of concepts including saving, investing, and debt that leads to an overall sense of financial well-being and self-trust. It starts by building a basic knowledge of money matters.
How do you become financially educated?
While it can take some time, there are some simple steps you can take to become financially literate:
- Learn about money matters.
- Use financial management tools.
- Ask for advice.
- Use your network.
- Learn to budget.
- Understand credit.
- Create and manage a checking and savings account.
- Understand debt and loans.
Do you understand money? Let’s see how well you do with the following questions.
1. Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After five years, how much do you think you would have in the account if you left the money to grow? A) more than $102; B) exactly $102; C) less than $102; D) do not know; refuse to answer.
2. Imagine that the interest rate on your savings account is 1 percent per year and inflation is 2 percent per year. After one year, would you be able to buy A) more than, B) the same as, or C) less than today with the money in this account? D) do not know; refuse to answer.
Cost of financial ignorance and its consequences
Financial illiteracy can result in poor savings, poor spending, excessive credit card use, and bad investment decisions. The stress of financial insecurity in families can lead to divorce, suicide, domestic violence, and other crimes.
Though personal finance has several aspects, they easily fit into one of five categories: income, spending, savings, investing, and protection. These five areas are critical to shaping your financial planning.
What are financial skills?
Is the capability to use relevant knowledge and understanding to manage an expected or an unpredictable situation to solve a financial problem and convert it into a benefit and opportunity to one’s advantage. These skills can be acquired or can be learned through interest.
Basic money skills you need to master before turning 30
- Create a budget
- Calculating your savings rate
- concept of paying yourself first
- How banks and the account types work
- Investing skills
- Managing debt skills
- Credit scores
- Making money skills/multiplying
- Side hustling
What will happen if you lack financial skills?
The lack of financial literacy can lead to several pitfalls, such as accumulating unsustainable debt burdens through poor spending decisions or a lack of long-term preparation. This, in turn, can lead to poor credit, bankruptcy, housing foreclosure, or other negative consequences.
What is your current money mindset?
Contemplate on the following questions and start working on the roots.
- How do past experiences shape your beliefs about money
- What tools, strategies, and resources are available to align your financial needs with your goals?
Ways to Improve your money mindset
Decide to be financially successful.
Determine your life values.
Get comfortable with your fears and your discomfort.
Use affirmations to improve your money mindset.
Don’t dwell on your past financial mistakes.
Let go of limiting money beliefs.
Get help with money mindset coaching and courses.
Follow Fin-influencers to improve your money mindset.
Use money mindset quotes to inspire you.
What are your Money attitudes, and behaviours?
Four attitudes towards money: You can evaluate your financial wellbeing by examining your relationship to money at four levels:
- Financial literacy
- Emotional symbolic meanings
- Processes for dealing with money
What is good financial behaviour?
A person seeking to achieve financial well-being needs to “live within their means.” This may mean being frugal, having discipline, and being able to distinguish between wants and needs. In addition, this person should be intentional in their lifestyle and think about how today’s decisions affect tomorrow’s outcomes.
How do attitudes affect financial decisions?
A person’s attitude towards risk and their chances of gaining from it is much more valuable than their attitude towards taking a loss from risk. Someone who understands that the risk is worth the reward will likely have a good attitude towards finances contrary to belief.
- What is your financial personality?
Your financial personality reflects traits and attitudes, such as whether you pay your bills on time, or how you feel about the future.
Why is it important to be financially disciplined?
Having financial discipline not only lets you spend your money only when necessary but also helps you to use the money you have in your hand most efficiently so that you would be prepared to handle unexpected happenings.