Financial Literacy: The Basic Requirement for Fina

by Basi M. Consultant

Financial literacy helps avoid financial pitfalls. Acquisition of financial skills is the beginning of wisdom. We often do not look at our finances the way we constantly check our health. We should.

Recommended Features

Financial mindset
Covering the basics
Savings and Investments
Practical application of financial ratios
Practical application of investment ratios

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Review on Financial Literacy: The Basic Requirement for Fina

What is Financial Literacy?
Financial literacy is the foundation upon which wealth creation can be build. Everyone can make money but very few can create wealth even when they have the opportunity to do so. A lot of people are able to make money either through salaries and talent through sports, arts and entertainment, etc. Many of those people are not able to manage the huge sums of money they receive because of their lack of basic financial literacy. I am sure you know of many people in sports and entertainment industries who amassed huge amounts of money and only to lose it all afterwards. Those are typical examples of why financial literacy is so important.
At a very lower level, Financial Literacy is the ability to understand the importance of saving for the future, the importance of maintaining a good credit record and manage personal finances which include:
Budget: The purpose of a budget is to enable you to realize you most cherished desires by defending them from your casual wishes. It helps to reinforce discipline as it forces you to live within your means. Budgeting helps to avoid impulsive spending.
Debt management: Proper debt management is the basis for healthy budgeting that stems from good discipline. Do not commit to debt simply because you can afford it. If need be and provided you can afford it, use it reasonably to acquire income generating assets. This way you will be leveraging your way to wealth creation. Be wise with your spending on credit. Deal with over-indebtedness harshly as soon as possible.
At a higher level, Financial Literacy involves the ability to read, understand and interpret financial statements and economic trends. This ability allows one to identify strengths and weaknesses of any business entity and spot opportunities for investment. It also guides ones quest for building and expanding their portfolio of income generating assets.