Why is financial literacy important and how you can enhance yours?

We would like to take you through why do you need a financial plan. Are you too young or too old to have one? The answer is no! And no matter which life stage you are at (whether you are wealthy or not wealthy enough) building a secure future by starting to manage your personal cash flow today is key to using your money to live a happier life.

1.⁠ ⁠Expense management
(a) Who much do I earn?
(b) How much do I save?

Many would know the answer to the first question, however fewer know how much they save. To efficiently optimize your personal cash flow, you will need to prioritize your spending towards your ultimate life goals and balancing living your life in the present whilst planning for the future.

It is key to monitor your money regularly so that you’ll understand your cash flow. There are 2 types of expenses – the fixed and the variable.

Fixed expenses are the essentials, recurring ones like your mobile plan, utilities, rent/mortgage, transportation, groceries, loan repayments or insurance premiums.

Variable expenses are the non-essentials where you can decide how you want to spend depending on the amount you have left after subtracting your living expenses from your total income. For example, choosing to take a taxi versus the train or to prepare your meal at home or dine out.

2.⁠ ⁠Create a budget and goal setting
Successful budgeting involves thoroughly understanding your income and expenses, setting achievable goals, and keeping track of your spending patterns. Now that you know what are your fixed living expenses, next step will be how much you have left each month and decide whether to spend, invest or save. It is time to also think about your current lifestyle and the life you want; what you want your financial future to look like. This might include buying your dream house, a car, retiring by a specific age or financing your children’s education. Once you have clearly defined goals, you can outline the steps required to achieve them, including your savings for short term and investing for the long term.

3.⁠ ⁠Read up and understand key financial concepts
Every individual’s attitude towards to money tend to vary based on your unique personal experiences. Strengthen your financial instincts and knowledge of various financial products, from simple savings accounts to complex derivatives. Consider reading up and be familiar with basic concepts. Having this knowledge will help you navigate the financial landscape better, allowing you to make informed decisions that align with your goals and risk tolerance. You can achieve this through self-learning, formal education, consulting with professionals and networking with peers.

4.⁠ ⁠Build emergency fund
Whether it is saving up for emergencies or managing daily expenses, creating an emergency fund acts as a financial safety net, protecting you from life’s uncertainties. The general recommendation is to save enough to cover three to six months’ worth of living expenses in an easily accessible and liquid account, separate from your other savings or investment accounts.

Having financial literacy empowers you to take control of your personal finances and navigate the challenges and opportunities that come your way. Remember, it is never too late to start managing your finances wisely. Your decision today will support your goals for tomorrow. Begin your journey towards a brighter and more secure future!

“The best investment you can make, is an investment in yourself… The more you learn, the more you’ll earn.” —Warren Buffett