What Does Personal Financial Literacy Mean? Why Is It Important?
October 7, 2021 | Emma Frost
If you’re on the journey to build financial success – or at the very least take better control of your money – then you’ve probably come across the term “personal financial literacy” more than once.
And while it may seem like a loud financial guru buzzword with little substance – it’s, in fact, very important. It is also simple to understand when not intentionally convoluted in an attempt to sell a personal financial literacy masterclass. Here is a breakdown of what personal financial literacy is.
What Is Personal Financial Literacy?
Personal financial literacy means having an understanding of various financial skills pertaining to one’s personal finances and the ability to efficiently use them to their advantage. The skills in question include but aren’t limited to money management, budgeting, saving, investing, acquiring, and paying off debt.
Why Is Personal Financial Literacy Important?
Personal financial literacy is a collection of tools one needs to control their finances efficiently and effectively, both on a short and long-term basis.
You might’ve heard that most people in America aren’t going to move out of their financial class. The easiest way to be wealthy is to be born wealthy, while those born poor will remain poor. And while there’s a kernel of truth there, it’s not all truth.
Those born wealthy aren’t safe from losing all their wealth due to poor financial decisions. While those who are poor may not become wealthy; but they aren’t cursed to remain poor either, as long as they’ve got the correct tools.
See, what often forces people to remain poor is financial illiteracy. If you get proper education or training, you’re very likely to get a good salary as well; only a good salary isn’t guaranteed to enable wealth-building.
There are people out there making 6-figure-salaries who are still poor. How? They live paycheck to paycheck. And if you spend everything you make, and have no assets to speak off, do not save for retirement, and losing your job means you lose it all – you are poor, no matter how big your paycheck is.
Most people in America aren’t being taught how to manage their money properly, they’re taught to spend. And that’s where personal financial literacy comes in.
Related Content: What Are Financial Goals?
Important Personal Financial Literacy Principles To Remember
Here are some of the most important money principles to keep in mind if you want to build wealth eventually:
- You need to know how much money is coming in, how much money is going out, and where it all is going. For that, you need a budget;
- You need to be living below your means – i.e. you should be spending less than you make;
- Pay yourself first if you want financial security. Have an emergency fund covering 6 months’ worth of your expenses at all times;
- Save little by little in advance for larger expenses like vacations or holidays. This will help you control the money flow without busting your budget;
- Don’t skimp out on insurance even if it seems useless at the moment;
- Start saving for retirement as early as possible. Long-term compound interest even on small amounts adds up to make an effective difference;
- Always max out employer retirement contribution, even if it means freeing up extra money from your budget;
- When getting a loan, never overborrow if you can help it;
- Treat credit cards as debit cards. If you don’t have the money to pay what you bought in full at the end of the month, then you shouldn’t be buying it in the first place;
- Be smart about debt. Don’t get a loan without a plan to pay it off.
What Does Being Smart About Debt Mean?
Debt is a tool that – like any financial tool – can be beneficial. But, of course, it can also hurt you if you don’t know how to properly use it to your advantage. This means knowing what the pros and cons of going into debt are, having a plan to handle it long-term, and having a good reason for getting it.
For example, if you need cash to cover an unanticipated expense, you may want to get an online installment loan. An online installment loan is an accessible way to get cash for those who need it on short notice. The good thing about an online installment loan from New Mexico Title Loans, Inc. is we welcome you even if you have bad credit.
Examine your savings, budget, and timeframe first. If there are possibilities to get cash together without getting a loan then you should explore those first. Only when the possibilities have been exhausted, should you resort to getting an online installment loan.
How To Get An Online Installment Loan
Getting an online installment loan with us at New Mexico Title Loans, Inc. is not difficult to understand. Just follow our quick guide below to have a better understanding:
- Start by filling out the online form found right on the website. Make sure to select installment loans when you do;
- Answer when our loan representative calls you to check your information and provide further instructions;
- Take the required items – a state-issued ID or driver’s license, proof of income, and a blank check from a checking account in your name – to the nearest New Mexico installment loans in my area;
- Let the representative assess your items and determine if you qualify for the loan. If you do, they will go over the loan terms;
- Once you understand the loan terms and agree, you can finish filling out some simple paperwork. Once done, you can get the cash either the same day or the next bank business day.
Start Working On Your Personal Finances Today
When you understand personal financial literacy, you are on the right path to start working on your own personal finances. Take this information and apply it to your finances to reach financial stability. And if you have an emergency expense, turn to an online installment loan for help. Fill out the online form today to begin.