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Financial literacy is not something fantastic, it is just knowledge of some principles. They are not a secret and in many thematic books you can find some great advice. However, one cannot do without an integrated approach, because half measures are not able to give the desired result.
We have collected most of these tips in this article and will consider each of them separately. But first, let's talk about why many people fail to be financially literate. Rather, about the excuses that people come up with for themselves.
It's all about how we look at wealth accumulation. For example, you may have many limiting beliefs about money that have formed in your psyche over the years as a result of parenting or traumatic events.
It should be said right off the bat that beliefs affect the way you look at money - both for the better and for the worse. Here's what they can be:
Physical excuses
These are dependencies for which we ourselves are to blame. For example, watching TV, surfing the Internet without purpose or purpose, playing video games, impulsive purchases. They distract from thoughts that one can become a wealthy person, that is, they become a kind of protective mechanisms.
Social excuses
These excuses usually take the form of the phrase, "I don't have the right connections to get rich." To some extent, this may be true, because the people with whom you communicate determine your thinking.
Only this is still an excuse. Especially in the information world, where, with due persistence, you can meet, if not the greatest businessmen, then at least quite ambitious ones.
You need to stop excusing yourself. Deciding firmly that you are ready to change your thinking is the most correct thing to do. And let it take years, but it will pay off in full.
Many financial experts believe that the budget should be kept on a 60/30/10 basis:
Of course, you need to not only keep records, but also manage your finances. The following information is about that.
Minimize monthly expenses
It should become a habit. Think once a week about what costs you can cut. At the same time, it is important to be in a good mood and not assume that you are making sacrifices. Turn the process into a game.
Here are three key questions to help you stick to this rule:
The more money you have set aside, the stronger your financial situation. To get your thinking right, ask yourself the following questions:
Spend exclusively your money
No matter how advertising assures you of the profitability of the next loan offer, even if it becomes necessary to use it, approach it carefully.
It is not necessary to borrow and manage other people's money. This habit leads to wrong thinking, and even to debt trap. We will also talk about this later.
Some people create a financial cushion just in order to temporarily retire and engage in self-development or, for example, write a book. This is also a great solution, just remember that it will not be too easy to return.
Calculating the financial cushion is easy enough, although some people use long formulas. Find out how much money you need to live a month - just calculate the expenses for the last six months and print the average. This will give you an approximate final result.
Of course, the financial cushion does not take into account inflation, price increases and unforeseen circumstances, so it would be more correct to add a reserve fund to it. Here you are free to decide whether you need to create it and if so, what amount should be contributed to it.
So set yourself financial goals. Here are some examples:
Become financially independent
It means earning such passive income to become independent from work. You can quit your job and live in peace on the money that regularly goes into your pocket.
How much money do you need a month to feel good? Write down this amount. After that, start thinking about what you need to do to get such passive income.
Get financial protection
It's a simple goal: how much money do you need to cover all your monthly needs and set aside a certain amount? For example, you make a thousand dollars, of which you save two hundred dollars every month. Spend the rest. If this is enough, it means that you are financially protected and are able to feed yourself at this stage of life.
Get financial security
This is a certain amount of money that will allow you not to depend on other people. It is needed if you want, say, to go to India for a year to get acquainted there with the culture of this country and indulge in spiritual practices. How much money do you need to quit your job and not ask anyone for money?
We have previously written about financial cushion and contingency fund. These are also goals that you can and should set yourself.
In order to learn how to manage money, you need to start saving it. We will devote a separate section to this issue.
These are all the questions you need to give yourself an honest answer to right now. The habit of saving money is very difficult to develop. And that is why there are so few rich people in the world. This requires a different kind of mindset that will lead to completely different decisions throughout the day.
However, if you want to achieve financial freedom, the first thing to do is to start saving some of your income. You will think about what to do with them later.
To start saving money, you need to save. This does not mean that your life will immediately turn into hell: for this you do not need to go on a hunger strike and leave to live in the forest.
Create your money saving plan
First of all, set achievable goals and commit to saving some money (or transferring to a bank you trust).
It is believed that every person, if they work, can save 10% of their income. It is not necessary to drastically overestimate this number at once, but try to go 15-20%.
Think economically
Whenever we hear that a person is thrifty, we immediately begin to consider him a curmudgeon. Sometimes this is true, so try to be clear about: what does frugality mean to you?
For example, lean people tend to:
All in all, these are just a few examples. We are convinced that you can make a personal list by analyzing your behavior over the past month. Think about how much money you have wasted before, and then start saving it. A decent amount will come up in a year (yes, we have already said that accumulation is a long process).
Consider working remotely
Instead of spending time and money getting to the office, try convincing your employer that you can do all the work at home (at least 1-2 days a week). This will save you a lot of time. However, keep in mind that working from home is not easy - you have to learn how to motivate yourself.
Exercise to prevent disease
We rarely think about it, but it would be worth it. The United States is experiencing a boom in interest in sports, because medicine there is so expensive that it can make almost anyone bankrupt if they start to get sick often (insurance does not cover all cases).
Therefore, be smarter and you. The body wears out in one way or another. To slow down this unpleasant process, you need to play sports and monitor your health: take care of your body and your teeth, quit drinking and smoking, and switch to healthy food. After all, what is the point of making a lot of money now, if in the end you spend it all on treatment?
You can use the following 7 step program. However, this does not mean that it will be easy. Quite the opposite. Any predicament is different in that you first need to change your thinking, and not act according to the usual algorithms.
First, admit openly that there is a problem. Take full responsibility. Whatever happened in the past, you are somehow to blame for it. Forgive yourself for this. You got a second chance and don't make those mistakes again.
Recognizing the problem helps to shape new thinking and get rid of the whining and blame.
List your debts starting with the smallest to the largest. Then clearly decide how much money you will set aside for repayment each week or each month.
The bottom line is to pay off the smallest debts first. Thus, you will reduce the number of creditors. This will relieve stress and allow you to focus on just a few people.
This is one of the most frustrating stages, but it is necessary. Stop feeling sorry for yourself and give up unnecessary pleasures. Leave the essentials. Don't buy anything you can't survive without.
Make a list of these things. You will be surprised, but a decent amount can run up if you manage to sell all this.
Thus, your apartment will become more spacious, which will have a positive effect on the quality of thinking.
Sit down and write down a list of 100 ways to make money. It seems impossible, but just a little brainstorming, it turns out that there are a lot of opportunities around.
As a last resort, talk to your boss. Perhaps he will be able to give additional work or help find something else.
We have collected most of these tips in this article and will consider each of them separately. But first, let's talk about why many people fail to be financially literate. Rather, about the excuses that people come up with for themselves.
Excuses for financial illiteracy
Psychological excusesIt's all about how we look at wealth accumulation. For example, you may have many limiting beliefs about money that have formed in your psyche over the years as a result of parenting or traumatic events.
It should be said right off the bat that beliefs affect the way you look at money - both for the better and for the worse. Here's what they can be:
- Money is the root of all evil.
- I will not like the life of a rich man, he has too many problems, and I am free.
- You have to work hard until old age to become rich.
- It takes money to make money.
- To become rich, you need to cheat, lie and steal.
- I'm not smart enough to be rich.
Physical excuses
These are dependencies for which we ourselves are to blame. For example, watching TV, surfing the Internet without purpose or purpose, playing video games, impulsive purchases. They distract from thoughts that one can become a wealthy person, that is, they become a kind of protective mechanisms.
Social excuses
These excuses usually take the form of the phrase, "I don't have the right connections to get rich." To some extent, this may be true, because the people with whom you communicate determine your thinking.
Only this is still an excuse. Especially in the information world, where, with due persistence, you can meet, if not the greatest businessmen, then at least quite ambitious ones.
You need to stop excusing yourself. Deciding firmly that you are ready to change your thinking is the most correct thing to do. And let it take years, but it will pay off in full.
How to learn to manage money
Start budgeting
This is the foundation. A budget is not only a record of income and expenses, but also a plan for saving money and investing.Many financial experts believe that the budget should be kept on a 60/30/10 basis:
- 60% of the income should go to your needs;
- 30% of the income should go to your wishes;
- 10% of your income needs to be set aside.
Of course, you need to not only keep records, but also manage your finances. The following information is about that.
Minimize monthly expenses
It should become a habit. Think once a week about what costs you can cut. At the same time, it is important to be in a good mood and not assume that you are making sacrifices. Turn the process into a game.
Here are three key questions to help you stick to this rule:
- Do I really need this?
- Can I do without this?
- What are my options?
The more money you have set aside, the stronger your financial situation. To get your thinking right, ask yourself the following questions:
- Why do I want to start saving?
- Why is this important to me?
- What are the long-term consequences of this habit?
Spend exclusively your money
No matter how advertising assures you of the profitability of the next loan offer, even if it becomes necessary to use it, approach it carefully.
It is not necessary to borrow and manage other people's money. This habit leads to wrong thinking, and even to debt trap. We will also talk about this later.
Create a financial cushion
A financial pillow should be understood as the amount of money that you could live on for 6 months if you lose your job or lose all sources of income. This time is needed not only to find new employment, but also to find oneself, develop skills, study, and read.Some people create a financial cushion just in order to temporarily retire and engage in self-development or, for example, write a book. This is also a great solution, just remember that it will not be too easy to return.
Calculating the financial cushion is easy enough, although some people use long formulas. Find out how much money you need to live a month - just calculate the expenses for the last six months and print the average. This will give you an approximate final result.
Of course, the financial cushion does not take into account inflation, price increases and unforeseen circumstances, so it would be more correct to add a reserve fund to it. Here you are free to decide whether you need to create it and if so, what amount should be contributed to it.
Set financial goals
It is psychologically difficult to save money or save money if you have no goals. The question constantly arises in my head: "Why am I suffering so much?" Not finding the answer, you give up.So set yourself financial goals. Here are some examples:
Become financially independent
It means earning such passive income to become independent from work. You can quit your job and live in peace on the money that regularly goes into your pocket.
How much money do you need a month to feel good? Write down this amount. After that, start thinking about what you need to do to get such passive income.
Get financial protection
It's a simple goal: how much money do you need to cover all your monthly needs and set aside a certain amount? For example, you make a thousand dollars, of which you save two hundred dollars every month. Spend the rest. If this is enough, it means that you are financially protected and are able to feed yourself at this stage of life.
Get financial security
This is a certain amount of money that will allow you not to depend on other people. It is needed if you want, say, to go to India for a year to get acquainted there with the culture of this country and indulge in spiritual practices. How much money do you need to quit your job and not ask anyone for money?
We have previously written about financial cushion and contingency fund. These are also goals that you can and should set yourself.
In order to learn how to manage money, you need to start saving it. We will devote a separate section to this issue.
How to learn to save money
Are you saving money? If so, do you think you can increase this percentage? Do you save where others impulsively spend and then regret?These are all the questions you need to give yourself an honest answer to right now. The habit of saving money is very difficult to develop. And that is why there are so few rich people in the world. This requires a different kind of mindset that will lead to completely different decisions throughout the day.
However, if you want to achieve financial freedom, the first thing to do is to start saving some of your income. You will think about what to do with them later.
To start saving money, you need to save. This does not mean that your life will immediately turn into hell: for this you do not need to go on a hunger strike and leave to live in the forest.
Create your money saving plan
First of all, set achievable goals and commit to saving some money (or transferring to a bank you trust).
It is believed that every person, if they work, can save 10% of their income. It is not necessary to drastically overestimate this number at once, but try to go 15-20%.
Think economically
Whenever we hear that a person is thrifty, we immediately begin to consider him a curmudgeon. Sometimes this is true, so try to be clear about: what does frugality mean to you?
For example, lean people tend to:
- Cooking at home instead of ordering food or dining out in restaurants.
- Use free apps instead of paid ones.
- Exercise on the street instead of buying expensive gym membership. Some people even think in the spirit: "If I buy a subscription, I will definitely go to the gym, so that it would not be so offensive."
- Buy good and at the same time not expensive clothes (and there is one).
- They borrow books from the library, not buy them.
All in all, these are just a few examples. We are convinced that you can make a personal list by analyzing your behavior over the past month. Think about how much money you have wasted before, and then start saving it. A decent amount will come up in a year (yes, we have already said that accumulation is a long process).
Consider working remotely
Instead of spending time and money getting to the office, try convincing your employer that you can do all the work at home (at least 1-2 days a week). This will save you a lot of time. However, keep in mind that working from home is not easy - you have to learn how to motivate yourself.
Exercise to prevent disease
We rarely think about it, but it would be worth it. The United States is experiencing a boom in interest in sports, because medicine there is so expensive that it can make almost anyone bankrupt if they start to get sick often (insurance does not cover all cases).
Therefore, be smarter and you. The body wears out in one way or another. To slow down this unpleasant process, you need to play sports and monitor your health: take care of your body and your teeth, quit drinking and smoking, and switch to healthy food. After all, what is the point of making a lot of money now, if in the end you spend it all on treatment?
How to get rid of debt
Our tips are aimed at managing the money you have. But what if you are deeply in debt? What strategy is needed?You can use the following 7 step program. However, this does not mean that it will be easy. Quite the opposite. Any predicament is different in that you first need to change your thinking, and not act according to the usual algorithms.
Step one: admit the problem
If you live in debt most of your life, it can become a habit and form parasitic thinking. You need to get rid of it as quickly as possible.First, admit openly that there is a problem. Take full responsibility. Whatever happened in the past, you are somehow to blame for it. Forgive yourself for this. You got a second chance and don't make those mistakes again.
Recognizing the problem helps to shape new thinking and get rid of the whining and blame.
Step two: take inventory
What is meant here is: List all your debts. With knowledge comes power. When you understand who you owe and how much, you can pull yourself together and make more informed financial decisions.List your debts starting with the smallest to the largest. Then clearly decide how much money you will set aside for repayment each week or each month.
The bottom line is to pay off the smallest debts first. Thus, you will reduce the number of creditors. This will relieve stress and allow you to focus on just a few people.
Step three: eliminate all non-essential
Start living frugally. Sit down, think a bit, and make a plan for where you can cut costs in your life.This is one of the most frustrating stages, but it is necessary. Stop feeling sorry for yourself and give up unnecessary pleasures. Leave the essentials. Don't buy anything you can't survive without.
Step four: create a realistic spending plan
This is the budget where you set monthly limits for categories of items and services. It is important that you be strict with yourself. Once you give yourself some indulgence, the process gets out of hand. You yourself know how this happens.Step five: sell everything you don't need
Let's now pay off our debts by adding some cash to our pocket. Selling the things you need is the last thing, but you can get rid of the unnecessary things without losing your self-esteem.Make a list of these things. You will be surprised, but a decent amount can run up if you manage to sell all this.
Thus, your apartment will become more spacious, which will have a positive effect on the quality of thinking.
Step six: think about how to increase your income
At this stage, you need to turn on your thinking to the fullest. There are probably some ways to make money quickly without taking a second job.Sit down and write down a list of 100 ways to make money. It seems impossible, but just a little brainstorming, it turns out that there are a lot of opportunities around.
As a last resort, talk to your boss. Perhaps he will be able to give additional work or help find something else.
Step seven: find support
It is not easy to cope with such a period of life alone. Therefore, ask for support from loved ones. Explain to them that you need them and that you really want to get out of debt. Some of them may even help find a part-time job.Books
Financial management is a very broad topic. The following books will provide you with a wealth of valuable information:- "Money. Master of the Game "Tony Robbins.
- "Business. Reboot "Nikolay Mrochkovsky, Andrey Parabellum.
- Rich Dad Poor Dad by Robert Kiyosaki.
- The Richest Man in Babylon by George Clayson.
- "How the Economy Works" by Ha-Joon Chang.
- “The Path to Financial Freedom” by Bodo Schaefer.
- Let's Talk About Your Income and Expenses Carl Richards.
- "10 Secrets of Wealth" by Adam Jackson.
- “Investment answer. How to Protect Your Financial Future ”Daniel Goldie, Gordon Murray.