Why Financial Literacy is Important to Everyone

Whenever we talk about money, we have varied opinions. Some would confidently say they have enough, while most would say they find it hard to make ends meet. Money is a big factor for survival. We need it to keep going in this race called life. But we should not be a slave of it. We should not let money control us. We should control money. We should control our finances. But how? The answer is financial literacy. It’s not about being debt-free or not having money problems at all. Financial literacy, according to Investopedia is the ability to manage personal finance matters in an efficient manner, and it includes knowledge of making appropriate decisions about personal finance such as investing, insurance, real estate, paying for college, budgeting, retirement, and tax planning.

Managing your finances in an efficient approach is one way to gain financial freedom. You must understand your cash flow, the transfer of money into and out of your pocket. You can’t spend more than how much you earn. It’s sad because most Filipinos struggle with this. Below minimum and minimum-wage earners still find it difficult to cope with the rising prices of basic commodities. How can we survive the economic crisis and global financial problem?

We have to step back and refocus. Let’s discipline ourselves in terms of expenditure. I know it’s not easy to manage our paycheck particularly allocating it to our daily expenses. But we must do something about it. We have to address the situation before it gets worst or pass on to your children.

The things we can do are:

1.       List down expenses. It must not exceed your monthly income. If it does, find other sources of income.

2.       Cut down expenditure categorize as ‘wants.’ Wants are unnecessary expenses or those that can wait at a future time. The intensity of ‘wants’ is reduced by doing delayed gratification.

3.       Pay off debts. If the amount is too big to pay off one time, at least have a payment scheme that would help you settle it the soonest possible time with lower interest rate.

4.       Make an ‘Emergency Fund.’ Allot a portion of your income to be used as a reserve funding.

5.       Diversify. This is related to #1. Diversify your source of income. Do not rely on a single source of income. Save and invest.

Even if we are poor, even if we are not yet rich, let’s not fall into the mentality of the poor. Let’s aim for financial freedom. Let’s not pass poverty and poor financial management to our children.