Financial anxiety is on the rise in the United States, making financial literacy – simply put, the ability to understand and effectively utilize various money management practices including budgeting, investing, and saving among others – as important as ever.
In fact, 36% of the U.S. general population feel anxious about their current financial situations with 26% feeling strained, according to research from World Financial Group. Taking steps to become more financially literate and manage money more effectively can help.
While there isn’t one “right” way to gain financial literacy, these steps can help grow your understanding and confidence around your finances.
Understand Your Finances
Understanding your finances and how your financial decisions impact your future self is essential for making appropriate choices. Without this understanding of your income and expenses, you become vulnerable to making the wrong decisions and can put yourself at greater risk in the future.
To further expand your knowledge base, consider taking a financial literacy quiz to test your understanding of concepts such as compounding interest, inflation, and risk diversification. If necessary, don’t be afraid to seek the advice of a professional before making important financial decisions.
Take Control and Plan with Confidence
To take control of short- and long-term financial priorities and aspirations, individuals should plan ahead. Establishing these goals is the first step to effective planning, whether lifestyle goals, hopes for retirement or specific items you wish to acquire, such as a new vehicle or home. This approach provides a target for building your savings and protection plans.
Prepare and Plan for Life’s Unexpected Events
If not adequately prepared, unexpected events can have catastrophic impacts on household finances. For example, having to leave the workforce early due to illness could mean years of lost earning power, which could impact your short- and long-term priorities and aspirations. Therefore, it’s essential to ensure backup plans, such as a retirement account or life insurance that includes income protection if unable to work, are in place, if the unexpected happens. This “cushion” can contribute to greater confidence in your future financial outlook and stronger feelings of security going into waves of economic uncertainty.
Courtesy of Family Features and World Financial Group