One of the must-have skill in everyone’s portfolio
Financial literacy should be a compulsory subject in Schools
It is a skill that teaches us how to maximize the money that we have stored in the so-called SAVINGS ACCOUNT, which just saves our money but not able to beat inflation.
Now, What is Inflation?
Inflation is an increase in the price of things around us over a period of time.
In Schools, we learned about interest like simple interest and compound interest, use their formulas, solved numerically but never uncover the hidden powers of compound interest. Basically, we never focussed on the practical angle of compound interest and also we don’t have a subject dedicated to financial literacy. It teaches us how to manage our funds wisely, how much to keep for our emergency needs, and how much to save for our future. We all know that a Savings bank account provides interest but it won’t add that much which is required to beat inflation and to multiply our money. A savings account is a bad place to keep our money growing.
“Financial freedom is available to those who learn about it and work for it.” ― Robert Kiyosaki
Simple ways in which you can become financially literate:
- Budgeting: It is a must-do. It is essential to realize your goals and materialize your dreams into reality. Income consists of investments, expenditure, and expenses. In this, we need to allocate percentages to all three of them so that we spend money wisely.
Income = Investments + expenditure + expenses- Emergency fund: It is one of the most important things. Basically, it’s a personal budget set aside for financial distress. We should always have a liquid amount of 8–12 times our monthly income set aside in our bank account.
- N&W: We need to segregate our needs from our wants and then creating a list of our needs.
- We need to get rid out of our painful debts.
- Risk Profile: First, we need to analyze our risk profile. Three types of investors are there includes Aggressive, Moderate, and Conservative investors. It is unwise to put all your eggs in one basket.
- We need to figure out our life goals so that we can make our investments accordingly. There are many options available in the market for investment including Fixed deposits, Mutual Funds, Stocks, Futures & Options, Real Estate, Digital gold, Government, and Corporate bonds, etc.
- Learn more, earn more: Investment in our education is the biggest investment. An investment in knowledge always pays the best interest.
- Make money while you sleep: We need to maximize our sources of passive income as it is the income that grows when we asleep.
- Insurance: We need to ensure that we should stay insured throughout our life health, life, home, car, and other applicable insurance plans.
- Retire Early: Always keep one thing in mind while making investments for the future that after our late 40s, we don’t have to work for money, money will work for us.
