5 Signs You Could Improve Your Financial Literacy

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While financial literacy isn’t always the most exciting topic, it helps to learn about money management so that you’re not constantly stressed about paying the bills. If you feel frustrated with a lack of knowledge on certain financial topics, it’s essential that you seek out relevant resources to help you out. We will examine the key signs to watch for and share solutions for becoming more educated about money. 

What are five signs you could improve your financial literacy?

Sign No. 1: Living Paycheck to Paycheck 

“A clear indicator of the need for improved financial literacy is living paycheck to paycheck, often characterized by a lack of savings and an inability to cover unexpected expenses,” said Sophia Tang, founder of Nako Cosmetics. 

If you find that you’re barely getting by and often waiting for your next paycheck, then it’s a sign that you have to learn about financial literacy. You want to do your best to avoid feeling like you can’t get ahead because you could end up in massive debt when you’re overwhelmed. 

Tang elaborated, “This scenario mirrors a common narrative where individuals find themselves in financial uncertainty due to insufficient planning and education.”

What can you do?

“Adopting practical tools and resources catalyzed my transition to financial literacy,” Tang noted. “Utilizing budgeting apps and attending financial workshops transformed my approach from uncertainty to confidence and clarity.”

One of the best ways to get started is to research any available budgeting tools or workshops. Many free resources are available online and in your community.  

Sign No. 2: You Don’t Know Where Your Money’s Going

Another warning sign that you could improve your financial literacy is that you’re unsure what’s happening with your money. You know that you make a decent amount, but at the end of the month you’re confused about what happened to all of the funds in your bank account. You feel like you should have more money left, but you don’t know where it went. 

What can you do to improve your situation? 

“Financially literate individuals see budgeting as a tool to make informed decisions about their income and expenses,” said Doug Roller, founder at Crossroads Financial Group. “A budget acts as a financial blueprint, guiding where money is allocated each month.”

One of the best ways to navigate this scenario is to find a budgeting system that works for you. There are different budgeting methods out there, including:

1. The Envelope System: With this budgeting protocol, you set up physical or digital envelopes for your various spending categories. You leave a specific amount of money in the envelope for every category, which is your spending limit for that period. For example, if you leave $100 in your entertainment envelope, then this is all that you can spend on this category until the next pay cycle. 
2. 50/30/20 budgeting: The goal is to have 50% of your income go toward necessary expenses, 30% toward discretionary bills and the remaining 20% go toward savings and debt. 
3. Track your spending: You can simply choose to track your spending with your checking account. You don’t have to overcomplicate budgeting because most banking accounts come with tools that help you track and visualize your spending habits. 

“Adopting a budgeting framework, like the 50/30/20 rule, which allocates income to needs, wants, and savings, can transform financial management from a daunting task to a feasible routine,” Tang said.

Before you start following a budgeting system, you also want to try the following:

• Review your accounts to look at where your money went. You’ll want to review your checking and credit accounts to see where you spent your money in the last month.
• Analyze your fixed expenses. You should review your fixed costs to see if there’s room for cutbacks. 

Sign No. 3: You Don’t Have Financial Goals

You could benefit from learning about financial literacy if you don’t have any clear money-related goals. If you haven’t started saving because you don’t have anything that you’re striving toward, it means that you may want to look into the importance of goal setting. 

What can you do?

“Budgeting is complemented by setting clear, achievable financial goals, whether saving for a down payment on a home or establishing an emergency fund, making financial progress measurable and motivating,” Tang said.

One of the most common reasons for lacking financial literacy is that you haven’t found a reason to save. We all need something that inspires us to get serious about our money management. 

“People with written financial goals are more likely to achieve them,” Roller said. “Financially aware individuals regularly revisit their goals, both short-term and long-term, making adjustments as needed.”

Sign No. 4: You’re Drowning in Debt 

If you’re drowning in debt and feel like you’re going to be stuck in this cycle for a long time, it’s crucial that you learn about financial literacy concepts. Significant debt is a sign that it’s time to learn more about the topic. 

What can you do?

“Understanding the implications of debt and having a plan to pay off balances is a sign of financial literacy,” Roller said. “Seeking low-interest loans for assets and staying current on high-interest debts demonstrate financial awareness.”

Sign No. 5: You’re Uncertain About Your Credit 

If you don’t know your credit score or what’s on your credit report, then this is a sign that you should take some time to learn about financial literacy. Your credit score impacts your finances more than you may think and you’ll want to know what goes into it.

How can you resolve this? 

“Regularly checking credit history and scores is essential for understanding one’s financial standing,” Roller said. “Being aware of credit reports helps in improving credit scores and making informed financial decisions.”

You may want to start by reviewing your credit report to assess your financial situation and determine what changes are required. If you don’t learn about credit, you could find yourself in a challenging situation in the future. 

Closing Thoughts

There are many clear signs that it’s time to improve your financial literacy. The good news is that there are numerous free tools available online to help you get started if you’re ever feeling stuck. The goal is to take that first step toward admitting that you have to learn more about this topic. 

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