Four Steps to Improve Your Financial Literacy
Date: April 27, 2016
April is Financial Literacy Month and becoming financially literate doesn't necessarily mean expanding your vocabulary or picking up a degree in economics. What it means is that you have a firm grasp of your personal finances — where they are and where you want them to be. Since most people unfortunately don’t learn about financial literacy in school, we’ve compiled the below steps to help you brush up on your finances for the rest of April and beyond.
Become the CEO of Your Household
The first step toward adopting a healthy understanding of your finances is to resolve to make them a priority. The CEO of a large corporation doesn't necessarily need a degree in finance, but he does have to take responsibility for his company's bottom line.
Imagine a CEO who didn't know if his company was going to report a profit or a loss at the end of the year. It's unlikely he would keep his job for very long. As the CEO of your household, resolve to take responsibility for your finances.
Ask the Right Questions
As the CEO of your household, make it your business to answer the following questions:
1. Will my household finances be profitable or unprofitable at the end of the year?
- Will our income be more than what we spend?
2. Is my household in the red or the black this year?
- Are our debts (red) more or less than our savings and assets (black)?
3. What are our financial goals this year?
- Answering this question usually involves reducing debts or increasing savings by a specific dollar amount.
Find the Answers
Personal finance software like Quicken gives you all the information you need to become literate about your finances. After entering your income and monthly expenses, you'll know immediately if you're saving money, losing money or breaking even.
Set Your Goals
When you're literate about your finances, you can begin improving your financial situation by reducing debts or increasing savings. For many households, this means going through your expenses and finding ways to reduce them. If you're already on a shoestring budget, you may need to find a way to increase income instead.