As you grow up and step into the working world, part of adulting means that you have to start picking up more responsibilities for yourself. That can mean a variety of things, such as learning valuable life skills and perhaps working towards financial independence from your parents.
But in order to fulfil that goal, you’ll first need to become financially literate. In short, this refers to the knowledge and confidence to manage, save, and invest money for yourself. Among everything you need to learn to live a good life, knowing how to deal with your personal finances is arguably one of the most important ones.
The importance of knowing money
Admittedly, it’s highly tempting to procrastinate on dealing with this, especially when the whole process can seem overwhelming and daunting. However, this is one life skill you shouldn’t put off learning, especially if you want to live a financially-stable life.
Financial literacy is especially crucial for long-term financial plans you might have as you get older, such as paying off your school loans, getting your own place, or other personal goals you might have. Without financial literacy, reaching those goals becomes much harder as your risk of falling into financial traps increases.
Developing financial literacy
Despite its importance, however, more than half of Singaporeans admit to being financially illiterate, with those aged 18 to 24 having the lowest rate of financial literacy. Fortunately, it’s never too late to start learning, and it’s not a skill that’s hard to learn either. Here are a few ways you can get started:
1. Set some solid goals
Proper money management starts with setting goals for yourself. After all, if you aren’t working towards anything in particular, you’re likely to spend more than you should, which can be detrimental if it goes out of control. These goals can be things like starting up an emergency fund, paying off your student loans, or even planning a rough retirement plan for yourself.
With how unpredictable life can get, progress on these goals isn’t always linear. Plus, you’re free to update and adjust your goals if needed; the most important thing is that you do your best to get back on track and keep making progress.
2. Make a budget
As mentioned before, a budget is one of the simpler goals you can work towards. By tracking your monthly expenses, you’ll not only be better aware of where your money’s going, but it’ll also help you identify areas in your spending that you can adjust or remove. Plus, being more conscious of your spending limits will reduce your chances of overspending.
How you want to track your finances is up to you – you can either use a simple spreadsheet on Excel or Google Sheets, download some budgeting apps or even write it down in a notebook.
3. Monitor (and pay off) your debts
If you have any outstanding debts (such as student loans or credit card bills, if you have them), be sure to pay them off as soon as possible. Choosing to neglect them will result in accruing more interest, which means you’ll have to pay even more than you should!
4. Get some insurance
It’s not enough to know how to accumulate wealth, you'll also need to protect it, too. By having insurance, you’ll be able to protect yourself in the event of an emergency, such as in the event of death, hospitalisation, and more.
5. Study up
Of course, there’s still plenty of other things to know about financial literacy, so be sure to do your research. These days, there are all kinds of resources to choose from, such as books, magazines, podcasts, or following social media accounts, something young investors use as their main source of information.
Feel free to go at the speed and pace you want; it's perfectly fine to spend just a few minutes a day educating yourself. What's important is that you stay consistent and keep learning, even long after you’ve grasped the basics.
The sooner you start mastering financial literacy, the more resilient and well-prepared you’ll be in the event of financial stress. By spending, saving, and investing smartly, you’ll be able to enjoy the fruits of your labour without worrying about your future money-wise.