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The Importance of Understanding Financial Literacy

Posted by Nicole Gomes on Dec 17, 2020 12:40:36 PM

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It’s important to have an understanding of financial literacy, because it will equip you with the knowledge and skills needed to manage money effectively. Read on to find out more about how to become financially literate.

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What is Financial Literacy?

Financial literacy is the ability to understand how to make financial choices, while managing and growing your money. Being financially literate will allow you to better allocate your income to achieve financial goals.

Why Financial Literacy Is Important?

1.      Teaches you How to Budget

Being financially literate can guide you when creating budgets and managing your money. It also can teach you how to distribute your income accordingly between expenses, debt, and savings.

2. How to Manage Debt

Learning more about finance will help you to start recognizing how important it is to choose low interest rates when getting a loan. And, the importance of paying off credit card debt each month to prevent interest rates from going up, which will negatively affect your credit score. Financial literacy can sometimes even help guide you on how to get out of debt as well.

3. Help Plan for Retirement

A financially literate saver will know the benefits of preparing for retirement and creating a retirement plan. Proper planning helps you effectively manage your finances to guarantee you can live your dream retirement.

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How to Become Financially Literate

1.      Get Started with Free Tools

Your bank’s mobile app or websites can help track monthly spending patterns. Also, banks, credit unions, and credit card companies often offer free tools available for you to use and stay on top of all your finances.

2.      Use Local Resources

For more ways to enhance your financial literacy, look into credit counseling agencies, attorney general offices, or states’ consumer protection agencies. These resources provide support for individuals and offer informative programs on financial topics.

3.      Hire a Financial Advisor

If you’re not sure where to begin, hiring a financial planner is a great place to start. Certified financial planners have the expertise in financial goal-setting, tax planning, and creating a retirement fund.

Being financially literate is necessary to understand money management, so you can be in control of your finances. The more you know, the more financially stable you will be, which gives you the opportunity to reach your goals.

Understanding financial terms can be overwhelming at first, especially if you’re not sure where to start. To learn more about how our financial experts can help you, contact Satty, Levine, & Ciacco, CPAs, P.C. today!

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