Financial literacy is not a quality that everyone has. Despite the internet being there for all our finance-related questions, having a firm grip on our finances still classifies as a Herculean task. And it’s not totally our fault; for starters, the economy has been on a downward spiral for as long as we can remember, and the price of groceries aren’t too friendly! But despite these obvious challenges, there are individuals who are so financially educated that they have managed to stay above the rubble! Great news, you can also become like that!
In today’s video, we will take a look at 15 interesting ways you can identify a financially educated individual, and of course how you can become one! Sounds good? Let’s jump right into it. Welcome to Alux. If you don’t feel like reading the article here’s the video version:
1
You Always Work With A Budget
Budget, that word that stops you from spending more even when you really want to. Having a budget is a strong sign of financial discipline; it means that you have created a concise and specific way you want to spend your money. Now, having a budget most times reflects your needs, rather than your wants. But if you earn more than enough, allocating a few dollars for that item you’ve always wanted shouldn’t be a big deal.
Anyway, the point of a budget is to help you make sure you spend your money on the right things. Your budget must include your basic needs such as housing bills, groceries, transportation, and whatnot. However, a budget is only effective when you stick to it!
Come on, what’s the point of a budget if you’ll eventually spend your income anyhow you want? A budget is important, but having the discipline to stick to it is way more important! Also, it is important to always prepare for price increases in your budget, and you can allocate a few dollars to this effect.
2
You Have An Emergency Funds Account
Have you ever heard anyone say “You are one emergency away from going bankrupt?” While this might sound like a bit of a stretch, it might end up being your reality if you haven’t got an emergency funds account.
Emergencies are unpredictable, there might suddenly be a need for thousands of dollars someday. If this happens, what’s your next course of action? Withdraw everything you have saved up for your kids’ college fees?
Or dip into your family savings? Whatever you choose to do, there’s one thing we are certain of; you’ll probably regret it in a few months.
But with an emergency funds account, you really don’t have to worry because that is the entire point of the account: to keep you afloat during emergencies! This fund could be used to pay high hospital bills, or sustain your family if you lose your job!
3
You’ve Got Insurance
Having an emergency funds account is great, and having insurance is basically taking that a step further.
Insurance is some sort of safety net for you and your family, they are supposed to help you bounce back right after something bad happens!
This could be a tragic accident, death of a loved one, a robbery, or even a fire outbreak; whatever the misfortune is, you can be rest assured there’s insurance that covers it.
We understand that most people are put off by the endless paperwork that comes with insurance policies, but this process is important for the companies as it helps them determine what you are entitled to.
Having insurance isn’t a luxury, but a necessity for every person and family, and of course a sign that this person has got their finances under control.
4
You Know About Your Taxes and You Never Overpay
It can be overwhelming to try to understand your tax information. But considering the fact that it’s one of the highest expenses in every household, it is only right that we dedicate enough time to understanding it. In fact, understanding your tax information can be a smart way to minimise it in the long run.
Also, you just might be paying more taxes than you should; there might be a mistake buried somewhere, and only a proper review from your end will expose it. And if you think you don’t have the experience or knowledge to understand your taxes, that’s totally fine! You can employ the services of an accountant who will help you see where you can cut back, eventually minimising the tax you pay in the long run.
5
You Have A Separate Savings Account
Financially educated individuals know the difference between an emergency funds account, insurance, and a savings account. Typically, a savings account contains college funds, funds for family needs, or perhaps money for a new home.
Having a savings account shows that you are planning for the future, meaning you wouldn’t be at the mercy of loan sharks when you do need the money.
Also, having a savings account shows a certain level of discipline, as it shows that you don’t spend every single dime you earn. Are you struggling with saving money each month? How about you start with a tiny percentage of your income?
It could be as little as 10%, or as bold as 20%; whatever percentage you choose, be sure it’s something that wouldn’t affect your basic needs.
6
You Pay Your Debts On Time
While growing up, you might have been fed the sentiment that it sucks to have debts. But it doesn’t! In fact, having debts is kind of necessary when you have to buy a house or a car.
Wanna know what actually sucks? Not paying your debts on time or entirely missing your payments! Financially educated individuals understand that handling debts responsibly increases their chances of getting another, and it has a direct effect on their credit score!
Repaying debts should always be a priority for you, and including it in your budget each month sounds like a great start.
7
You Invest Wisely
Have you ever explored the possibility of your money earning more money for you? Sounds like a steal, right? Well, that’s exactly what investment does for you. If you want to earn more money on the side without necessarily putting in more hours, then you should consider investing.
Here’s the great thing about investment opportunities; there are several options available and you can find investment plans that go for as little as $100! But knowing how to invest and what to invest in is where the real work begins. While stocks and bonds are the most popular options today, they might not be the right fit for you.
And even if they are, you have to be sure you are investing in the right company! Before you commit to any investment plan, be sure to learn everything there is about it, and you can also hire a professional financial advisor.
8
You Set Financial Goals
Why are goals important? For starters, they give us long-term visions, and help us organise our time, skills, and resources in such a way that they bring positive results.
It’s the same with setting financial goals; they help us see the small and big picture, and they determine what we will do to get to that point. Do you want a new home? What steps do you have to take to make this possible? A new job? A savings account? Or a loan? Having long and short-term financial goals helps you make more informed financial decisions, and it eventually guides you to financial freedom.
9
You Understand Diversification
We’ve mentioned that financially educated individuals are always looking to invest, but you know what increases their chances of a bigger payout? Diversification.
Diversification teaches that you don’t invest all of your money in one particular niche; instead, diversify by putting your money in different types of investment.
Usually, this lowers the risks of losing your money, while also increasing your chances of success. Basically, diversification is a modern way of saying do not put all your eggs in one basket.
10
You Always Think Of The Future
Financially educated individuals are always fixated on the future, and they create a financial structure that reflects this sentiment.
Nobody wants to be stranded in future due to poor financial decisions, so the right time to act is now! Always thinking of the future also prevents situations from taking you by shock. It’s quite logical that if you plan ahead for something, you are better suited to handle it when the time comes.
11
You Stay Up To Date With Finance News That Concerns You
Being financially responsible also means that you have to stay updated with finance news that concerns you. This is even more important when you have an investment portfolio. Having the right knowledge will help you determine the next step, and it will also affect your financial decisions. Let’s imagine that a financial analyst predicts an astronomical increase in the price of goods and services. Seeing that this affects you directly, wouldn’t it be great if you decide to invest in real estate? This is because real estate does relatively well during surges of inflation!
Now, that’s just one example! You are bound to discover more profitable financial tips when you stay updated and conduct extensive research.
12
You Are Disciplined With Money
Whether we admit it or not, being disciplined with money is a core sign of financially educated individuals. Being disciplined means you are never wasteful with your money, you follow your budget closely, and you never miss your debt payments. Discipline with money also suggests that you don’t buy things on impulse, nor do you pay for items that you really don’t need!
13
You Have A Mental Knowledge Of Your Net Worth
We mostly use the words “net worth” in connection with celebrities, but knowing your net worth as an individual is equally important!
Basically, your net worth is the total value of every asset you own. However, to arrive at a fixed figure, you have to minus your debts and the cost of your liabilities. Your assets include everything your cash at hand or in your bank accounts, and everything else you can exchange for cash.
It typically consists of your real estate, funds in your retirement, savings, or checking accounts, cars, stocks, bonds, business assets and so on. Your liabilities on the other hand includes your debts and loans.
There are tons of tools available online that can help you calculate your net worth, and knowing this figure is important in knowing how healthy your finances are. Knowing your net worth can also suggest where you can make immediate changes to improve your financial position.
14
You Don’t Replace Things That Aren’t Broken
Most people want to use the newest phones and cars, but financially educated individuals know that there’s no point in replacing their gadgets if they aren’t broken.
Come to think of it, why do you need to buy the latest washing machine when your current one works perfectly? When you choose to keep using things that aren’t broken, you have not only saved a good amount of money, you have also prevented yourself from making a bad financial decision.
15
You Know How To Have Fun Without Breaking The Bank
- When you think of fun, what immediately comes to your head?
- Does it involve a large party filled with beer and pizza?
- Or a hangout with your friends at the beach?
- Having fun shouldn’t mean breaking the bank, you can have fun with a minimal budget!
- And there you have it!
- 15 signs of a financially educated individual.
Did any of these reflect your stance towards your finance?
Then this means you are doing something right. And if nothing did, this is the right time to start making the right financial decisions.
Did you watch this video up to this point? That’s great! To show how happy we are about that, here’s an extra tip for you!
16
You Know Your Credit Score
Knowing your credit score is important for so many reasons, but it is mostly needed to help you determine your financial health. In fact, lenders use your credit score to ascertain if you qualify for a loan or not. So, if you’ve always ignored how important this is, now is a good time to change that!
Thank you for spending some time with us today, we are so glad you did! If you found value in today’s video, please give us a like! Hit the bell icon to never miss an upload, and don’t forget to subscribe!
