5 Ways Financial Literacy Impacts Your Life & Journey

Hey Buddy,

Do you know that every naira you spend, save, or invest is dependent on the decisions you make?

Everybody should have basic knowledge of personal finance or at least be financially literate enough for their everyday life.

While we might stop going to school at some point, it is important to never stop learning because your level of understanding around the fundamentals of budgeting, saving, debt and investing will impact every part of your life and can mean the difference between prosperity or poverty.

Read our article on Personal Finance if you need to know more about it.

Being financially illiterate in 2024 can lead to many pitfalls, such as being more likely to accumulate unsustainable debt burdens, either through poor spending decisions or a lack of long-term preparation. This, in turn, can lead to bad spending habits, bankruptcy, and other negative consequences.

Why is Financial Literacy Important?

From day-to-day expenses to long-term budget forecasting, financial literacy is crucial because it assists people in becoming self-sufficient and financially stable. It is important to plan and save enough to provide adequate income in retirement while avoiding high levels of debt that might result in bankruptcy, defaults, and foreclosures.

For starters, if you don’t have a strong understanding of your finances, it’s all too simple to make terrible judgments with long-term ramifications. For example, you may be unaware of how much debt you have or how much interest you are paying on that debt. This can lead to major financial issues in the future.

Second, even if you understand your finances well, you may lack the skills and knowledge required to make the best decisions for your future. You might not know how to invest your money or save for retirement, for example. Without this knowledge, you may make decisions that may cost you a lot of money in the long term.

Finally, financial knowledge is essential for avoiding frauds and other financial problems. Many people are prepared to take advantage of those who are not financially knowledgeable. It’s quite simple to be taken advantage of if you don’t grasp what something is or how it operates. However, if you’re financially literate, you’ll be able to detect a scam and avoid it.

In fact, here are 5 ways how being financially literate can help you:

1. Increases your confidence to make financial decisions.

When you are unaware of your financial options, you’re more likely to rely on others to make decisions for you. That might be okay when choosing a destination for winter, spring, or summer break. However, when it comes to the big financial decisions in life (such as choosing a house to buy, saving for a 4 over 5, or paying down debt) — knowing about all of your options gives you the confidence to choose what’s right for you.

2. Gives you the power to negotiate.

From interest rates on the money, you borrow to the goals you have for the money you invest; financial literacy lets you understand all your options. That knowledge will put you in a better position to clearly articulate your expectations with lenders and financial advisors, so you can then feel confident about choosing the right option that best suits your needs.

3. Heightens your ability to protect yourself.

With identity theft and online scams on the rise, the more you stay in the know, the better prepared you’ll be to protect yourself from falling prey to financial fraud.

Financial literacy inspires confidence. Consider making a life-altering decision without all the necessary information. Individuals with adequate financial knowledge can approach major life decisions with greater confidence, knowing that they are less likely to be surprised or negatively impacted by unforeseen outcomes.

4. Boosts your chances of achieving your goals.

A person’s goals may be more easily attained with financial literacy. People can make plans that set expectations, keep them accountable for their finances, and chart a road for accomplishing goals that first appear unattainable by improving their grasp of how to budget and save money. Even if a person’s ambition cannot be realized right away due to financial constraints, they can always devise a plan to improve their chances.

Provides you with a fighting chance during emergencies.

People that are financially literate are better prepared for emergencies. People can prepare for the unpredictable by learning about financial literacy issues like saving or emergency planning. Despite facing a financial emergency like losing a job or incurring a sizable unforeseen bill is always difficult, one can lessen the impact by practicing financial literacy beforehand and being prepared for anything.

Financial literacy empowers you to take control of your financial destiny. By understanding your finances, you can make informed decisions, plan for the future, and achieve your goals. Don’t wait any longer to take charge — start your financial literacy journey today with Wealthbuddy!

With Love,

Your Personal Wealth Advisor.