By shilpa

April 6, 2021

What Is Financial Literacy
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What Is Financial Literacy

Financial literacy is the level of knowledge in the field of finance, personal savings, and the ways of managing them. In this article, we will tell you about the basics of financial literacy, which will help you become financially independent and manage your money competently.

Basics of Financial Literacy for Beginners

Table of Contents

These five rules will allow you to achieve financial independence:

  • Always spend less than you earn.
  • Try to invest in something that tends to become more expensive.
  • Try not to buy something that is likely to become cheaper.
  • First of all, meet the basic needs.
  • Consider not only the cost of the item but also the cost of its maintenance.

In addition to the basic rules, some additional recommendations will help you become a financially literate person and avoid typical mistakes. Below is the information that will allow you to start managing your funds effectively.

Is It Worth Taking Out Loans?

Loans may be a wise decision in the following cases:

  • For housing
  • On working and manufacturing equipment (that can bring profit in the future)
  • For treatment

You can always get a loan with a secure and convenient service, such as Payday Depot or Now Loan in the UK. However, keep in mind that it is highly unadvisable to use credit for entertainment, clothing, food, etc.

Credit cards should be used very carefully or not at all. Keep in mind that a new loan may only be taken out after the previous one is paid off. Try not to combine two or more loans if you are to follow financial literacy rules.

Financial Reserve

Any person needs to have a reserve that can be spent in case of force majeure.

The minimum amount of the reserves is equal to your income for 6 months. However, it is fine to start from smaller amounts. However, aim for a financial cushion equal to one year of your earnings. This will provide optimal security for your budget.

Typical Financial Mistakes

The basics of financial literacy will help you avoid the typical mistakes that people make. Below you can see the most popular ones:

  1. I spend everything I earn!

Reserves are not formed. The solution to housing problems occurs with the attraction of maximum credit, which increases the cost of interest and reduces the standard of living.

  1. I want to buy it!

Impulsive shopping is a problem many people encounter. A lot of such purchases are made with the help of loans. 

  1. I want the best one!

Saw a branded limited collection shirt you saw on some influencer’s blog? If you always want to buy something that you can afford, it may become a problem.

How to Improve Financial Literacy?

You can take these easy steps to improve your financial literacy:

  • Analyze your income and expenses. Check what you can cut down and how much you can save. 
  • Save money and learn how to invest it. In addition to bank deposits, you can invest money in bonds, real estate, your own business.
  • Use your loans carefully. Try to pay off your debts quickly and live within your means.


Knowledge of finance and the ability to manage personal funds will allow you to accumulate wealth and gradually increase your financial capabilities. Use our tips to take your financial situation to a whole new level!

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