Learn How To Make & Save Money Now
If there’s anything we’ve learned in the modern age, it’s that personal financial literacy and security are some of the most important life skills to have. In fact, being financially literate can mean the difference between living a comfortable life and being stuck living paycheck-to-paycheck.
While making money isn’t always a walk in the park, learning what to do with it doesn’t have to be daunting. Today, I’m going to go through with you a few key components of financial planning that have helped me on my journey to financial success, and that I hope will help you too. Think of this post as a valuable piece of financial literacy training you can keep as a pocket guide.
What Is Financial Literacy?
So, what is financial literacy? Some of you might be looking at the term and scratching your heads. To add, most people think they already know all there is to know about their personal finance.
But, there’s a lot more going to successful money management than just creating a budget and saving a few pennies here and there.
At its core, true financial literacy entails knowing how to save, spending smartly, debt management, investing well, and much more.
What Are Financial Literacy Topics
While it may seem like a lot to take in, the personal financial literacy topics you’re about to explore are all incredibly valuable and should always be referenced when making a decision.
To introduce the next section, here’s an overview: you’re going to learn about how money is created, maximized, and secured. The ultimate goal of the financial literacy topics I’ve laid out below isn’t necessarily to guarantee you massive wealth—it’s to supply you with the tools you need to create it yourself.
The first personal financial literacy essential topic is straightforward, in a way: saving money. The concept is simple, the more you save, of course, the more money you’ll have down the line. But this topic is more complex than it may seem. For example, you have to decide how much is the right amount to save from each paycheck and defeat the demons of instant gratification and impulse buying.
Again, saving may seem like something that doesn’t need to be explored, but the fact is that many Americans (and people worldwide) seriously struggle in this area. In fact, according to Statista, 69% of Americans have less than $1000 secured in a savings account this year.
To overcome the odds, knowing how and how much to save is vital to your comfort level. Having less than $1000 is not enough to prepare you for emergencies or to grow wealth comfortably.
In general, it’s widely accepted that people should save about 10% of their paycheck, if possible. Of course, many people’s circumstances may not allow for this percentage, but if you are in a position to save this much, it can change your life—especially if you start early.
To ensure that your money grows and stays protected, you’ll want to put whatever percentage of your funds you’re saving into a secure savings account.
What kinds of savings accounts are there?
There are a few different types of savings accounts that fall under a similar umbrella. Knowing where to put your money for the best return is going to set you apart from other savers—here are a few you might have heard of:
1. Retirement savings accounts.
There are a few different options if your goal is to start saving early for retirement. These include accounts such as an IRA, 401(k), HSA, and more. Usually, your employer will match your contribution percentage to a retirement account through the company, so save as much as you can.
2. Emergency funds.
This is a straightforward type of savings account—you never know what life will throw your way until it happens, so it’s absolutely vital to have funds on hand in case of emergency or unexpected expenses.
3. General savings accounts.
Everyone should have a general-purpose savings account where they store money they’d like to see either grow through interest or be safely stored away.
4. Targeted savings funds.
What I mean by targeted in this respect is that you can set up savings accounts for certain things, such as a new car, a down payment, or other large impending expense or financial goal. These accounts can keep your eyes on the future and help you take the next steps in life.
Tools and Services for Saving Money
Now that you’ve heard a bit about savings in general, I want to mention a few finds that might help you maximize your savings on a daily basis.
I recommend Ibotta for a host of reasons, but mostly because this app rewards you for doing your regular grocery shopping. Food is an expense that will never go away, so I figure Ibotta can help relieve some pressure in that area, offering you discounts on certain products each day of the week.
Even if you’re not the type to actively research which deals are available, there’s good news—you can still save just by uploading a picture of your receipt to the app. Ibotta will scan your receipt, and if there are any products you bought that they discount, they’ll apply it right then and there for you to cash out with later.
Drop is another service that offers you cashback if you shop regularly through their app. Dosh and Drop are very similar, but Drop is different in that it offers points instead of direct money at first. Once you accumulate a certain amount of points, you can cash out the same way.
In the end, if you’re between Dosh and Drop you should choose based on which stores or merchants they feature in-app. They’re both completely free, so you’d have nothing to lose and a lot to gain.
Last but not least, I personally have used and would recommend Trim, an app that goes the extra mile to help you save smarter. Trim is an excellent tool for managing subscriptions, something crucial in today’s world.
As we all know, websites and e-services are making it harder and harder to easily navigate to the ‘cancel’ page. It’s a shady tactic to keep you on the hook, but Trim will lay out all your subscriptions and help you cancel without the regular hassle.
The first is a free app called Dosh, which I find to be a great tool if you still like to spend money on online purchases. It can be hard to give up shopping altogether, and that’s not really what smart savings are all about.
So, Dosh is a cashback service that partners with popular online stores, and you’ll receive monetary returns when you shop as you normally would using their app. Over time, these cashback opportunities can add up, and you can cash out straight to your bank account, Venmo, or PayPal.
Overall, I’d say Trim is my top recommendation for those who participate in numerous free trials online and enjoy subscription services.
Budgeting and Smart Spending
By now, you should be well-versed in the idea of spending, and hopefully, this has shed new light on ways to minimize your expenses. Another basic financial literacy pro tip is to create a solid budget. This is a core element of personal financial literacy that is not expendable in any way, shape, or form.
And no—I’m not just talking about creating an estimation, or writing down a few things that you want to save for. I’m talking about creating a comprehensive record of your income and expenses you can refer back to and analyze over time. By keeping a record, you can budget with concrete numbers and eliminate unnecessarily.
It’s essential to create a document you can edit over time to reflect how much you’re really spending and how much you can afford to save. Knowing where your money is going is one of the key components of financial planning.
Creating a quality budget and expense record
Right now, I’m going to share with you my budgeting strategy when I was just getting started. As your wealth grows, there are lots of services and professionals out there to help you manage your money, but as a starting point, you can make your own records to interpret.
Here are a few tips:
1. Create your record with Excel, Google Sheets, or another similar product.
The first tip here is to use a service like the ones mentioned above. At least in my opinion and experience, Google Sheets and Excel are the best spreadsheet builders and can help you easily manage your financial data to make decisions.
Once you have access to these, make a spreadsheet you will use to list out your income and expenses (here’s where a little accounting knowledge can boost your budget skills).
2. Record expenses using the same timeframe for each.
You might have expenses that are charged daily, weekly, monthly, or yearly. For example, a coffee each morning or a weekly news subscription might show up on your sheet.
To most effectively compile all your expenses, choose a metric like expenses by month or year. To do that, multiply daily expenses by 31 or 365, weekly expenses by 52, and monthlies by 12.
3. Use the sheet to analyze and start budgeting effectively.
Once you’ve listed out every expense you think you might run into, you can start the analysis stage. Compare your income and expenses, and needless to say, the latter should be smaller.
It’s up to you to decide how much you want to decrease your expenses or increase your income to create a healthy balance. This process will help you realize how much disposable income you have leftover to budget with.
Next on the list of financial literacy topics is debt management. The term might sound intimidating, as debt can be a complicated subject on its own. But here, it’s simple: you’’’ need to learn how to approach debts you might have and evaluate how much is okay.
Debt is one of the top reasons that some people can’t manage to climb the wealth ladder—it’s daunting, easy to accumulate, and can be dangerous to your financial success.
It’s normal to have debt (i.e. student loans, a mortgage, etc.), which is unfortunate but not the end of the world if you have solid personal financial literacy.
What you need to look out for is interest—if you don’t pay the minimum on any type of debt you have, the cost will grow each month that it’s unpaid. Watch out!
One of the basic finance concepts you’ll need to know is how to build and manage credit. If you ever want to take out a loan for something in the future, having a solid credit score early on will increase your chances of being approved for it.
Among the people that I coach, creating good credit is one of the things they’ve struggled with the most and wish they’d started earlier. Building a credit score can affect lots of financial areas for you, so here are a few ways to ensure that your credit score stays fortified:
1. Use a credit card for smaller purchases.
If you want to build credit, start by purchasing with a credit card you know you can pay off each month. To do this, start intentionally making small purchases on your credit card. That way, you can build credit early on with little risk.
2. Pay off any debt on time, and don’t accrue more than you can handle.
This is straightforward, but the most important point—pay off debts as they come to you before they have the opportunity to grow.
If you’re able to do these two manageable things, your credit score should jump each month and keep getting better as your money grows.
Here’s a point I’ve talked about in many other posts here. Increasing your income is one of the most obvious ways of becoming financially independent. This isn’t always so easy, but we’re going to explore a few ways you can increase your income streams to offset expenses you may have.
On the road to personal financial literacy and success, there are quite a few paths to take to grow your income. You can follow the employment process, start your own company, or do odd jobs on the side to make your living. If you like the idea of a combination of the options, it’s very possible and potentially lucrative.
If you’re geared towards the employment side of things, make sure when you start, there’s upward movement potential. If you want to increase income at a current job, you’ll likely need to increase your performance as well to secure a raise or promotion.
Guaranteed you have the time, one of the lowest-effort ways to make extra money is to do odd jobs or start a sort of side gig. If you have a talent or like to craft, you can monetize it with the right entrepreneurial skillset.
Unless you’re just starting out in the financial realm, you probably know a thing or two about what investments are and how they can grow your wealth. Investing can be low- or high-risk depending on your style and time commitment, but there is always risk involved. So, it’s vital to learn how you can increase your chances of success in the investment world.
To add, there are so many different types of investing. Some of the most popular are public stock investments, mutual funds, real estate, cryptocurrency, and more. These are all forms of betting, in a way, and how investments perform is directly influenced by world events, consumer confidence, market history, and more.
Every form of investing comes with risk, so it can be intimidating to make a decision. But, no matter what you choose to grow your money with, there is always going to be a way to mitigate as much risk as possible.
To become financially independent, you’ll absolutely need to be well-versed in investing pro tips. Below, I’ve written out a few that I think every person on the planet should know before making the jump.
How to invest successfully
1. Deeply research stocks and trends you’re interested in.
If you find an investment opportunity you might want to go for, it can be easy to do minimal research and jump right in. There are so many investments that seem attractive at first, but once you take the plunge, it plunges too.
This is usually because not enough research was done to ensure that it was really a good choice. Luckily, there are tons of financial analysis resources online, so make sure to research thoroughly.
2. Don’t make investment decisions solely based on your own perspective.
This ties in with the previous point to a degree, but it’s seriously best not to play the market based on luck and luck alone. Sure, if you like a certain company, it can seem like a no-brainer to invest, but make sure you get the analysts’ perspectives beforehand.
3. If you’re new to investing, use an app to help you out.
Newcomers to the world of investing might be a little bit overwhelming, so it’s helpful that there are apps like Robinhood and Acorns to get you started. I’d recommend using one of these right off the bat.
Approaching the end of the list of personal financial literacy topics, we have taxes. Nobody likes paying taxes, but it’s necessary and inescapable in any case. Being tax-smart is another thing that can define financial literacy to a degree. Most people actually don’t know how much they could be saved by knowing how to file, manage, or lower taxes ethically.
One of the best ways to lower overall taxes is to find a way to lower your taxable income. This can be done by gaining income through investing, using retirement accounts wisely, and recording business expenses to write off later.
With investing, the money you gain on returns will still be taxed—however, the returns you get are considered capital gains. Capital gains are taxed at a lower rate than other types of income, so if you invest your money well you can see relatively lower taxes each April.
There are retirement accounts such as your IRA or 401(k) that, if used to their fullest potential, can save you tax money. When you contribute an amount to one of these accounts, it’s tax-free upon deposit. This is to say that when you withdraw the money later, it might be taxed but at a much lower rate than on other types of income. In the end, withdrawn funds from these accounts will be considered income of a sort.
Business expenses are considered anything you’ve purchased to facilitate a work environment or contribute to your business operations. These can be recorded on your tax return and save you a great deal of money.
Among my financial literacy tips, I couldn’t omit the importance of utilizing insurance to protect your assets and potentially your life savings. Without investing in proper insurance coverage, you could enter into peril should anything happen.
Insurance can come in many forms and is essentially protection from all kinds of risks you face. There’s health insurance, home insurance, car insurance, life insurance, and more. If you want to insure something, it can be done.
How it works is that you pay a fee each month or year, and if an emergency health issue occurs or your house burns down, your insurance company will cover it (or at least large parts of it). The idea is that these events are unlikely, so insurance companies will charge you based on how prone you are to them.
Insurance can be a hassle to deal with, especially if you think these things will never happen to you. But the reality is that no one is invincible, and without insuring against emergencies the costs could be outright crippling.
The last on the list of basic personal financial literacy topics is the concept of financial security as a whole. Savings accounts and insurance can only do so much to protect your assets, but knowing the ins and outs of general financial security is priceless in today’s society.
What I mean by that is hacking in the 21st century is more prevalent than ever, and malicious technologies are evolving at a lightning speed. You’ve probably heard stories about older folks getting scammed by devious software, ads, or even regular people. Evidence has shown that as technology advances, those scams are just the tip of the iceberg.
It’s unfortunately never been easier to steal people’s data online, and when data is breached it can lead to financial losses through hacking. When we’re not careful online, there can be incredible losses on the horizon if the wrong person comes across your information.
Something I personally do and would recommend to anyone else is to use a VPN while using the internet. I use IPVanish, as there’s a zero-log policy and assures that my information will be secure while I’m using my computer.
Financial Literacy Course
So, I hope that list of essentials for personal financial literacy gave you a solid grasp on what it means to know your money. If this post has piqued your interest in what more there is to learn about financial literacy and freedom, there are many resources online that could help you start using your knowledge.
I’d recommend Udemy or Coursera to further your financial knowledge, as they offer self-guided courses from top instructors all over the world. It can be helpful to get multiple perspectives on this kind of thing, as there’s no one way to go about building wealth.
If there’s anything I want you to take away from this post, it’s that you now have a complete overview of financial literacy topics to come back to for reference. In the age of information availability, I feel it’s my duty to share what I’ve learned about finance over the years so you can climb that wealth ladder and achieve your monetary goals.
Another thing to take away is that while no one could stress enough the importance of saving and monitoring money, it’s also important to keep a healthy work-life balance. The ultimate goal should be to enjoy what you have while managing it intelligently. Don’t give up everything just to save a few bucks here and there—just prioritize and be realistic.
Anyway, I hope this guide has answered your questions and helped you on your own personal wealth journey. Check back for more tips on entrepreneurship and achieving financial freedom whenever you can.