In India, in particular, it is assumed that if a person is âliterateâ, he is automatically financially literate. Unfortunately, it is not the case. Many adults who earn do not know how to spend their resources effectively. Understanding how to spend is essential to maintaining long-term stability.
It also helps reduce stress and anxiety caused by uncertainty. Financial planning is a necessary skill in today’s times. Setting short term goals, long term goals, and an emergency corpus when needed helps to allocate funds in a structured way, reducing stress in unforeseen and unfortunate circumstances.
Setting financial goals and objectives can also help in understanding how to manage spending accordingly, thus making a habit of controlling spending. This practice can reduce unnecessary expenses. It also provides details on how you prioritize your financial goals, which will help you optimize your budget to meet your needs with maximum efficiency.
An effective financial plan can ensure long-term stability. Depending on the stage of life, different permutations and combinations of saving and investing can help secure a retirement fund, children’s higher education, marriage, home ownership, and other events. important to life. Risk averse people can invest in term deposits with banks that offer higher interest rates, debt funds, high interest savings accounts, etc. For people with a higher tolerance for risk, invest in stocks, stocks, etc.
Lack of this knowledge makes a person “financially illiterate”. The downside of being financially illiterate is the higher likelihood of making uninformed decisions. The consequences of these decisions can lead to anything from the simple loss of opportunities to falling victim to predatory loans or spiraling into the debt trap.
For adults, it is advisable to start by referring to different resources exploring topics such as money management, saving and investing for short and long term needs. In addition to this, it is also essential to take care of such things as the efficient use of credit cards. It is worth exploring financial instruments as different instruments serve different long and short term financial goals.
Various newspaper publications cover personal finance. It’s a great way to keep track of new investment options and opportunities. When it comes to financial planning, many financial management apps and financial advisers organize investment plans. The best way to learn money management and invest is through action. Apply the learnings to realize which methods best suit your ultimate financial goals.
The author, Archit Gupta, is the founder and CEO of Clear. Opinions expressed are personal
First publication: STI