10 Tips for Improving Financial Literacy

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Do you know how to manage your money efficiently? Are you financially literate?

When you’re earning money from a business, employment or pension, it is not enough to budget your finances by living within your means, paying your bills on time, and keeping a portion of your income towards your savings. It is also important to invest, pay off debt, manage taxes, and plan for future expenses like college and retirement. All these money matters can be easily taken care of if you’re financially literate.

Financial literacy is, in a nutshell, the ability to make smart decisions with one’s money. It enables you to understand and practice efficient financial management and helps you become self-sufficient and achieve financial stability.

Unlike academic literacy, financial literacy is not taught in schools. It is first learned at home from parents and adult guardians and later through individual experiences and everyday interactions with other people. Unfortunately, not many families put a high value on this basic life skill.

If you’re one of those who are constantly struggling with your finances and do not know how to start managing your money effectively, here are basic tips to get you started:

1. Get better informed

If you’re not “inherently good with money”, you can learn a lot about smart money management from various learning resources, including books, websites, blogs, e-books, online training courses, webinars, videos, and podcasts.

If you need a more in-depth understanding of financial literacy, there are also financial classes and seminars that are offered by your community, company, church, and university. It can also be provided by financial institutions and government agencies.

Get information from various sources before making your own judgments and decisions on financial matters, regardless if they’re in personal or business affairs.

However, use all the information you learn, including insights and recommendations, as a guide and not as a set strict of rules. This is because you are learning about financial literacy from someone else’s point of view and the author’s experiences and way of life could be entirely different from yours.

2. Track your spending

Whether you’re writing your expenses manually on a record book or using modern apps, tracking your spending helps you understand your spending habit, create a realistic budget, and identify areas for improvement in managing your finances.

Once you understand your spending patterns, you can easily adjust your budget to better suit your needs and goals. You can also stop spending on products and services that you rarely or never used at all, like online subscriptions and memberships.

3. Develop a savings strategy

As soon as you develop a realistic budget based on your spending behaviour, you can easily strategise ways to save money while diligently paying your bills and necessities.

There are plenty of savings strategies that you can live by. These include:

  1. Paying yourself first. Set aside a portion of your income to save before spending your money for anything.
  2. Settle your debts first. Whether it’s paying off your highest-interest-rate debts first or prioritising your smaller balances, settling all your debts can free up your money for financial goals.
  3. 10% Savings. Depositing 10% of your monthly income to your savings account no matter how much you earn will ensure that you’re growing your savings steadily.
  4. No-spend month. Ideally, you’re not supposed to spend money on anything within the 30-day period but since this is almost impossible, the closest workaround is spending only on necessities.
  5. Minimalism. This means living a modest lifestyle of a smaller house, less stuff, and fewer utilities.

All of these strategies work, but the most effective one depends on your unique financial situation and goals. You can also develop your own savings strategy, or adjust the one that you’ve adapted as your lifestyle and financial needs change.

4. Start investing

Saving money is not enough if you want to become financially secure. Whether you’re running a business or simply working the old nine to five, you need to grow your income by investing.

There are different avenues for investment, such as:

  • Property
  • Equities trading
  • Managed and indexed funds
  • Exchanged Traded Funds
  • Cryptocurrencies
  • Pee-to-peer lending
  • Superannuation

The investment opportunities are endless; You just need to know the ones that work for your financial situation. For instance, if you’ve bought a new property, you can rent it out or wait for it to increase in value and then resell it. Meanwhile, if you need more money for your investment ventures, you can take out a personal or business loan to fund your projects.

The earlier you start investing, the more your financial investments will grow through compound interest.

5. Plan for future expenses

Setting financial goals is important when you’re building financial security. Goals provide you with a sense of direction, purpose, and motivation.

For instance, if you’ve set to buy a new pair of sneakers by the end of the month, you would work on that goal by carefully budgeting your monthly income and saving enough money for the purchase. You may also refrain from spending your money on various other expenses to ensure that you save enough for the product that you wish to buy.

For major expenses like a car or a home, you would need to have a long-term financial plan. Aside from saving money for quite a long time, you may need to plan your loan applications and repayments if approved. You may also need to start investing in various schemes to save enough money for the down payment, as well as for the regular repayments.

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6. Build and maintain a good credit profile and score

You’ll never know when you need to get more funds to pay for a personal or business project. If you have a good credit profile, you can easily borrow money with a low-interest charge from lenders. Many lenders would be willing to approve your loan application with a good credit profile because it reflects a responsible attitude towards handling finances and managing debt.

  • To establish a good credit profile, you need to have a history of taking our debts that you responsibly paid on time. Typically, this can initially be done with the use of credit cards before proceeding to take out bigger loans, like vehicle financing and business loans.
  • When using a credit card, do not spend more than the recommended 30% of your maximum credit limit. Doing so will affect your credit score negatively as it suggests that you’re having problems with your cash flow.
  • If you’re running a business, it is best to use a separate credit card for business expenses. Your business’s credit profile is different from your personal credit profile.

Aside from responsibly handling your debts, be mindful also of your bills. Pay them on time to avoid late payment penalties. If you have a long-overdue bill, a utility company can also send your account to a collection agency, which in turn may forward your records to the credit bureaus.

7. Use financial management tools

There are plenty of financial management tools that you can utilise to manage your finances, from your credit cards to your bank transactions. The most advanced of these apps and software programs not only can help you budget and track your spending, but they also have bill payment and investment forecasting capabilities.

Top financial management tools include:

  • Xero
  • Quickbooks
  • Mint
  • MoneyBrilliant
  • Australian Taxation Office app

8. Secure your financial identity

Identity theft is common. Don’t fall victim to it. Keep your financial information private. Avoid sharing it with a stranger, especially over the phone. If you need to provide your financial information to sort out an issue on your bank account and other financial-related concerns, visit the concerned institution to talk about your issues in person. If you need to speak to a company representative over the phone, initiate the call by contacting its official phone numbers.

The same wariness should be applied to your emails. Aside from practising caution when communicating with any company representative, also refrain from responding to spam and phishing emails, clicking on any links inside them, and downloading any attachments.

If you use banking and other financial-related apps, always secure your transactions by using a strong password--usually a combination of letters, numbers and special characters--that you regularly change.

9. Plan with your house companions

Are you living with your family or friends? Make everyone in your household involved in financial planning. After all, these “other people at home” are likely included in your weekly, fortnightly, or monthly budget.

For instance, if you’re preparing for an upcoming holiday celebration, let everyone know that you’re financially preparing for it by minimising spending and saving as much as possible. Also, encourage them to share their thoughts and ideas on money issues.

  • The same principle applies when you’re running a business. If you own a company, you have to include your key employees in financial planning as they are likely to have great insights.

To teach your kids the importance of good money management, introduce them to the concept of savings by providing them with a piggy bank and then later on, opening their own savings account. Also, share with them your personal experiences with money issues, as well as the financial literacy resources that you've collected from various sources.

10. Regularly review and update your financial plan

Revisit your financial plan from time to time to track your goals and check your progress.

Aside from helping you identify and correct errors in the plan, the constant reviews can also motivate you to keep going on your financial journey despite the challenges. It also assures you that the plan aligns with your current situation.

Financial experts recommend reviewing your financial plan every three to six months and when a significant life event unfolds.

In case your financial situation changes, like getting a salary increase or losing your income after being terminated from your job or failing your business, you need to adjust or update your financial plan to reflect your new needs and goals.


Financial literacy is a necessity that you should master along with everyone else who uses cash or credit cards. It helps you stay in control of your finances and work towards your short-term and long-term financial goals. Without adequate financial know-how, you’re bound to get caught in debt or be stuck in the endless cycle of debt and money problems.

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