Some people believe that they are able to keep track of their investments and income in a healthy and safe manner, neglecting the need to learn about financial education and to prevent out-of-control.
But, why, even the most restrained should learn about it?
Educating oneself in this segment is more than necessary , since the main commercial relations that happen today involve money , whether to go to the supermarket to buy a food, to hire an employee or even to use public transportation.
The currency of exchange is financial and if money is at stake, nothing is fairer than learning how to use it wisely.
Do you know what financial education is?
Contrary to what some people think, the concept of financial education goes way beyond saving money or saving it for posterity.
Financial education corresponds to a series of decisions to use finances in the best possible way, not only in the future but also in the present.
All this based on economic fundamentals and important studies in the area.
Learning about finances is a way of realizing practices that will help the choices made by the individual, always focusing on understanding how money works in the world , with the purpose of managing the gains and expenses.
Why is it important to study financial education?
By living in a society that relies on constant consumption and purchases, it is very common for the individual to lose control of his or her spending and enter into a cycle of indebtedness.
In 2018, Brazil had about 63.4 million people with overdue accounts , according to a survey of the Credit Protection Service (SPC) published by State.
Even so, this does not only affect Brazilian lands, other countries have faced the same problem for decades, to the point of needing drastic solutions.
Not surprisingly, the Organization for Economic Co-operation and Development (OECD) , which involves 36 nations, decided to create a government project in 2003 to improve financial education through the dissemination of its principles to the population. only reinforces the importance and latent need to address financial education .
Given that this is a world demand, it is noted that education in finance plays a key role .
With it, it is possible to facilitate the process of understanding that consumption experienced daily, as well as helping the individual to find a way to manage their spending through simple and conscious practices.
What is the purpose of this study?
Here, the goal is financial guidance , without cutting costs, but planning them so that the end-of-month result is positive.
For this, the subject will inform himself; clarify your goals; be aware of your earnings and expenses; know the terms of personal finances with the help of financial education books and PDFs; learn about risks and investments; find ways to make money yield , among many other possibilities.
What counts is to make you aware of all these transactions, without just using money in a rampant and impulsive way.
Remember, the more information you have about something, the better it is.
For this, check out 7 financial education tips that will help you in your day to day:
7 Powerful Financial Education Tips
1. Remove Your High Interest Debts
The longer you hold a debt, the more months you will have to pay the interest .
Consequently, if these interest rates are high, you will be more likely to spend on extending your repayment.
Hence, opting for a personal loan with the lowest interest rate on the market to cover high interest debt is a great option .
In Credit Checker , rates are from 1.9% per month, compared with, for example, interest on the credit card , which reach 12.7%.
Do the math, see the difference and make the right choice .
2. Master the 3 Stages of Wealth Accumulation
When one thinks of financial education, the accumulation of wealth, that is, this act of saving now to consume in the future, is extremely important.
Therefore, three stages permeate this theory, being: to generate a monthly economy, to monetize it and to preserve it . More on this topic below, stay tuned.
3. Learn the Difference Between Price and Value to Improve Your Financial Education
Have you ever heard that some objects are so valuable that they are priceless?
If so, you know full well that value is related to a number of qualitative factors, which even money can not quantify.
On this basis, the concept of price refers to the cost of something, the money invested to acquire it .
Already value is the perception of that price , that is, it is the way the subject perceives that amount, judging it to be fair or not. And it is precisely this analysis that is fundamental to be made.
By knowing this difference between the two, it is possible to reduce consumption by impulse .
So, instead of looking at a part and buying it right away by being, for example, a special brand, the customer will consider whether it is really worth it, whether it is a quality product, if the price matches the market and whether it will last for many a time or if it will ruin soon.
These minutest details make the difference and guarantee an assertive purchase , instead of taking a bad and expensive product home.
4. Learn to Save the Best Way
According to Forbes Magazine (2016), in the pursuit of money saving , people should try a method that became known as 50-20-30 .
In it, 50% of the income would go to the bills, tickets and commitments that the individual already pays monthly, 20% would be saved or invested and the other 30% would be used for the superfluous expenses, like a new clothes or a cineminha.
Still, while this is a promising method, there are other, simpler ways to economize, such as using a spending spreadsheet or avoiding overeating, such as dining out.
Some of these solutions to your financial routine, inclusive, have already been addressed here on the site. Be sure to check to learn.
5. Invest Your Money
Only those who have a large amount of money can invest, right? Lie. Even those who have little can make investments.
Whether in Treasury Direct , at the Selic rate at 6.5%, savings started to yield only 4.55% per year.
This means that there are different types of investment that are more profitable than they are and that promise even greater gains when compared.
Despite this, if you have at least considered saving some of your money and applying it, this is already a sign that you are interested in financial education and are starting to plan .
So do not give up if you are still new to the process. Look for courses, watch videos about financial education on YouTube, read about it and find out. The first step has already been taken .
6. Create Financial Goals According to Your Priorities – Set Goals
Financial education makes you understand where you want to go, that is, it makes you understand your dreams and the goals you set.
In this way, whether in the short, medium or long term, the ideal is that small financial goals can be attainable by organizing them according to what has the highest priority at the moment.
By creating this action plan, you become more aware of what you really want by focusing on the goals you have created rather than spending money on other options that may not be as emergency.
In addition to being a simpler way to face dreams , the completeness of these goals gives more impetus and encouragement so that the individual can fulfill the next desire, such as buying a home appliance, a car or even clearing a debt that has been kept for years .
7. Create an Emergency Financial Reserve
The emergency reserve is money that is saved for any eventuality. However, it should be used only in situations that are, in fact, emergency, such as loss of employment, cases of illness, among other factors.
The ideal is that it corresponds to the cost of living of the individual for six months , containing fixed, variable, extra and superfluous expenses, based on the monthly budget and a spreadsheet of what is consumed.
Thus, if there is a need, this reserve will be sufficient to “hold the ends” during the period of difficulties.
Other than that, it is important that it remains untouchable and locked, requiring the owner of the finances to have self-control and be ready to understand that this is money that should only be used in the last case.
Basic Principles of Financial Education
When it comes to financial education, there are some principles that govern this concept, and it is fundamental that the individual follow them in order to achieve good monetary health. They would be:
Everyone dreams of financial independence . Whether it is to get rid of debt or to live on the income of investments instead of working, each one has an objective when talking about this emancipation.
However, as is well known, few people really care about achieving this independence at an early age, especially young people.
Younger people, in general, have a hard time seeing in the long run and in planning to make that dream come true.
Instead of buying assets, it is common for money to be used in liabilities, such as cars and other objects that will not generate wealth, but rather expenses – a serious mistake not only for the inexperienced but also for the elderly .
Finally, when the subject becomes aware of independence and his will to achieve it, the investor must be patient, understanding that it is a cycle .
It is no use investing irresponsibly or greedily, because this can lead to loss of money.
Therefore, it is necessary to study, plan and put into practice all the theories before choosing the best way to invest. Including, it is worthwhile to go through the cycle completely, first creating the emergency fund, then getting rid of the debts and finally, using the accumulation of income to survive.
However, this is a time-consuming and time-consuming process. In this case, the phrase “haste is the enemy of perfection” is more than welcome!
Cycle of accumulation of wealth
The Cycle of Accumulation of Wealth corresponds to three fundamental stages: to accumulate, to profit and to preserve .
And it does not have to be thought only in the long run, accompanying every moment of the individual’s life, but can also be used in small monthly goals.
By controlling finances and generating a monthly savings , the subject begins to accumulate.
In this first phase, it is necessary to control the budget, manage the money left over from the salary and regularly save part of the income.
With this, the chance to invest in assets and multiply them in the next step is even greater.
The next step is the monetization , the multiplication of the patrimony. Here, the money that was saved month after month can – and should – be invested in profitable assets.
However, it is important to exercise caution and to be careful about the risks involved in each of these transactions
Therefore, the idea of creating the emergency reserve may come in handy at this time, should there be any adversity along the way.
In the third stage, the preservation or maintenance of the patrimony generated in the previous phase takes place .
After all, just like in weight loss, despite the difficulty of achieving the goal, the most difficult thing is to maintain the positive results.
Now, on reaching this point, the individual can even lead a quieter life and have achieved financial independence.
However, it is still necessary to keep investments in less risky assets , remaining with a more conservative stance monetarily and ensuring security.
Goals and Financial Planning
Just like everything else in life, planning is essential to receiving good feedback and when it comes to achieving the desired goals, it is no different.
You need to use personal financial education to find budget-appropriate planning, mapping a strategy to achieve those goals, carefully studying the possibilities, and facilitating this process.
Therefore, it is essential to face the reality of each one, observing how much is earned and spent per month, if there are existing debts, how much has been invested, among other factors.
By doing this analysis and putting the details in the tip of the pencil, it is much easier to observe the habits of consumption, control the money, cut unnecessary expenses and face everything from another perspective.
Keep in mind that to achieve a goal, you need to organize and manage the money you already have.
And to manage it, you need to be able to measure it. With planning, the diagnosis of your financial situation is evident, and may even be a reality shock.
With all the above considerations, it is possible to realize the importance of financial education , not only to save or invest, but mainly to understand the monetary operation, to plan the next actions that will be taken and to be able to visualize the budget through a spreadsheet.
In today’s world, it’s no use just to work and put a portion of the salary on savings – or worse, end the month in the red because nothing is left.
It is necessary to invest, to have wisdom, to analyze the options carefully and not be fooled by techniques that may or may not work. Knowing the cause is essential.