One of the best decisions you can ever make at the start of any year is to focus on improving your financial knowledge. This will not only help you plan for the future but enjoy the present as well. The better you know about your finances, the more informed decisions you can make which is always a pre-requisite for good and sound decisions.
Much like how executives are able to make big business decisions only when they understand the situation and have all the information on hand. Only then will they be able to decide based on the company’s goals. This is much like how you need to approach your decision making and how you manage your own personal finances.
Increasing your financial knowledge will help you understand the situation in front of you. It will also help you identify the tools you need to be able to make the most appropriate decisions. This is just one part of why you need to understand your finances better. However, how do you start learning more? How can you make better money decisions? Here are a few things you can look into.
Know your weaknesses
One of the best approaches to making improvements in almost any aspects of your life especially your finances is identifying y our weaknesses.Y ou need to know the areas you are having the most problems with and work on them. This is one of the fastest and most direct approaches to help you learn more in the subject of personal finance.
If you are having a hard time understanding your 401(k) and how you can better plan for your retirement, focus on that topic. Find time before you go to sleep to read up about retirement savings. Talk to your HR or Finance coordinator at work to know how a matching-program works and how you can take advantage of it.
The idea is to quickly address your weaknesses by reading up or talking to people about it to help increase your financial knowledge. You need to accept that fact that you need help and would have to research the topic, read books, talk to people at work, or even seek out a finance professional. The bottomline is to do something about it and not brush it under the rug.
Look for ways to address your weaknesses
As mentioned earlier, once you identify your financial weakness, you need to quickly do something about it. Apart from learning more about it through reading and talking to people, you need to act on it as well. It is not enough to just know and read about it, you have to put it into practice to help you move forward with your plans.
Just like retirement savings, once you identify that a matching-program at work is essentially free money on the table, you might want to max out your contributions. This way, you get to take advantage of the amount your company is putting into your own retirement fund. If you already know how to trade in stocks to earn some passive income, the put some money into it and start trading.
The more you act on improving your weakness, the more you get better at it. You also increase your financial knowledge along the way. One thing you need to understand is that you will make mistakes. Even when you already know what you are doing, you will still make mistakes. This is natural but what you need to do is get back up and try again.
Improve on your strengths
Now that you have addressed your weaknesses, do not forget to take advantage of your strengths as well. This will help you reach your financial goals faster and maybe you can help other people out as well. If you recently got out and paid your student loans off in record time, it might be a good idea to use the same discipline in paying off other deb accounts.
You might have used debt consolidation to get ahead and manage your student loan payments, maybe you can do the same with your credit card payables? If you were successful in using it to pay off college loans, use that knowledge apply it to other debt accounts. Along the way, you can also help other people out by sharing tips on how you paid your loans off. A lot of people could pick up a lesson or two from your experience.
Start reading up on financial news and events
Financial knowledge starts from you and you need to be disciplined enough to know what needs to be done and doing it. One habit that can help you understand about your finances better is reading up on current news and events around you. You might think that this is just a waste of time but these types of information can help you manage your finances better.
If you are investing in stocks, knowing the current feel of the market gives you a better understanding of your stocks. You might even be able to identify companies to invest in or which ones to stay away from. This is a good idea since Gallup shares that only 37% of consumers under 35 years old are investing in stocks. If the news shows that interest rates are dropping on homes, maybe it is time to refinance your mortgage to enjoy that lower rate.
What can make it hard for you?
As you go on and try to improve your financial knowledge, there will be hurdles and challenges along the way. Here are some of them worth knowing and staying away from.
Believing you know everything
One of the biggest obstacles in trying to learn more and improving what you know about your finances is believing that you already know everything. It is also possible that you may not know everything but you do not want to know more because you believe you already know enough to make your financial decisions work to your advantage. You have to admit the fact that even the finance professionals had to start somewhere. If you are having a hard time with a financial topic, accept that and try to learn more about it.
Not reading the signs you are in trouble
There are financial signs that you are already heading down a vicious cycle of debt. You need to make sure that as you try and increase your financial knowledge, you also stay away from being in too much debt. The NY Post shares that total American households debt has reached over $13 trillion. This is because it is a lot harder to focus when you are too pre-occupied paying down several debt accounts.
Choosing to just wing it
This is a dangerous mindset when it comes to your finances believing, whatever happens, happens! You need to take a proactive approach when it comes to money management. When you are content to just wait and watch on the sidelines, you could land in big trouble. You have to take control of your finances at every chance you get.
If you just save what is left for retirement and not have a concrete plan how much you need to set aside a month, you are putting your golden years in peril. You might end up way short and would be forced to work more years just to have enough. If you just put some spare change into your emergency fund believing that it will be enough when you need it, you could be headed for disaster. You have to take control and save a specific amount each month to reach a goal.
You financial knowledge is an important aspect of your life that you need to make sure you put focus into it. Do not be afraid to face your fears and weaknesses because that is the first step to becoming stronger.