04/11/2021
Basic Principles of Financial Literacy
➜ Spend less than you earn
The ability to limit your desires and save money is a key skill in achieving financial freedom. Make a rule for yourself to save at least 10% of your income every month; you can live on the remaining 90% quite well, can’t you?
Why is it necessary? In the future, you can create passive sources of income based on this capital, replenish the reserve fund or save money for something expensive.
➜Meet basic needs first
When a dilemma arises between “postponing this amount for buying an apartment” and “going abroad”, what choice will you make? Common sense dictates that the basic need for housing should be met first. And only then you can spend money on entertainment.
➜ Don’t make spontaneous purchases
A short story of a real person is quite appropriate here: “Once I was in another city and came across a huge book market. My passion for books is too great, so I couldn’t help sticking there for an hour. As a result, I came out with a pile of books. Not only did they make it difficult to get home, but since then I haven’t read any of them. The amount spent by me was, of course, rather small, but it was completely pointless”.
The way to avoid this is to plan your expenses. Make your budget every month. Highlight mandatory payments (utilities, transport, Internet, different subscriptions, etc.), funds for food, entertainment and other categories.
➜ Consider not only the purchase price, but also its maintenance
When deciding on a purchase, take into account hidden costs that are not included in its basic price. Buying a car means spending on gasoline, parts, insurance, maintenance, etc. Traveling abroad means not only a payment for a finished tour, but also other expenses for souvenirs, additional excursions and force majeure. Consider this factor and always plan your maintenance budget.
➜ Build financial reserves
Any state or private enterprise has reserve funds in the budget structure. Their presence is due to the unpredictability of the world in which we live. Financial crisis, job loss, sudden illness, a lawsuit from an ill-wisher - all these black swans can instantly empty your wallet. Be sure to create your own personal contingency fund.
