As vision boards took the world by storm this New Year, images of long-awaited holiday destinations, a sleek sports car (maybe two) and modern designer items were the hopes and dreams of many who yearn for a life of luxury. However, as the months roll by, the wallet grows light along with a bank account that doesn’t see all that many zeros — all thanks to irresponsible spending and an unfortunate case of money mismanagement. 

But with financial literacy, budgeting and some other handy tips, you can learn to manage your money well, make meaningful purchases and finally book that ticket to Bali.

Financial literacy involves having a repertoire of skills developed through financial education that assist in making wise financial decisions. It is vital when it comes to one’s financial planning. Implementing such skills helps people, particularly the youth, achieve financial goals, build emergency funds and prepare for retirement. Additionally, it helps many escape the grasp of bankruptcy and debt as they are more likely to avoid making poor financial decisions. Here are some approaches you can take to become financially literate.

Learn about personal financial management

Take the step to understand how money works, by reading books, articles or even listening to podcasts to learn about personal finance, budgeting and how to set the right financial goals. Following social media accounts based around personal finance is a good way to keep yourself updated with the latest information and tips. Educating yourself on the topic gives you a clear introduction and provides you with a good foundation to get started on your own money management. 

Set financial goals

Having specific financial goals makes it easier for you to get into the mindset of managing your money well and keeps you consistent. Set short-term goals such as planning your dream wedding or vacation or investing in a venture, as well as long-term goals like saving up for retirement and achieving financial independence. 

Establish a budget

Budgeting is essentially a way to track the money you earn and your spending expenditures each month. By taking into account all your sources of income, you can set aside amounts for your necessary expenses through Excel, budgeting apps or by integrating budgeting plans in a bullet journal or online planners such as Notion. This helps you understand your spending habits and allows you to set aside certain amounts for your financial goals. 

Pay your bills on time

Take care of your essentials first, such as rent, groceries, bills and other general expenditures. This helps guarantee that no debt is incurred, before saving up and setting aside your income for other goals. A good way to keep track of payments is to set up payment reminders for services through SMS or emails to make sure you don’t miss out on any bills. 

Saving goes a long way

Saving part of your earnings each month has many benefits, like helping you maintain an emergency fund, providing support if you’re in between jobs and boosting up any ideas of entrepreneurship or a side hustle. The knowledge of a backup brings psychological ease and eliminates financial stress. 

To achieve your short-term financial goals, it is best to maintain a savings account, where you can transfer the amount through recurring payments each month automatically. The most common rule and recommendation is to save 20% of your income. It is also advised to regulate your spending, by finding areas where you can reduce expenses, such as avoiding impulse shopping, cooking at home to cut back food costs and lessening unnecessary expenditures (especially, that pair of shoes you’ve been eyeing). 

Invest your money

You can generate a passive income by investing in stocks, assets and other ventures with a certain amount set aside from your savings. The return will be greater than your initial investment, which is an effective way to build your wealth and help contribute towards your long-term financial objectives, such as preparing for retirement, purchasing a house or paying off any loans and ensuring that your financial future is a hassle-free one. 

Understanding financial literacy can be intimidating, what with the complexity of financial concepts and the abundance of knowledge available online. However, with a little effort and time, it’s a skill that anyone can develop - one that doesn’t require a CIMA certificate, yet is guaranteed to take you far. With a smart plan and some savings, those dreams on your vision board may be closer than you think.