Financial education is a fundamental pillar of grown-up economics. Seldom do we see individuals studying for financial freedom. Nevertheless, it is an important skill to master as below are a list of five ways we can spot a financially literate person.
1. Financially literate people are those that have their financial goals (business or personal) set, written down and constantly visualized. It becomes second nature when a person constantly visualizes their goal and constantly strives to achieve it.
2. Discipline is another important trait where individuals set budgets and abide by it. Disciplined budgeting helps draw out onto a larger plan or financial goal. This way, the individual ensures that a strict percentage of their income is allocated for a specific purpose.
3. Financial education is a key element of being financially literate. This helps greatly by distinguishing the difference between good and bad debt. Bad debt is those categorically seen with high-interest rates (from either credit card or payday loan debt) with a range from consumer to perishable to low-zero second-hand value products. Bad debt becomes a liability that eats into your savings. Good debt is categorized by low-interest debt that enables an individual to increase their income and net worth. In such a way that individuals earn more from the low-interest rate loans than how much it costs to take such loans.
4. Overcoming common money management mistakes is crucial for financially literate individuals. Those that are financially literate will (try) not live on credit. These individuals will learn to live within their means ensuring their income will not exceed their monthly expense. Another common money management mistake is by not setting financial goals.
5. Financially literate people are those that take active learning in their financial life. Educating themselves to make better, informed decisions on their financial future. There are constant changes in the money and property markets, new financial regulations and the introduction or retraction of statutory taxation laws that a financially illiterate individual may not know.