What Is Financial Literacy?
Financial literacy
Financial literacy is the foundation of your relationship with money. It is the ability to confidently understand personal financial management, budgeting, and investing. The goal is to establish control over your finances. You should be able to also use money as a tool to build on the things you want in life.
When you're financially literate, you understand how to put income toward your goal. You aren't just focused on ongoing expenses. You have a plan for your savings, debt repayment, and an emergency fund too. You have the financial resources you need to build your credit, invest, and create new opportunities for yourself.
This could look like an increase in your retirement savings with each raise. Perhaps you've finally built up six months worth of a savings nest or finally decided to start checking your credit report!
If you're not quite there, that's okay. There are plenty of tools to help you on your way. Here we can dive into a few ways to become financially literate.
1. Free stuff: There are tons of free resources you can take advantage of. For example, you can monitor your spending online or through your Unity Catholic mobile app. You can also access an annual credit report through each of the three major credit bureaus. Another great practice is to check with your employer. Many businesses offer free financial counseling or employee financial wellness programs.
2. Credit Counseling: Expert help is also available from credit counseling agencies. These agencies provide guidance on consumer credit, money management, debt management, and budgeting.
3. Paid Resources: Working with a financial advisor is a great option if you have a little extra money to play with. Financial advisors are also ideal when working with large budgets and investments!
4. Outsource Resources: Seek out resources from well-regarded nonprofits and agencies. They can teach you the basics about finance on your own time. A few options to look into:
MoneyEd: A personal Finance Program
Nonprofit Finance Fund
Consumer Financial Protection Bureau
Practical Money Skills
Financial Planning Association
National Foundation for Credit Counseling (NFCC)
When prioritizing financial literacy, the largest component to consider is your credit score. Your credit score is essentially your social security number of the financial world. It is the deciding factor for everything from loan rates to apartment application approval and more! One of the central reasons to build financial literacy is to build on and protect your credit score.
A high credit score creates opportunities for lower rates, flexible terms, and above all else, it gives you options. However, in order to maintain or improve your credit, you need to understand how it is determined.
The main components that make up your score are:
Payment history: Pay your bills on time!
Credit utilization: This is the amount of revolving credit you use compared to your credit limits. The best practice here is to pay off credit card balances each month,
or at least maintain a credit utilization rate below 30%.
Check your credit score: Stay informed on where your credit stands. You can’t make adjustments without knowing first there is a problem.
Ultimately, the best outcome of your commitment to financial literacy will be increased confidence in yourself. At Unity Catholic FCU, we want our members to have the knowledge they need to make informed decisions, trust their ability to manage their debt, investments, and work towards their long-term financial goals.