Financial literacy and its importance for all

The importance of Financial Literacy is about making thoughtful and informed decisions about personal finances and is more important now than ever before, because credit in Fiji is more accessible than ever before.

Financial literacy helps individuals become self-sufficient so that they can achieve financial stability.

Those who understand the subject should be able to answer several questions about purchases, such as whether an item is required, whether it is affordable, and whether it is an asset or a liability.

This demonstrates the behaviours and attitudes a person possesses about money that is applied to his or her daily life.

Financial literacy shows how an individual makes financial decisions.

This skill can help a person develop a financial road map to identify what he earns, what he spends and what he owes.

This topic also affects small business owners, who greatly contribute to economic growth and stability here in Fiji.

Financial illiteracy affects all ages and people from all walks of life.

Financial illiteracy causes many people to become victims of predatory lending, fraud and high interest rates, potentially resulting in bad credit or even bankruptcy.

The lack of financial literacy can lead to owing large amounts of money and making poor financial decisions.

For example, the advantages or disadvantages of fixed and variable interest rates are concepts that are easier to understand and make informed decisions about if you possess financial literacy skills.

Why is it important to us Fijians?

We all need to have the ability to manage personal finance matters in an efficient manner, which includes the knowledge of making appropriate decisions about personal finance such as investing, insurance, buying or renting property, paying School fees, household budgeting, retirement planning and if necessary, tax planning.

We Fijians do all or some of these things in one way or another, so it is important that we understand it.

According to Investopedia, the main steps to achieving financial literacy include learning the skills to create a budget, the ability to track spending, learning the techniques to pay off debt and effectively planning for retirement.

These steps can also include counselling from a financial expert, like your solicitor or accountant.

Perhaps you have a family member that can help?

We all need to understand how money works, how to create and achieve financial goals, and manage financial challenges.

SET A fiNANCIAL GOAL

This could be to repay all or some of your debt.

Keep is small at first and keep it simple. Write it down and put it somewhere you can see every day.

Say you have a personal loan that you pay off and draw down on regularly. Make that your goal. To pay it off.

When you have paid it off, set another goal. Perhaps a bigger goal. Write it down, and so on.

DEVELOP A BUDGET AND STICK TO IT

List what you earn and what you spend. Keep reviewing your list regularly. Can you increase the amount you earn?

Can you reduce the amount you spend.

If so how? Write it down and review it regularly, changing it as you go.

This way you keep a record of what you are spending your money on.

It can be surprising what you find you have been buying at the end of each week or month.

DISCUSS fiNANCES OPENLY AND STAY INVOLVED

HONESTLY, AND

If you have an accountant this is one of the best people you can discuss your finances with.

Or perhaps a close family member that will keep your business confidential and will help you to achieve your goals.

Review your budget and goals regularly. Set a time to meet once a fortnight or even only once a month.

LEARN THE DIFFERENCE BETWEEN GOOD DEBT AND BAD DEBT

Buying an asset to generate or save money is good debt.

So long as the benefit is not outweighed by the cost!

Buying an asset that only costs money — does not generate any — is bad debt.

Think about whether you really need that asset.

EDUCATE YOURSELF ON PERSONAL fiNANCE

Speak with other people about their budget and planning methods.

Google it. Find out about education classes after hours or weekends. Invest some time in your future now.