please tell us about yourself finance essay

please tell us about yourself finance essay

The Importance of Financial Literacy in Personal Finance

1. Introduction

Personal finance skills are typically acquired over time. In fact, most young adults do not acquire certain money-management skills until late in their education or even after they graduate, and by then it tends to be too late as they already have significant debt from student loans, credit card purchases, and many people are defaulting on their repayments. With high personal debt early in life, most young people are also unable to save for important future goals including real estate, their own businesses and retirement. Most take a significant portion of their disposable income and spend it on consumables, fun items or services, daily needs, and debt repayments. Financial illiterates also create large social costs, making it more difficult for governments to achieve socially desirable objectives such as investing in education, welfare benefits or public health. Effective financial education helps individuals make smarter and more informed decisions about their money and can be useful in bridging the gap between having poverty and having a prosperous life. To promote this policy, many countries have introduced financial education into school curricula at the elementary or even university level.

Financial literacy – the ability to consume, save and invest money effectively – is essential for ensuring that people do not fall into poverty. Proper financial management is a key component of a person’s general well-being. Effective financial management can realize dreams of owning a home or owning a business, while poor money management can have lasting consequences and lead to a life of poverty and hardship.

2. Understanding the Basics of Personal Finance

Accounting, the primary language of business, serves as the cornerstone when formation of any business decisions or working decisions are to be made. Accounting thus is an essential part of any finance. Accountants are the ones who make sure the actions taken in the business have been as per expectation or have failed. Without accounting, the landscape is all blurry in which it is possible for fraudulent activities or deceitful use of funds to go unnoticed. Legally, accounting is a must-have document in every trade where it is required for an audited file or a financial institution loan or its institutional investment as assets. In its basic essence, accounting is required for calculating profit and loss, and the technique through which this is completed is statistical.

1. Earnings – to recognize types of income and how to file tax forms and income taxes. 2. Saving – to recognize the importance of saving and know the varieties of interest and applications. 3. Spending – by realizing that spending cash for essentials, non-essentials, and wishes may be a part of the spending techniques and also to be able to differentiate needs from desires and stop any financial pitfalls. 4. Borrowing – to realize types of credit expenses, types of credit, bankruptcy, and credit reports. 5. Financial Services – to apprehend diverse services available from monetary institutions.

The understanding of the basics of personal finance is important as it will enable individuals to make properly informed choices, avoid financial frauds and pitfalls, and plan for the future. There are five important components of personal finance that individuals should understand, which include:

3. The Role of Financial Education in Empowering Individuals

The importance of financial education in enabling individuals to weigh up risks, rewards, and alternatives goes beyond the decisions of individuals in their private capacity. The nature and extent of formal and informal financial education a person receives can influence the wider community’s economic prosperity. Educational attainment is positively related to economic performance at a national level. This outcome holds even after variations because of national IQ, religious composition, and national attitude towards work independently of educational attainment have been taken into account. In countries with high educational attainment, there are higher levels of economic performance and higher growth rates consistently over the period. Differences in educational attainment between countries explained more than half of the differences in growth rates between countries in the period.

An individual’s economic position is influenced by a range of factors. Some of these are outside of the individual’s control, such as the impact of global economic forces on their employment opportunities. But individuals also play an important role in shaping their economic position through the decisions they make across their lifetimes. Some of these decisions (such as education and training choices) are well-recognized as influencing economic outcomes, but recent research and policy focus now also highlight the importance of ‘beyond-school’ choices such as when to enter the workforce, when to buy a home, how to finance this home, and how to invest superannuation and other savings. Such savings and investment choices are particularly pertinent because they occur at an age when individuals have low levels of financial maturity. Young people’s decisions about savings and investment can be critically influenced by cognitive, social, and emotional factors, and by their access to appropriate knowledge. Indeed, there is increasing momentum to develop effective financial education initiatives because we know that people with high levels of financial literacy are more likely to plan for their future and to take steps to secure that future.

4. Practical Strategies for Managing Personal Finances

You will have a mix and match of expenses in some cases, some will be fixed and others may need to be flexible. Even though sometimes your income may be constant, your expenses are not always changing. Some expenses may decrease depending on your level of need. You may need to pay more for light and heating during the winter months if it is chilly compared to what you paid during the summer months because power costs will be used on a minimum only. Then there are online subscriptions that you are not using – you need to look into them in your household budget. There are box subscriptions like Netflix and Hulu subscriptions that can be put on hold because you are not getting value out of them currently and there is no new content being released at this time. With this and more advisable tips given to you in the checklist, you will make your housekeeping in check and be safe and secure.

It is very possible to be financially healthy if you know the basic and fundamental aspects of budgeting. You should know how to manage your income and expenses through a budget. If you analyze your expenses and income, you will know where to reduce wastage and make comparisons on what you can do without. A budget plan helps you set a certain percentage of your income to save for your future and spend wisely, keeping your financial dreams in check.

5. Conclusion: Taking Control of Your Financial Future

That’s why you need to take control of your own financial future. It’s why you need to create a safety net around you so that when something does go wrong – and trust me, something always goes wrong, even if it’s just the car’s A/C breaking down – you’re in a position where you’re not required to put off school, eviction, retirement or draining your good old 401(k). With enough information, a little bit of sheer willpower and some persistence, you’ll be able to control your own future and choose how soon you’d like to retire. Money does not have power over you, you are the one who’s in control.

It could be very intimidating when you start to think about all the things that can go wrong with your finances. Sometimes, it’s just easier to forget the insistent nagging of bills and the prospect of a maxed out credit card or student loan debt and go about your life as if it’s all just nothing important. Bad things happening to your finances won’t happen to me – not when you don’t bother to check your statements – no sirree. This attitude is okay when you’re a kid and getting used to living on your own. It’s not okay when you’re older. You have some basic responsibilities that can’t be ignored and you can’t afford to put your own interests and future at risk.

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