When it comes to investments, all you really need is capital. With enough money, you can buy your fair share of stocks, bonds, and properties. However, it’s not guaranteed that you’ll get a return on investment. This is why it’s important that you have some prior knowledge before you ever spend a cent. The great thing about this is that you don’t need to have an economics degree or a job in Wall Street to start investing. You just need to know enough. And a great place to start is by knowing the terms.
To help you start building a worthwhile investment portfolio, here are the keys to improving your financial literacy.
Start with the Basics
If you’re on your very first job just after graduating, it’s normal that you won’t know a lot of technical terms. You’re probably familiar with mortgages, bills, and interest rates. But, it’s not enough to know their definitions. You should also know how one affects the other, possible alternatives and consequences.
A year after the start of the pandemic and the economy is starting to recover. With that said, there’s still a lot of people who are struggling. One report has found that almost three million people are lagging behind their mortgage payments. It may be because of job loss or business closures. But the good news is that there’s a way to ease the financial pressure. Borrowers can refinance their homes, so they would enjoy a lower interest rate. A lot of people jump through hoops and go through obstacles because they’re struggling to deal with their mounting debt. But, with a good understanding of your options, you don’t have to burden yourself too much.
There’s a reason why it’s called financial literacy. It’s not too far off from learning a new language. Just learning the definition of a new term isn’t enough. You have to learn how to use it in real life as well. For example, it’s one thing to know how a foreign language is written, but it’s a completely different thing to understand native speakers pronounce the words. As anyone who has tried to learn a new language can attest, one of the best ways to be fluent is to get exposed.
Now more than ever is it easy to be exposed to the ins and outs of finance. For one thing, the internet has made it as accessible as ever. There are always seminars, online or in person, taught by experts so you can get a grasp on the basics. There are also various resources which makes it easy for you to pick whatever topic you’re interested in.
Keep up with the Trends
If the coronavirus pandemic has taught people anything, it’s that life is unpredictable. Very few people could have predicted the virus’ spread worldwide and the magnitude of its impact on life, economy, and everything in between. In fact, one such effect that the pandemic had was the rise of cryptocurrency. A paper published by the Columbia Law School attributed crypto’s accessibility led to its high demand. It’s no longer surprising to hear overnight success stories about people becoming millionaires due to crypto.
To get up to date with the latest news, you must rely on sites that are not only timely but also accurate. When it comes to Wall Street updates, you can check out CNBC’s app and website. Other reputable sources are Kiplinger, Bloomberg, and Reuters. Social media sites are a great way to get updated as well because it’s as close to real-time reporting you can get. The downside is that the information you’ll find there isn’t always verified or contextualized. It’s best to check sources before you invest because of something you read on Twitter.
Put It into Practice
No matter how much financial terms you know, it won’t matter if you won’t use them in real life. For example, it’s one thing to know what credit scores are but it’s a completely different thing to know how to improve it. If you don’t pay your bills on time or if you keep maxing out your credit card, it will go down.
One of the best ways to apply financial literacy is by establishing a reasonable budget. This means that your budget is balanced enough to enable you to contribute to your savings, bills, and still give you room for the occasional splurge.
Financial literacy is not rocket science. But it is more than learning what 401(k)s are or the processes of refinancing a loan is. It’s about how to maximize your knowledge to grow your money and achieve financial freedom.