by Sharon Jones
Image Credit: Pexels CC0 Licence
Everyone should be taught more about money management. Unfortunately, most kids rely on their parents to teach them about finance and, let’s be honest, how many parents have the time or expertise to explain how investment works?
Financial literacy has a massive impact on how people live. Those who understand the markets tend to do significantly better than those who are still scraping by with no idea that they could be doing more to grow the wealth they have.
So, here’s what you should do to boost your own financial literacy.
Research
At the most basic level, money management is about balancing your income with your outgoings. The best way to ensure that this happens every month is to create a budget. A basic budget will list all your essential outgoings - bills, mortgage or rent etc. - and all your income streams or your salary. However, a budget can also help you manage how much you decide to save and invest as well as form a basis for paying off any debt.
Of course, money can quickly get more complicated and there is a wide range of financial products that might appeal to you. The best advice you can get is to research thoroughly before you enter into any financial contract and always ask a financial adviser if you aren’t sure whether a product is suited to you. Only when you feel comfortable with the theory should you start investing yourself.
Experiment
It is a good idea to only invest money you can afford to lose. This way, whether you plan to buy cryptocurrencies on bitit or purchase stocks, if your risk doesn’t quite work as you planned, you won’t end up struggling to meet your basic needs. For example, you might start out by investing just $100 and seeing what happens - your return will undoubtedly be small but remember, at this stage it’s all about seeing what happens.
When you are more comfortable, you can consider experimenting with another idea or building up your investment portfolio. If you plan to start investing larger sums of money, you must look at ways to diversify your investment portfolio. This is the best way to mitigate risks because if one investment doesn’t work out, another will still be okay. Whatever you do, don’t put all your money into one high-risk investment!
Repeat
Making your first investment is a brilliant way to get some real experience with a more complex financial environment. This is now a good time to repeat the process. Do some research on another financial opportunity you are considering and then consider trying it out with some cash you can afford to lose.
While you are learning more about money management, it is crucial that you never stretch your money too far and you give yourself a decent amount of time to learn. Markets don’t move very fast when you are investing in small sums so don’t expect to learn everything overnight. Take your time; you’ve got years to master this skill.