March 24, 2024 Education
What you should know about financial awareness
Financial awareness means possessing a set of knowledge and skills necessary to make the right financial decisions at the right time
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Welcome, now that you are here, you must be interested in improving your life financially. In this article, we will give you a snack about what you should know about financial awareness.
First: What is financial awareness?
Financial awareness means possessing a set of knowledge and skills necessary to make the right financial decisions at the right time.
Understanding the nature of money and possessing the skills to deal with it will make you better able to deal with the financial problems and obstacles you face in your life, from buying your daily necessities to making crucial and investment decisions. On the other hand, it relieves you from the trouble of facing many problems resulting from poor financial management, such as resorting to borrowing or living with a low standard of living.
A good and stable standard of living is not related to the amount of money we have, as much as it is related to how we deal with money. What matters is not what money you have, but rather how you deal with it. Therefore, we see from time to time that those who we considered to be rich have begun to ask for subsidies!
Second: The importance of developing financial awareness skills
Positive dealing with money is a basic skill that can be acquired. You may acquire it from your family, school, and work. However, you will need to organize these skills and make them deeper and clearer. However, you may not have an environment that cares about financial awareness. Here the responsibility will fall on you alone in developing your financial skills, and this is not It is a choice, even a duty, that must be made if you seek a decent life, given the growth and complexity we are experiencing in the financial aspect of individuals, in addition to the growth and increase in the requirements of life as a whole.
Financial awareness will give you the ability to control money by organizing your priorities, financial planning, and getting rid of debt. It will protect you from chasing offers and discounts. Remember that you are the first target for all sellers!
Money is a good servant and a bad master
In order for you to realize the importance of financial awareness, you must imagine that, God forbid, you lost your job, which constitutes the primary source of income for you and your family. Imagine that you did not find a job and this situation continued for two or three months. Where will you get the money to cover your family’s expenses for all this period? Will you resort to borrowing? What will you do with the accumulation of debt?
Imagine, God forbid, that one of your family members had to undergo an expensive operation in a private hospital that is not covered by insurance. Will you cover him by borrowing? Even sudden moderate expenses such as unplanned home maintenance, or even sudden social event costs. How will you deal? Will borrowing be the same? Your first solution? Or will you have to sell some of your belongings?
Financial awareness will give you protection against these circumstances. Protection that stems from your personal behavior, stems from your positive dealings with money. Financial awareness is not a luxury of knowledge, but rather the basis of a decent, stable life.
Third: Basic skills for building financial awareness
You may be wondering what skills I need to acquire in order to be financially conscious? There are five basic skills that I must learn in order to achieve this:
- Basics of budget preparation: The first enemy of financial stability is unplanned spending, because it makes us easy prey for momentary pleasure, neglecting our necessary needs and financial capacity. Preparing a budget gives us the opportunity to know our approximate income, and it also helps us to be more aware of the process of spending and arranging priorities. Which protects us from ourselves and our personal desires to be more rational in our financial dealings.
- Giving priority to saving money: Many of us believe that what is directed toward saving is the remainder of the income at the end of the month! However, this is one of the most common mistakes, as in most cases there will be no income remaining, and you may borrow to complete the month’s expenses! Saving must be taken at least 10% of income at the beginning of the month, and I promise you that you will not feel the loss of this percentage. The evidence for this is remembering the salary increase that you recently received, which did not make a significant difference in your standard of living, to the point that you now do not feel its presence. However, before the increase Your salary was at the same level, so why not direct it to the savings fund!
- Understanding debt: You should not view borrowing as a way out of any financial predicament, because it leads to an imbalance in the flow of income. Borrowing means that you are spending income from the future on an obligation in the present! Which forces you to borrow again in the future to cover its expenses, and this puts you in a never-ending cycle of borrowing! Therefore, you must learn how to deal with debt and get rid of it. Here we are not talking about usurious borrowing because it is forbidden by Islamic law, and on the other hand, it leaves us facing a more complex problem. In general, be sure that freedom from debt does not come by chance, but rather requires commitment to a plan to end it.
- Financial safety and financial identity theft: You must learn how to preserve your financial information, especially since we are in the era of financial technology, which has provided many services via phone and facilitated the operations of hacking bank accounts and credit cards. On the other hand, you must learn more about the widespread fraud schemes. So that you do not fall into it, and how to act if you are a victim of a scam.
- Understanding the mechanism of money: There is a famous saying that says that money brings money, and it is completely true. We either spend money on purchasing liabilities such as trips, clothes, and other expenses that represent a decrease in the money we have, and here money will not bring money. Or we can spend the money on assets such as buying company shares, real estate, and other assets that will represent a new source of income over time.
Now consider with me these basic skills. How many skills do you have? Every skill you master makes you more capable of dealing positively with money. Remember that we are not slaves to money, but dealing negatively with money will make us so. You will work for hours to eliminate debts and will not end. You will continue day and night without... A real improvement in your standard of living, but know that financial awareness is the straight path to financial stability and financial freedom.