The survey confirms that financial literacy in India has consistently been poor compared to the rest of the world. It can be detrimental to India’s ambition of becoming an economic superpower in the coming years. Financial illiteracy puts a burden on the nation in the form of higher cost of financial security and lesser prosperity. Most people resort to investing more in physical assets and short-term instruments which clearly conflicts with the greater need for long-term investments, both for households to meet their life stage goals and for meeting the country’s capital requirements for infrastructure.
In addition, there are certain erroneous beliefs associated with financial literacy – the most common being the myth that one who is ‘literate’ or ‘rich’ is ‘financially literate’ too. Lack of basic financial understanding leads to unproductive investment decisions.
The need of the hour is for a drastic overhaul of approach to savings and investments by Indian households.
It’s a time to set your priorities.
Creating a list of needs and wants can help you set financial priorities. Needs are things you must have in order to survive: food, shelter, clothing, healthcare, and transportation. Wants, on the other hand, are things you would like to have but aren’t necessary for survival. Many people get into financial trouble by spending too much on wants and don’t have enough left over for their needs.
When it comes to financial wellness one should be able to distinguish between wants, limited resources, and alternative resources. You need to rank your needs as well as your wants in order to clearly define where your money should go first. This not only applies to your current expenses, but to your goals – which can also fall into the categories of wants and needs.
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Do you know about your spending? People may tell you how much money they could make but few can actually tell how much they spend, very few can even tell you how and where they spend their money. What comes in goes out this is a circular flow of income- time to make a budget plan on your personal expenditure. A budget can be a real eye-opener when it comes to spending choices. Many people are surprised to find out just how much money they are spending on superfluous goods and services.
The best way is to avoid getting into debt, to begin with (by making practical spending choices and living within one’s means), there are strategies to pay down and get out from under the debt people have already acquired. Debt is a kind of emotional drain on an individual and on one’s family.
Secure your future. Learning more about your retirement options is an essential part of securing your financial future. Even if you can’t save much, every bit helps. Once you’ve developed a plan, you could end up making better spending choices now that you have a goal in mind.
Time to show your proactive behavior in acquiring financial literacy. Even if you didn’t learn money skills at home or at school, in office it’s never too late to catch up. Re-aligning your focus and adjusting your finances now will make all the difference for your future.
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