Financial Literacy Month: 16 Effective Money-Management Tips For Corporates And Employees

Every April, Financial Literacy Month is observed. April 2024 will be designated National Financial Literacy Month for the 21st year.

It is both a celebration and a task. This month is the opportunity to go through your finances and steadily improve them. There are several reasons why the designation is as significant as it has always been.

Financial literacy is managing your personal and household resources to plan and achieve meaningful objectives.

History of Financial Literacy Month

Financial Literacy Month was established in the United States of America in the month of April 2004. This was done to emphasize the need for financial literacy and teach individuals how to become financially literate.

It evolved from Youth Financial Literacy Day, established by the National Endowment for Financial Education (NEFE). The NEFE was an activity included in the High School Financial Program.

The United States Congress strongly supported Financial Literacy Month in 2003 when the Senate Resolution and House Resolution petitioned President George W. Bush to proclaim April as National Financial Literacy Month.

Later, the United States House of Representatives enacted a measure in favor of the aims of Financial Literacy Month. The measure also requested that the President direct the Federal Government, schools, municipalities, and nonprofit organizations to begin implementation on this month. It is claimed that developing a budget and expanding your financial knowledge is the cornerstone of a prosperous future.

Why Is Financial Literacy Important?

Being financially educated is a skill that provides various benefits that can improve an individual's living through greater financial stability.

Some of the importance of financial literacy are as follows:

• Capability to make better financial judgments

• Effective debt and money management

• Better suited to achieve financial objectives

• Cost savings

• Less financial stress

• Increased ethical decision-making while choosing insurance, loans, investments, and using a credit card

• Structuring budget

Suggested Read: 12 Best Financial Literacy Books To Build Financial Confidence

How To Observe Financial Literacy Month At Your Workplace?

Commit to making better financial judgments by observing financial literacy month at your workplace. Below are some pointers -

• Encourage your employees to take a financial literacy course.

• Make an effort to teach your employees about monetary responsibility.

• Look for tools and resources to assist you in guiding them through the traps.

• Encourage your employees to invest time to acquire key financial skills to enhance their financial wellness.

• Look for ideas, videos, and guides to help you brush up on critical financial management principles.

Basic Components Of Financial Literacy

Financial stability is achieved by managing the mix of financial components to stabilize and expand investments and savings while decreasing borrowing and debt.

A thorough understanding of the financial components listed below increases an individual's financial literacy.

1. Budgeting

The four primary uses of money in budgeting are spending, investing, saving, and giving away.

Creating the correct balance among the basic uses of money helps individuals to utilize their income better, resulting in financial stability and prosperity.

A budget should be constructed to pay off all current debt while keeping money aside for savings and valuable investments.

2. Investing

To become financially educated, one must first understand about fundamental components of investment. Interest rates, price levels, diversification, risk reduction, and indices are some components that should be studied to ensure profitable investments.

Learning about important investing components enables people to make better financial decisions, which may increase income.

3. Borrowing

Almost every person is obliged to borrow money at some point. Understanding interest rates, compound interest, time value of money, payment intervals, and loan structure is critical for efficient borrowing.

If the preceding criteria are properly grasped, an individual's financial literacy will improve, providing practical borrowing recommendations and reducing long-term financial stress.

4. Taxation

Understanding the various types of taxation and how they affect an individual's net income is essential for achieving financial literacy. Employment, investment, renting, inheritance, and unexpected income are all taxed differently.

Knowledge of various income tax rates promotes economic stability and improves financial performance through effective income management.

The overall combination of all the above components becomes the primary criterion of personal financial literacy.

Financial Literacy For Corporates

Taking measures to become financially literate is a vital component of life that may provide financial stability, alleviate worry, and promote the attainment of financial objectives.

1. Educate Yourself

Look for ways to further your financial education this April. Check with your local Small Business Development Center or your bank for financing seminars. Look for online financial literacy tools to help you remain on top of your business finances heir an accountant.

Choosing the appropriate accountant is important, and you must consider a few things. Some may be self-evident, such as their degree and specialty. Others may need to be more obvious such as their distance to your workplace, your rapport, and if they'll represent you if you're audited. Once you've decided on the greatest match, regularly check to verify whether you chose the right accountant.

2. Manage Business Expenditures

While the sheer amount of purchase orders and invoices might be overwhelming, it is easier to handle your money once you know who you owe and who owes you. Make a small company budget and know how much money is going through your firm each month. Also, keep an eye on staff expenditures and search for ways to cut unnecessary corners.

3. Keep A Line Between Your Professional And Personal Expenses

Keeping your business spending separate from your personal expenditures is typically a good idea. This can help you avoid tax issues while saving you bookkeeping time. We recommend locating a small-business-friendly bank, credit union, or other financial institution that can assist you in managing your company's assets at an affordable cost.

4. Start A Financial Wellness Program For Your Employees

Businesses are increasingly providing financial wellness options to their employees. When employees are stressed out from their personal life, it might affect their performance at work. Consider what you can do to assist your staff in becoming more financially secure in the spirit of Financial Literacy Month.

Also Read: 5 Lesser-known Elements of an Employee Wellness Program

Financial Literacy For Employees

Have you ever yearned for a simpler approach to finding out what you should do to enhance your financial health? Check out some of the recommendations below.

1. Make A Budget

This is the beginning point for all your other life goals. Knowing where your money is going each month makes it much easier to progress.

Make a list of your debts and assess your income.

Rethink your budgeting strategy. Consider how much you pay monthly for modest items such as books, software, and online-service subscriptions. Determine what you truly require and what you can live without.

2. Know Your DTI

DTI, or debt-to-income ratio, is defined as your total monthly financial commitments - or debt - divided by your total take-home income. This includes your rent and any outstanding liabilities, such as education and mortgage loans.

Create a budget that covers your monthly expenses. Print and examine your recent bank and credit card statements.

3. Set Short, Mid, And Long-Term Goals

The time required to attain your financial objectives vary. Short-term objectives are priorities that are met within the next two years. Ensure each objective has a clear purpose, a monetary value, and a reasonable deadline.

Mid-term objectives are priorities that are met in two to five years. Make sure your objectives are both realistic and adaptable. If you set your objectives too high, you will be frustrated and unable to achieve them.

Long-term financial objectives are priorities that may take longer than five years to achieve. Most long-term ambitions need consistent savings.

4. Pay Off Your Debts

People commonly employ two techniques to deal with debt. The first step is to prioritize paying off the debt with the smallest sum first. Make sure to make the due payments or EMIs on all obligations.

After repaying that balance, apply that payment to the card with the next smallest balance and repeat the process until all obligations are met. This strategy may be quite gratifying because you can see results rapidly.

The second popular strategy is to prioritize repaying the loan with the highest interest rate. This strategy will save you the most money in interest rates in the long run. Be patient and persistent, regardless of the strategy you select.

5. Maintain Your Credit Report

Credit is an important aspect of your financial picture. It symbolizes your dependability and loyalty as a borrower and how successfully or unsuccessfully you handle your debt and personal finance.

Maintaining a good credit report is important for several reasons. A credit report summarizes your credit history, including information about your borrowing and repayment habits. Lenders, landlords, and potential employers may review your credit report when deciding whether to extend credit, rental housing, or employment to you.

6. Save Automatically When You Receive Your Paycheck

Nothing beats receiving a large sum of money at payday. So, what are your plans for it? You may purchase that new phone you've had your eye on. Or it can be about paying your rent.

The risk is holding a large amount of money in a single account. Suppose you have 50,000 bucks in your bank account; you're likely to spend it all.

It is preferable to allocate a portion of your paycheck to your savings objectives. When it comes to paydays, you have the most money to work with. Use your authority to distribute your money as you see proper.

Set up an auto transfer for debt repayment for various savings objectives such as an emergency fund, a vacation fund, and retirement. Paying yourself first will benefit your future self in the long term.

7. Calculate Your Daily Spending

It's time to fill out this handy spreadsheet with all your fixed, recurring, and variable costs and see where your income and expenses intersect or fail to meet.

Calculate your monthly expenses so you know how much you can spend on discretionary items daily. That way, your bills and savings objectives are taken care of. The daily total might help you stay on target.

8. Determine Strategies To Save Costs

Most people will have to earn more or spend less to achieve a balanced budget or boost their savings. If the concept of spending fewer sounds daunting, start small. In addition to making tiny changes, pledge to increase your savings by including your "windfall" money.

This windfall money includes additional income from a salary raise, birthday presents, insurance settlements, escrow overages, tax refunds, and inheritances.

9. Make An Emergency Fund

Let us hope there is never an emergency, but putting money aside for an unanticipated emergency might make you feel safer. According to a FINRA Investor Education Foundation poll, 46% of Americans do not have a rainy day fund.

There's no better time to start planning than now—after all, you never know when an emergency will hit. It would be best if you had three to six months' worth of funds in an emergency savings fund.

Even tiny monthly contributions can help. This might help you develop your savings gradually over time.

You may automate the transfer of funds from your paycheck to your savings account or utilize smartphone alerts as a reminder.

10. Don't Rely On A Single Source Of Income

In this modern age, you're just scraping by if you don't have double or multiple sources of income. The age of working one job your whole life is gone, and millennials are highly innovative with their side hustles and investments in making additional money.

Some side hustles pay handsomely, while others are passion projects, but let's be honest: everybody who does this in their spare time understands how liberating it is to have a buffer in your bank account.

11. Protect Yourself By Doing Financial Audits

It's a huge responsibility to control the family's finances. You may feel responsible for your family's general financial well-being and supplying them with life's needs. One of the finest ways to care for your family is to be ready if something happens to you or another family member.

12. Savings For Retirement

The benefit of putting your funds on autopilot is that you won't spend them if you can't see them. When it comes to retirement planning, the reality is that the sooner you begin saving, the better off you may be, owing to the magic of compound interest. Even if you started saving late or have yet to start, it's essential to know that you're not alone and that there are actions you can take to boost your retirement savings.

If your company has an employer-sponsored retirement plan, take advantage of it. If they provide a matching contribution, make an effort to contribute at least enough to receive the full match.

It's never too late to get started - Debra Greenberg (Director, Retirement and Personal Wealth Solutions, Bank of America)

Also Read: 5 Ways to Promote Financial Wellness Month at Your Workplace

Bottom Line

During Financial Literacy Month, financial institutions, nonprofit organizations, and human service organizations emphasize the significance of financial literacy and raise awareness via events, financial wellness programs, and counseling. The purpose is to assist people in improving their personal and household financial stability and success by teaching them more about finances.

Financial Literacy Month may give us a chance to increase our knowledge about our finances and learn how to make our money work harder and better, which is comforting since it is never too late to start.