Most people fail to realize that in life, it’s not how much money you make. It’s how much money you keep. We have all heard stories of lottery winners who are poor, then suddenly rich, and then poor again. They win millions, yet are soon back where they started. Ore stories of professional athletes, who are the age of 24 are earning millions, but are sleeping under bridge 10 later.
Therefore, Financial literacy is also required to know the difference between an asset and a liability because an asset puts money in our pocket and a liability takes money out of our pocket.
How Many People Are Financially Literate?
Based on the stats that we’ve already considered, it’s fair to guess that the majority of people don’t know how to handle their money. And while there’s no one sure way to measure how many people are financially literate, the lack of certain skills would confirm that guess.
For example, if you used the number of people who don’t live paycheck to paycheck as an estimate of financial literacy, only about 20% of people would qualify!
Budgeting could be another skill for measuring financial literacy. And how do Americans stack up in that department? Sadly, not even a third of people earning a paycheck (32%) stick to a budget.
There are four broad area of expertise:
Actually, Accounting is not an academic subject it is business language to understand the performance of the business transactions. In other words, it is financial literacy or ability to read the numbers. This is a viral skill if you want to build an empire. Financial literacy is the ability to read and understand financial statements which allows you to identify the strengths and weakness of any business.
Inventing is the science of “money making money” this involves strategies and formulas which use the creative right-brain side.
Understanding markets is the science of supply and demand. You need to know the technical aspects of the market, which are emotion driven in addition to the fundamental or economic aspect of investment.
Taxation & Compliance:
A person who understands the tax advantages and protections provided by a corporation can get rich so much faster than someone who is an employees or small-business sole proprietor. It’s like the difference between someone walking and someone flying.
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It will evaluate an individual's credit history to calculate a score that represents the individual's creditworthiness. Each bank has its own method of assigning the score; however, a high score will indicate a healthy credit score while a low score can decrease the chances of loan application approvals.
A credit rating estimates the ability to repay debt. A credit rating is a formal assessment of a corporation, autonomous governments, individuals, conglomerates or even a country. Credit rating is evaluated on the basis of financial transactions carried in the past and assets and liabilities at present.
A Credit Rating Agency plays an important catalytic role fostering the growth, stability, and efficiency of global and domestic capital markets. A comprehensive analysis of a credit instrument and a subsequent impartial assessment of the credit risk of the instrument, offer numerous benefits to all parties in concern.
The most obvious reason it's important to know your credit score is that your score determines your ability to qualify for loans and to get better interest rates when borrowing. If you know your credit score, a little research can let you know how much you should pay in interest on a loan before you apply.
It’s common knowledge that a better score can get you a lower interest rate on a mortgage or auto loan. However, many people don't realize just how much their car insurance premiums depend on their credit score.
Fintech companies not only allow you to check your credit score for free but have pre-approved offers for various credit products for different ranges of credit scores because of their tie-ups with various lenders. You can also compare the offers available in the market and pick the best one.
Every borrower looks for the lowest possible interest rate on his or her loan. The only way this is possible is when you are a good borrower or, in other words, have a good credit score. Certain banks have already started the practice of offering better interest rates to home loan borrowers with a credit score above 760. It’s only a matter of time before this becomes an industry-wide practice.
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