Financial literacy helps a person to achieve a financially balanced, responsible, and ethical lifestyle and make appropriate financial choices during their lifetime. Studies have shown that financial literacy greatly affects a person’s saving, investment, debt management, and loan-taking practices. This is the knowledge that helps someone to take appropriate action regarding their financial affairs. Being financially literate can change one’s ability to earn a livelihood, contribution to society, and one’s attitude toward money. 

Getting Started

Welcome to the Understanding Budgets and Financial Reports workshop. Every day businesses deal with budgets and financial reports in some form or fashion. At a minimum, business managers review budget numbers and run financial reports for decision-making and reporting to shareholders and Federal regulators once a month. Many companies devote the last few months of the calendar year to creating budgets for the next calendar year. In addition, organizations create and disseminate year-end financial reports to investors. The goal of this workshop is to give the participant a basic understanding of budgets and financial reports so they can hold relevant discussions and render decisions based on financial data. This course will define key terms like ROI, EBIT, GAAP, and extrapolation. Furthermore, this one-day course will discuss commonly used financial terms, financial statements, budgets, forecasting, purchasing decisions, and laws that regulate the handling of financial information. Before we begin, let us get to know more about each other. 

Learn How to Budget

The first step to gaining financial literacy is learning how to budget. When you have a budget plan, you can spend money accordingly and will be able to save any extra to use later in case of an emergency. Without a budget plan, you will be unable to control your spending and, as a result of this overspending, may suffer if your salary or allowance ends. In order to make a budget plan, you first need to note your monthly income and, second, track your spending. You need to include all your fixed expenses like your mortgage or rent, utility bills, loan payments, etc., and then include variable expenses such as groceries, entertainment, etc. 

Understand Your Credit Score

When someone pays off their credit bills on time, they are viewed as trustworthy by the lender. They begin to build a credit history and are afforded an improved credit score that will help them obtain future loans. In the US, a credit score is a three-digit number from 300 to 850. A high score indicates someone who is low risk financially and repays their credit bills on time, while a low score indicates a credit risk and who has likely not previously paid their credit bills on time. You should also be aware of your credit report, which is a summary of your financial situation. 

Understand Loans

It is important to understand the importance of paying off your debt and loans. Having a debt-free life is a desirable dream for most individuals. There are two ways to pay off your debt fast. One way is to identify the loan with the highest interest rate and pay this off first, hence reducing the amount of interest you will need to pay in the long term. Once this debt is cleared, you can then focus on paying off the loan with the second-highest interest rate, and so on. An alternative approach is to pay off all small debts first and then focus on the larger loans. 

Reduce Spending

If you wish to put more money aside as savings, you have two choices. You can either take on another job to increase your income or reduce your outgoings or expenditure. Spending can be reduced by planning your grocery shopping list carefully. For example, if you want to buy two items but also want to reduce your spending at the same time, you need to identify the most important item and buy that one first. The next month when your new salary comes in, you can buy the second item. Dividing your spending over a period of several months in this way can help you to save money. And reducing your spending will help you to reach your financial goals. 

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