What is Financial Literacy? Why is it important?

Financial literacy is knowing how to handle your money and use it productively in more than one way. Often we spend our money carelessly and regret it later. Utilising your money in a way that proves useful in the present or sometime in future is why financial literacy is important. This is just a brief description of it. In a real sense, it is a very vast subject. 

Financial literacy involves things like budgeting, saving, investing and loans and interest. This skill is developed when one gets involved in financial transactions. 

What is financial literacy?

It is the ability to understand and effectively use financial skills. Financial skills include:

  • Budgeting 
  • Saving
  • Investing 
  • Credit management 
  • Financial management

You might deal with these in your day to life. But to acquire these skills one needs to understand the basic financial concepts. These financial concepts include the time value of money, compound interest, annualised returns and opportunity cost. 

Why is financial literacy important?

The answer is very simple. You are financially literate, you can manage your money more effectively. It increases your confidence to manage your money and allocates it towards your goals. 

  • Distributing your income in a way that your expenses get paid without disturbing your budget. Note how much income is coming in and distribute it accordingly. And make sure to keep a track of your expenses and make changes in your spending plan now and then. 
  • If you are financially literate, you know that while seeking a loan you look at for the one with the lowest rate of interest. Comparing different loan plans is very important. You also are well aware that paying credit card bills on time is for your good. Because after a certain time you get charged with interest. This will only increase your expenses. time
  • Emergency funds are very essential in today’s uncertain time. Start saving little by little separately for emergencies. If you are already a financial literate you know that saving money equivalent to your three or six-month income is a must. Use it when you are in dire need of money. 
  • Everyone has to stop working after a certain age. Maybe because of health issues or because of retirement. Thus, you need to have a retirement plan. You should be well aware of which accounts will help you secure a good life after retirement.

How to improve financial literacy skills?

  • Manage your bills properly. Use the auto-debit option for recurring bills. Don’t postpone paying bills for late as it may affect the entire budget.
  • Maintain a good credit score. If you have a good credit score you can secure low-interest rates on loans and credit cards. 
  • Manage your debts properly. Stop spending lavishly and start saving and increase repayments. This will reduce your liability and pay off loans with high interests first.
  • Start saving and investing more. Investments are a good way to increase your saving. Invest where the rate of return is high. Also, don’t spend needlessly and save that money for something better and use it effectively. 

Lack of financial literacy will lead to budget mismatch, higher expenses, accumulation of debt, poor credit score and financial frauds. 

Acquiring financial skills will help you make major financial decisions. It ensures that you have a stable present as well as a future. It is a necessity.

How to create the initial team for your startup

 Establishing a startup is not a one day task. It requires a lot of hard work, patience and most importantly, it requires an excellent team to work with you to achieve your goals. And building a winning team that rides your startup to victory is not an easy task. The people you choose have the ability to make or break your business. You need to take a few essential steps at your initial stage to begin your work. 

  • Identify Positions

 If you are not doing a sole proprietorship, you and your co-founder need to know the positives and negatives of each other. You can’t be perfect in every skill, so you both must do a self-evaluation and know what are your strengths and weaknesses. When you know about it then you both can categorize your work according to your skills.

 When things between you and your co-founder are settled, you should start identifying positions to complete your team. Marketing and sales, accounting and finance, research and development are just a handful of examples of positions that you may need in your team.

  • Selecting your team members
  •   The process of hiring of team members should be done very accurately for the firm.
  •  Try to find T- shaped people for the organization. These people are experienced in one specific area but can handle other tasks too. They are quick learners and ready to take new challenges. They will benefit you more as compared to the employees experienced in a specific area. This will also help in recruiting a few numbers of employees in the beginning. 
  • Hire people who understand the importance of customer service.
  • You can appoint advisors to guide on important matters.
  • If your capital is limited, then you can go scouting in different colleges. Choose interns from there. Explain your plan to them and convince them to join you.

When you select your candidates, you must see that they fit in your startup culture, possess the right set of tools for your startup and should be passionate about what they do.

After selecting your candidates, there should be hiring and training. After this, they should be assigned their roles and responsibility. 

Always keep in mind whether you are choosing your 1st or your 100th candidate, you should know about the needs of your company and only then appoint someone who perfectly fits in that role.

  • Important things to keep in mind while building your startup:-
  • Be focused on your plan.
  • Make products keeping in mind what customers will be attracted to.
  •  Customer satisfaction must be a priority list.
  • You need to create a unique brand proposition of your product.
  • You must have good leadership quality.
  • Always communicate with your team members.
  • You must have a proper check on the cash flow of your company.
  • Never ignore or underestimate your competition.
  • Ability to listen and understand your teammates.
  • You should always be willing to learn and adapt to the changes happening around you.

In conclusion, this African proverb sums up beautifully:

If you want to go fast, go alone; if you want to go far, go together. 

Building your startup is a ride of ups and downs. You need to be calm and positive in the initial period. Thus, if you want to make your startup into the leading company, you need to start by building a winning team that will take you far.