Learning Basic to Financial Literacy! Imagine you are a 25-year-old man who graduated from a decent university and has office logistics worked but still complained of not enough monthly salary. You have plans to travel so to experience luxury and leisure but, because of an empty pocket, it seems to be contented to saw every day the chaotic view of your dormitory balcony.
You earn money through hard work and dedication, despite all those sacrifices you can't manage to have decent money in your pocket, you always experience a shortage and left empty, so able to seek debt is the only option. Think about your goals, your dreams of owning a house, is that only for a hardworking and lucky person, or it has just become one of an unreachable desire of yours? Have given that you are working and your salary isn't enough, then you have the plan to resign and find another job, this idea is ineffective that may lead your problem to worsen. Financial Literacy is self-reflection on how you spend your money, and how effective in handling expenses. Control your emotions to those unwanted expenses, pay attention first to your monthly bills, and priorities your basic needs.
Anyone can resign to work and start their own business but not anyone succeeds because of an inability to understand Marketing, product pricing, and other things that are fundamental to business operations, Financial Literacy is no excuse. The very basic of Financial knowledge is from knowing your Assets and Expenses.
Understanding Assets
What is an asset? Your assets include money, savings, cash on hand, labor (work), and all things you own with monetary value. Assets are your hard-earned money or the fruit of your Investment. Assisting your finances to grow is the best solution for your shortage, don't put your cash to the savings if you have it, instead learn to leverage your money.
What is Leveraging?
Technically speaking, it is about to use the money to get more money or borrow money to buy an Investment. For further understanding, let me take these explanations from Investopedia; "Leverage results from using borrowed capital as a funding source when investing in expanding the firm's asset base and generating returns on risk capital. Leverage is an investment strategy of using borrowed money—specifically, the use of various financial instruments or borrowed capital—to increase the potential return of an investment. Leverage can also refer to the amount of debt a firm uses to finance assets."
Understanding Expenses
You may pay attention to your unavoidable expenses, wants, and needs; these are the drivers of your spending. All things that we bought are expenses, whether it is a brand-new car, a new Louis Vuitton fashionable bag, or your second build house.
The Misinterpretation of Investment
Investment is intentional expenses that will help you to earn and generate another income that fills your assets, while the Expense is another thing that burdens your finances. The new car has maintenance, accessories, and fuel. The car, house, and bag will depreciate and loses value over time.
The misunderstanding is that you bought things that you think as an Investment, not knowing that it is an Expense. If a new car is for your use, it falls to liability if the intention is to resell at a much higher price; it's called Investment the same as to the house and the bag. It's easy to recall. Investments are intentional expenses to fills your assets and leverage your income.
If you want to be Financially-free, you need to become a different person than you are today and let go whatever has held you back in the past _Robert Kiyosaki.
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