3 Stressful Signs Your Financial Literacy Could Use Some Improvement
If you're tired of thinking about money -- or more accurately, thinking about not having enough money -- you’re not alone. Financial stress is one of the biggest sources of anxiety for most Americans, and often the only cure is increasing your financial literacy of budgeting, saving, investing, managing debt and planning for the future.
That sounds like a lot because, well, it is. However, if you’re feeling stuck, here are three key signs your personal finance skills might need an upgrade, and what to do about it.
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Stress Sign No. 1: Living Paycheck to Paycheck Has You Thinking About Money All the Time
If you’re constantly worried about bills, debt or saving enough, that’s one of the biggest red flags. In fact, USA Today reported that nearly 1 in 3 Americans say they frequently feel stressed about money.
"A clear indicator of the need for improved financial literacy is living paycheck to paycheck, often characterized by a lack of savings and an inability to cover unexpected expenses," said Sophia Tang, founder of Nako Cosmetics.
If you find that you're barely getting by and often anxiously waiting for your next paycheck, then it's a sign that you have to learn more about money management. Tang elaborated, "This scenario mirrors a common narrative where individuals find themselves in financial uncertainty due to insufficient planning and education."
How Can You Fix It?
"Adopting practical tools and resources catalyzed my transition to financial literacy," Tang explained. "Utilizing budgeting apps and attending financial workshops transformed my approach from uncertainty to confidence and clarity."
This kind of stress often also comes from not fully understanding how to manage your money. So start with the basics:
Create a simple monthly budget
Track your spending for 30 days
Build a small emergency fund
Stress Sign No. 2: Your Money Has No Budget
Not having a clear budget or even knowing where your money is going is really shooting yourself in the financial foot. A lack of budgeting is one of the most common mistakes, and it can cost you more than you think in overspending, credit card debt and missed savings opportunities.
If you know that you make a decent amount, but at the end of the month you're confused about what happened to all of the funds in your bank account -- this is a clear sign you need to improve your financial literacy.
How Can You Fix It?
Start by reviewing your checking and credit accounts to see exactly where your money went last month — both fixed and discretionary expenses. From there, you can identify areas to cut back, set up a budgeting framework (a simple rule or an app works well), and automate bills and savings to stay on track.
"Financially literate individuals see budgeting as a tool to make informed decisions about their income and expenses," said Doug Roller, founder at Crossroads Financial Group. "A budget acts as a financial blueprint, guiding where money is allocated each month."
One of the best ways to navigate this scenario is to find a budgeting system that works for you. There are different budgeting methods out there, including:
The Envelope System: With this budgeting protocol, you set up physical or digital envelopes for your various spending categories. You leave a specific amount of money in the envelope for every category, which is your spending limit for that period. For example, if you leave $100 in your entertainment envelope, then this is all that you can spend on this category until the next pay cycle.
50/30/20 budgeting: The goal is to have 50% of your income go toward necessary expenses, 30% toward discretionary bills and the remaining 20% go toward savings and debt.
Track your spending: You can simply choose to track your spending with your checking account. You don't have to overcomplicate budgeting because most banking accounts come with tools that help you track and visualize your spending habits.
"Adopting a budgeting framework, like the 50/30/20 rule, which allocates income to needs, wants, and savings, can transform financial management from a daunting task to a feasible routine," Tang said.
Stress Sign No. 3: You Are Losing the Battle Between Debt and Financial Goals
If you have no clear financial goals, are drowning in debt or haven't started saving, brushing up on financial literacy could help — particularly around goal setting and debt management.
"Understanding the implications of debt and having a plan to pay off balances is a sign of financial literacy," Roller said. "Seeking low-interest loans for assets and staying current on high-interest debts demonstrates financial awareness."
How Can You Fix It?
"Budgeting is complemented by setting clear, achievable financial goals, whether saving for a down payment on a home or establishing an emergency fund, making financial progress measurable and motivating," Tang said.
One of the most common reasons for lacking financial literacy is that you haven't found a reason to save. We all need something that inspires us to get serious about our money management.
"People with written financial goals are more likely to achieve them," Roller said. "Financially aware individuals regularly revisit their goals, both short-term and long-term, making adjustments as needed."
Martin Dasko contributed to the reporting for this article.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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