The world of finances is very vast and large. There are a lot of things that you could get lost in, and you might be overwhelmed by the things that exist there. This is especially true if you’re a budding adult just starting to enter the real world and outside academics. Things such as savings, income, taxes, investments, and so many other financial terms might blindside you. Reality is as harsh as it gets, and if you don’t prepare, you’d be easily swept by them as well.
Being financially savvy could also go a long way, such as availing discounts and taking advantage of a checking account bonus. Before going that route, though, let’s first talk about some of the concepts that you have to familiarize yourself with in order to be financially literate and make the best out of your earnings.
Why should you bother?
Understanding these financial concepts will give you a practical edge in the real world. The way humans interact makes it so that everything can be very complicated, and there are a lot of variables that each and every one of us should consider. Even in finances, there are multiple factors that come into play. For example, buying your groceries isn’t as simple as going to the mall and selecting the food and items. You have to budget, learn about taxes, and manage your income so that you’d be able to adjust things accordingly whenever you’re in a pinch. You’d have to consider inflation, recession, market supply and demand, and even your own preferences whenever you’d want to buy a piece of bread in the grocery store.
Investments are a big part of financial concepts. Investing is essentially putting money aside and allocating it to be funded for a budding company, or any other public company for that matter. There are other ways to invest as well, such as buying real estate and renting it out, going for stocks and bonds, or even starting a business yourself. Investing could be as risky as you can tolerate it to be. The thing about investments is that you put money aside in the hopes of gaining something from it in the future, i.e., profiting. This is different from savings in such a way that savings are usually more simple, more secure, and more stable. You simply put money in a bank and wait for it to grow through interest for savings while investing involves a whole host of factors that may or may not be to your liking.
Insurance is another type of financial concept that you have to get yourself familiar with. Think of insurance as a safeguard against emergencies and unforeseen events. Insurance is basically setting money aside in order to be used whenever something comes up that has not been accounted for in your budget. This is usually done through insurance companies that specialize in different situations. Basically, you could insure your house, car, or any property that holds a lot of value. You could also get health insurance, which is essential for some states in order to not drown in medical bills.
Insurance companies collect a portion of your earnings and save it for later, which could be accessed whenever you get into sticky situations. For example, you get into a car crash. Instead of paying for the car damages and treatment for your injuries, you could call up your insurance company to take care of the two. That way, you won’t get shocked with bills and sudden requirements to pay for something very expensive. There are a whole lot more types of financial concepts that you could search and understand for yourself, and this is just the tip of the iceberg!