Personal Finance

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Foundations for Financial Success Volume 1, Issue 1, March 3, 2011 TABLE CONTENTS OF What is financial literacy and why is it important? Financial literacy is the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being. More specifically, it refers to the set of skills and knowledge that allow an individual to make informed and effective decisions through their understanding of finances. Financial literacy involves a number of different areas of understanding. Learning about money and how it works is an important aspect, as well as understanding products like credit, loans, and investments. Competency in managing money appears to be a skill that doesn’t come naturally to…show more content…
This is why money alone does not make you rich." - Robert Kiyosaki Newsletter Determining Where Your Money Goes Title To determine where your money goes, you must be able to understand the importance of a personal cash flow statement, and the components needed to develop this tool. The cash flow statement outlines your total income and total expenses to demonstrate where your money is going and how much of it. This can help you control expenses. The potential benefits of examining your cash flow may lead to moderate spending, increased savings and investments, and peace of mind knowing that you are now in control. The merits of examining a cash flow statement will be illustrated in the following example. Once you have gone through Stephanie Spratt’s cash flow statement, you Example will realize how important it is to make sure your expenses are not exceeding your income. The best way to do this is by budgeting. In Stephanie Spratt’s case you will see how much her morning coffee can add up over the course of a month. You will also realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise. Opportunity cost is a financial term which represents what you give up as a result of that decision. By spending money for a specific

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