Financial education

Very few educational systems take the time to educate their students financially. This causes us to grow up without understanding how the most basic aspects related to our treatment and management of money work. Financial education is as important as learning to read or write, it is the way we have to develop ourselves and take care of our family economy. A financially educated population will always have a better chance of finding prosperity than one that has not been educated to understand finances.

Basic finances, those that are of practical use in managing a household and understanding how the liabilities and assets we acquire over time work, are actually very simple to understand. What happens is that since we are never told about it, we come to think that this knowledge is reserved for the wealthy or those who have studied subjects related to this topic.

During the development of this guide, we will be analyzing two of the most essential elements of basic finances that you can use to improve your quality of life and your general wellbeing.

Manage your household finances

One of the most practical ways to understand basic finances is by taking those related to your household finances. Understanding how the flow of your household capital works will help you learn basic financial principles that can then be used in your professional and personal development. Start by being aware of what your household expenses are and what percentage of your recurring income they are.

An easy way to visualize these two values is to make a table with your assets and liabilities. In the first column, the assets column, you will put all the monthly income you receive, in this case we would be talking about net income. Net incomes are those that are left after paying taxes, that is to say, money that is free of expenses or debts. In the second part of the table you will put your liabilities, liabilities are everything you spend money on, be it household bills, food, cleaning products, among others.

The remaining capital from subtracting your liabilities from your assets should be represented by a percentage value. This percentage value will reflect how healthy your finances are and will help you understand if you should cut back on your spending.

Educate yourself on saving and investing

Another practice you can do to improve your financial education is to save and invest. There is a very marked difference between the two activities, while saving consists of setting aside a portion of your earnings to cover a future expense or an unforeseen emergency, investing has a somewhat more technical pu