How to Boost Financial Awareness and Maturity

If you are trying get a better hold of your personal finance, but you don't know where to start, you have stumbled upon the right article. 

Defining 'Financial Awareness' 

The first step to beefing up your finances is to have better financial awareness. However, most of us might get confused hearing the term, so let's give it a bit of definition. Financial awareness is having knowledge of various aspects of your finances which include two of the starters: (1) inflows and (2) outflows. Hence, having awareness allows you to answer the question, "Where is your money going?".

Levels of Financial Awareness

• Level 0 - You typically struggle to get hold of your expenses. You often get surprised finding your savings and wallet emptied without enough knowledge of where you spent them. 
• Level 1 - You have awareness as to your savings, and how much they are growing. However, you still don't have much idea of where your money is going.
• Level 2 - You have a grasp of your inflows and outflows in totality allowing you to know exactly by how much your revenues are higher than your expenses. 
• Level 3 - You know the breakdown of the inflows and outflows mentioned in Level 2, which means you know where your money is coming from, and where they are going.
• Level 4 - You not just know the breakdown of both your inflows and outflows, but you also know if you are spending or earning more in one area over time (i.e. versus last month, or over the last 6 months)

Benefits of Financial Awareness

In order to build a habit in continuously raising your awareness, we need to understand why it is important. Here are some of the reasons.

1. Consciousness - Awareness allows you to be more conscious of your spending. One of the reasons why we tend to struggle in our finances is because we are not conscious enough that we are overly spending on some categories of our expenses. And it's only by having consciousness when we begin to realize, accept and eventually do something about it. 
2. Control - Awareness brings forth the possibility of analyzing your income and spending patterns, and when it does, this gives you the opportunity to control them. In a similar way, you'll begin to understand how much spending is extravagant and how much is just enough. 
3. Predictability - Awareness through habitual recording of your income and expenses allows you to understand patterns which then gives you predictability. This predictability allows you to be more strategic in your spending. At the same time, predictability gives you an idea of how long will you be able to achieve your savings goals.

Ways to Boost Financial Awareness and Maturity

• Level 0 to Level 1 - Start listing down all your accounts (e.g. payroll, savings, checking, time deposit, etc.) including the balances, and start doing the same at the end of each month. In this way, you'll have an idea how much they are growing or declining.
• Level 1 to Level 2 - Start recording how much you spent at the end of each day, even just the total. Then, sum up all of them, to arrive at your total expenses for the month. You can now compare this with your income for the same month, and assess if you spent more than you earned.
• Level 2 to Level 3 - Start breaking down the daily expenses, mentioned above, into categories (e.g. Food, Utilities, Transportation, Grocery, Rent, etc.). Tally the same at the end of the month. You'll then now know where exactly your money went.
• Level 3 to Level 4 - Start comparing the expenses in each category across the months, and see if you are growing or lessening your spending.

In order to further boost your financial awareness and maturity, I suggest you download a finance tracking or budget tracker app. This will allow you to conveniently record your income and expenses. Normally, there are also built-in features of comparing your expenses against previous months. This will accelerate your progress of going to Level 4. 

Listen more about it in this podcast episode.

A lot will be further expounded in this episode, so hit the play button now.