What is financial - There is no doubt we have heard the term financial or finance quite often, but what does it mean, and why is it essential to manage finances? Before going any further, we should first understand the definition of finance.
According to the Great Dictionary of the Indonesian Language (KBBI), financial is a matter of finance. Not only that, according to the Corporate Finance Institute, finance also takes the form of money management, such as loans, investments, etc.
Then, what is financial literacy? According to the Indonesian National Literacy Movement, Financial literacy is the ability to apply concepts, risks, skills, and motivation to financial situations.
It is critical to have the financial literacy to be able to make decisions to improve welfare that are based on financial knowledge. The coverage of welfare can also be social as well as individual. We can also participate in society to create a prosperous environment.
Also Read: 7 Examples of Simple Living, The Key to a Happier Life
What is Financial?
1. An Overview of the Financial
Do you know what, Whizmates? The word financial is derived from the word finance, , which means money. In simple terms, financial understanding is all things related to finance.
So, speaking of finances, we will discuss how to study personal, business, and organizational financial conditions—From managing, improving, empowering, and allocating to risk calculations and making predictions about the future.
Therefore, it is imperative to know and be successful financially. Once you are an adult, you will be given full responsibility for managing the family's finances.
2. The Definition of Finance According to World Economic Experts
Some economists also argue about the definition of finance. Some of them are as follows.
1. Gitman
According to Gitman, finance is an activity related to financial managers in a company. The task of the financial manager is to organize and manage the company's private and public finances.
2. JL Massie
According to JL Massie, finance is an operational activity conducted by a company to obtain funds, which must be used effectively and efficiently later.
3. Prawironegoro
Meanwhile, according to Prawironegoro, finance means activities carried out by companies to get and use capital effectively, efficiently, and productively. The goal is to make a profit, Whizmates.
4. Martono and Harjito
Martono and Harjito define finance as an activity performed by a company to obtain and manage funds for a specific purpose.
5. Nana Sudjana and Berlian
Lastly, based on Nana Sudjana and Berlian, finance is an art and science used to manage and control money.
Considering the experts' five definitions of finance provided above, it follows that finance is the management of financial resources. It's not just about companies! You also need to know how to manage your finances! If you find it challenging to manage your finances manually, you can use the Whiz financial application. to make it easier.
What are the Benefits of Financial Literacy?
Now, we know the definition of financial and financial literacy, but what is the importance of financial literacy for life? Let's look at the following benefits!
1. Understand financial conditions
Knowing and understanding our financial situation is essential so that we can manage expenses, income, and what activities will affect our finances in the future.
2. Know the available financial products & how to take advantage of them
We can choose various financial products to improve our welfare, for example, stocks, deposits, and mutual funds. Financial literacy makes us understand what financial products are suitable for us and how to arrange them so that they are beneficial.
3. Improving the welfare of life
After knowing the financial situation, we can start setting targets and allocating funds for passive income. We can gradually improve the quality of life based on income.
4. Avoid fraud
With financial literacy, we understand the types of financial and business products. We can use this knowledge to avoid fraud. Generally, fraud is fast, practical, and too tempting. Knowing that finance takes time and a good strategy will help us avoid being scammed.
5. Taking responsibility for financial decisions
Indeed, you will have many options you can choose from once you have money. For this reason, having a good understanding of financial literacy will make you more responsible for your financial decisions.
6. Create a Savings Plan for Pension Fund
Making a savings plan for a retirement fund is also a benefit that you can experience when you are financially literate. It will make you wiser with your money, so you won't need to worry about old age with retirement savings.
The Example of Financial Literacy
After studying the benefits of financial literacy, how about an example of an individual who already understands financial literacy? Here are examples!
Knowing a Variety of Financial and Savings Products
There are many kinds of financial and savings products. Knowing the types and differences is an example of financial literacy.
Active in economic activities
As citizens, taking part in economic activity has a positive impact on the wider community and the country. Being aware of the importance of economic activity is evidence of financial literacy.
Aware of the importance of investing
Only some people know the importance of investing. Financial literacy results in the awareness of investing, which is not only a way to save money but also a way to multiply it.
Being able to turn debt into something productive
Who would have thought that debt could be productive? If we understand finances, we will also realize that debt can bring benefits. For example, When debt is used to buy gadgets that can result in profits, it has become productive.
Find Passive Income Opportunities
If you find passive income opportunities, then you will at least understand financial literacy since you will always seek to maximize your resources. For example, you have a laundry business, rent a boarding room at home, and so on.
Although the activities you do are minimal, the money you can earn can be extremely high
Finding Additional Income
Currently, there are lots of job vacancies with a freelance status that you can find. Doing freelance work will undoubtedly help you get additional income and improve your family's finances.
Financial Condition Indicators
In each region, people have different financial literacy conditions. Four indicators can be used to determine the state of a society's financial literacy. Here's the explanation!
Not Literate
This indicator is the lowest since the people have little knowledge and trust in finance.
Less Literate
Most people have finance knowledge but do not fully believe in it or know how to use it.
Sufficient Literate
The community already has knowledge and trust in finance, but they are not yet experts in using the product.
Well Literate
The community already has knowledge and trust in finance from its institutions, products, benefits, and risks. They are also an expert in managing and utilizing all financial products.
Also Read: 6 Examples of Future Needs That You Must Know!
That was Whiz's explanation about finances. Financial literacy is essential for individuals and society, so let's start learning to manage finances as early as possible!
LET'S USE THE FINANCIAL APPLICATION WHIZ
Updated by Farrosa Aini
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