Developing financial self-awareness is the best strategy you can adopt to keep your finances in check. This skill allows you to improve your financial health.
Between theory and practice, however, many people have difficulty controlling their budget and, consequently, achieving their goals.
If this is your case, the lessons learned throughout this article can help. In addition to clarifying what financial self-knowledge is, we will talk about its benefits and how to develop this behavior in your life.
What is financial self-knowledge?
As the expression itself suggests, financial self-knowledge is the ability to understand your own decision-making profile when it comes to money.
This involves understanding how you usually consume, your choices when investing , what your goals are regarding financial issues, and also how you control your budget.
Why practice self-knowledge in finances?
Practicing self-knowledge in finances is about making smarter decisions when spending or investing available resources.
After all, this is a skill that makes it easier to identify habits and situations that tend to lead you to impulsive consumption. It also helps you understand what your priorities are and what changes you need to make in your routine to achieve them.
It may seem strange, but most people still have an estranged relationship with money and avoid even looking at their bank account balance . Whether out of fear, disorganization or any other behavior, this makes it difficult to control spending and leads to a distorted view of financial reality.
Benefits of financial self-knowledge
The truth is that dedicating yourself to learning about your own financial habits can yield a series of benefits that you shouldn’t ignore. Find out what the main ones are in the list below:
- Better understand your own choices and who you are
- Consume more consciously
- Improve your financial health by making smarter decisions
- Set goals in an organized way, already thinking about the financial impact
- Understand the importance of having an emergency fund
- Save to invest in your future
- Avoid stress caused by lack of knowledge about finances
- Being able to make investments aligned with your plans.
Each of them is a reflection of the process of simply stopping and analyzing your own financial decisions , seeking to identify patterns, necessary changes and opportunities to grow even further.
How to develop financial self-knowledge
You’ve already realized how much financial self-knowledge can change your life for the better, right? If you’re wondering how to get there, it’s worth understanding that we’re talking about a process.
You don’t just wake up one day and feel more aware of your relationship with money. You need to be willing to reflect on the subject, revisit past situations and change unfavorable behaviors.
To help you along the way, try following the tips we’ve put together for you below.
1. Analyze your own profile
It’s time to go back in time and rebuild your own profile. Evaluate how you use your credit card, when was the last time you used it, how often you manage to save money at the end of the month, and also how long it takes you before deciding to make a purchase.
The more information you can gather, the easier it will be to understand what kind of care you need to take from now on.
2. Challenge yourself
Once you’ve done that, it’s time to start setting yourself small challenges. If your main problem is impulsive spending , decide that you need to think about each purchase that goes beyond your basic needs for 30 days.
It may seem extreme, but this period will allow you to reflect on the real need for the purchase. In many cases, it will even lose its purpose after this month of reflection.
Another option is to challenge yourself to reduce your credit card bill by a specific percentage that is consistent with your reality.
All of these attitudes make you think about why this is your spending pattern and how it affects the realization of your true dreams.
3. Plan your future and how you can prepare for it
The decisions you make today can directly impact your future. That’s why it’s important to plan for tomorrow and understand how and where you’d like to be .
If you want to have a financially secure retirement , for example, think about how your habits bring you closer to or further away from that dream. More than that, what actions can you take to visualize the future you want?
One option is to start a private pension plan now or even encourage your company to offer a sponsored plan. This way, you can save small amounts month after month and reach retirement with the planned amount .