Financial Literacy and

Preparedness
Claire C. Imperial
Nicole I. Encinas
Michael D. Paitan
Angielyn A. Cubillas
Where does
money come
from?

One things for

sure, it doesn’t
grow on trees!
Even though we
wish it did.
 Survey
• Do you currently have a
savings account?
• Can you purchase a house
without a down payment?
• Do you currently have a
checking account?
• Do you currently have a credit
card or loan?
• Do you plan on owning or
currently own a car?
• What is a co-signer?
• Do you plan on owning a • What happens if you have a
co-signer on a loan and you
house one day? What would
neglect your payments?
you do to finance your house?
It is the possession of the set of skills and knowledge
that allows an individual to make informed and
effective decisions with all of their financial resources.
The lack of financial literacy can lead to owing large
amounts of debt and making poor financial decisions.
Is becoming financially literate one of the solutions to
prevent such losses while achieving financial security
and freedom?
YES, but only if it is backed up with actions that lead
to behavior changes.
According to The Pennsylvania State University
Sokolov-Miller Family Financial and Life Skills Center,
these are the core competencies in achieving financial
goals.
Earning
It refers to bringing money home from a job, self-
employment, or return on various investments. Most
individuals earn money via employment in the form of a
paycheck. The average employee pays between 28-30% of
their gross income in taxes and other deductions before
receiving their net income or take-home income. It is
extremely important to understand gross versus net in a
paycheck.
Saving and Investing
Deals with the understanding of financial institutions and services available to you.
First of all, you should have a saving and a checking account to manage your own financial
transactions. Start SAVING EARLY and PAY YOURSELF FIRST to help you
understand the concept that saved money grows over time which also leads you to explore
long-term investments for retirement planning.
Spending
It is probably the most important concept because it is a
personal reflection of your values, lifestyle, and your
financial behavior. Differentiating
between NEEDS and WANTS is the basic concept of
controlling spending. Budgeting is the most powerful and
impact-full tool you can adopt to control spending to allow
for saving and investing.
Borrowing
It is acquiring debt to create assets. Most students have to
borrow student loans to finance their educational goals, and
with a financial plan for repayment, they can turn this
investment in their education to their advantage. Business
loans to create self-employment opportunity or build a
business, and real estate investments, are also good
examples of how borrowed money can be turned into
assets and wealth accumulation.
Protecting
Deals with insurance, ID theft, and retirement planning.
The idea is to stay protected at all levels in your life; on
personal, health, and social levels. You will need to
understand risk management, insurance coverage, identity
theft protection, fraud, and scams, in order to master self
and family financial protection in life.
In 2015, The Consumer Financial Protection Bureau did a
survey to determine the four elements of financial well-
being.
Steps to financial literacy
Make the commitment
This is a "must do" step to reach financial literacy. By
now, you know that your actions and your attitude toward
money are what drive your saving and spending habits.
Hence, you have to make the commitment to yourself and
your family to invest in taking responsibility for your
financial situation. Your commitment has to be sustainable.
In other words, you cannot decide to adopt a budget for
one month and break it the next.
Assess your financial situation
This step is a form of examination of your financial record. You
need to examine each core of your earning, saving, spending,
borrowing and protecting. This step is the process of financial
discovery. It is to help you document your financial behavior and
think of ways to improve your earning, saving and investing as you
eliminate wasteful spending and make plans to stay protected in
insurance and retirement. This assessment is critical, as it builds the
foundation for your improvement.
Clean financial clutter
This step means many things to many people. Basically, it
is a suggestion for you to become organized in your financial
transactions. You need to eliminate the clutter so you can
focus on improving your financial situation. An example
would be to dedicate a physical or cyberspace to conduct your
financial transactions so you stay organized, or re-grouping
your credit cards into a manageable 2 or 3 cards. Cleaning the
clutter is the result of taking actions after you assess your
financial situation to improve your financial transactions and
get a handle of your financial records.
Create a budget
This step is the foundation of financial literacy. A good
budget has to be sustainable, and simple to follow, so you
don't break your commitment out of frustration. A budget
that does not give you security and freedom of choice is
not a successful budget.
Know the rules

The 2 most important rules are the 20/10 for managing

debt and the rule of 72 for managing investments.
1. Rule of 20/10 - Your total outstanding debt should not
exceed 20% of your total net yearly income. Your monthly
debt payment should not exceed 10% of your monthly net
income.
2. Rule of 72 - To find out how long it takes for
your invested money to double in value, Divide 72 by the
expected interest rate you hope to earn. The result gives
you the approximate number of years it will take for your
investment to double. Years to double = 72 / Interest Rate
 Freedom from debts
Depending on the level of your debt, there are
many strategies to help you combat debt and reach financial
security and freedom.
Mastering the principles of budgeting
How to increase income
Income can be derived from multiple sources, it can be
active such as a pay check from employment and self-
employment; or passive such as income from investments.
There are many ways to help you increase your income, you
just have to tap into your potential and do your research so
you can maximize the return on your investments.
 How to decrease spending
Decrease or cut spending is the other choice to help you
save money so you can invest or free yourself from debts.
You can achieve this goal by adopting a lean budget. Here
are the steps to help you cut spending painlessly.
1. List all of your current monthly/yearly bills
2. Sort them by WANTS and NEEDS
: Hint - use a red highlighter for all WANTS and a green highlighter for all
NEEDS
3. Formulate a plan to STOP all spending with red highlights
4. Examine your NEEDS and find ways to make them LEAN
5. Your goal is to strip your budget to the bare minimum to compare and
balance your expenses with your take-home income.
: You can always build your wants back up as your saving gets more
significant. Many people report that saving can be addictive because it guides
you to a feeling of financial freedom and security.
 Test your knowledge - Financial Literacy
1. Analyzing your current financial position is a part of the
first stage of the financial planning process.
• True
• False
Financial planning has specific techniques that will be
effective for every individual and household.
• True
• False
Opportunity costs refer to what a person gives up when
making a decision.
True
False
When managing investment, what rule you would follow?
The rule of 30
The rule of 65
The rule of 72
The rule of 88
Which ONE is not included in the four elements of
financial well being?
• Control over day-to-day, month-to-month finances
• Capacity to pay check this month
• Financial freedom to make choices to enjoy life
• On track to meet financial goals
Protecting in one of the five competencies of financial
literacy. What does protecting mean?
Protecting deals with insurance, ID theft, or retirement
planning.
Protecting does not include caring your family’s financial
protection.
Protecting means acquiring debt.
Protecting includes paying taxes.
What is the most appropriate goal of financial literacy?
To provide you gain financial knowledge
To get you out of debt
To get you to make informed financial decisions
To help you save money
Which one of the following is true about financial literacy?
Financial literacy cannot be the solution for your future
financial freedom.
Financial literacy is same as knowledge about finance.
Financial literacy does not necessarily require actions or
behavior change.
Financial literacy includes changing people’s core attitudes
and beliefs.
What is the main goal of personal financial planning?
Savings and investing for future needs
Reducing tax liability
Achieving personal financial security and freedom
Spending to achieve financial wants
What is NOT a recommended strategy to increase income?
Turn your hobby into money generating activity
De-clutter your belonging, recycle and reuse
Invest in real estate to get rental income
No additional seasonal work