Financially Capable

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Your ability to use financial products and access tools effectively means you’re financially capable. You’ve entered Stage 2 on the Financial Wellness Roadmap.

Stage 2: Financial CapabilityFinancial Capability Road to Financial Wellness

Financial capability is being knowledgeable and capable to make better decisions with your money. You’re knowledgeable about your financial options and capable of banking and creditor relationships. The World Bank defines financial capability as encompassing “knowledge (literacy), attitudes, skills, and behavior of consumers with respect to understanding, selecting and using financial services, and the ability to access financial services that fit their needs.”

At stage 2, you can answer questions like: where do you bank? what’s your credit score? why do you save money? how do spend?

Key features:

  • abundance mindset;
  • research and verification skills;
  • assessing financial offers;
  • using banking products and services.

Being financially capable means you’re able to exercise money management decisions that best fit your life, able to access appropriate financial services and use them accordingly. You see value in actively managing your money and confident in making financial decisions.

Financial capability strategies can have a huge impact on long-term financial wellbeing as it relates to achieving your lifestyle goals such as choosing where to live and how to afford it.

When your financially capable you are able to:

  • Manage money well
  • Save for future purchases
  • Planning and preparing for future events
  • Using credit and managing debt

Research

To be capable means you have access to financial products that support your financial wellbeing, so you research and ask questions. Before making a financial decision, you determine its impact on the quality of your life.

Financial Plan

A financial plan is a detailed and comprehensive plan that outlines your life and financial goals using a budget to allocate money to them.

Managing Debt

Credit may be necessary to help you during tough economic times, but debt can hold you back from feeling financially secure. It’s important to keep debt in check by controlling credit use.

Retirement Planning

Whether you decide to retire earlier or you wait until the government-sanctioned retirement age, you’ll need to plan for retirement. Financial capability is contributing to an employer-sponsored retirement plan and taking advantage of other tax-deferred retirement accounts such as Individual Retirement Accounts.

Retirement planning doesn’t end with company-sponsored plans. It requires a comprehensive plan to include Social Security Benefits, Pensions, taxable investment accounts, annuities, and other income-producing assets.

Investing

Investing helps you make money with money. Being financially capable, you have mastered saving for emergencies and other purchases. Now, you’re focusing on creating financial security for yourself through diversified investments.

Protecting Identity

You’ve worked hard for your money and there are scammers out there ready to take it away from you. Protect your identity by using credit monitoring services.

Next stage: Financial Security

Jason Vitug

Jason is the founder of phroogal, creator of the award winning project Road to Financial Wellness, and author of the bestseller and New York Times reviewed book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.

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