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Being financially literate or ‘having financial literacy’ is not difficult to define.

These terms simply mean you have a basic understanding of finances and the value of money.

But, while it’s easy to define, it’s not always easy to execute.

There’s the technical side – the jargon which can sound like gibberish – but that can often be solved with a Google search or a chat with someone who knows what they’re doing.

Then there’s the real work that involves putting together a plan that will secure your future.

To help get you on track, and to simplify this daunting undertaking, Moneyweb whittled things down to seven easy to remember ‘Ds’.

Delayed Gratification

This is simple – you need to forfeit the immediate high you get from spending your cash in favour of putting money away for your future.

That said, it’s not always easy, and if you work hard it’s only natural to want to reward yourself.

In this sense, you need to find a balance by spending your money in a meaningful way, while making sure that you’re still saving.

Diversification

If you’ve invested in markets over the past few years, you probably already know the importance of having a diverse portfolio.

Diversification is about recognising that different asset areas respond differently to the same event. If you mix up where you allocate the assets in your portfolio, you can help alleviate the effects of a volatile market.

Disability or Disease

No matter how well you take care of yourself, life can be unpredictable. It’s important to plan for things like disability or disease, even if you feel fine now.

Medical aid is your first line of defence, but you should also consider investments that will generate good returns and insurance that will cover you in the event that you’re unable to work.

Detours

They say that the best-laid plans of mice and men often go awry.

It’s not only disease or disability that you have to worry about. Life can take any number of detours. To prepare for this, you need to undertake careful scenario planning and then put things in place that will protect you.

Debt

If you’ve managed to make it through life without a shred of debt, I commend you. You are the exception. Most of us will accumulate some debt at some point – buying property, student loans, the list goes on…

The important thing here is to learn the difference between ‘good debt’, and ‘bad debt’. You do this by taking into account a number of factors, including the interest rate, the period of the loan, and the reason for borrowing the money in the first place.

If you’re paying something off in monthly instalments that amount to double the price, while the object depreciates in value, you’re doing it wrong.

Death

Financial and estate planning involves putting mechanisms in place should you die. This includes drafting and keeping a will up to date, investing in funeral cover, and choosing a medical proxy (someone who will take charge if you’re too ill to handle things).

Distribution

Another important aspect of planning is determining how your wealth would be distributed should you die. Take stock of all assets, including physical ones like property and valuable objects, and draw up a documented estate plan.

We may throw an eighth ‘D’ into the mix, and that’s don’t go it alone. The overwhelming admin of financial planning, and the temptation to spend when you shouldn’t, can be mitigated if you hand the management of your personal wealth over to an expert who will take control, and make sure that the decisions that you’re making will have the best possible outcomes.

You can’t go wrong with Consequence Private Wealth. They believe that “the consequences of decisions made today will unfold over a lifetime based on the sound principles applied at their inception”.

Take that as your mantra every time you experience the urge to spend what you should be saving or investing.

[source:moneyweb]