Wananchi Opinion: Signs you could be financially illiterate

Financial literacy simply means one’s ability to manage money wisely. 

It involves knowing how to budget, save, borrow responsibly, invest, and make informed decisions about spending.

Sadly, many people struggle not because they lack money, but because they do not know how to handle it.

Financial illiteracy can lead to stress, constant debt, and missed opportunities.

The good news is that by recognising the signs early and taking action, anyone can improve their financial health.

One of the clearest signs of financial illiteracy is living from paycheck to paycheck.

If someone finds themselves always waiting for the next salary just to survive, with nothing left to save or invest, they are likely spending more than they should. 

This way of living is dangerous because it offers no room for emergencies. A job loss or a medical issue can throw everything into confusion when there is no cushion.

The best way to deal with this is by creating a simple monthly budget. Tracking every coin spent helps identify where money goes and what can be reduced.

Setting aside even a small amount each month can build savings and create peace of mind.

Another common sign is not knowing where the money goes. Many people often find themselves broke days after receiving their salary, yet they cannot explain how it was spent.

This lack of awareness leads to poor decisions and uncontrolled spending. Writing down daily expenses or using simple mobile apps to track spending can bring clarity.

Once someone sees the full picture, they can make smarter choices, such as cutting back on unnecessary purchases.

A major financial red flag is the absence of an emergency fund. Without savings to cover sudden needs like medical bills, car repairs, or temporary unemployment, people are forced to borrow or sell belongings. Building an emergency fund is not about having a large amount of money all at once, but about saving little by little over time.

It helps to keep the money in a separate account and resist the temptation to touch it unless it is truly necessary.

Using loans or mobile apps regularly just to survive is another warning sign. If someone is always in debt, borrowing to pay for food, rent, or other daily needs, it shows a lack of planning.

This behaviour can trap a person in a cycle of borrowing and repayment that never ends. The way out is to stop borrowing for consumption and create a repayment plan.

Clearing the most expensive debts first and avoiding new loans is key. At the same time, learning to live within one's income is essential.

If the situation is too difficult to manage alone, seeking help from a financial advisor or counselor can be helpful.

People who do not have financial goals often spend without purpose. They live only for today and do not plan for the future. Without goals like buying land, educating children, or saving for retirement, money is easily wasted.

Setting specific and realistic goals gives direction and motivation. Breaking those goals into smaller steps and attaching timelines to each of them makes them easier to achieve.

Some individuals avoid talking about money altogether. They think financial matters are only for experts or the wealthy, and as a result, they miss out on important knowledge.

This fear or discomfort keeps them stuck. But financial literacy starts with curiosity. Reading simple personal finance books, watching videos, attending community talks, or speaking to someone knowledgeable can make a big difference.

The more one learns, the more confident they become in making smart decisions.

Finally, financially illiterate people often do not invest at all. They keep their money in cash or basic savings accounts, which do not grow with time.

Due to inflation, the value of their money actually decreases. To change this, one can start learning about safe and basic investment options like government bonds, Sacco shares, or real estate.

It is important to begin with what one understands and to seek guidance before investing in anything unfamiliar.

Becoming financially literate does not require a background in finance. It simply calls for discipline, curiosity, and the willingness to learn and change habits.

Once a person understands how money works and takes control of their financial behavior, they can escape poverty traps and move towards a more stable and prosperous future.