Financial Literacy and Self-Awareness in Entrepreneurship

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Financial Literacy and Self-Awareness in Entrepreneurship

Financial principles are one of the most valuable knowledge entrepreneurs and investors should have to succeed in business. The two essential concepts that can be beneficial for people in this field are financial self-awareness and literacy (Chowdhry & Dholakia, 2020). Financial self-awareness allows a person to accurately assess ones current budget state, while financial literacy reflects an individuals knowledge to make savings and invest thoughtfully (Chowdhry & Dholakia, 2020). Indeed, these two terms are interrelated because both concepts influence financial outcomes, including satisfaction, spending, and saving and investment (Chowdhry & Dholakia, 2020). Making reasonable monetary choices requires understanding ones financial situation and knowing how to spend money to increase profit. Moreover, comprehension of such economic terms as assets, liabilities, stocks, and mutual funds is considered instrumental in helping individuals make prudent financial decisions (Chowdhry & Dholakia, 2020, p. 1). Therefore, financial literacy and self-awareness should become an integral component of a persons skill set in business.

Investment and entrepreneurship demand people who work in these fields to have financial self-awareness and literacy. For example, according to Chowdhry and Dholakia (2020), financial literacy showed a positive association between saving and investing and knowledge about the market. However, it was not significantly related to spending or financial satisfaction (Chowdhry & Dholakia, 2020). On the other hand, the study by Chowdhry and Dholakia (2020) found a positive association between self-awareness with these two outcomes, showing the importance of knowing ones financial state. For example, if a firm has a limited budget, its leaders should understand that they need to reduce spending and increase investments to raise income in the future. Since these two concepts complement each other, entrepreneurs should consider them for future business analytics because companies cannot last without proper spending, saving, and investment. Overall, financial literacy and self-awareness are critical at the individual and company level to prevent bankruptcy and ensure a successful outcome.

Reference

Chowdhry, N., & Dholakia, U. M. (2020). Know thyself financially: How financial selfawareness can benefit consumers and financial advisors. Financial Planning Review, 3(1), 1-14. Web.

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