Money Fundamentals

How to Achieve Financial Capability

From financial literacy to being financially capable, your ability to use financial products and access tools effectively means you’re onto becoming financially capable. It’s an important stage for economic prosperity.

What is Financial Capability?

Financial capability is being knowledgeable and capable of making better decisions with your money. You’re knowledgeable about your financial options and competent in 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 you spend?

Financial Capability Key Features

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

Financial Capability Defined

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

Financial capability means you can:

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

How to Become Financially Capable

Financial capability services can have a substantial economic impact on overall wellbeing. The following are financial knowledge areas:

1. Financial Education

Once you’ve gained a level of financial literacy, your education on personal finance continues as you progress through the roadmap. It’s still important to continue to receive high-quality financial education.

For instance, federal regulations may change. New financial products may emerge. Your wants and needs will evolve. But your skills to manage money and use financial products and services will carry over to other stages. 

2. Research Ability

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

3. Budget Skills

A budget is a framework that helps you allocate your money and time to achieve financial and life goals. Your income will change over time. Your needs and wants too. Budgeting is an evolving practice to ensure you’re focused and shifting resources towards things of value. 

Your budget will change over time as you progress through the financial wellness roadmap. You’ll learn more about yourself which often leads to different goals.

4. Financial Planning

A financial plan is a detailed and comprehensive plan that outlines your life and financial goals using a budget to allocate money to them. Being financially capable is having the ability to budget to achieve your financial plans.

5. Managing Debt

Credit is a tool. It may be necessary to help you achieve financial goals such as a college degree and home purchase. Credit becomes debt–a financial obligation. The key is to utilize credit and to manage debt. Mindless use of credit can lead to long-term debt that can hold you back from achieving financial security. You must understand credit as a tool and limit your debt load.

6. Retirement Contributions

Whether you decide to retire earlier or you wait until the government-sanctioned retirement age, you’ll need to plan for retirement. Financial capability contributes to an employer-sponsored retirement plan like a 401(k) and taking advantage of other tax-deferred retirement accounts such as Individual Retirement Accounts.

7. Investing

Investing helps you make money with money. Being financially capable, you have mastered saving for emergencies and other purchases. Now, you’ll want to create financial security for yourself through investments. Start by learning the steps to invest for beginners.

To continue progressing through the roadmap, incorporate these areas into your life and improve your financial behaviors.

Next stage: Financial Security

Additional reading:

Jason Vitug

Jason Vitug is a bestselling author, entrepreneur, and founder of and His purpose to help others live their best lives through experiential and purposeful living. Jason is also a certified yoga teacher and breathwork specialist and has traveled to over 40 countries.

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