Improving Financial Literacy as a Prerequisite for Increasing Fiscal Capacity: The Bulgarian Case

Abstract

Nowadays, the question of financial literacy and its interdependence with different aspects of the social and economic life of the state and citizens is being raised more often than ever. In the scientific field, numerous studies are exploring the relationship between the level of financial literacy of citizens and the financial decisions they make at different stages of their lives, according to their different needs. While in early studies of financial literacy researchers focused primarily on issues of personal finance administration and the level of basic financial knowledge, nowadays financial literacy is seen as a much broader and complex concept. The perceived individual need to make adequate financial decisions creates the need for specific financial knowledge and skills, i.e., financial literacy. Individual's responsibility for decision-making related to welfare, health and pension insurance, relationships with credit institutions and the state leads to the increasing and pressing need to improve financial literacy and incorporate (study) it in the educational processes.An essential component in the process of making informed financial decisions and the resulting rights and obligations of citizens is the relationship with the state, i.e., the fiscal. Good knowledge of the structure of public finances, the tax system, the methods for calculating taxes due, etc. have a significant impact on this process. The current study aims to establish the level of financial literacy held by citizens and to test the research hypothesis that high financial literacy is a prerequisite for improving the country's fiscal capacity. For the purposes of the study, the authors have developed a unique survey, structured in 21 questions, conditionally divided into 3 groups. The survey analyses the results obtained by 266 respondents.

Impact of financial literacy, mental budgeting and self control on financial wellbeing: Mediating impact of investment decision making

“…This implies that having a strong understanding of financial concepts, such as budgeting, saving, and investing, can contribute to improved PLOS ONE PLOS ONE financial outcomes. These findings are consistent to previous literature [45][46][47][48][49]. Furthermore, individuals who engage in mental budgeting, which involves mentally categorizing and tracking their expenses, exhibit higher levels of financial well-being.…”

“…It also includes a capacity and confidence to handle personal funds appropriately, short-term decision making and solid long-term financial thinking [46]. Moreover, being familiar with finance-related issues and making rational financial decisions based on basic financial knowledge are also crucial components of financial literacy [45,47]. Subjective financial knowledge, which refers to individuals' self-evaluation of their financial knowledge, has been found to be a stronger predictor of financial behavior and subjective financial wellbeing than objective financial knowledge [48].…”

Consumer behavior modeling of “smart” scales choosing

“…The lack of deep and thorough knowledge of these relations has a direct impact on decision-making on tax planning, payment of taxes, social security contributions, etc. (Aleksandrova & Ismailov, 2021). On the one hand, the growing consumer needs led to an increase in industrial energy consumptionto produce goods and services, the economy needed more energy, and on the other handimproving the living standard of households led to an increase in households' energy consumption (Todorov, Aleksandrova, & Ismailov, 2023).…”