Financial literacy is a big deal.
There is an understanding that to achieve security in retirement, people need to have the confidence and ability to make well-informed and lasting decisions about their personal finances throughout their lives. Nevertheless, only a fraction of households feel confident about retirement savings and one-third of adults in their late 50s, say they have failed to develop any kind of retirement saving plan.
What is responsible for the low level of retirement preparedness? The absence of financial education is one critical role in retirement security. In this case, we must take the bull by the horns and change our mindsets and behaviors regarding financial literacy over the long term. Make it personal!
WHAT IS FINANCIAL LITERACY?
Financial literacy describes the ability to make informed judgments and to take effective actions regarding the current and future use and management of money. It includes the ability to understand financial choices, plan for the future, spend money wisely, and manage the challenges associated with life events such as a job loss, saving for retirement, or paying for a child’s education. Financially literate people are equipped to make informed financial decisions about a host of money-related matters, such as:
- Banking and Bank Services
- Investing and building passive income streams
- Using and managing credit and debt
- Avoiding financial scams and exploitation
- Setting and saving for financial goals
- Long-term financial planning
- Estate planning
Like language literacy, where your reading grade level quantifies your competency, financial literacy is gradated. Novices have little to no understanding of even the most basic financial concepts. Intermediates grasp the basics of spending and saving but may struggle with more abstract or longer-term concepts. Experts have the knowledge and confidence to manage all aspects of their financial lives and equip others — kids, parents, domestic partners, friends, employees — to do the same.
HOW TO INCREASE YOUR FINANCIAL LITERACY
If you think of yourself as financially illiterate, you are not alone. Many people struggle with knowing how to manage personal finances, reduce debt, decipher the stock market, and save for retirement. No one is born with expert-level financial literacy, and no one achieves it overnight. But that’s not to say that becoming financially self-sufficient requires years of intensive study — far from it. Here’s what you can do, right now, to begin or advance your own personal finance journey.
The first step on your journey toward financial literacy is self-knowledge. Yes, as your financial and personal circumstances change, so will your principles, objectives, and priorities. But that shouldn’t deter you from establishing a frame of reference in the here and now.
Sort Through Your Paperwork
This doesn’t sound like the most exciting task, but it’s essential to know where you stand before you can make any changes to your financial situation. Choosing to live in the dark is probably the worst thing you could do to your finances (other than getting yourself neck-deep in debt!). Spend some time reviewing your paperwork in detail. Bank statements, insurance policies, energy bills, mortgage or rent payments, mobile phone bills and any other bills you may have – make sure all of these elements get some well-deserved attention. List them all to see how much you’re spending on each, as well as make a list of how much money you have coming in each month. Do your finances look healthy (you have money left after all bills are paid), or are you getting yourself into more debt? Seeing this before your eyes will give you a good starting point.
Identify (and Cut) Unnecessary Costs
Now that you have a clearer idea about the movement of your money, it’s time to identify the areas in which you could spend less. Maybe you’re a member of the gym you’ve barely set foot in? Or maybe you’re subscribing to a magazine or service that you no longer use? Be strict, be realistic – and, if you never use some of the services you pay for - don’t let your money go down the drain. This may also be a good chance to take a closer look at some of the bills to identify any costs that have risen over the past year or so. Maybe you’re overpaying for a service – and you could pay less? Pick up the phone and call your service provider to get some advice – sometimes they won’t offer a cheaper option until you inquire.
Consider any deeply held beliefs or values that may affect your financial behaviors. Some consumers aim to avoid debt at all costs, for instance. Others orient financial decisions around environmentalism, precluding luxuries like car ownership. What stage of life are you in? Younger consumers’ priorities naturally differ from older consumers’.
Goals and Objectives
What are you spending and saving for? Where do you want to be in five, 10, 20 years? Setting goals for your future are wise – but without reviewing them, how will you know that you’re on track to accomplishing them? Checking in with your financial goals regularly will help ensure your expectations are in line with what your future financial situation is likely to be - and that your goals are realistic. Be critical and be honest with yourself. If you’re not making enough contribution to your financial goals and priorities, it’s not too late to make some changes in your budgeting. Better late than never! Reviewing and fixing the cracks in your financial systems is always a good idea. ‘Money can’t buy happiness’, they say – but lack of money can definitely contribute to making you feel unhappy.
Even if you suspect you don’t have much of financial history, find out for sure. Triple check your insurance information. It isn’t something you should ever compromise on – the unexpected can really eat up your budget to the last penny. Don’t be afraid to set an appointment with your insurer to be walked through each feature and when they may apply – you’ll refresh your memory and have a better understanding of your policies, so you can avoid overpaying. How are your savings for retirement coming along? You know our stance on retirement savings – make sure your pension pot is being topped up regularly. A rule of thumb says that you’ll need about 70-80% of your regular income for retirement – so putting enough money aside is essential.
While, when it comes to any form of investing, there is no fail-safe formula, there are steps that you can take to first, protect your assets, and second, to increase your chances of a worthwhile return. If there is one single golden rule of investment success, it has to be diversification. While everyone knows the adage of not putting all of one’s eggs into a single basket, it can be easy to forget the sense of this when you think that you’ve found a killer investment. The thing is, even if something looks like a sure bet, you can’t be absolutely 100% certain that it’s going to succeed, so even though, for example, we’re completely positive that the FAST INVEST is going to be a huge success. This is not just shallow saying and we can prove it.
This is just the start. As your financial literacy improves, you’ll gain more insight into who you are as a consumer, planner, or investor. Luckily, today there are many resources at your fingertips to help improve your knowledge about making financial decisions. Nevertheless, becoming financially literate does not happen overnight, nor is it accomplished by reading just one book. It happens through education, practical experience, and life lessons.
FINANCIAL LITERACY EDUCATION RESOURCES
Not a big fan of reading, listening or watching financial topics, are you? What if we tell you that reading is one of the seven ‘rich habits’ of highly successful people? In fact, there are at least 5 billionaires out there who credit their success to being voracious readers – and some of them spend at least 80% of their day with their heads buried in a book. The truth is that if you’re tired of working for money and are keen to make money work for you, you probably have some learning to do. Not only reading is a way of indulging yourself with knowledge. Getting free advice from more experienced bloggers, influencers and professionals are great on podcasts or youtube channels. Plus, when people who have managed to make billions using their investment techniques want to share their success secrets with you, you shouldn’t think twice about taking that advice.
Financial BOOKS Every Newbie Should READ
- “All the Money in the World: What the Happiest People Know About Wealth” by Laura Vanderkam
- “The Millionaire Next Door” by Thomas J. Stanley and William D. Danko
- “The Recovering Spender: How to Live a Happy, Fulfilled, Debt-Free Life” by Lauren Greutman
- “Why Didn’t They Teach Me This in School?: 99 Personal Money Management Principles to Live By” by Cary Siegal
- “You’re So Money: Live Rich Even When You’re Not” by Farnoosh Torabi
- “I Will Teach You To Be Rich” by Ramit Sethi
- “The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money” by Carl Richards
- “The One-Page Financial Plan: A Simple Way to Be Smart About Your Money” by Carl Richards
- “The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness” by Dave Ramsey
- “How to Retire Happy, Wild, and Free: Retirement Wisdom That You Won't Get from Your Financial Advisor” by Ernie J. Zelinski
- “The Slight Edge” by Jeff Olson
- “The Investment Answer” by Daniel Goldie and Gordon Murray
- “The Simple Path to Wealth” by J.L Collins
- “Think and Grow Rich” by Napoleon Hill
- “AgeProof: Living Longer Without Running Out of Money or Breaking a Hip” by Jean Chatzky
- “The Richest Man in Babylon” by George S. Clason
- “Rich Dad, Poor Dad” by Robert T. Kiyosaki
- “Your Money or Your Life” by Vicki Robin
- “You Are a Badass at Making Money: Master the Mindset of Wealth” by Jen Sincero
- “How to Think About Money” by Jonathan Clements
- “The Bogleheads’ Guide to Investing” by Taylor Larimore
- “The Automatic Millionaire” by David Bach
- “Money: Master the Game” by Tony Robbins
- “How to Win Friends and Influence People” by Dale Carnegie
Financial PODCASTS Every Newbie Should LISTEN
- So Money with Farnoosh Torabi - Stories of Personal Finance, Entrepreneurship, Financial Success, and Money Strategy by Farnoosh Torabi
- The Dave Ramsey Show
- The College Investor
- The Fairer Cents
- Money For the Rest of Us by J. David Stein
- The Disciplined Investor
- The Smart Passive Income Online Business and Blogging Podcast
- Financial Independence Podcast
Financial BLOGS Every Newbie Should READ
- P2P Millionaire
- The Penny Hoarder
- Money Crashers
- Money Talk News
- Marco Schwartz
- Good Financial Cents
- Money Under 30
- Financially Free
- The College Investor
- Budgets are Sexy
Financial VLOGS Every Newbie Should WATCH
- The Financial Diet
- Jordan Page, FunCheapOrFree
- Ryan Scribner
- Financial Education
- Wealth Hacker - Jeff Rose
- Phil Pustejovsky
- KEEPING IT REAL WITH CREDIT
- Rachel Cruze
- Living On A Dime
Financial ONLINE COURSES Every Newbie Should WATCH
These free resources give you an opportunity to improve financial literacy and push money education forward. This is only a small sample size of the growing effort to break down the taboo of money. Hopefully, the road ahead for all of us can be eased through tools like those above and FAST INVEST platform.