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Financial Literacy

By Phil R

One of the things that many of us (most of us) want for our lives and our families is financial wellness or financial security. Whatever that means to each of us individually; we all have different needs and definitions.

In the most basic sense, financial wellness is defined as having adequate funds to pay your bills, to pay off or better yet, to have no debt, to have funds set aside for emergencies, and to be able to plan for and set aside funds for the future. To have choices about the present and the future when it comes to money.

There are four basic principles of financial wellness, and if you follow them, you are likely to be on a good path:

  1. Budget – Have a plan, track how you do against that plan, and stick to the plan. Adjust the plan as conditions change. Pay attention to your plan!
  2. Manage your debts – If you can’t avoid debt, as most of us can’t at some level, make sure that you understand your debt, understand what the debt is costing you, and never miss a payment.  While the best place to be is zero debt, most of us have some debt (mortgages, cars, college, credit cards).
  3. Have savings and investments – To do this, you must spend less than you earn, then you can build savings and make investments. The first two principles will help you get to this one.
  4. Have insurance – Insurance costs money, yes it does, and you may never use it, but it is necessary to guard against the big and unexpected losses.Those losses that can ruin you financially.

It all sounds simple, right!?! But we all know that it isn’t. It is nuanced and it is constantly challenged by the realities of day-to-day life.

To get to wellness, you must have financial literacy. Literacy = understanding.

The financial world is very complex, confusing, and challenging. You can get an undergraduate degree, graduate degrees, doctorates, and certifications and letters by the boatload behind your name. That is all great and I applaud you if you can (if you have the time, opportunity, desire, and resources). But there is a lot that you can do on your own, free or at low cost by using existing published resources. Learn the basics and the language and terms, and just knowing those basics can make a significant difference in your life. Your employer may also have resources available through its employee benefit offerings, employee assistance program, or 401(k) and like plans. There is information out there and a little research and study will pay off (no pun intended). It is worth the effort.

Go complicated if you like and have the time and resources, but at a minimum, I highly recommend that you at least learn the basics! Learn the terms, the biggest risks, and mistakes, and learn how to build slowly and be patient and have a long-term vision of where you want to be.

I have said that there is a lot of information out there. That is good AND that is another challenge. There is an ocean of financial advice out there. And an army or people more than willing to take your money. What is right, what is wrong. It really gets down to each person’s individual situation. Read a lot, learn

The terms – I repeat: learn the language, learn from other’s successes and mistakes. Also, talk to friends and family. Then you can assess, what makes most sense for you in your individual situation.

Rather than write a blog post that educates you to all this stuff, I am not going to reinvent the wheel. I am going to encourage you to use resources that already exist. Yes, I am writing a blog post where I recommend that you read other blogs! All that you need to do is go to the oracle, otherwise known as Google, and search for financial blogs, and voila, a wealth of learning opportunities!

Following are nine blogs that I found in a matter of minutes that are examples of what is available. They seem to understand the basics and speak to us as normal people and not CPAs and PhDs, those of us getting through everyday life. I do not vouch for the content on these. I am only recommending them as a source of information where you can read, learn, and assess. Read with a critical lens. Look at others that come up in your search. I would love to hear about your experiences as you do so!

  1. Get Rich Slowly: getrichslowly.org
  2. Money Moustache: mrmoneymustache.com
  3. Money Smart Latina: moneysmartlatina.com/blog
  4. Debt Free Guys: debtfreeguys.com
  5. Rich and Regular: richandregular.com
  6. Inspired Budget: inspiredbudget.com
  7. The Fioneers: thefioneers.com
  8. Clever Girl Finance: clevergirlfinance.com
  9. Brave Saver: bravesaver.com

In closing, let me recommend that you do three practical things starting RIGHT NOW to help you begin your journey:

  1. Write everything down. Keep track of where your money goes every day. From your mortgage or rent, to your fancy Look at the categories: insurance, food, drinks, eating out, medical, school, child care, recreation. Knowing what you spend and where you spend is illuminating. Understanding where you spend your money will help you identify what is mandatory and unavoidable, to what is a need, to what is discretionary. When you need to save or cut costs, this will provide the data from which to make the best decisions. This is how you formulate you budget and plan.
  2. If at the end of the month, you have earned more money than you spent, invest that excess. Whatever the amount, $25 matters. At the very least move it to a savings account. Over time and with learning, you may develop a more sophisticated investment strategy that can go from low risk to high. But at a minimum, move those dollars and cents to a savings account and keep track of how much you have in there.
  3. If your employer offers a pre-tax savings option such as a 401(k), participate. If your employer offers something like this and offers a match for your investment, invest as much as you can to take full advantage of the match – it is FREE money people!!! While it is building savings for you, it is also reducing your tax burden – a two for one, and I am always down for that. Whatever the case, participate. It will grow over time and in time you will be surprised how much a little bit can become.

I wish you the best and good luck in your journey. Based on your current financial literacy, start there, and build and grow. It doesn’t have to be grand, but every dollar (penny) counts!