How to Avoid Becoming a Financial Illiteracy Statistic

While you can’t buy love, money does, in fact, buy happiness — or at least the opportunity to seek happiness. Studies on financial security have found that people who have a stable income that covers their basic expenses, i.e. their home, utilities, food, transportation and some fun, are much, much happier than those who live on less. While the happiness doesn’t increase much after a person reaches that critical threshold, it is quite important that everyone strive to obtain and maintain a certain level of financial comfort in their lives.

Fortunately, most people are capable of reaching the happiness through financial health — unfortunately, most people don’t know it, yet. Financial literacy is distressingly uncommon; in America, only about 29 percent of women and 47 percent of men are able to manage their money with effectiveness and confidence. If you want to avoid contributing negatively to these woeful statistics, here are some facts, skills and tools you need ASAP.

Subscribe to Personal Finance Media

What does “amortization” mean? What is a credit score, and how is it different from a credit report? Are creditors the same as lenders, and are lenders the same as banks?

Financial literacy requires that you recognize, understand and properly deploy financial language, and the only way to become fluent in a new language is to immerse yourself in it. Without a doubt, you should subscribe to some beginner personal finance blogs; of course, we are partial to this one, but you might also look into sites like Making Sense of Cents and Five Cent Nickel. Another good outlet for learning the basics of personal finance is podcasts, like NPR’s Planet Money, So Money with Farnoosh Torabi and Afford Anything with Paula Pant. Because blogs and podcasts update regularly, you can get a convenient dose of new information every week, to slowly and surely build up your financial knowledge.

If you are a bit more old-fashioned in your media choices, you might look for personal finance television shows, like Mad Money or Money Matters, or books and magazines that suit your lifestyle and goals. You can visit your library’s financial literacy section or ask your local bookseller for recommendations.

Take Inventory of Your Financial Habits

As you develop a foundation of financial understanding, you should begin to pay closer attention to how you gain, spend and save your money. Certain financial habits will undoubtedly prevent you from building wealth and attaining the comfortable lifestyle you crave. It is imperative that you understand your personal attitude and behaviors with money, so you can take more impactful steps toward your financial goals.

There are a few different ways to track your financial habits. Inarguably, the most convenient method is through money management software, which connects directly with your financial accounts and automatically categorizes your expenditures. This makes it easy to see where your money is going and to build budgets that target your worst spending inclinations. It is possible to monitor your habits through manual means, like a spreadsheet where you enter your daily, weekly or monthly purchases, but you need to be honest and diligent to ensure this method is accurate and revealing.

Make Realistic Financial Goals

Financial literacy is a useful skill because it has so many applications across lifestyles. Throughout your personal finance journey, you should have financial goals that will improve your comfort, confidence and quality of life. Here are a few examples of goals you might consider adopting as a beginner to financial literacy:

  • Pay off debt. Student debt and credit card debt are dangerous to hang around, so paying them off quickly should be a priority
  • Build an emergency fund. Experts agree that you should have between three and six months of expenses saved in an accessible account, in case you lose your job or experience some other catastrophe.
  • Buy a home. Investing in real estate is a smart financial move, as long as your finances are healthy.
  • Save for retirement. Studies indicate that 15 percent of Americans don’t have anything saved for retirement, and 64 percent don’t have nearly enough. You should start building a retirement fund, like an IRA or 401K.

The sooner you believe that financial stability and success is within your grasp, the sooner you can start building serious wealth. By taking steps to become financially literate, you will gain the knowledge and skill necessary to see your dreams come true.

Share this post:

Leave a Comment