When I use the terms “financial literacy”, I can instantly see people get tense and emotional. Most people have developed an unhealthy relationship with money, which began from an early age. As we get older, the relationship can continue to deteriorate unless, as with most things in life, we learn the right skills to manage our money so that it doesn’t manage us.

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What is financial literacy?

Financial literacy is not complicated. It means being knowledgeable enough to feel confident that you are making the right decisions when managing your personal finances.

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Being knowledgeable about your finances can mean knowing the difference between which savings strategy to choose, how to make a budget, and understanding some of the general basics about taxes. It also means being aware of how important it is to save or plan for your retirement. It encompasses a wide range of subjects.

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Does this mean you have to become a financial expert? Not at all. It simply means that you need to know where to go for help, which questions to ask, and feel confident that you have made the right financial decisions for you and your family. Being financially literate can help ensure that your personal finances remain in a healthy state that will support your various life goals, such as saving for a new home, a vacation or retirement, using debt responsibly or running a business.

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The more financially educated that you become, the more aware you will be of your financial situation and how to improve it. Peace of mind is one of the great advantages that will come from financial literacy.

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Financial Literacy 101 – The Basics:

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Live within your means. Start with a Budget. Be aware of your required monthly expenses, figuring out what you have left. Then make careful choices about your discretionary spending. Most people have trouble differentiating “needs” vs. “wants”. That’s where a financial professional can help.

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Pay yourself first. As soon as you start earning money and have a good idea of your required expenses, the ideal thing is to save 10% to 15% of your salary on a systematic basis. The best way is to set up automatic withdrawals on the days that your pay hits your account. Why? Because psychologically you will not miss what you never see.

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Create an emergency fund. Start by setting aside three to six months’ worth of expenses in a high-interest savings account. Grow it, little-by-little, if you must. The important thing is just to start.

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All these things require discipline. If you want to improve your financial health, you have to set objectives and follow through with your plan. The benefits will have repercussions in all aspects of your life. Be patient with yourself. Rome wasn’t built in a day. Need help? Just reach out to me.