10 Tips for Boosting Your Financial Literacy
You’ve probably been told at some point in your life that you are “book smart” or “street smart,” but have you ever been told that you are “money smart”?
Being “money smart” means that you are financially literate – or you possess the necessary skills to manage your money and make intelligent, logical decisions regarding it. Financial literacy encompasses both book smarts and street smarts; some people may exude an innate financial awareness from birth, while others may spend their entire lives studying the art from others.
Regardless of your current financial literacy level, there is always room for improvement. As policies change and new laws are enforced, your financial picture may change dramatically, for better or worse. Check out our tips below for ways to stay up-to-date and consistently improve your money smarts.
10 Ways to Continually Improve Your Financial Literacy
- Involve your significant other and children. If only one person handles the finances in your household, consider engaging everyone in some manner. You may uncover differences in opinion that need to be resolved, but the effort may define and solidify your financial goals. It may also help your children learn the value of a dollar – a lesson that is often lost as our society becomes increasingly cashless.
- Secure your financial identity. Whether you were issued a new credit card for preventative measures or you had to spend countless hours on the phone disputing charges, identity theft is now commonplace. Ensure that your accounts remain secure by carefully tracking your transactions and changing your login information periodically. You may even want to sign up for third-party fraud monitoring for greater peace of mind.
- Consume information regularly. Books, newspapers, blogs, podcasts, and webinars can all contain useful information. Just remember that you are consuming someone’s particular point of view, so you should gather lots of information before you make your own judgments. For more in-depth instruction, you can seek out a financial class at a local college, church, or financial institution.
- Learn about your credit score. This one little number can impact your financial situation dramatically, especially when it comes time to secure a loan or purchase your “forever” home. The credit scoring process is complicated, so the sooner you understand the ins and outs of your score, the better.
- Record your spending. Take a moment to track your spending over a set amount of time. It may be surprising how much you spend on a particular category – like dining out – over the course of a month. Once you understand your habits, it is much easier to alter them and guide your money in a different direction.
- Develop a savings strategy. Once you record your spending, you can create a realistic budget that includes saving money for an emergency fund, a certain goal, or retirement. Even if you don’t budget, it is important to implement a savings strategy. By “paying yourself” and keeping the money out of sight (and out of mind), you can accumulate a solid base for your financial future.
- Incorporate a financial management tool. There is a wide variety of both free and paid tools in the marketplace that can help you manage your credit cards, checking accounts, savings accounts, and more. While some look like fancy check registers, others have robust budgeting, forecasting, and bill-pay capabilities. Find one that works for you and your unique needs.
- Consider how to make your money work for you. While this may seem like a tip for soon-to-be retirees or people with substantial savings, the truth is that your money can begin working for you at any age. Research the benefits of compounding interest or different strategies for creating passive income. The earlier you think about “outside” revenue streams, the more wealth you can potentially accrue.
- Think long-term. It’s a good idea to consider your legacy- and retirement-planning options even if you are years away from utilizing them. Tie up loose ends – such as designating beneficiaries, establishing a trust, or writing a will – now instead of later. Your plans may change as the years go by, but it is good to have your affairs in order and an end goal in mind to inspire future success.
- Ask around. Great advice can come from unlikely sources. Your friends, family, and coworkers may be willing to share their stories – especially if their stories are successful ones. You may even be able to find a financial mentor amongst your inner circle who can offer some guidance for free; keep in mind, though, that every experience is unique and your results may not be the same as theirs.
A Lifelong Pursuit
Becoming money smart doesn’t happen overnight. Think of financial literacy as a lifelong pursuit that will evolve over time – sometimes rewarding you, and sometimes not.
And remember: It’s never too early or too late to begin your journey! The sooner you start, the better – but that doesn’t mean that you’ve run out of time to make a difference to your bottom line.
The opinions voiced in this material are for informational purposes only and are not intended to provide specific advice to any individual. Consult your legal, tax, and/or financial advisor to determine what is appropriate for your situation.