Do you find finances intimidating? You are not alone. Many people put off learning about finances or taking control of their own situation because they feel like too many pieces of the puzzle are out of their control or they worry they will seem ignorant if they ask questions.
Nothing could be further from the truth. Taking control of your financial future means improving your financial literacy — and becoming more informed in the process. There is nothing wrong with admitting you do not understand something. In fact, it’s the only way you can get the help you need to achieve understanding.
April is National Financial Literacy Month, which makes it the perfect time to branch out and learn new things that can help you plan for the future and your retirement. It doesn’t cost you anything to learn. But it could cost you money in the future if you don’t start taking the initiative now.
What Is Financial Literacy?
Financial literacy is understanding the concepts and nuances related to managing money and investment. Achieving financial literacy means making informed decisions about personal finance and budgeting. These decisions might involve a number of things, including:
Other aspects of financial literacy include grasping concepts of banking, setting financial goals and estate planning.
Levels of Financial Literacy
Some people have little to no understanding of these concepts. Their financial literacy is low.
Others understand many of the concepts related to personal finance but aren’t sure how to incorporate the principles into their daily lives. They have moderate financial literacy.
People with high financial literacy not only comprehend but also embrace the financial responsibility and also encourage their loved ones to join them on the journey. They can impart their knowledge.
Ways to Raise Your Financial Literacy
Maybe you recognize yourself in the above descriptions. Maybe you are ready to increase your financial literacy. But you are not sure how to start. Here are a few ideas to get you started — and you will likely find more as you push down this path.
1. Learn About Goal Setting
You need to know what you’re working toward to set a goal. For instance, we advise our clients to think about retirement planning as a puzzle. Get the right pieces, and you can complete it. Make your goals part of the pieces.
Setting attainable goals versus pie-in-the-sky aims will help you stay on track. Instead of saying, “I’m going to save half my paycheck,” start by socking away 5 percent, and move up from there.
2. Discover Risk Tolerance
Risk tolerance relates to how much risk you are willing to take on to reach your goals. Your risk tolerance should vary based on your age and goals. This questionnaire can help you determine your own.
3. Find Your Credit Profile
Borrowing money you pay off down the road can be a great way to finance a purchase. It can also count against you if you’re racking up loads of debt, making companies less willing to take a chance on you based on your history. If you haven’t gotten a free credit report recently, sign up for one (or see if your credit card company offers one) to uncover what your financial history says about you.
Do you need more information about financial literacy? Jay is the regional director for a fiscal literacy nonprofit called the Financial Education Partnership (FEP), which helps people like you improve their literacy and make informed decisions about retirement savings. Get in touch with Jay to learn more about it.