So, you’ve found your way here. Maybe you’re worried about money and in a desperate search for financial enlightenment. Perhaps you’re just curious. Or possibly, God forbid, you landed here by accident while looking for a cat video. Whatever your reason, I appreciate you for being here. We’re going to embark on an epic journey. Not quite Lord of the Rings-level, but close.
This is the first post in a series dedicated to getting you up to speed on all the personal finance concepts you should have been taught in school.
In this blog series, we’re going back to homeroom and learning the basic financial concepts we should all be well versed in. We’ll break em down, build em up, and then throw in some homework for good measure. We’re going to learn about personal finance in a way that will give us superpowers when compared to the average person.
Even more importantly, we’ll become equipped to teach our kids about this game too.
So, buckle up buttercup, with me as your guide we’re going to learn this money thing together.
What the Hell is Financial Literacy Anyway?
Let’s start by breaking down this mysterious creature known as financial literacy. It’s a term that gets thrown around quite a bit, but what does it actually mean? Rather simply, financial literacy means being able to decipher that cryptic language of numbers and jargon your bank throws at you. It’s the ability to make decisions about money that won’t make you wake up in a cold sweat at 2 a.m.
At its core, financial literacy is the ability to understand and effectively use various financial skills, including saving, budgeting, and investing. At a graduate level, it’s about understanding the psychology of why your brain wants you to buy that cheeseburger telephone on Amazon instead of dropping a few bucks into that brokerage account.
Trust me, all of this is about as sexy as it sounds. But just like that weird gadget in your kitchen drawer, it’s more useful than you realize.
Let’s take a quick peak at where our financial foundation will begin:
Budgeting – The cornerstone of any financial plan. It’s about knowing where your money comes from and, more importantly, where it’s going. It’s the art of balancing income and expenses, prioritizing needs over wants, and understanding that buying a fancy new TV might mean cutting back elsewhere. Just don’t shoot the messenger.
Saving– Think of saving as your financial bodyguard, there to protect you when things go south. It’s about setting aside a part of your income regularly, whether for specific short-term goals like a vacation or just that rainy-day “shit’s gone sideways” fund.
Investing – Now, this is where things get spicy. Investing is about making your money work for you. It’s putting your money into stocks, bonds, real estate, or other ventures with the expectation of achieving a return on that money. Investing can be a great way to preserve your money against inflation, create a stream of income, and grow your wealth over the long term. It’s not without risks though.
Debt – Debt is like fire. Managed correctly, it can be a useful tool. Mismanaged, and it’ll burn you. Good debt helps you generate income and increase your net worth. Bad debt, on the other hand, can be a continuous drain on your resources. There is a reason that a popular financial guru preaches that all debt is bad. The average person doesn’t have the tools necessary to use it. We are going to change that.
Taxes and Insurance – Ah, taxes, the annual thorn in our sides. But understanding them is key to avoiding potential financial pitfalls. Similarly, insurance, while often overlooked, plays a crucial role in protecting you and your assets from unexpected events.
Retirement – It’s never too early to think about retirement. Planning for those pool-side Mai-Tais during the golden years requires understanding how much money you’ll need and creating a strategy to get there. It’s about making sure you can maintain your desired lifestyle -even when the paychecks stop coming in.
Why We Suck at Money
Here’s the ugly truth: We’re not great at this money thing. Most people’s financial understanding today is, to put it mildly, pretty shit. Survey after survey shows that a significant chunk of the population is woefully unprepared to make sound financial decisions. We live in a time where only 52% of American’s have 3-months of savings set aside for an emergency.
Nearly one-quarter of Americans have no savings at all . More than half of us don’t feel confident that we are doing enough for our own retirement. But hey, that’s future-us problems, right?.
Our collective understanding of budgeting, taxes, inflation, and all the other drivers of our current wealth situation is, understandably, also not where it should be. We’re more likely to know the intricacies of the Kardashians’ lives than understand how compounding interest works.
This, folks, is a problem. Why?
Because whether we like it or not, money makes the world go round. And – unless you go all Captain Fantastic and move your family off the grid – we must live in this world.
Adulting and Money: A Match Made in Hell
As adults, we’re supposed to have our shit together, right? We’re expected to manage our personal and family finances, make informed decisions, avoid drowning in debt, and as discussed – save enough for retirement. And somewhere in there while achieving this financial independence we’re also supposed to drive two hours to work, cook dinner for the family, and help the kids with homework.
This is all a Herculean task if you’re lacking the financial literacy needed to understand what the Fed just said – and then why it matters.
Even more importantly, we need financial literacy because money is more than just buying that shiny new iPhone or guzzling overpriced lattes. It’s about stability, independence, and security. It’s about not panicking every time a bill arrives or your car makes that weird noise. It’s about not living paycheck to paycheck and knowing how to shield yourself from financial pitfalls. It’s about, well, freedom.
Money Talks with Kids
The importance of financial education doesn’t stop at us adults. Kids need financial literacy, too. I know what you’re thinking. Why burden their innocent little minds with the brutal truths of the real world? Hear me out. The reason is simple: The earlier kids learn about money, the better their chances of becoming financially responsible adults.
Just look at my own initial foray into the real world.
I don’t remember anything from my 12th grade Environmental Science class. What I do remember is the 5 credit cards I later applied for on the steps of the WVU student union for a promotional t-shirt that read “Eat Sh*t Pitt”. Had my parents, society, or the school system taught me something, anything, about credit scores and debt before I was sent into the wild, I might have laughed at the offer. But alas, that enlightening T-Shirt was well worth starting my financial future in a hole.
More “future me” problems, I guess.
The earlier children understand money – how to earn, save, spend, and donate it – the better equipped they are for the real world. It’s about teaching them the value of money, and not just in the “money can’t buy happiness” way. Sure, it can’t buy happiness, but it can buy comfort, security, and reduce a hell lot of stress.
It’s also about using it to instill in them the life values of patience, prioritization, and goal setting. It’s about teaching them the difference between needs and wants. It’s about preparing them for a future where they’re financially independent and don’t have to eat ramen for every meal (unless they really love ramen, of course).
Monkey See, Monkey Do: Your Kids Are Watching
Whether we like it or not, we’re the first role models our kids have. They’re little copycats, replicating what we do, including our money habits. If we’re screwing up our finances, there’s a good chance they might, too. So, it’s our responsibility to ensure that we’re not just financially literate, but that we’re also teaching our kids about money.
Yes, the school system should do a better job at this, but we can’t just sit around and wait for that to happen. It’s up to us to take the reins and teach our kids what they need to know.
Teaching financial literacy is not just about explaining the difference between a credit card and a debit card. It’s also about including them in real-world financial decisions. Should we buy the expensive brand of cereal or the store-brand? Can we afford to take a vacation this year? Is buying that new gaming console worth it, or should we save that money for something else?
It’s about showing them that every financial decision, whether it’s about buying a toy or saving for college, has consequences.
And So, We Begin…
Alright, we’ve set the stage. We’ve talked about what financial literacy is, why it’s important, and how it impacts not just us, but our kids as well. This blog series will not just be about understanding how much change you should get back at the grocery store. It’s about being equipped to navigate through life, make informed decisions, and have a solid foundation for the future.
It’s about living a life less stressed.
A life where we feel secure and confident.
A life where we can help set the next generation up for success.
And, as I often like to remind people, we’re all flawed, and that’s okay. Maybe we’ve made bad money decisions before. Maybe we’ve bought stuff we didn’t need, racked up credit card debt, or ignored our retirement savings. Hell, maybe we’re still making mistakes. Its ok because every day is a chance to learn something new, to do better, and help someone else along the way.
This series aims to give you that chance as it deals with money.
But for now, let’s take a breather. Absorb what we’ve discussed. Maybe have a glass of wine (or three). It’s a long road ahead, but we’ll take it step by step. Until next time, my financially curious friend.
Up next in the series:“Money Mindset: Overcoming Your Financial Fears and Misconceptions.” Because let’s face it, we’ve all got a couple of financial skeletons in our closet we need to address before moving into the more technical aspects of finance.
Was this helpful? Do you want more? Did I miss something? Let me know in the comments.