Money. Are you comfortable talking about it, or does the subject make you cringe?
Matters of personal finance can be an emotional trigger. Tracking expenses? Looking up a credit score? For some, the mere thought of financial literacy spells one thing.
Run! But it doesn’t have to be this way. Learning how to become financially literate, like anything else, takes practice. Here are the 12 ways to get started.
Why Financial Literacy?
If you think you’re in the minority when it comes to financial illiteracy, think again.
Here are some stark numbers, so that you know you’re not alone:
According to Forbes Magazine, 44% of Americans lack enough cash in the bank to cover a $400 emergency. Over 40% of student loan borrowers are not making payments, and a third of Americans have no money saved for retirement.
According to a recent survey, over three-quarters of workers live paycheck to paycheck. Even among higher earners, one in ten earning over $100,000 a year live paycheck to paycheck.
The numbers go on and on. The point is, most Americans could use some financial literacy help. And with today’s deepening economic inequalities, financial literacy is as critical as ever. Luckily there are plenty of resources out there to get you started.
What is Financial Literacy?
But before you learn how to become personally financially literate, it’s essential to understand what financial literacy is in the first place.
In a nutshell, financial literacy revolves around the understanding of money and personal finances. Personal financial literacy includes the following topics:
- Budgeting and managing money
- Setting financial goals
- Paying bills and saving
- Understanding credit, including credit cards and reading your credit report
- Investing and retirement accounts
Pretty simple right? Knowing what you’re supposed to do is one thing, actually doing it is another. Still, not enough people have a basic understanding of this most fundamental element of their lives: money.
The following tips on how to become financially literate is a combination of habits and resources that will help you in your journey to financial independence.
How to Become Financially Literate in 12 Steps
These days, with the economy tanking ever more precipitously every day, learning how to hold on to every penny is not just a good habit, it’s a survival mechanism.
So here are the top eleven steps to help you attain financial literacy.
1) Follow Every Dollar
By all accounts, tracking your expenses is the single most important habit you can develop regarding money wisdom. Why?-
First of all, it takes no skill or money. Expense tracking does not require an accountant’s knowledge of numbers, a fancy app, a computer program, a magazine subscription, or even a trip to the library.
Get a notepad and a pen, and start writing down every dollar you spend. Just do it for a month, or heck, even just a week or two. You may be surprised at where your hard-earned dollars go.
Secondly–and most importantly–tracking your money forces you to face the facts. It puts the stark reality of what you spend right in front of your face, and reality is what people with financial problems generally don’t like facing.
Money tracking is an essential first activity because it’s an actionable baby step you can take to build awareness of your finances. And awareness lies at the heart of financial wellness.
People who are good with money aren’t geniuses. They make mistakes and even throw away or lose money on occasion. The quality that separates them from the rest of us is that they’re keenly aware of their finances.
Despite mistakes or occasional temporary blind spots, the money-wise can re-orient because they know every corner of their finances, from how much they make every month, to how much they spend to how much they have saved.
And it all starts with tracking your expenses.
Honing an awareness of how you spend your money–looking it square in the eye every week–will gradually lead you to spend less. Guaranteed!
2) Read Books
The next several steps involve educating yourself. Just like any other skill, learning how to become financially literate involves feeding your brain–consistently. One of the best places to start is with books.
You can start with this excellent list of personal finance books from New York Magazine.
3) Read Magazines
Magazines carry the advantage of giving you more updated information, which can help you keep up with what’s current in the financial world.
From Money Magazine to Kiplinger’s to the more newsy Bloomberg Businessweek, there are dozens of publications to choose from.
4) Listen to Podcasts
Podcasts are one of the best ways to drill knowledge of a subject into your subconscious. The fact that you can listen to podcasts while doing other activities–and the fact that podcasts are free–makes them a must-have for your knowledge arsenal.
Some notable money podcasts include: The Fairer Cents: The Tim Ferris Podcast; Martinis and Your Money; Death, Sex and Money; and Planet Money.
5) Get the App
When it comes to tracking money, there are plenty of apps for when you’re ready to step up your expense-tracking game.
Budgeting apps, like Mint, Wally, and You Need a Budget, help you with money spending and budgeting. The Acorns app allows you to invest spare change in the stock market.
What makes apps an excellent choice for personal finance is that–if you’re like most of us–you always carry your phone. So you’re more likely to be consistent with tracking your money if it means something as simple as opening an app.
6) Read Websites
Personal finance websites abound. Not only are they free, but many of the finance blogs come from a more personalized perspective. The conversational feel, combined with the insights from everyday experience, may sink in better for some of us.
From the widely popular Wisebread website to CashMoneyLife.com to MyMoney.gov, there are myriad options. Websites like cfi.co can get you the personal finance and global news you need to stay in the know.
You can even join a Reddit group on personal finance, where you can read ground-level insights as participate in discussion threads.
7) Team Up
One of the best ways to follow through with something is to have an accountability partner. Why not with personal finance as well? Find a friend or acquaintance who is in a similar position as you and work through some initial financial goals together.
Consider joining a meetup group. Personal finance meetup groups exist, so see if one is active near you and don’t be shy.
8) Get a Mentor
You should consider a financial mentor if you’re serious about getting right with your money. A consistent mentor is similar to an accountability partner, except they’re ahead of you in life–at least when it comes to money.
If you can’t find one online, see if someone who has their money act together will meet with you regularly as a personal finance mentor. You’d be surprised at how generous people can be. But proceed respectfully, and don’t be an askhole!
9) Take a Financial Literacy Course
Take a financial literacy course to learn the ropes of personal finance, especially if you’re new to the subject. From budgeting to saving to wills and insurance, a free personal finance course will help you understand all aspects of the landscape.
10) Government Resources
You might be surprised at what free government resources are available to you. From personal finance info to taxes, government resources should be part of your educational quiver.
Start with the U.S. Department of Treasury website on financial literacy.
11) Dedicate the Time
Deciding to commit to financial literacy can be overwhelming. So take it a little at a time. For example, start with a financial literacy month.
Commit to a full month of doing all the great things you’ve been reading about in books, listening to on podcasts, and talking about with your financial mentor.
If you start with an end in mind, you’ll be much more likely to commit to the activities that will eventually develop financial intelligence.
12) Understand the Mindset
Living below your means translates to a mindset. The mindset is this:
Understanding the dignity in spending less than you earn.
It’s easier said than done. In our increasingly digital world, visual content rules the stage, and flash abounds. Wealth, as the day is long, continues to reign as the symbol of success.
The exotic vacations, the newest foldable electric scooter, the $400 camping stove.
As awesome as these things are, you don’t need them. And they’re definitely not worth going into debt for.
As the great Jay-Z was quoted as saying: “If you can’t buy it twice you can’t afford it.”
So resist the temptation to acquire more stuff and take pride in your frugality.
Consistency Wins Every Time
Good financial habits will come and go when you’re learning how to become financially literate. The key is to stay consistent.
And don’t give up! Stay the course and keep learning everyday. If you do you will reap the benefits of financial literacy and abundance.
In fact, you can start by reading more financial articles on our website.