Next steps: Beyond Financial Literacy

Understanding financial basics is just the first step — practicing healthy financial habits will help you win with your money in the long run.

The improvement of one’s financial literacy is only the beginning — having a firm grasp on the basics of personal finance is just the foundation. Knowing the basics of budgeting, saving, and even compound interest rates is a good start. But financial literacy isn’t enough. You also need the financial capability, financial wellness, and financial resilience. If you have any hopes of building wealth or even a comfortable life of healthy money habits — this requires practice and the application of basic financial principles in everyday life.

Generally speaking, Americans aren’t doing so well with financial literacy. 21 percent of Americans have no emergency savings, they pay on average close to $600 in late fees, overdrafts, and other fees, and about 75 percent of teens don’t feel confident about their financial education.

Family

The antidote to this malady is quite simple: education. And not just education of oneself, but making it a family value that continues down the generations. Make financial education an integral part of family. Talk to your partner and children about money principles and best practices. Have your children manage household spending for the day or encourage a family member to look into an investment idea and explain their reasoning behind their decision.

Checklist

Financial wellness is the ability to live comfortably today and still have the means to support yourself tomorrow. Like physical health, financial health requires regular maintenance and checkups to ensure you’re on the right path. Create a checklist of questions that will lead you in the right direction.

• Am I saving enough money for emergencies?
• Am I spending more than I make?
• What is my credit score? How can I improve it?
• How much is my retirement savings worth today?
• Do I have disability protection if I can’t work?
• Is my life insurance coverage enough to provide for my family?
• Do I have a will, and is it up to date?

Ongoing education

To bridge the gap between financially illiterate and financial wellness, we need to know what we don’t know. The old saying that you can’t solve a problem unless you recognize that it is a problem first applies here.

Close to 55 percent of Americans do not use a budget to manage their hard-earned income, and a similar 56 percent say they do not even know how much money they spent last month. So, whether you have designs on becoming a millionaire or just have your sights set on living a life free of financial stress and worry — there is still a lot of work and smart things that can be done to improve and manage the money you earn.

Possibly the best advice for anyone looking to improve their financial situation is to act now and continue to learn. Do not wait. In addition, once you learn the basics, continue to expand and grow your knowledge. There is no merit in resting on your laurels or just knowing a few of the basics. Increasing your knowledge base will only continue to improve your financial situation.

 

 

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.

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