The First Step In Financial Literacy

The words financial literacy and financial education can be used interchangeably and have been thrown around quite a bit lately. It refers to the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.

The great thing about financial literacy is it opens a door to better understanding your knowledge around money, your mindset and therefore your habits. It’s not as simple as swiping a card for a purchase, the behavior runs much deeper.

It includes conversations around budgeting, investing, retiring, wealth building, saving and life in between. Daring Balance adds a different element to it, creating financial education for women because we deserve more than a canned program.

So, what’s the first step in financial literacy? Acknowledgement.

Acknowledge where you stand with your finance and where you have deficiencies. Here are some questions you can start with to help:

·      Where do my finances stand currently? (include checking, savings, 401k, personal loans, credit cards, etc)

·      What are my goals? (pay off debt, buy a house, earn more income, retire early)

·      What do I need to do to reach my goals?

·      What questions do I have around my finances? (HYSA, budgeting, 401k, savings, getting ahead, removing debt)

So many times, our panic and worry around a problem is partly from not knowing where we stand. Now that you have a baseline for your financial situation, you know where you can go from here.

Remember, it’s not always about not having enough money. We want to move strategically towards wealth. This means making our money work for us. While it is important to work towards being current on bills + payments, minimal debt, and funding our emergency funds, there are other ways to set yourself up for success. You can start these now.

Here’s where the balance part comes in. In addition to acknowledging where you stand financially, you also need to take time to notice where your life activities might be impacting your money situation. Are you going through some major life changes that require some serious planning?

·      Graduation

·      Wedding

·      Move

·      Baby

·      Pet

·      Renovation

·      Starting a new business or changing jobs

·      Caring for a sick family member

Going through any of these major life changes can wreak havoc on your bank account if you aren’t prepared or planning. It can feel like life is hitting you from all sides. Increasing your financial literacy can increase your awareness around spending and decrease your chance of overindulgence. This in turn provides you with an opportunity for some control when other areas of life may be crumbling.

I’m going to give you a super simple exercise you can do RIGHT NOW to gain some composure regarding your awareness of your finances. You’re going to need a print out of a calendar (grab my freebie here if you need it!).

Step one: Add the dates for the month if they aren’t already listed

Step two: Write in all holidays, events, parties, happy hours, appointments, travel days, basically anything that will cost you money (a card, a gift, a meal, etc)

Step three: Write in all bills on the date they are due and bonus point if you include the price of the bill (sometimes that’s difficult until you receive the bill if they vary), include credit card and loan payments

Step four: Mark down your pay dates – this can help show which checks will cover which dates/bills/activities

Not to be repetitive but often finance is – doing this practice has hopefully helped you become more aware of where you stand. It’s so easy to build a budget without considering all of the life activities we’re planning and that thing can be blown in two days. How defeating, right?

This practice is a great activity for you to get a visual of your month and how all the money shakes out. Ideally, you would complete it monthly since your activities will change. You guessed it though; your bills and paychecks likely will remain similar so you will see some patterns.

Your first step in achieving financial literacy is already done! Investing time in yourself by reading this article, taking time to complete the activity, and hopefully continuing to bring awareness to your finances as you build your wealth. I’m there with you every step of the way.