April is Financial Literacy Month — something we can all benefit from!
As someone who has personally experienced the benefits of financial literacy and understanding how money works, I can tell you that it is SO important to have this kind of knowledge. Whether you’re just starting out on your financial journey or looking to take your finances to the next level, understanding how money works is a critical first step. This helps strengthen families, increases confidence, and brings hope and peace of mind. Not to mention, it can help lower anxiety and stress around finances.
So, what does it mean to understand how money works? At the most basic level, it means having a solid understanding of personal finance, including concepts such as budgeting, saving, and managing debt. It also means understanding your financial habits, cutting out the ones that don’t serve you, and increasing the ones that help you financially.
One of the most important aspects of financial literacy is understanding the power of compounding. This is the idea that when you save money, you not only earn interest on your principal but also on the interest you earn over time. Over the long term, this can result in significant wealth accumulation. Who wouldn’t want to build more wealth, right? By starting early and saving regularly, you can take advantage of the power of compounding and grow your wealth over time.
Understanding how taxes work is also a critical aspect of financial literacy. Taxes can have a significant impact on your money, so it’s important to understand how different types of accounts are taxed. For example, some accounts held for more than a year are subject to long-term capital gains taxes, which are generally lower than short-term capital gains taxes. It’s important to understand which type of account is best for your financial situation.
In addition to these concepts, there are a number of other important financial skills that fall under the umbrella of financial literacy. These include budgeting, saving, managing debt, and understanding credit scores. By mastering these skills, you can build a solid financial foundation and set yourself up for long-term financial success.
The best time to start is NOW. Remember, I was broke when I first started applying these concepts and applying them CONSISTENTLY, over time, changed that! So, how can you improve your financial literacy and start understanding how money works? Here are a few tips to get started:
Start by reading books, articles, and blogs about personal finance. There are many great resources available online that can help you build your knowledge and understanding of financial concepts.
Take A Course
Consider taking a course in personal finance. Many community colleges and universities offer courses on these topics, or you can look for online courses. If you’re interested, DM me and I can give you a couple of suggestions as well.
Talk to a financial professional. A good way to start is by asking for referrals and then interviewing these people to make sure they’re a good fit for you. Make sure they do a financial needs analysis and go over your goals and dreams.
Practice Good Financial Habits
Build good financial habits by budgeting, saving regularly, paying yourself first, and paying off debt. These habits will help you build a strong foundation and set you and your family up for success. You could do old school and just write your expenses on paper, but there are a bunch of cool apps that you can find online to help you create and manage a budget.
I was 22 years old when I first started learning about financial literacy, and I was surprised at how easy it was to learn. What was more surprising was realizing how few people understood the basics. I thought to myself, “Everyone in my family needs to know this stuff. Why don’t they teach this in school?”
Even with a tight budget, I started saving $250 a month. It didn’t grow right away, but those first initial accounts helped set me up so I have no financial stress now.
It’s like going to the gym. You may not want to go and it takes a while to see results. But, if you’re consistent, your body will change. Saving money is the same way. It can be painful to start a budget and put it in place. And just like going to the gym, if you’re consistent with saving, you’ll start seeing the change in your financial life for the better. You’ll start to get excited as you see your money grow.
The bottom line? Understanding how money works and developing financial literacy is essential for anyone who wants to achieve financial security and build wealth. By mastering key financial concepts such as compounding, diversification, and taxes, and practicing good financial habits, you can set yourself up for a financially secure future.
Now, does having more money automatically make you happier? That answer is NO… I can tell you from personal experience though… I have been broke, and I have been rich, and being rich is way better! So, this April do something productive to grow in this area! Start educating yourself today and take control of your future.