Do you need to be financially literate?

If there is one essential ingredient you need to become a successful investor, it’s financial literacy. You’ve probably already came across this term in our blog, but do you really know what it means?

Today, I’m gonna explain to you what financial literacy is, why it’s important, and how you too can become financially literate.

What the *BEEP* is financial literacy?

Imagine this… It’s Saturday afternoon, you’re having a barbecue with a bunch of friends. One of your friends starts talking about how he/she decided to manage his/her earnings, expenses and savings to plan for retirement. Would you feel comfortable in taking part in this conversation? A financially literate person would!

Financial literacy is the ability to understand how money works. This includes how money is earned, spent, saved and invested. A financially literate individual has the necessary set of skills to effectively manage his/her money and make rational decisions in terms of spending, saving, and investment.

At this point, do you feel as financially literate? Let me give you more precise examples. The short list below gathers the most essential money-related subjects financially literate people are comfortable with:

• Investing
• Real estate
• Banking
• Long-term financial planning
• Managing debt
• Saving for financial purposes

Alright, and why do you need it to become a successful investor?

I’m sure you can guess why… FINANCIAL FREEDOM!

Indeed, financial literacy is a “must have” when you’re aiming to achieve financial freedom! When you have a good idea of how money works, you’re in a better position to make more confident investment decisions. Confidence is really an important keyword you should keep in mind! Being financially literate will help you feel more confident when it’s time to invest!

Starting to invest without a basic understanding of how money works is like moving to a new a country where don’t speak the language: you won’t understand anything!

Financial literacy can only positively effect your life! You’ll understand how to manage your budget, the importance to have an emergency fund, get out of debt and plan for the long-term … You’ll have the perfect profile of a successful investor!

How can you improve your financial literacy?

Now you’d be thinking “Well, I’d like to be more financially literate, but I have nooo idea where to begin … “

I’ll share with you my best hot tips.

Know Yourself

Become aware of your goals and priorities. This will help you when making daily choices and over the long term these will certainly add up! It will help you decide on how to spend your money, how much to save and help you identify areas of your knowledge you need to brush up on. 

So now ask yourself:

• What stage of my life am I in and what are the priorities going with it?
• What financial situation do I plan to achieve and when?
• What do I consider as good financial behavior?
• What beliefs and values are driving my money management strategy?

Once you’ve answered these questions, you’re ready to start your investing journey and see which financial literacy topic(s) you need.

Be curious

While learning about financial literacy, curiosity will be your best friend! Search, ask, think … Understanding how money works is a long-term process so the more curious you are, the more skills you’ll acquire to invest smartly!

Your curiosity should also be focused on other medias! There are tons and tons of books, TV and radio shows to help you! If you want to learn about budgeting and savings, check out the book The Total Money Makeover by Dave Ramsey. Or maybe, you know your weakness concerns debt management? Check Lynnette Khalfani-Cox’s book Zero Debt: the Ultimate Guide to Financial Freedom. See! you can find books for any financial topic you wish!

Maybe reading books isn’t really your thing? So many TV and radio shows exist for you ladies! Here is my top 3:

• The Dave Ramsey Show (radio show you can follow on Dave Ramsey’s Youtube channel),
• The Suze Orman Show (TV show available on Youtube)
• Mad Money (TV show available on CNBC)

Don’t hesitate to ask people around you! They can give you new perspectives about money management or make you understand subjects you were confused about. Join our FB Page Women Investors Club where we talk about all topics related to money.

Add New Tools to your Daily Habits

Leveraging new technologies could change your world. You may already be using health apps on your phone to track your daily activities and so too for your daily money management. These new tools can bring awareness to your spending habits and help you make important changes. 

On my personal banking platform, I have access to a tracker that categorizing my expenses. Besides your bank app, other budget trackers exists if you prefer.

Mint is a nice one you can use to make your first steps. You can easily follow your spending, debt and investments … Another software I found was Credit Karma. It’s a credit monitoring service that goes a little bit deeper into the financial analysis of your money management. The app attributes you a credit score (the higher the better!) and then gives you specific recommendations and helps you to compare loans to find the lowest interest rate.

The last tool you can use is a financial calculator! Try, do your own calculations! You’ll immerse yourself into realistic financial calculations and there’s nothing better to understand how it works than by doing it. Be careful because financial calculators aren’t very easy to use the first time if you’re not used to it. Check out my compound interest calculator on my blog and give a try!

Take Classes

When I started doing research to improve my own financial literacy, I realized that there are many financial literacy classes out there.

If you are someone that learns by having the support of a mentor to guide you then you may benefit greatly from a class. Some universities give access to personal finance courses, so check the closest one to you!

Online courses are for sure available too: stay at home and learn! Check out our online course The Stock Market Project. If the Stock Market is something you want to learn more about.

If you are interested in reaching financial freedom, financial literacy will be your best ally. We aren’t born financially literate so don’t be scared, you can do it!

Don’t stand on the sidelines

XX

Salomé Darme

Disclaimer

The content in this article is intended for general education and information purposes only. It is not intended to be investment advice. Please consider your personal situation before investing or seek professional advice.