Tips for Increasing Your Financial Literacy
A recent CNN article titled "Americans are 'financially illiterate'" reports that a survey found that a large proportion of Americans they tested do not seem to understand their debt. I am not that surprised by the report because in American we really do not get very much financial education in schools. However, I think financial literacy is very important and here are some of the things I think anyone can do to gain financial knowledge.
1. Get over your fear/hate/disinterest for finances - Sometimes I feel that managing money is pretty annoying and tedious, and I know I am not the only one that feels this way. Most of my twenty-something peers think that financial topics are so boring that they do not make an effort to learn about it. For many people, learning about financial topics is like swallowing bitter medicine. However, I think of financial knowledge as a vaccine against bad financial decisions, and if people get over their distaste for it they may be better off in the long run.
2. Learn about one topic at a time - You do not have to become a financial mastermind overnight. It really takes years to learn about every financial product and concept. So I think people should attack one topic at a time. For example, set a goal to learn about one retirement account option available to you, or one kind of mutual fund . It is really easy to get overwhelmed when you see a basketful of acronyms like IRA and AMT, but if you take it one thing at a time you will be able to learn things in a more focused manner.
3. Seek out free professional knowledge - If you are a customer at a bank or other financial institution you can call in at any time and ask questions. When I was in college I opened a Vanguard Roth IRA because my parents said it was a good idea , and I did not understand a lot of things. So I called Vanguard's customer service line often and asked questions about dollar cost averaging, fund types, and asset allocation. Most of the account representatives at large financial institutions are very professional and knowledgeable, and it is always nice to have a real person explain things to you.
4. Employ online tools - Along with the CNN article there is a calculator that helps you figure out how long it would take to pay off a certain amount of credit card debt. There are many online calculators like this. In fact, Millionaire Mommy Next Door compiled a giant list of these tools. You really do not need to memorize the mathematical theorems behind these tools to use them. Most of these calculators will help you plan your financial goals better because they give you a more accurate estimate on your financial situation.
5. Read financial news - Laws and products are constantly changing in this world so it is important to read the news. It takes me a few minutes a day to peruse the Yahoo Finance and pick up useful knowledge about the finances of the world and how the current situation affects me.
There you have it, a few everyday tips that can help you increase your financial knowledge. As the cliche goes, knowledge is power, and you can definitely increase your wealth if you knew more about how things work.