4 Things You Can Do to Improve Your Financial Literacy
Whether you have a lot or a little of it, money significantly affects your daily life. That’s why it’s so important to understand the basics of money management and use that knowledge to make decisions. You might also hear this referred to as financial literacy.
Knowing how financial concepts work is one thing—confidently interacting with them is quite another, and it’s something a lot of people struggle with. Most people feel capable of managing their bills and budget, but when it comes to paying down debt, choosing products like insurance, and investing, that confidence falls away. That’s particularly true among women, according to a 2018 report from wealth management firm Merrill.
There are a lot of reasons that adults and especially women aren’t sure how to use their money. For starters, there’s a lack of financial education in schools, there have long been societal norms that discourage talking about money, and then there’s the fear of making mistakes that can keep you from taking action. Getting past those obstacles takes work and facing your fears, and that’s much easier if you take it a few steps at a time.
Here are four things you can do to improve confidence with money, as shared by financial planner Dominique Broadway. Broadway’s financial literacy workshop was part of the 2021 Finance Festival, a series of virtual events targeted at helping women take control of their wealth and future. The events run from April 14-28 and are hosted by Ladies Get Paid and trading platform/social network combo Public.com.
Evaluate Your Relationship With Money
Before you start looking at numbers, take the time to consider the emotional side of your finances. Broadway said to write down your first experience with money and ask yourself how that experience affects your perception of money today.
“These could be experiences that you had as a child and the relationship that you saw your parents had with money,” Broadway said. “Did you see your parents struggle? Do you feel like it has to be hard to make money?”
Negative associations like that can affect your mindset. For example, you might find yourself dwelling more on the problems money creates rather than the solutions it gives you.
“The relationships you have with money could literally be blocking you from receiving the money you want,” Broadway said.
Know Your ‘Magic Numbers’
What is your income? What are your expenses? Knowing the answers to those questions might seem simple, but many people don’t know those numbers on demand.
“You should be able to rattle them off like your name or date of birth,” Broadway said. “How can you be on a financial journey if you don’t know your two magic numbers?”
While most people (86%) have a regular spending plan, only half of them gave a firm “yes” when asked about it in a recent survey by The Balance. The rest said they “kind of” keep a budget. Getting a sense of how much you bring in versus how much you spend—whether you use paper, a spreadsheet, an app, or a budget calculator—is the foundation of good, confident financial decisions.
Do a Goals ‘Brain Dump’
Any dreams you have come with costs, even when they’re not framed in terms of money. Let the ideas flow, decide what’s most important to you, and work from there.
“Think about what you want to accomplish,” Broadway said. She gave an example of how she wanted to wake up every day and look at the water, so she took that goal and figured out what she could do to earn the money that allowed her to reach that dream. “Write out these goals and make a list of action items for you to reach these goals.”
Break Goals Down Into Actions
It helps to not only set goals but to also identify the tasks you should complete along the way. Again, Broadway shared a personal experience of wanting to have a month where her business made $1 million, so she broke it down into how many leads she needed to generate, how many clients she needed to secure, and how much she needed in other revenue streams (like book sales) to reach the milestone.
You can follow your own path to goal setting, but some sort of structure will help.
“You have to know yourself. I know myself,” Broadway said, noting that if she doesn’t set dates for her plans and goals, she won’t get them done.
Each of these actions will help you better understand yourself and the role money plays in your daily life. That said, even one of these steps may seem intimidating, and that’s OK. Often, one of the hardest parts of any financial journey is actually starting it.
As for fear of making mistakes, that’s part of financial literacy, too.
“It’s better to be doing something than be doing nothing,” Broadway said, specifically in reference to investing.