Financial Literacy for All

Getting Started in Financial Literacy

Did you know that the month of April is National Financial Literacy Month? Priscilla Reed, Special Projects Coordinator at United Housing, Inc., shares her knowledge as a certified financial capability counselor in the following blog post.

Priscilla Reed, MBASpecial Projects Coordinator, United Housing, Inc.

With a background in foreclosure prevention, I help people save their homes using many different tools, but one of the most important tools is building a monthly budget. During my time at United Housing, I have found that the basic rules of budgeting and spending are the same at various levels of financial health. Because of this, I am able to communicate and help people from all walks of life. I encourage you to read on in order to see what I've included in the essentials of financial literacy. President Obama declared April Financial Literacy Month in 2011, saying, “I call upon all Americans to observe this month with programs and activities to improve their understanding of financial principles and practices.” (www.whitehouse.org)

It is very important to achieve and maintain financial solvency.  Being financially literate helps you build savings, improve credit and eliminate debt.  On the contrary, as I have seen with past clients, the absence of financial literacy can cause a consumer to build no savings, increase debt and develop poor credit.  In addition, it can negatively affect health and is a known cause of divorce. Now that we have looked at the pitfalls of lacking financial knowledge, let’s look at how we can better achieve it.

What Is Financial Literacy? 

Financial literacy is the ability to understand money and make sound monetary decisions. According Investopedia, financial literacy also "involves intimate knowledge of financial concepts like compound interest, financial planning, the mechanics of a credit card, advantageous savings methods, consumer rights, time value of money, etc.” (http://www.investopedia.com/terms/f/financial-literacy.asp, 2015.)

Get To Know Your Spending Habits

The first step of being financially sound is tracking your spending, which can also be one of the most challenging tasks.  It is very important to know what is earned and what is spent in order to increase savings and avoid debt.  How do you avoid overspending?  Create a budget.  If you don’t like the word budget then develop a “spending plan.”  A spending plan allows you to track what you spend and save. Yes, savings is an expense. If you treat it as an expense, then you will be sure to pay yourself.  Once you’ve established a budget or spending plan, you must periodically check it to ensure it's functioning properly and make necessary adjustments. 

Identify Needs vs Wants

On your road to becoming more financially literate and healthy, be mindful of the differences between needs and wants. Before making a purchase, ask yourself, “Is this a need or a want?”  You may have to step back from a purchase to think about it.  Although habits are hard to break, it can be done. It may take a few months to get into a good financial pattern and reap the benefits, but the important thing is to stay focused and determined.

Remember, no matter where you are in the process of financial literacy, the ultimate goal is to become financially capable.  National Financial Literacy Month is a great time to start!