You could end up losing a substantial amount of money by not learning about finances.
Is financial literacy one the most important subjects we should learn? It might surprising to some but over the years I have found that regardless of education, social and economic backgrounds, individuals at all levels have difficulty in learning how to manage their finances. If this is the case, why is it difficult?
To begin there are a number of factors such as social pressures and individuals own needs and wants that can make it can be difficult to manage money in a constructive way, yes we can be are own worst enemy, Luckily there is a lot more information on the internet today to try and help us learn how to be financially independent.
“It's strange that we put so much emphasis on being financial literate, yet we do so little to teach this subject in school.”
So why do we need to be financially literate? First it could lead to poor financial planning, which will not only affect your financial well-being, it could also affect your mental well-being as well. Secondly by not understanding the fundamentals of personal finances could end up costing you a substantial amount of money over time. Finally financial literacy can help individuals become self-sufficient meaning you could end up being financially stable, however let’s look at some simple examples to help you understand a little better:
Mortgage
It’s common for people to make a number of judgement errors that can cost a fortune over
time when purchasing a home and getting a mortgage. This could include:
1. Not negotiating a good rate for your mortgage or shopping around for the best rate.
2. Paying the minimum mortgage amount and extending the maturity to the maximum length.
3. Not understanding the interest savings you could realize by making extra payments.
I do fully understand that there are times you may be required to sacrifice and extend your mortgage to the maximum but as one insider mentioned to me, most customers do not aggressively negotiate rates or shop around to do rate competing with other financial institutions.
Personal Debt
Learning more about personal finances can help individuals better manage debt and open your eyes to the effects of fees, penalties, compounded interest charges and minimum payments have on your credit card and loan debt. In fact over time you could end up decreasing your credit score resulting in higher interest rates and decreasing your ability to negotiate better rates. Financial literacy enable individuals to better understand how they can reduce debt and save money by learning how to pay off your debt quickly and to maximize the benefits they receive from their credit card.
Savings and Investments
Understanding personal finances can mean understanding the effects of high fees, low interest accounts, not investing in ETF’s and keep all your money in cash, as individuals learn more they can better understand effects of inflation along with the positive effects of compounding, dividends and capital appreciation on the growth of their money.
Be positive and understand it will take time to educate yourself.”
If your reading this article and other similar articles, the good news is individuals such as yourself are trying to learn and understand the importance of financial literacy, the most difficult part is how to take that understanding and come up with an action plan that is both manageable and not overwhelming. Learning to understand personal finances can be the same as trying to go to the gym, it takes time to motivate yourself and make the life style changes required. In the end I can only highlight and help people understand that managing money can mean some changes, which may not be what they want to hear but it does not mean they need to suffer either. For some it’s easy but for many people it’s difficult, which is not surprising, because unless our parents teach us, we never really get to learn the value of personal finances and it becomes a little hard as we get older.
Comments