Have your cake and eat it too
Enjoy your life now AND later
So what?
Financial literacy, unfortunately, is not something that we learn in our education. If you are fortunate enough to have financially literate parents, you will learn from them. Otherwise, the burden falls on you. It’s a shame that we are not taught it at school as it is one of the most important hard skill to have in life. It allows you to:
- Have more now;
- Have more later;
- Be prepared for emergencies; and
- Less stressed paying bills.
What is financial literacy?
Financial literacy is an understanding of how money works. This includes, but not limited to, earning, saving, spending, investing and borrowing.
Why is it important?
How financially literate you are will determine how much you earn and spend. It’s the ultimate driver for your bottom line, in an accounting sense. Sufficient understanding and putting it into practice will influence how much you can enjoy life now and later.
You can have your cake and eat it too.
Simplicity is key
Below are three simple steps that you can take now to start your journey on improving your financial literacy.
- Understand your earnings and spendings: Make a budget that is as simple or as complex as you want it to be.
- Manage your debt: Pay down your debts as quickly as you can and avoid them like a plague (to your best ability).
- Give every dollar a job: Determine your needs and wants based on level of importance and allocate every dollar to them.
Most importantly, you need to find your money “smart”. Find out whether your financial strength is earning, saving, spending, investing and borrowing. And focus on it.
My experience
We took out a car loan back in 2018. The car loan itself isn’t inherently bad but it’s how you arrange it can make it so. We put down the bare minimum deposit required and only negotiated the purchase price. We didn’t have a good understanding of spending money. Whilst I was very frugal (in someways I still am), we didn’t consider the compounding effect of interest and the effect borrowings can have on your ability to take out a mortgage.
What now?
Whatever your smart is, identify what you need to learn and what you are good at. Use your strengths to better manage your money.
You can’t go wrong with a book like The Barefoot Investor by Scott Pape with a bonus point for simplicity. If you want a heavier read, I would recommend The Psychology of Money by Morgan Housel.