The Mid Atlantic Fund

Breaking the Chains of Financial Ignorance

Financial literacy is not a luxury; it’s a necessity. In this installment, we discuss how financial illiteracy is entirely avoidable and why becoming financially savvy is well within everyone’s reach.

Education is the Key: The Foundation of Financial Literacy

To eradicate financial illiteracy, we must start with education. Education is the cornerstone upon which financial literacy is built. Whether it’s through formal schooling, personal finance courses, or self-study, education empowers individuals to understand the complex world of finance. But it’s not just about acquiring knowledge; it’s about how that knowledge is applied.

Formal Education:

In an ideal world, financial education would be a standard part of every school curriculum. Unfortunately, this is far from reality in many places. The public school system in the US, for example, with its push to focus on standardized testing, has long since abandoned even the perception of teaching basic life skills. However, there’s a growing movement to integrate financial literacy into schools, recognizing its vital importance. We’ll explore how these efforts are making a difference and why they should be more widespread.

Personal Finance Courses:

For those who’ve already passed their school years, personal finance courses are an excellent way to fill the knowledge gap. Many institutions and organizations offer courses on budgeting, investing, and retirement planning. Open an account with a large financial institution, whether it is a bank or investment firm, and they commonly provide free information, or even learning modules, to their clients. 

Self-Study Success Stories: 

In years gone by formal education was about the only way to get a deep dive into financial concepts. However, in today’s world information is everywhere. In fact we are over loaded with it. YouTube alone has over 1 million videos about financial education and many are full categorized video courses. Another popular source or learning for all ages is Khan Academy which offers free courses to learn thousands of topics. The internet has democratized knowledge, making it accessible to anyone with a thirst for learning. Millions worldwide have taken their financial education into their own hands, using online resources, books, and seminars to transform their financial lives. These success stories prove that it’s never too late to start learning.

Basic Financial Decision-Making: Empowering Through Knowledge

Financial literacy isn’t about mastering complex financial theories. It starts with understanding the basics. In this section, we’ll provide practical tips and insights into managing finances effectively, saving for the future, and avoiding common financial pitfalls.

Budgeting Essentials:

Creating and sticking to a budget is the foundation of financial stability. With this organization is the key. You must have an understanding of your income, expenses, and the timing of both in order to make the best decisions.  Dave Ramsey and Suze Orman have made careers and sold millions of books based on providing consumers with basic rules of budgeting. There are also dozes of apps (many free) that simplify tracking budgets, expenses, and provide useful tips along the way.

Savings Strategies:

Saving money doesn’t have to be daunting. Start with the #1 rule of the 1%, which is: pay yourself first. Do this always and every time! Living below your means over the long term is what creates financial peace and ultimately financial independence. Most experts say that most households need to be saving around 30% of their after tax income.  More is better but this is a good place to start. This should go first to and emergency fund, then to retirement accounts, and the finally to investments with reasonable liquidity. Time is the key here, Albert Einstein said that compound interest is the 8th wonder of the world. It allows everyone to be rich as long as you have enough time.

Avoiding Financial Pitfalls:

Famous Berkshire Hathaway Vice Chairman, Charlie Munger, famously said the best way to become extremely wealthy to ‘simply make fewer mistakes than the next guy’.  So clearly financial literacy isn’t just about making the right choices; it’s also about avoiding costly mistakes. So next time you want to make an important decision try running it by someone you respect first. It could make all the difference and help you avoid common financial pitfalls like high-interest debt, overspending, mismanaging credit, and failing to plan for retirement.

Taking the First Step Towards Financial Empowerment:

Financial literacy is within everyone’s reach. There are no more excuses. Education, whether formal or self-driven, is the key to breaking the chains of financial ignorance. Armed with knowledge, individuals can make informed financial decisions, build wealth, and secure their futures. In the upcoming blogs in this series, we’ll delve deeper into specific aspects of financial literacy, providing you with practical tools and insights to navigate the complex world of finance confidently. Remember, it’s not about how much you earn; it’s about what you do with it that counts.