Happy Financial Literacy Month! For those who don’t know, financial literacy is the ability to fully understand your financial situation and make optimal decisions using the resources and opportunities available to you.
Financial literacy isn’t achieved by reading just one book or even by taking a course on personal finance, but is instead a lifelong learning process. In fact, even professionals with degrees in finance are continually improving their own financial literacy.
Therefore, April is an annual opportunity to both celebrate your financial milestones and challenge yourself to ongoing education about personal finances. We believe financial literacy is one of the most important things you can do to build security and stress less about your finances.
To help you celebrate, we’ve put together a list of seven actions you can take right now to improve your financial literacy.
Seven ways to improve your financial literacy right now
1. Check your credit reports
One of the best ways to perform a “check-up” on your financial health is to look at your credit reports. Your credit reports show how you previously handled credit accounts as well as how lenders evaluate your creditworthiness as a potential borrower. (To learn more about why you have more than one credit report, see our previous article on the subject here.)
Checking your credit reports helps you know where you stand in terms of creditworthiness. If you’re actively trying to improve your credit, checking your reports allows you to track your progress. For example, if you recently paid off a credit card, your credit reports may show that progress and inspire you to continue making good decisions with your credit.
It’s important to check your reports at least annually, which you can do for free by going to www.AnnualCreditReport.com. Checking your reports often also helps you identify possible mistakes or identity theft. If you notice a mistake or identity theft, you’ll want to take action immediately to rectify the situation. Not doing so can damage your credit – and your ability to take out a mortgage, an auto loan or other types of credit – for years down the road.
2. Review (or create) your budget
When you want to learn more about your own spending habits, the best way to do so is with a comprehensive budget. Many people think of budgeting as a restrictive tool that only serves to make you feel guilty about how you spend your money.
We think just the opposite! With the right mindset, budgeting can actually be fun and freeing. To be clear, we don’t believe a budget should make you feel guilty about what you spend your money on. Instead, the budget simply gives you the clarity to know how you spend your money and make changes if you wish.
3. Plan a money date with your significant other (or with a friend!)
Americans typically think talking about money is crass or taboo. But this can actually prevent people from asking important financial questions or learning about alternative financial mindsets. We don’t encourage you to share anything about your finances you’re not comfortable with, but lessening the stigma of talking about money might improve everyone’s financial literacy.
If you have a significant other with whom you share financial goals, it’s incredibly important to talk often and openly about your finances. With financial difficulties being in the top five most common reasons for divorce, we think couples should make talking about finances fun.
That’s why we encourage you to plan a “money date” with your significant other – perhaps weekly or monthly – to discuss your financial goals and budget. Make it enjoyable: order a pizza, open a bottle of wine and curl up on the couch with your favorite budgeting tool.
If you don’t have a significant other, you can still plan a money date with a trusted friend who is also working toward financial goals. A money date with a friend can help keep you accountable to your goals and learn about each other’s financial mindsets. You’ll have the opportunity to share financial tips and knowledge with each other without the stigma.
4. Write down your financial goals
Some studies have found that people who write down their goals are more likely to achieve them. There are compelling reasons for why this might be, including the fact that writing something down helps to store the information more concretely in your long-term memory. Additionally, writing your goals down makes them visual.
Whenever you see the written goal, the visual reminder may be more motivating to continue working toward the goal. And the more detailed your goals are, the more excited you’ll feel about taking the steps to achieve those goals.
We also recommend posting your goals in a place you’ll often see them. Your refrigerator, the wall above your desk or your bathroom mirror are all great places to post your goals because you’ll be reminded of them frequently. Get creative with this! You can type up your goals and add images to make them even more visually pleasing.
5. Choose a finance tool that works for you
Personal finances are personal, so what works for your brother might not work for you. It may take some time to find financial tools you enjoy and that make your life easier.
There are a multitude of budgeting apps to choose from. Some apps automatically import your transactions, generate visual reports of your progress and allow you to set different types of goals and categories. We personally recommend an app like Mint because it’s free and easy to use!
6. Open a Loqbox to improve your creditworthiness AND save money
Two of the best ways to improve your financial situation are to save money and improve your credit. Whether you’re saving toward an emergency fund, retirement or for a goal like a down payment on your first home, saving money increases your financial security and gives you the freedom to do more of what you want.
Likewise, improving your credit history helps you access credit and helps you qualify for more favorable terms like lower interest rates. Loqbox gives you the opportunity to pursue both goals at the same time for free.
By opening a Loqbox, you commit to saving a certain amount of money each month (start by saving as little as $20 per month). As you pay your monthly savings into your Loqbox, we report these positive actions to the credit bureaus. This helps to improve your credit. Learn more about how we work here.
7. Improve financial literacy with ongoing education
As we said above, improving your financial literacy is ongoing. After you finish this article, we encourage you to find one way to continue your financial literacy education.
For some people, this might look like creating a list of personal finance books to check out from the library. For others, it might be listening to a personal finance podcast instead of the same old playlists on your commute. Here are some other ideas to improve your financial literacy:
- Follow a personal finance blog like our blog at Loqbox – we regularly post about budgeting, the home buying process, how to improve your credit and more
- Follow a personal finance influencer on your favorite social media platform
- Subscribe to a personal finance YouTube channel
- Join a personal finance book club
- Use government resources like MyMoney.gov to learn about financial basics like balancing a checkbook or investing your 401(k)
- Sign up for a financial literacy class at an adult learning center or at a local community college or university
However you choose to continue your financial literacy education, we wish you the best of luck on your journey! As we said above, we believe improving your financial literacy is one of the best things you can do to lessen financial stress and gain more freedom to do what you want with your money. Happy Financial Literacy Month!