Get Financially Fit
Learn about financial literacy and improve your life – starting today
Dec 17, 2020
We all want to improve ourselves, whether that’s with fitness goals, productivity, or the desire to live more sustainably. And with the incredible amount of knowledge we have at our fingertips, we think there’s no better way to practice self-improvement than in the area of personal finance. Educating yourself about your personal finances is also known as becoming financially literate.
What is financial literacy?
Financial literacy is essentially your comfort level when it comes to understanding your own finances. But more than just understanding them, financial literacy is the knowledge and skills you possess to make good financial decisions.
Solid financial literacy allows you to live with less stress. Our finances affect all areas of our lives, spilling over into our work or school performance, the fulfillment we get out of our relationships, our ability to take care of ourselves and our loved ones, and even how well we sleep at night.
Yet many people (in all stages of life) don’t have a good understanding or control of their own finances. Most think the only way to escape their financial problems is to make more money. But if they don’t know what to do with that money – or how to optimize the money they have now – simply making more of it won’t solve anything.
Financial problems aren’t restricted to low-income families
It’s been said that the more you make, the bigger your financial problems. Even some high-income earners struggle to make good financial decisions because they don’t know how to properly manage their money. So the question becomes: How can we make better decisions with the money we have?
Instead of worrying about making more money, focus your energy on making good decisions with the money you have now. Financial literacy allows you to make decisions with better results whether your income increases drastically or not.
Financial literacy is the key to financial freedom
Financial ignorance leads to expensive mistakes. Some financial mistakes, like maxing out a credit card, can set you back years (and cost you thousands of dollars in interest). But a lot of people don’t know how expensive these mistakes can really be – or how to avoid them while still living their lives comfortably – because they aren’t financially literate.
Financial literacy can take you from struggling to make ends meet month after month, to easily covering your expenses and even saving money down the road. Knowing how you spend, curbing unnecessary expenses, and saving more toward goals like an emergency fund or a down payment can set you free from financial stress.
We all need to be more financially savvy
More than 70% of Americans consider themselves to be financially literate, yet 54% of Americans are struggling with at least one aspect of their financial lives. This discrepancy indicates that Americans don’t accurately judge whether they’re financially savvy or not, so it’s no surprise that we could all do a little more to educate ourselves in this area.
People shy away from financial self-education because they’re intimidated by it. There’s a lot to learn, and some technical aspects of personal finance can be overwhelming to beginners, such as:
- Managing your 401(k) or other employer-sponsored retirement plan
- Investing savings in the stock market (or somewhere else)
- Applying and budgeting for a mortgage or other types of loans
- Knowing how to build credit history in positive ways (check out our Credit-Building Tips blog for more information)
Emotions skew our ability to be smart about finances
Perhaps even more difficult than the technical side of things, we also have to confront our money mindsets, which may be deeply ingrained in us from childhood. Our parents and the environment we grew up in have a huge impact on our relationship with finances, and unpacking these things can be emotional.
But allowing our emotions to drive our financial decisions is not smart, as both positive and negative emotions can cause us to make irrational financial decisions that don’t make sense for our future. Being able to separate our emotions from financial decisions will help us plan better and stick to those plans to reach our goals.
No right or wrong way
You probably learned most of your money habits from your parents – or perhaps you’ve learned opposite money habits from your parents’ financial mistakes. When our money habits are only learned from experience rather than education, we risk skewing toward extreme behaviors.
On one hand, there are those of us who love to live in the moment. We don’t want to pass up any opportunity for a fun adventure. Or maybe we have a hard time saying no to store sales convincing us we have to act now. After all, what if we miss out on the deal of a lifetime?
On the other hand, some of us are frugal savers. We hardly ever just enjoy ourselves and splurge on a nice treat. Our lifestyles are so economical, they’re hardly ‘lifestyles’ at all. This may not be healthy or sustainable long-term.
When becoming financially literate, it’s important to create a money mindset and find a healthy process that truly works for you. Personal finance is, after all, personal. There’s no one way to live your life financially, and the best way to unlearn toxic money habits is to educate yourself about all sorts of options.
Become more financially savvy starting today
It would be great if our public school system incorporated financial literacy into the core curriculum and started us on the road to healthy finances early in life. For the time being though, it looks like we’re on our own.
But remember! Financial literacy is a marathon, not a sprint. Don’t burn yourself out trying to learn everything at once.
Instead, think of becoming financially savvy as a new habit. If you incorporate financial education into your daily life in small amounts, you’ll be on your way to creating healthy habits that set you up for success in the long-term.
Here are 8 great ideas you can pull from to start becoming financially savvy today.
1. Listen to podcasts
If you have a long commute, work out at the gym, or need to walk the dog around the neighborhood, maximize that time by plugging into a money podcast. Find a list of some of our favorite finance podcasts here.
2. Explore the web
Besides podcasts, you can access lots of great finance bloggers at the click of a button. Check out some of our other LOQBOX blogs, or settle in with a nice cup of coffee and Google away. Here are some of the best finance blogs on the internet right now.
3. Create a budget
Creating a budget is essential. It can be overwhelming at first, but a budgeting app that automatically imports your transactions and links directly to your bank accounts makes the process so much easier. In fact, as you get more control over where your money goes, you will be so inspired and motivated by your progress as you watch your savings grow!
4. Boost your savings
Speaking of savings, nearly 70% of Americans have less than $1000 in their savings account. This doesn’t provide much of a cushion if something unexpected were to happen, such as losing your job or getting injured in an accident. Experts recommend having 3-6 months worth of living expenses saved up in an emergency fund. This takes time, so starting sooner rather than later is important.
5. Pay off debt
Work on paying off your debt before prioritizing savings (although it’s always a good idea to have at least a modest emergency fund). Paying off your debt faster saves you tons of money in interest, so you can usually make up on your savings goals after that debt is paid off.
6. Check your credit reports
Make sure your financial growth is being recognized! Your credit reports show you how potential lenders will evaluate you as a borrower, and you want to make sure you’re checking for mistakes or inaccuracies on your reports so you can get them removed.
Knowing your credit score will also help you prepare for financing you plan to apply for in the future, like a mortgage or car loan. For more information, read our blog on how and why to check your credit report.
7. Read personal finance books
Once you really get going, you’re going to want to read some personal finance books for more in-depth information. Dave Ramsey is one of the best-known financial gurus in the US, and he’s written plenty of personal finance books for beginners. Find more great titles here.
8. Learn how LOQBOX can help you
We love sharing tips and tricks to help you live a better financial life. We write about the home buying process, how to check and improve your credit history, ways to build financial fitness, and so much more. We specialize in helping people improve their credit history while saving money, all for free. Learn more about how we work here.
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