Financial Literacy Basics
Mitchell Freedman, CPA/PFS (CEO, MFAC Financial Advisors) gives expert video advice on: What are the most common financial problems you see?; How do you help people break bad financial habits? and more...
What are the most common financial problems you see?
There are two financial problems that I find are most problematic with young people today- in fact, they're problematic with older people as well- and that is a failure to save, or save enough, and the inability to manage credit. Those two financial problems, in and of themselves, put people behind the eight-ball in terms of trying to gain financial independence, and until such time as they learn how to save, learn how to budget, and spend only what they earn, and not go into credit for their day-to-day needs, they are going to be challenged for a long time to come.
How can emotion affect the way we handle our finances?
It's not uncommon for emotions to come into play when individuals are dealing with their finances, and these emotions can take different, different faces. Some people have a difficult time dealing with money if they have it. They don't feel that they should have it. Other people don't feel they have enough and they feel that they have to spend more and consume more because they just don't have as much as they want. Still others might inherit money, and they have this feeling that it is an enormous obligation to have wealth or significant assets, and they don't know how to deal with it, so sometimes they procrastinate and/or do the wrong thing. In addition, it's not uncommon for couples to each bring different elements of emotion to their finances. One party can be a spender, the other a saver. One can enjoy spending money; the other might really not like to do it at all. One might want to save, and the other might want to buy the latest technological tool or game. So, we all have to deal with it in one way or the other, and it is a challenging situation for couples and individuals, and it's kind of rampant throughout society.
What is "financial literacy"?
If one is to become financially literate, they must know how to handle credit. The financially literate must understand the concept of saving, and the compounding of interest over time and what that means. The financially literate must understand the concept of budgeting and applying a spending plan to the earnings that they have, so that they are spending the amounts of money, or no more than the amounts of money that they're earning These are the primary issues that one has to deal with when becoming financially literate.