The American economic crisis that started in 2007 had many contributing factors. For mortgages and credit cards, part of the responsibility falls on the consumers. The lack of financial literacy contributed to consumers getting involved with financial products that were wrong for them.
Financial literacy is a lifetime learning process that will require a lot of repetition. Most financial topics have layers of detail that need to be approached steadily. Here are a few suggestions to improve your financial literacy.
Listen and watch: Start watching financial television show and listening to financial radio shows. Jim Cramer and Suze Orman are two television personalities in personal finance. You may not like their on-screen personality, but try to pick out the financial knowledge. Many news radio stations will have daily or weekly money hour. Motley Fool has a few financial programs on public radio that provides excellent information. Also consider downloading their podcast. There website is excellent for basic knowledge on personal finance and investing.
Read: Start increasing your financial reading and study slowly. Do not immediately subscribe to six magazine, three newspapers, and four web newsletters. Do not immediately put a stack of financial books on your nightstand. Start slowly and avoid burn out. Buy one magazine at a time from a newsstand or supermarket and try the different ones: Forbes, Fortune, Money, Bloomberg Businessweek, Kiplinger’s Personal Finance, Smart Money, The Economist. Purchase one every one or two weeks. Also alternate in some of the financial newspapers: Wall Street Journal, Barrons, and Investors Business Daily. Initially, just scan through these items. With time, you will begin to understand more, become more interested in the articles, and see connections between topics.
Investors Business Daily is not only daily newspaper on finance and investing. The founder and publisher of the newspaper, William O’Neil wrote a good book: 24 Essential Lessons for Investment Success: Learn the Most Important Investment Techniques. Investors Business Daily also includes a page on motivation and success. You may want to connect your financial literacy efforts to your efforts in self-improvement and personal success. Your long term goals and how they are broken down into monthly and weekly steps should include goals in financial literacy and financial improvement. One well known author in this area is Robert Kiyosaki, best known for his Rich Dad, Poor Dad book series.
Fine Print: Start reading the fine print. It will be confusing and boring initially. The cliché is true: The fine print is what takes away. When does your mortgage interest change? What fees exist in yourchecking account? What penalties can occur in your credit card? With a lot of big contracts like mortgages and real estate transactions, try to get the paperwork or a sample packet early and read it at home. As you read it, make a list of questions. Review these questions with your professional before the signing point. For example in some states, real estate transactions include disclosures about mold, termites, property insurance claims, and natural hazards, just to name a few. You may want to understand why these are included in the transactions. Most life insurance polices provide a free look period after receiving the policy.
Question every line: When looking through a bill or statement, start to question every line and charge. Maybe you set up a subscription on your credit for something that is going to your old address and was never cancelled. Maybe you are paying for that extra cable converter box that has not been used in 12 months. Maybe your are paying for two credit monitoring services.
Save money: Setting a financial goal connected to saving will help motivate and guide your financial literacy efforts. You can reconsider your credit card balance and interest and look for ways to lower them. You can set up monthly transfers into savings and investing accounts.
For basic financially literacy, here are a few suggested topics to focus on.
-Life Insurance: Why to mix whole life and term life
-Credit Card Statement: Understand all charges and fees for the past six months
-Savings Account: Determine a basic minimum balance for your emergency fund
-Stocks: Understand dividends
-Interest: Simple Interest and compound interest
Improve your financial literacy by making small steps. You will reap the rewards slowly over time as well as have the knowledge and confidence to make the right choices for the big decisions.
References
Motley Fool Website: www.fool.com
Investors Business Daily Website: www.investors.com