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Writer's pictureDarius Malbon

5 Reasons To Be Financially Literate

Finance is the largest industry in the world. Think about it. Your student loans, car loans, mortgages, doctor bills, pay roll, taxes and even more involve finance. Without money, this world does not function to the level that it does today if at all. Many people have a goal to have financial freedom but don’t have the knowledge to achieve this goal. In fact, a 2018 FINRA study found that 53% of adults in America are anxious when thinking about their financial situation and 4 out of 5 youths failed a financial literacy quiz. It isn’t your fault. Financial freedom isn’t something that you learn growing up in school. Understanding money comes from research, practice, and resources. Here are 5 reasons to become financially literate.


October 18, 2020

By: Darius Malbon



1. Handling Finances

Everyone needs a “Why” when it comes to finances. You have to ask yourself why should being financially free be a goal of yours and also how do you get there. Being able to handle finances takes practice. One of the biggest reasons why people don’t handle money well is because they feel helpless.

During a college break, I took my sister to Cookout for some fast food lunch. We both got lunch of course and since I was the big brother, I had to pay. When I got to the window, I gave them my debit card and the worse thing happened… it DECLINED. I felt awful and had to give back one of the meals. The impact of that incident hit me severely, and I told myself that I would never in my life feel that way again.

After that experience, I made sure I went out of my way to budget and to study finance. The knowledge you can learn from finance allows you to handle money efficiently, understand cash flow, and create wealth so that you can actually live the life you want. Challenge yourself to handle your finances effectively.

Reflection 1: Challenge yourself to understand finance and seek guidance from a professional. Use your resources such as budgeting tools. A great budgeting tool I started using is the Every Dollar App by Dave Ramsey that allows you to budget easily and more efficiently. You can also check out general resources that are on my finance page on my website.

2. Avoiding Too Much Debt

Debt is the biggest reason why people cannot find financial freedom. It is your debt and expenses that are more detrimental to you versus your income. Often, the more money someone makes the more they spend as well; therefore, they are still not creating wealth. Experian’s 2019 Consumer Debt Study shows that the total consumer debt in America is $14.1 trillion with the average American’s personal debt being $90,460.

The key to tackling consumer debt is to make sure that you have enough assets or cash that can pay it off at any moment so that you are never in a bind. A good position to be in would be if you had $5,000 of consumer debt but $10,000 in savings. This means you could pay off your debt at any point. Find ways to save money so you can use it to pay off debt so that you don’t have to use loans in order to purchase items because most of the time you are paying more once you add interest into the equation. The only time having more debt than your cash and it make sense would be if you have a mortgage and even then, you don’t want to have more debt than you can chew. Rule of thumb is that your mortgage payments should not exceed 28% of your gross income.

Reflection 2: Make sure that you reduce debt as quickly as possible. Without debt, you have more money to allow yourself more options such as investing and saving for the future.

3. Preparing Yourself For Life Emergencies And The Unexpected

Most families in America live paycheck to paycheck which means that you are spending most or all of your monthly income on expenses. According to a 2017 Career Builder survey, 78% of adults live this way. Many times, Americans feel limited by their financial situation and do not have a Plan B if a crisis arises. As one can see during the pandemic in 2020, times can be extremely tough if you do not have any type of emergency fund to back you up.

The rule of thumb for an emergency fund is to have 3 to 6 months’ worth of monthly expenses saved. Think about it. If your family spends $2,000 per month, imagine if you had $6,000-$12,000 (multiplied $2000 by 3 months and 6 months) in your savings. You would have that cushion for a few months to find another job or have money stored in case of an unexpected expense. The best part about it is that you will have a sense of peace because you will not be stressed out for the next month.

Reflection 3: Make sure you crunch the numbers and have at least 3-6 months of savings. One tip would be to pay yourself first. Before you spend any money on expenses, you pay yourself a certain percentage of your check each month to go into savings. Rule of thumb is to save 10% of your income. Example: Paycheck is $4000 per month. This means you would put $400 per month in your savings account for emergencies before spending money anywhere else.

4. Finding Ways To Grow Wealth

When it comes to financial freedom, growing wealth is what it’s all about. Building wealth is the most important aspect of staying financially free. Growth is important in finances because it allows you to beat inflation. Inflation basically means that prices increase and slowly devalues the dollar. The average inflation rate in the U.S. is about 3 percent.

Investing is the primary source in beating inflation. There are several investment strategies that one can pursue: stocks, bonds, mutual funds, real estate, and many more. Many millionaires and billionaires diversify their investment portfolios to minimize risk. Basically, you don’t want to put all your eggs in one basket. There are over 600 billionaires and 18 million millionaires in the United States and the numbers are going to continue to climb for those who can learn how to grow their wealth.

Reflection 4: Growing wealth is essential in order to create an estate that can last for a life time or multiple generations. I will let you all in on a secret as well. Wealthy individuals typically purchase items with returns on their investments which means that they can still keep their initial investment. That is why they don’t become broke. Example: You invest $100 for a year into a stock. It grows at 10% for the year which means you would end up with $110 (100 x 10%). You decide to buy a $10 shirt from the store. Guess what… You still have $100!

5. Prepare For Your Future

As you can see, you need to prepare for your future. You have the power and choice to make your dream a reality. It may not be easy and some things may not be fair, but you have to still take control of your life. There are plenty of people who have had disadvantages in life. Daymond John was dyslexic and that never kept him from being a millionaire and being a host of the largest entrepreneurial show, The Shark Tank. He is a prime example of someone taking their future into their own hands despite the circumstances.

Preparing for the future keeps you out of trouble and helps you sleep at night. I don’t know about you but not having to worry about the lack of money sounds soothing. If you want to be financially free, put your energy into activities that will allow you to be financially free.

Reflection 5: Get a professional and do your research so that you can change the trajectory of your life and your family’s lives as well! You can do it…have faith!

Deuteronomy 8:18 – But remember the Lord your God, for it is he who gives you the ability to produce wealth.

Disclaimer: This is for general and educational purposes. Profits or losses are not guaranteed. We are not liable for your financial engagements nor outcomes.


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