It's Financial Literacy Month, but why should I care? What am I supposed to do about it?
Financial Literacy Month sounds like a 'Hallmark Holiday,' minus the greeting cards and decorations. It has some stiff competition, too. November is also Aviation History Month, International Drum Month, Peanut Butter Lovers Month and of course, "Movember."
You are right to ask, "Why should I care?"
Increased financial literacy equals improved quality of life
You should care because increasing your level of financial literacy will improve the quality of your life. This is a simple and compelling equation that too many people fail to understand.
I am not going to ask you to stop spending money on the things that you enjoy in life—you can make those decisions for yourself. I just want you to be more informed about the trade-offs you're making on a day-to-day basis. Increased financial literacy will give you clarity on what you need to do to get a handle on your money, and the confidence to actually do it.
Building an investment plan can be empowering. As one person recently wrote to me after reading my book Moolala, "I felt empowered by the fact that I am taking the time to educate myself and gain clarity on what is best for our family." But perhaps the bigger compliment was the fact that he went straight to the bank to do something about it.
Knowledge, skills and habits
I think of financial literacy as developing the knowledge, skills and habits you need to manage your money.
Put another way, you can't prepare a healthy meal without learning about the ingredients first. You need to know what broccoli is and that it contains nutrients like vitamin C and calcium. But that isn't enough. Next you have to develop the basic skills to prepare it. And finally, you need to get into the habit of buying it and making it part of your diet.
You may never love broccoli. And you may never love the topic of personal finance. But I don't really care. Both can make a big difference in the quality of your life.
This segues to your second question: "What am I supposed to do about it?"
Three ways to celebrate financial literacy
We have this made-up month focused on financial literacy and no traditions to mark it. So here are three specific ways to celebrate.
1. Gain a new piece of knowledge
Go out and learn something new about money. Look up this phrase: net worth. Find out what a credit score is and why it's important. Learn what it means to pay yourself first.
There are plenty of outlets for you to learn. Surf MoneySense. Get a book from the library, the bookstore or your uncle who worships at the altar of The Wealthy Barber's Dave Chilton. Check out www.financialliteracymonth.ca and go to a live event near your home.
2. Develop a new skill
Take that knowledge and develop it into a skill. For example, if you figured out what net worth is, take the time to calculate it for yourself. Get your credit score and research ways to improve it. Develop the skill of paying yourself first by learning how to set up pre-authorized contributions to your TFSA and RRSP.
Keep it simple. You don't need to qualify for Top Chef Canada with your broccoli dish. Just cut it up and steam it until it is tender, drain and then add some salt and butter or marg. I have very low standards for your new personal finance skills, too. The way I see it, as long as you are developing a new skill with your money you're going to come out ahead.
3. Commit to a new habit
The most important thing you can do to celebrate financial literacy month is commit to a new habit. What will you now do every week, every month or every year? For example, you could commit to calculating your net worth every year on January 1, and put a reminder in your calendar so you do just that. You could take on the habit of paying off your credit cards in full every month. You could contribute to your RRSP every payday, automatically, instead of in a blind panic at the end of February.
There are many ways to celebrate this glorious month of Financial Literacy. What is yours?
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