Financial Literacy: Essential Life Skills for Financial Success

Posted on January 04, 2024 by Erin Scallon, One of Thousands of Life Coaches on Noomii.

Financial Literacy: Essential Life Skills for Financial Success

Hello fellow transformation seekers!

If the thought of budgeting and investing makes your mouth go drier than a sleeve of saltine crackers, you are not alone! This week’s blog post will pick up on last week’s topic of mindsets but with – you guessed it – a focus on finances. If you missed last week’s post, take a moment to check it out and then pop back over.

Money may not solve all your problems, but it will solve all your money problems…and the fastest way to understanding money is to get back to the basics of financial literacy. In a world driven by economic intricacies and financial decisions, understanding how money works, how your mindset impacts your financial choices, and making informed choices is more important than ever. Read on to discover what you need to master your finances.

The Importance of Financial Literacy

Financial literacy refers to the ability to understand and use various financial skills, including personal financial management, budgeting, and investing. A lack of financial literacy can lead to poor financial decisions, debt accumulation, and missed opportunities for wealth creation. According to the National Financial Educators Council (NFEC), individuals with a higher level of financial literacy are more likely to save for retirement, make informed investment decisions, and effectively manage debt.

A report by the Global Financial Literacy Excellence Center (GFLEC) reveals that individuals lacking financial literacy are more likely to engage in high-cost borrowing (AKA pay day loans), experience financial distress, and struggle with retirement planning. The study emphasizes the role of financial education in mitigating these issues and fostering economic well-being.
Financial literacy is not confined to personal finance; it also plays a crucial role in career success. Those who understand the basics of financial management are better equipped to negotiate salaries, plan for career advancement, and navigate workplace benefits.

Financial literacy contributes to financial resilience, enabling individuals to navigate economic challenges effectively. A study by the Federal Reserve Bank of St. Louis underscores the link between financial literacy and resilience, emphasizing the idea that financial education is a lifelong process. The study encourages individuals to engage in continuous learning, regardless of their current level of financial literacy, to stay prepared for new challenges and opportunities and adapt to changing technologies and financial climates.

Increasing financial literacy

Increasing financial literacy doesn’t necessarily require expensive courses or resources. There are plenty of free and accessible ways to enhance your financial knowledge. Here are some suggestions:

1.Local Banks and Credit Unions
Banks and Credit Unions offer resources – often free of charge to members or those with open accounts – to review your budget and checking and saving options. They may offer additional learning opportunities, too.

2. Online Courses:
Websites like Khan Academy, Coursera, and edX offer free courses on various financial topics. Check if your local library provides free access to online learning platforms.

3. Personal Finance Blogs and Websites:
Follow reputable personal finance blogs and websites for articles, tips, and advice. Some popular websites include The Balance, NerdWallet, and Investopedia.

4. YouTube Channels:
Numerous YouTube channels focus on financial education. Channels like “The Financial Diet,” “Graham Stephan,” and “The Dave Ramsey Show” cover a wide range of financial topics.

5. Podcasts:
Listen to financial podcasts during your commute or downtime. Examples include “Bigger Pockets Money,” “The Clark Howard Podcast,” and “So Money.”

6. Books:
Visit your local library for personal finance books. Classics like “The Total Money Makeover” by Dave Ramsey or “Your Money or Your Life” by Vicki Robin are excellent choices. “I Will Teach You To Be Rich” by Ramit Sethi is a personal favorite of mine.

6. Government Resources:
Government websites often provide free resources on financial literacy. For example, in the United States, you can visit MyMoney.gov for tools and information.

7. Financial Apps:
Use budgeting and financial tracking apps to better understand your spending habits. Apps like Mint, YNAB (You Need A Budget), and Empower (previously known as Personal Capital – I personally use this app) can provide insights into your financial situation.

8. Webinars and Workshops:
Look for free financial webinars and workshops offered by community organizations, senior centers, financial institutions, or non-profit organizations.

9. Social Media Communities:
Join personal finance communities on platforms like Reddit or Facebook. Engaging in discussions and asking questions can provide valuable insights.

10. Educational Websites:
Explore websites like Money Smart from the FDIC or the National Endowment for Financial Education (NEFE) for free financial education resources.

11. Financial News Outlets:
Keep up with financial news from reliable sources like CNBC, Bloomberg, or The Wall Street Journal. Understanding economic trends can contribute to financial literacy.

12. Local Workshops and Events:
Check for local workshops and events on personal finance hosted by community organizations, libraries, or educational institutions.

13. Employer-Provided Opportunities and Benefits:
Many employers offer free financial resources. Some employers may even offer a financial benefit for activities like completing financial trainings, setting up and funding certain types of savings accounts – who doesn’t like free money?!

Remember, consistency is key. Take small steps, focus on specific topics, and gradually expand your financial knowledge. Tailor your learning to your personal goals and financial situation.

Mindsets and Money

“The Psychology of Money” by Morgan Housel is a compelling exploration of the behavioral and psychological aspects that shape our financial decisions. Housel encourages readers to reflect on their own behaviors and attitudes toward money, fostering a more nuanced and thoughtful approach to managing wealth. Some key takeaways from the reading include:

1. Understand Your Own Psychology:
Understanding your own financial psychology, including biases, emotions, and attitudes toward money, is crucial for making sound financial decisions.

2. The Importance of Patience:
The book underscores the significance of patience in building wealth. Housel illustrates how time and compounding interest are powerful allies, emphasizing the need for a long-term perspective in financial planning.

3. Risk and Luck:
Housel delves into the role of risk and luck in financial success. He highlights that taking the right risks and managing them wisely is key, and luck, both good and bad, plays a substantial role in financial outcomes.

4. The Power of Compounding:
Compound interest is a central theme in the book. Housel explains how small, consistent actions over time can lead to significant wealth accumulation. He emphasizes the need to avoid actions that disrupt the compounding process.

5. Adapting to Change:
The book explores the idea that financial success often requires adapting to change and being resilient in the face of unexpected events. Flexibility and the ability to learn from setbacks are essential components of long-term financial success.

6. The Role of Behavior in Investing:
Housel discusses the impact of behavior on investment decisions. Emotional reactions to market fluctuations can lead to poor decision-making. Investors who understand and manage their emotions are better positioned for success.

7. Money and Happiness:
Housel challenges the notion that more money necessarily leads to more happiness. He explores the concept of “having just enough” and how financial security and a sense of sufficiency contribute more to well-being than constant wealth accumulation.

8. Avoiding Unnecessary Complexity:
The book advocates for simplicity in financial planning. Housel argues that overly complex strategies and financial products often lead to confusion and mistakes. Keeping things simple and understandable is key for most individuals.

9. Personal Finance is Personal:
There is no one-size-fits-all approach to personal finance. Housel emphasizes that individual circumstances, goals, and values vary, and financial strategies should be tailored to fit one’s unique situation.

Enhance Your Financial Potential

A life coach can play a valuable role in helping you enhance your financial literacy by providing support, accountability and helping you define personalized strategies. Here are several ways in which a life coach can assist you in developing financial literacy:

1. Setting Financial Goals:
A life coach will work with you to identify and articulate your financial goals, whether it’s saving for a major purchase, building an emergency fund, or planning for retirement. By understanding your aspirations, a life coach can help create a roadmap for achieving these goals, breaking them down into manageable steps.

2. Budgeting and Money Management:
Life coaches assist you in creating realistic budgets tailored to your income, expenses, and financial objectives. They can coach you on tracking spending habits, identifying areas for potential savings, and implementing effective money management practices.

3. Debt Management:
If you are dealing with debt, a life coach can help develop a debt repayment plan and explore strategies for managing and reducing debt effectively. Providing emotional support and motivation is crucial in helping you stay committed to their debt reduction goals.

4. Financial Education:
Life coaches help you foster a learning mindset, a life coach can empower individuals to take control of their financial situation and make informed decisions – like seeking out educational resources and tools to enhance your understanding of financial concepts, investments, and economic trends.

5. Career and Income Growth:
A life coach will help you identify opportunities for career advancement, skill development, or additional income streams; maximizing your earning potential is integral to achieving financial goals and increasing financial security.

6. Behavioral and Emotional Aspects:
Financial decisions are often influenced by emotions and behavior. A life coach will help you recognize and manage emotional triggers related to money, fostering a healthier relationship with finances. By addressing limiting beliefs and mindset blocks, a life coach supports you in making positive and sustainable financial choices.

7. Accountability and Progress Monitoring:
Regular check-ins with a life coach provide accountability, helping you stay on track with your financial plans. Monitoring progress and celebrating achievements, no matter how small, reinforces your positive financial habits and motivates continued effort.

8. Financial Resilience and Planning for the Future:
Life coaches help you develop financial resilience by planning for unexpected expenses and economic uncertainties. For example, the creation of emergency funds and exploring long-term financial planning, such as retirement savings, contributes to overall financial well-being.

Financial literacy is not just about balancing a checkbook; it is a fundamental life skill that empowers individuals to make informed decisions, achieve financial goals, and navigate the complexities of the modern economy. By understanding the importance of financial literacy, taking proactive steps to enhance your knowledge, and being aware of how your mindsets and behaviors impact your financial wellbeing, you can pave the way for a more secure and prosperous financial future.

As a life coach, I will be your supportive partner in your journey toward financial literacy, offering personalized coaching and support. My combination of financial knowledge and emotional intelligence will empower you to make meaningful and sustainable changes in your financial lives.

Are you ready to transform your mindsets and master your finances?

Schedule a free 30-minute discovery coaching session with me using this link calendly.com to take that first step!

With gratitude,
Erin

Source 1: National Financial Educators Council (NFEC), “The State of Financial Literacy in America” (2019)

Source 2: Global Financial Literacy Excellence Center (GFLEC), “Financial Literacy Around the World: Insights from the Standard & Poor’s Ratings Services Global Financial Literacy Survey” (2015)

Source 3: Federal Reserve Bank of St. Louis, “The Demographics of Wealth – How Age, Education and Race Separate Thrivers from Strugglers in Today’s Economy” (2018)

Source 4: Housel, M. (2020). The Psychology of Money: Timeless lessons on wealth, greed, and happiness. Harriman House.