Financial literacy is noticeably absent from the educational fabric of our society. We, as a society, teach a myriad of different topics in high school and throughout college but never teach people how to budget, how to save for the future, how to build your credit, how to manage loans and much much more.
Today, and ongoing, we will talk through some of the financial pitfalls that exist in our society – and come up with solutions to address these concerns. These four pitfalls are; disorganization, lack of prioritization, rate of return over savings rate, and guessing the ‘need’.
The first financial pitfall that we see is financial disorganization. There are dozens of different
financial products and people that we will interact with throughout our adult lives. Some of them are, the mortgage banker, the car insurance guy, a CPA/tax preparer, human resources at work, dealing with student loans, the life insurance person, the investment manager to name a few. What is the likelihood of all 7-10 of these people to sit down at the same time to discuss your finances? Probability of that is zero. Reason being, is that the financial service industry is fragmented and disorganized.
Additionally look at all the different ways we can move money in today’s society compared to
that of our parents’ generation. Today we have plastic/cards, they had cash. Today we have banking apps on our phone to transact instantly, they had checkbooks and teller lines. Today we have digital records of our purchases, they had receipts that needed to be saved. Today we can instantly buy a stock with the touch of a button, they had to call an order down to a broker and pay large fees. All these advancements help improve access to markets, information, and tools – yet somehow people are still financially disorganized. One could argue that these advancements should have made it simpler, but people feel more disorganized than ever.
Here are some key takeaways to address the clutter and get financially organized:
- Have clearly stated goals
- Follow a time horizon
- Consider life and disability insurance to protect your income
- Consider investments you are comfortable with
- Plan for taxes (both this year and 20 years down the road)
- Split expenses into fixed and variable
- Pay yourself first
- Put all your finances in one place
Remember that financial literacy doesn’t always come natural, and it rarely is taught – which is why the most important takeaway is always continue to learn!
You can find me here for more information:
https://www.linkedin.com/in/frandall/