How To Become Financially Literate
The first step to achieving financial independence is to become financially literate. Becoming financially literate means understanding how the world of finance operates. What rules and laws govern that world? When you learn how the finance world works, then you can make better decisions about what rules to follow and what rules to break. Developing financial literacy takes time, since you will always have more to learn, but getting started is quite simple. Here are 7 ways to achieve financial literacy that you can start doing today.
1. Pick up the paper
Start reading everything you can about finance. Yes, you can buy books on the subject (or better yet, check them out at the library or download them) but you can also learn a lot just by reading the finance section of your local paper. If physical newspapers are not your thing, you can also read the financial section of the Wall Street Journal, Barron’s, Fortune, Forbes and Money.
2. Read Rich Dad, Poor Dad
While much of the financial advice in this book flies in the face of traditional investment wisdom, there are reasons it remains one of the bestselling financial books of all time. Just remember, don’t believe everything you read, but that doesn’t mean you can’t pick up some great advice.
3. Avoid “get rich quick” schemes
One of the fastest ways to lose all your money is to invest in pyramid schemes. The world – and the internet – is full of people promising you fast wealth and instant results. There is no quick and easy path to wealth. There are longer ways and shorter ways, but they all take discipline, determination and patience. Don’t believe anyone that tells you differently, and definitely don’t give them your money.
4. Use financial management tools
Before you can build wealth, you must understand your own habits and patterns and what you are currently doing with the money you have. Personal financial management tools like Mint from Quickbooks is free to use and can give you a tremendous amount of insight into your personal financial habits. Building wealth often involves breaking bad spending habits, but in order to break them you have to understand what they are.
5. Take a class or attend a seminar
Not only will taking a class or attending a seminar help to build financial literacy, but it will also put you in contact with other like-minded individuals. You aren’t going to be able to learn all by yourself or even build wealth by yourself. It will take a network of people to help you. Some people in your support group will be experienced, some will not, but they will all possess knowledge and information you do not. They can help talk you down from the ledge when things get turbulent and can also be a good sounding board for any crazy ideas you may have.
6. Find a mentor
Chances are you know someone either in the financial world or who is a successful investor. They don’t necessarily have to be a millionaire to be successful, just financially stable. If you know anyone who is not constantly worried about money, then chances are good they are a financially literate.
7. Dive in
One of the best ways to learn about investing is to invest. You will always be more interested in something you have a stake in than something you don’t. You can retain the services of a professional firm to help you get started, or you can do it alone using a self-service apps but the best way to learn is to just do it. You don’t have to invest your life’s savings or bet the farm just yet (in fact, you shouldn’t) but you should at least dip your toe in the water to get started.
Brittany Waddell is a contributing writer and media specialist for NexGen Wealth. She often produces content for a variety of finance blogs.