Written by Aniket Mittal & Edited by Sterling Xie
What brought you here today? Are you curious about improving your financial literacy skills? Improving your current financial situation? Well, first, realize that you are not alone. In fact, according to the Life Insurance Marketing and Research Association, only 12% of Americans have adequate financial literacy skills. But you might wonder, how can a nation with such a booming economy have such poor financial literacy? Well, most Americans never think about finance simply because they never needed to. The American education system prioritizes learning important skills, needed for a successful lifestyle, rather than focusing on conserving the financial resources that we need. In fact, COVID-19 has exacerbated this flawed mentality, pushing many individuals to request financial help.
Before we get into the intricacies behind finance, what is personal finance? Personal finance refers to how you manage your money and resources as an individual or family to promote long-term financial stability.
Well, why does this matter? Think of personal finance as the Jenga tower that you played as a kid in elementary school. When you first construct the tower, you forge a strong stable foundation. However, as you play the game and take out pieces, you make it loose, unstable and stressful. The less you take out, the more stable your financial situation will be. Although saving resources is hard for us, financial stability can be especially pragmatic and lucrative for your future as you can fulfill your goals, and avoid debt, bankruptcy and poor health. Although this may sound really complicated, you can start improving financial stability by saving, budgeting, and planning!
Common Myths About Personal Finance
Myth #1: Financial Planning is Ineffective and Pricy
Financial planning is actually quite inexpensive and easy! You can start financial planning right now. Thanks to the ubiquity of new technology, resources, and financial consultants, financial planning has never been more affordable. In fact, it’s extremely important. Not only does financial planning help you live more sustainably, it also helps you spend more confidently. According to Kris Borghesan from Savology, households that have financial plans are 2.5x more likely to save enough for retirement and 83% feel much better about their financial stability after just one year.
Myth #2: A Budget Is A Financial Plan
Many Americans believe that they can live more sustainably by budgeting and controlling their expenditures. However, a financial plan is so much more. Although budgeting is a key component of creating an effective financial plan, financial planning also encompasses your income, investments, and retirements. A financial plan makes it easier for you to manage your expenses more confidently, earn a greater monthly income, and save for your future.
Myth #3: You Need A Financial Advisor
Many people believe that they can’t create an effective financial plan because they don’t have a financial advisor. However, this is simply not true. Although a financial advisor can help you create a more sustainable financial plan, you can create an effective plan thanks to the ubiquity of resources and technology online. Consultants often overlook the lower income brackets of the US simply because they cannot bring the profits financial planning for richer categories bring. As such, there is a huge disparity between the financial literacy of privileged communities in comparison to the underserved communities. At SOAR, we provide free resources for you to effectively manage your finances.