10 Powerful Financial Literacy Principles

The Daniel Williams

3/23/20234 min read

Apex Living > 10 Powerful Financial Literacy Principles

April is the commemoration of Financial Literacy Month.

As Americans continue to struggle with the increasing costs of living and balance those against the decreasing value of their earned dollars, the value of basic financial literacy becomes that much more evident.

If your goal is to get a handle on your money, here are the 10 most powerful financial principles you will need to learn.

“Financial literacy is the ability to make informed judgments and to make effective decisions regarding the use and management of money.”
~National Foundation for Educational Research

Knowledge Is - Indeed - Power

Contrary to the popular cliche, what you don't know CAN in fact be harmful. Especially when it comes to managing your money.

As you begin your journey to healthier finances, you have to increase your knowledge about the topic at hand.

There is no shortage of books, websites or podcasts that you can read, watch or listen to to improve your understanding of basic money principles.

Key to increasing your knowledge is to also actually APPLY what you learn.

Pay Yourself First

Make no mistake. This is the single most important ACTION you can take to improve your money outlook.

It is as simple as opening up a separate savings account, and automatically depositing a portion of your income every time you get paid.

For young people, the sooner they develop this habit, the better their financial futures will be. Especially, if they maintain or increase the amount they set aside for themselves.

This habit, practiced consistently, will set the stage for better financial security.

Make. That. Damn. Budget

Yes. It sucks.

Yes. You have to confront your bad money habits.

Yes. You will feel overwhelmed.

Create that damn budget anyway.

A budget sets your financial priorities. It also helps you determine where the holes are in your monthly spending.

The sooner you put your budget on paper, the sooner you can get a handle on your finances.

Establish An Emergency Fund

This is not a matter of "IF."

It's only a matter of "WHEN?"

An estimated 56% of Americans couldn't cover a $1,000 emergency without using borrowed money.

This is a huge reason why "Pay Yourself First" is such a powerful principle.

It gets you in the habit of putting a portion of your money away for any unexpected expenses.

Experts recommend having anywhere from 3 - 6 months of emergency funds squirreled away for a rainy day.

And rest assured that a rainy day is a guarantee.

Increase Your Income

Let's be clear.

You can't "financial literacy" your way out of poverty.

It is why a huge aspect of improving your financial outlook that goes criminally understated, is making more money.

There are many ways to accomplish this.

You can ask for a raise at your current job. You can apply for a promotion at your current job. You can get a better paying job. You can start a business or a side hustle.

You can do a combination of all of the above.

There are millions of ways to earn extra dollars every month, which will have the ultimate effect of improving your bottom line.

Tighten Up Your Credit

Having a great credit score can mean a difference of thousands to tens of thousands of dollars spent to pay back borrowed money.

Make it a priority to learn about and understand the basic principles of credit and how to leverage it to accomplish your money goals.

Credit is relatively simple to maintain, but a bitch to resolve if you damage your score.

Request your credit reports and review them regularly to ensure the information on there is accurate. Take the time to resolve any negative entries you find on your file.

Put Your Money to Work

At a time when inflation is over 7%, the money in your savings account is losing value every day.

Put your money to work by acquiring investments that grow at a rate greater than the rate of inflation. Stocks, bonds, commodities and real estate are all great investments that generally perform better than the rate of inflation.

Money left in a bank account will lose purchasing power over time. Make sure that any capital you have available is invested in increasing your net worth or cash flow.

Assets Over Liabilities

Understanding the difference between an asset and a liability is a small, but impactful way to ensure that your money continues to grow.

Assets are things you can acquire that increase in value or return a cash flow. Liabilities tend to depreciate over time or take money out of your pocket.

The sooner you shift from a consumer to an investor mindset is the sooner you can ensure that your money is deployed in a way to contributes to you long term goals.

Plan For Tomorrow

The size of the global marketing industry is estimated to be $1.7 TRILLION annually.

If you don't have a plan for your money, there are millions of companies who have a plan to move your dollars from your pockets to theirs.

Create a plan for your future that takes into account your goals and desired accomplishments.

Then assign a dollar amount to these goals.

Your responsibility is to ensure that your money is deployed in service of your Grand Money Plan.

Anything that doesn't align with your overall objectives needs to be discarded.

Reduce Your Expenses

One of the most important things that a budget does for you is that it establishes a baseline for your spending.

This makes it easier to identify when your expenses are out of line.

One of the ways to get your finances back in order is to reduce any unnecessary or excessive spending.

Do you have subscriptions that you no longer need? Are you spending too much on small regular purchases that add up over time?

Once you identify the holes in your budget, you can take the necessary actions to plug them before they blow a sizeable hole in your budget.