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Monday
Dec192011

Financial Literacy Is Overrated

Have you ever answered your front door and to your disappointment there is someone there offering you some informational material on something. Local politics, census, magazine subscriptions - it doesn't matter because they are all create the same reaction. You "yes" them until they go and odds are you barely look at the materials they have provided you. I know this isn't always the case and that sometimes you do get things in the mail or delivered by solicitor that are important..or even interesting. I am worried that "Financial Literacy" is falling the way of the door-to-door information peddler.

How many websites and non-profits are out there offering financial literacy. Heck, I even try to do it here. Well my goal is to make people smarter consumers of products, services, and information. The idea is that there is a ton of financial literacy out there. The intent seems honest enough and that is to inform people about all the benefits and dangers that are out there in the big open sea of the financial product ocean. Boring. Overrated.

Don't get me wrong I think it's through education that people actually get some kind of onus for their financial well being. It's through education that you can create engaged advocates and stakeholders. But the label and context that has befallen "financial literacy" makes me sad. Before I keep going I have to just make one thing clear: If you are fighting the good fight trying to educate I'm not talking to or about you. You know who you are.

I think there needs to be a shift in the financial awareness paradigm. It needs to move away from stuffing literacy down everyone's throat and move to changing people's behavior. It should be about focusing on the results and the consequences of our actions and the real things we can do everyday to improve them. I have put together a little list. The list is a few actions you can take to really start to change your behavior on a fundamental level. No theory or explanation.

It's not the be all end all and it might not even be that creative or unique. Just real things you can do. I'll leave the creativity to you but I'm willing to bet that once the habits start to build and you see results, I won't have to convince you any more.

Better than Financial Literacy Top 3

1. Carry cash only. Decide what you need for the week or the day and carry 20 percent less on your person. Go to work or to school with your important ID's and just that cash. Taking it out of your wallet and out of reach will force you to quickly adapt your spending habits..hopefully. The idea here is to give your savings as good a shot as possible.

2. Set up automatic transfers to accounts designed for specific goals. Weekly, bi-weekly, monthly is all good. Once you set it up you won't even have to think about saving any more. What's even better is that you hold off on getting the checks or debit card link with it. That way you have to add an extra step in accessing the funds by going to the bank/financial institution in person.

3. Enveloping. Like carrying cash this enveloping is the enforcer for your budget. First though, build a budget. Then for all the categories in the budget create envelopes and load them up with cash. The idea here is that you try to avoid unplanned spending as much as possible. Mental math and rationalizing are the biggest causes of failed budgets. Take the math and the rationalizing out as much as you can this way. Then if there is anything left over apply those savings to another savings goal. Now you've given yourself an incentive to not over/cross spend.

Like I said - not the most unique or creative. This stuff works though. If you are running from paycheck to paycheck and figure you can't save...you'd be surprised. It takes more then will power and a good plan sometimes. It takes doing something. So make a choice, set up the infrastructure and do it!

 

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Reader Comments (5)

Great post and you are so right. There is so much information out there it is very difficult to sift through. To your point, habits and behaviors have to change and our focus is changing information into habits for kids. The key is, it is very difficult for an adult to change their habits as they are so engrained, so focus on kids when they are young by instilling the right behaviors and habits around money management. FamilyMint promotes exactly what you talk about for kids in an electronic format. Getting the kids parents to change their habits would be a huge help as well.

December 21, 2011 | Unregistered CommenterBob

Thanks Bob! You're right getting kids involved early is so important.

December 26, 2011 | Registered CommenterNunzio Bruno

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