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Financial Literacy Month

By Brett Danko, CFP®

National Financial Literacy Month is recognized in the United States every April. The purpose is to shine a light on the importance of financial literacy and teach Americans how to establish and maintain healthy financial habits for obtaining one’s short-term and long-term goals.

If National Financial Literacy Month is recognized in April, why are we writing about it now? After all, it’s nearly June. The fact is that most people don’t know about Financial Literacy Month. The fact is, WE didn’t even know about it. Well, now that you, and we, know about it, let’s learn more. . .

Many of the country’s financial institutions and nonprofit financial educational organizations promote Financial Literacy Month by holding events and circulating educational materials that focus on effectively handling money, dealing with debt and the pitfalls of credit.

This all sounds well and good, BUT most Americans are NOT listening or doing anything to learn more about this important topic.

Hopefully our clients and readers of this newsletter hold a deeper understanding of personal finance than most Americans, though each person has their own financial strengths and weaknesses and areas for improvement.

Unfortunately, Americans still have record amounts of credit card debt, low savings rates and under-funded retirement accounts. They have higher stress and lower pay from jobs they are worried about NOT having in the near future.

Plan B?

Many Americans are living without a “Plan B” which means one job loss or significant medical bill can drive a person or family into bankruptcy. This leaves Americans to hope that the U.S. government will serve as the ultimate savior of poor management of money OR unexpected misfortune.

The CEO of bond giant Pimco Mohamed El-Erian recently discussed the troubles facing various governments by stating we are in difficult times and we have already used our “spare tire.” Therefore, there is little or nothing on which to fall back. (Heck, most cars don’t even have a full spare tire anymore; they have a smallish “donut” tire in the trunk.)

Many depression era Americans had a “secret stash” of money in case life threw them curve balls which they kept in the ice box/refrigerator in case of fire – hence the term “cold hard cash.” In addition, that generation steered far and clear from easy credit.

As my grandfather told me once:

“Brett, if you can’t afford it, don’t buy it, done, period. Once you owe money, you start to lose control if something bad happens.”

Rather than reinvent the wheel, we recommend checking out the free website www.financialliteracymonth.com. It has numerous resources for getting started with or next steps to getting your financial house in order.

Below is “The Pledge for Financial Literacy” from this website because the first step on the road to financial literacy is making a commitment to achieving this goal.

Take the pledge

Willing, Ready, and Able to take financial responsibility

Are you ready to accept responsibility for changing your financial situation?

Do you believe that you can and will change the way you make financial decisions?

Can you identify at least one benefit you hope to gain by changing your money management behavior?

If you consistently answered yes, pledge to continue on the path to financial wellness:

1. I will make informed financial decisions, understanding the difference between wants and needs.
   
   
2. I will communicate with my family about money matters so that we are all working toward the same goals.
   
   
3. I will be aware of the effects of advertising on the financial decisions I make, and resolve not to be influenced by them.
   
   
4. I will take care of my finances today by tracking expenses and creating a budget that is flexible and realistic.
   
   
5. I will take care of my finances tomorrow by saving for my future.
   
   
6. I will meet the credit obligations I have made on time and as agreed.
   
   
7. I will continue my personal education about financial health, budgeting, credit, and personal debt.
   
   
8. I will plan for periodic expenses, including the next holiday season.
   
   
9. By good example, I will teach my children the importance of budgeting, saving, and the wise use of credit.
   
   
10. If I am over-obligated, I will take the necessary steps to seek assistance.

I pledge to take steps to improve my financial wellness.

What steps or actions do YOU need to take?

If you are on top of your finances, I applaud your efforts. Please forward this to a friend or family member that could use the help.

Americans MUST get their financial house in order as our state and federal governments will not be able to bail us out in the long run. Our government has already used its “spare tire”, and, as individuals, we need to make sure we are NOT caught with a flat tire with no spare on a deserted road in the middle of a snowstorm.

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