We’re quickly approaching the end of Financial Literacy Month in Canada so hopefully you’ve been taking the time to learn more about your money. If not, what has been stopping you? Many people out there believe that they’re doing just fine with their money, so there’s no need to learn more, but what do you really know about money?
It’s safe to say that people who aren’t interested in improving their finances aren’t reading my blog, so lets focus on the 2 types people who do read my blog. We have the people who already have a good grasp of their finances, and I also get a lot of readers who’re looking to improve their knowledge of money. Again I ask you, what do you really know about money?
In my personal situation, I know exactly how much I take home each month, how much I’m saving, and how much I’m spending. I know that my auto-withdrawals come out on the 3rd and 17th of every month and it covers my savings, car maintenance, and vacation funds. As you can see, I’ve got a very clear picture of where my money is going.
Some people that I talk to who say they’re doing great with their money when in reality they’re not. Low monthly payments have given them the illusion that they’re richer than they think. Lenders are more than happy to loan you money so you can but that big house or new car; they could care less about your overall financial situation.
It’s not fair for me to blame people for their lack of awareness, but to simply assume you’re doing alright because someone else told you that you are is just silly. Only a financial professional can really give you a clear picture of how you’re doing, and even then you need to do your own due diligence. A certified financial planner has a fiduciary duty to you, but employees of a bank or investment firm don’t so that’s why you need to know about your money.
Making the right choices
For whatever reason it’s always the people who are completely clueless about money who think they know the most. They have these grand ideas about how money is easy to make, but at the same time they’re making minimum payments on their credit cards. I don’t know of any get rich quick schemes, but I do know that paying down a credit card that charges 20% interest is a pretty good return.
Regardless of our age, we all need to have some kind of financial plan in place. With a plan in place, we can start figuring out what our priorities are. People who avoid planning their finances are always the ones that end up in the worst situations. If we can’t even figure out what we’re doing on a monthly basis, how are we going to handle a financial emergency or our retirement?
I’m a little more forgiving when it comes to the lack of knowledge when it comes to retirement planning. Some people honestly believe that they’re on the right track, and they may very well be saving a decent amount, but I believe that many people under estimate how much they’ll need in retirement.
There’s no set amount that we need to retire, but we should look at what we’re currently saving and calculate how much we’ll have saved by the time we retire. Remember that financial plan I just mentioned? It refers to retirement planning too. What we need to ask ourselves is what kind of retirement lifestyle would we like and will we reach that goal?
To fully answer those questions, we’ll have to answer a ton of other questions. We won’t be able to answer all of those questions definitely, but I think you can see why we need to ask ourselves what do we really know about money?
None of us will ever know everything about money, but as long as we have a defined financial goal in place, we can start working towards that goal. Take the time to educate yourself and don’t be afraid yo ask your financial advisor questions if there’s something you don’t understand.