Financial literacy can sometimes mean the difference between living paycheck to paycheck and making smart decisions that allow for a more comfortable lifestyle.
Despite being such an important topic to be familiar with, financial literacy isn’t typically taught in schools, and many of us end up scrambling to fill in the gaps in our knowledge as adults — which can end up adding to the stress of any financial insecurity.
Luckily, there are many ways that can get you started in developing a robust skill set and boosting your understanding of financial terms and concepts. Below, we’ll be looking at 10 tips on how to improve financial literacy, and explaining how investing time in this can be beneficial to your career!
What is financial literacy?
Financial literacy refers to the knowledge of various financial concepts and the ability to utilize important financial skills. These skills include budgeting, investing and personal finance management, and can come in handy in a variety of settings, from saving for education to preparing for retirement and navigating debt.
Why is it important for your career?
Financial literacy can be beneficial to your career in multiple ways. Let’s outline five of these below:
1. Better salary negotiation
Having a strong understanding of financial concepts can help you accurately determine your own worth within the job market as well as how much money you would need to maintain the lifestyle you desire. The clearer you are about these things, the better you can support your case during a job offer negotiation or a salary negotiation.
Plus, you’ll also have an advantage when assessing the value of other forms of compensation beyond your hourly wages, such retirement plans and stock options.
2. Improved budgeting and saving
A strong aptitude for personal finance management will allow you to make the most out of your income. It can enable you to save for unforeseen events, make smart investments, and avoid barely scraping by each month.
With financial stability come lower stress levels, meaning you can focus your time and energy on advancing your career.
3. Improved decision making
Financial literacy can lead to better decision making in regard to different career moves, from switching jobs (or career paths!) to pursuing entrepreneurial ventures or even investing in further education.
Each of these things can come with financial risks as well as rewards, so a solid understanding of financial concepts can let you weigh up the pros and cons effectively, improving your chances of enhancing your earning prospects and advancing your career.
4. Greater career growth opportunities
Although understanding financial principles can be beneficial in multiple aspects of life, not just professionally, it can definitely open doors for you in terms of your career.
Leadership and management roles often require a solid knowledge of concepts such as budgeting, cost control and profit margins. Therefore, demonstrating financial skills within the workplace can work in your favor when the time comes to negotiate a promotion or apply for a role that grants you more decisive power.
5. Improved long-term planning
With better decision making comes more effective planning. A good understanding of personal finance concepts can allow you to make long-term plans and meet important goals, whether that’s starting a side business to up your income, transitioning into a new career path, or retiring by a certain age.
Financial literacy can help you weigh up any risks and choose the most appropriate timing for any new venture you wish to explore.
How to improve your financial literacy
Even if you lack some financial skills or knowledge, there are many ways these can be developed. Below, we have outlined 10 actionable steps you can take to boost your financial literacy:
1. Listen to financial podcasts
The good thing about podcasts is that you can listen to them in a range of settings, sometimes while carrying out other activities. This means you won’t have to allocate time specifically to enriching your financial knowledge, thus saving time.
Whether on your morning commute to work, while cooking dinner or walking on a treadmill at the gym, having a podcast on can be an effective way of building your knowledge.
Some podcasts worth checking out include:
2. Learn about investing
Investment education comes in many shapes and forms. There are blogs, books and magazines you can read, podcasts you can listen to, and online resources you can access — some for free — including video tutorials and courses.
Investing can be an excellent way of generating passive income, diversifying your assets and building your wealth, thus establishing financial security for the future.
If you’re a complete beginner, you could benefit from checking out the following resources:
3. Read finance books and magazines
Some people are better able to retain information through reading as opposed to listening. If you have a hard time focusing and memorizing tips, hacks and advice as shared in an audiobook or podcast, then it might be beneficial to get your hands on a physical or digital copy of a book.
If you want to ensure that any new information you gain actually sticks in your memory, it’s a good idea to take notes by hand. Indeed, research shows that, as opposed to typing on a keyboard, writing by hand results in “higher levels of electrical activity across a wide range of interconnected brain regions responsible for movement, vision, sensory processing and memory”.
4. Use personal finance tools
Personal finance tools and accounting software apps can help you gain valuable insights into how you navigate financial matters. They also allow you to start forming better habits so that you gain and maintain more control over your assets.
Some tools worth exploring include:
- Quicken
- Xero
- Zoho Books
Depending on the application you pick, you’ll gain access to handy features such as expense tracking, goal setting, investment tracking, and budgeting and saving functions.
5. Learn to budget
Budgeting effectively gives you a greater sense of control over your finances. This can help you move through day-to-day life with more confidence and optimism, and significantly less stress.
To get started, be clear about your net income — that is: know exactly what deductions apply to your salary, whether that’s for taxes or employer-provided programs. If you’re self-employed or have an otherwise irregular income, you’ll have to stay on top of your contracts and payments so that you’re always aware of your net wages.
Once you have that, try to get into the habit of tracking your expenses. Make a list of your fixed expenses, such as utilities and car payments, and then consider your variable expenses, including groceries and entertainment. This latter group is where you could find opportunities to make some savings.
6. Subscribe to financial newsletters
Subscribing to a financial newsletter can be a great way of staying up to date with the world of finance and uncovering hacks, tricks and other useful advice. By signing up, you’ll ensure that a steady stream of relevant information arrives to your inbox, eliminating the need of manually searching the internet for articles, guides or news.
Choosing a credible online publication, such as Matt Levine’s Money Stuff newsletter, can ensure you’re only reading carefully selected nuggets of wisdom. This can be useful if you’re fairly new to financial concepts; you won’t have to rack your mind trying to figure out if what you’re reading holds any weight.
After all, the web is teeming with questionable advice and false information, so trusting thought leaders (and cross-checking information) is the safest way to go.
7. Understand credit scores
A survey by BadCredit.org has shown that 31% of Americans don’t know their credit score. FICO, meanwhile, reports that only 37% of Americans check their scores on a monthly basis.
A good understanding of how credit scores work, as well as regular monitoring of your score, can help you maintain a sense of accountability, enabling you to reach your credit goals.
Some things to bear in mind include the following:
- Credit scores are three-digit numbers ranging between 300–850.
- Credit scores are divided into categories: poor (300–629), fair (630–689), good (690–719) and excellent (720–850).
- Your score is calculated using information from your credit reports.
- Based on your score, lenders determine whether to approve you for loans, and credit card companies decide on what interest rates to charge you.
8. Utilize online resources
Although being connected to the internet 24/7 can have its negative effects, what with our brains being incessantly bombarded with information, great things can come of it, too. For starters, we have access to all kinds of resources, including free ones, each one reflecting a slightly different point of view.
When it comes to enhancing your financial literacy, this means you can find not just one or two ideas as to how to enrich your knowledge, but dozens of approaches that have been put to the test and proven to work.
Some free resources worth checking out include:
- Khan Academy’s Personal Finance course
- Udemy's Personal Finance 101 course
- The University of Illinois—Urbana-Champaign’s Financial Planning for Young Adults course
9. Speak with a financial advisor
Working with a financial advisor can be a great way to build your financial literacy quickly — and to ensure that the knowledge you acquire is legitimate.
Financial advisors offer a range of services. Their job is to help you reach your goals, be that retiring early or saving up to send your child to university. Besides providing you with guidance in setting and meeting targets, however, their role also entails showing up as an educator, ensuring that you’re clear about various financial topics.
As financial advisors are an additional cost, you’ll have to carefully weigh the pros and cons before deciding to work with one. If you feel particularly stuck or lost, it may very well be worth the cost. After all, you can always part ways once you’re confident in the financial skills you have developed.
10. Attend a financial literacy camp
Financial literacy programs (sometimes referred to as financial literacy camps) are designed to help you develop the necessary skills to manage personal finance matters as effectively as possible.
Thanks to the internet, you should be able to find in-person workshops as well as online self-paced programs — such as the FIS Financial Literacy for Adults program — and work on broadening your financial skill set right away.
Key takeaways
As we have seen, eliminating financial illiteracy can help you make significant improvements in your day-to-day life as well as contribute to your career success. To summarize:
- Some vital financial literacy skills to develop include budgeting, saving and investing.
- Developing your financial literacy can help you on a professional level, as you’ll be better equipped to negotiate starting salaries, raises and promotions.
- The internet is your friend — but can also be your enemy. Always try to crosscheck any advice you read prior to applying it.
We hope our guide on improving financial literacy has been helpful to you. Do you have any more advice to share with fellow readers on how to effectively deal with money matters? Join the conversation below and let us know!