Making good financial decisions is all about developing good habits. Here is how to become financially literate and stay that way for good.
How to Become Financially Literate (And Stay That Way)
Your finances are important. Knowing about finance (budgeting, saving, investing) is even more important. You can’t make sounds financial decisions without know how to do so in the first place.
I’ve come to help. You may be lost on how to be financially knowledgable.
We live in a world that is full of opinions and misinformation. Everyone is incentivized for personal interest and intent. That’s why I personally love making financial decisions on my own.
We live in a world that is full of opinions and misinformation. Everyone is incentivized for personal interest and intent. That's why I personally love making financial decisions on my own. Click To Tweet
I get to be in control, which is why I pursued a path of financial literacy and knowledge. This is helpful in my personal financial plan. If I’m fully literate in my finances, the process gets easier over time.
I use Personal Capital to stay on top of my game for managing my net worth and cash flow.
The platform is completely automated and allows me to track everything in one concise simple manner for free.
This saves me time to focus on other things like learning and putting my money to work.
What does financially literate mean?
Financial literacy is the act of learning and building solid foundational financial habits that will allow you to make better financial decisions.
If you practice financial literacy, you should make better financial decisions that will position you for success in your financial goals.
11 Ways to Become Financially Literate
Here are some of the most important ways to become financially literate.
1. The More You Learn, The More You Earn
“The best investment you can make is in yourself. The more you learn, the more you earn.”
There’s a reason why one of the richest people on Earth said that. They believe it and it worked. Millionaires spend a lot of time learning and reading. You can read about anything and it could help you financially.
It does not need to be about finance believe it or not. You can learn about entrepreneurship, digital marketing, SEO, math, physics and so much more.
On a budget? Here are ways to get free books directly to your door.
2. Take Risks and Test Your Boundaries
How do you know what you ARE and ARE NOT comfortable with financially if you don’t take risks?
I remember when I lost over $500 trading AAPL stock options in less than 10 seconds! I quickly realized that was NOT how I would save and invest my money.
Secondarily, I also lost a significant sum of money trying to create a software company. I spent a bunch of time on the product, team and growth. I lost all of it.
Looking back on it is painful, yes. But, it also makes me grateful. I learned so much from it. One thing I learned was how important it is to choose your risks wisely.
If you find something that is working, stick to it.
3. Find a Mentor
Mentorship is crucial. It’s a bit of an extension of learning and reading. The only difference is that a mentor provides you experience.
Not only does a mentor provide you experience. They provide you practical experience. Books can provide perspective and experience, but not true application of experience.
4. Spend Money on Things, Experiences, Travel
Is it worth it to live stingy?
No, you will miss out on the finer things in life. Money isn’t everything so don’t waste an opportunity for it.
Spending money is one of the greatest ways to learn about money. You realize what you truly need and want in life. If you don’t spend money, you will go into a lifecycle stuck in a rut about never having enough money.
It’s distasteful for those around you. Go out, explore and see the world.
5. Interact with Like-Minded Individuals
One thing that I love about the FIRE (Financial Independence / Retire Early) community is how much interaction and encouragement there is to learn and practice sound financial principles.
You don’t need to be in that specific community, but pick one or two to work off of. An example is the BiggerPockets community for real estate investing.
Find something that you can pick a few ideas off of people or you can bring up your situation to others and learn from their perspective.
6. Make Extra Money
I think a side hustle that makes you more money is a great way to become financially literate.
If you earn extra income on top of your day job, you can test the financial decisions you are making. Money should never change you.
Your financial literacy will really come into focus when you start making more and more money.
Why? There are plenty of life lessons you learn from excess income.
- You will learn the value of a dollar.
- You discover what you can do with money.
- Excess income can unlock future opportunities for additional income.
- You will realize the importance of your early-stage learnings about money.
I’m a big fan of making money online because it allows me to work whenever and wherever I want.
7. Donate Money
Donating money is a great way to learn more. You can see the perspective of others, which will lead to your appreciation and gratitude. Think about people around you that could use the money.
If you don’t want to donate money or don’t have the resources, then donate time.
All ways are enlightening perspectives on life. Need some specific tips? Here is how to save your money with a purpose.
8. Life Events (Getting Married, Having Kids, Etc.)
You have to budget for a wedding, having a kid, planning school for your kids, etc. There is no getting around that. Creating a personal financial plan will help you understand finances.
More importantly, it will help you discover what is most important for YOUR finances. These life events are a huge deal. You will need to buck up and get it done financially.
Do it with smart decision making. Don’t be afraid to ask questions from others about help and guidance.
Life events are “trial by fire” financial experiences. You will make mistakes, but you simply need to make decisions hastily.
9. Use Financial Tools
We live in a century where monitoring your money and net worth have never been easier. Imagine having to spend hours to budget out your net worth or how much cash you saved in a year?
Enter financial technology to make your life simple, so you can learn and execute your personal financial planning strategy. I use Personal Capital to monitor my net worth and income for completely free.
Here are some other lifesavers that I use:
- Trim: Use Trim to monitor your subscription bills and for free. Trim will automatically make recommendations about the areas of excess cost that you should “trim” out.
- Drop: Drop is a simple app that rewards you for routine spending like at grocery stores. Think about it as a modern version of rebates, except you don’t have to do anything! Get 1,000 free points for signing up by using my link.
- Arcadia Power: Arcadia Power is a free way to move to clean energy while saving on your electric bill. There are no installation costs to go clean energy. If you use my link, you will get a free $20 credit when you link your utility account. Here is why saving electricity is so important.
These are the other financial resources that I personally recommend to better your financial future.
Stop working hard and work smarter.
See Related: Personal Capital Review
10. Teach Kids or Others About Money
I’m a firm believer that you learn more when you can express it in words yourself. I remember when I taught at a local Chicago area school about how to invest in stocks.
By describing the best decisions to make to someone else, you are naturally learning about your own habits. Doing it with kids is better. You are teaching someone that knows very little about financial literacy.
Something that I believe is not taught enough in schools.
See Related: Why Your Debit Card Declined (And How to Fix)
11. Subscribe to Money-Related Newsletters
There are plenty of money newsletters out there that provide amazing content and advice. You can, of course, join the Financial Wolves newsletter by signing up on our homepage or below this post.
There are a few others that are pretty useful that I would recommend:
- Campfire Finance: They culminate some of the best personal finance posts from across the web.
- Fincon Community: Facebook community, newsletter and conference that allows money nerds to connect from around the world.
- Personal Finance Blogs: Personal Finance Blogs is all in the title. This is another directory that grabs the best blog articles about personal finance.
- Apex Money: This is a content culmination that hand-selects the very best content from around the web. No need to scour through to find top-rated content. They will do it for you. JD Roth and Jim teamed up in what is an epic collaboration of content.
I’d suggest subscribing to the newsletters from content aggregators like the above to get an automated, hassle-free delivery of financial content.
Then, find one or two of your favorite personal finance blogs that suits your philosophies about money.
12. Listen to Personal Finance Podcasts
If you are not a reader, you can be a listener. The best part about personal finance podcasts is that you can take them anywhere while you do other activities. Like newsletters, there are plenty of options to choose from.
Here are some of the best podcasts to consider:
- ChooseFI Podcast
- Afford Anything Podcast by Paula Pant
- Stacking Benjamins Podcast
- How to Money Podcast
We are awash with content these days. The only decision you need to make is whether you want to listen, read or watch.
Conclusion on Becoming Financially Literate
Financial literacy is not taught enough. We don’t teach it early enough either. So, it’s up to you to put your best foot forward to live in a better personal financial situation.
The good news is there are plenty of resources in today’s age to help you. You just need to go out and find them.
I hope these tips have helped you become smarter financially. If not, I hope these tips have helped arm you with better tools for financial success.