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Financial Literacy, Credit Repair, and Retirement Planning

  • Earn

  • Spend

  • Save and Invest

  • Borrow

  • Protection

Earning

The earn principle encourages us to make the most of our pay and benefits. Although this points to understanding paychecks, taxes, and workplace benefits, the earn principle also encourages individuals to invest in their professional future. A key element of financial literacy is taking part in professional development to increase your earning potential. 

Spending

The spending principle encourages us to develop a budget (spending plan) and plan to use our money toward our goals and the things we truly value. In today’s society, financial decision-making and spending are impacted by tempting instant gratification. We’re constantly being marketed to and feeling pressure to keep up with lifestyles and milestones seen on social media. And with spending being as simple as a cell phone tap nowadays, it’s easy to overspend and not align our money with long-term benefits.

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Saving and Investing

The save and invest principle encourages us to become intentional about setting money away for the future. One of my favorite financial idioms is “It’s not about how much money you make, it’s about what you keep that counts.” An intentional savings plan and investment strategy helps us to grow our wealth over time. It’s important to note that saving and investing starts with a budget. When we plan to save a percentage of our income through our budget, we intentionally plan to build wealth and create accountability for ourselves.

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Borrowing

Sometimes it’s necessary to borrow for major purchases like an education , a car, a house, or maybe even to meet unexpected expenses. Your ability to get a loan generally depends on your credit history, and that depends largely on your track record at repaying what you’ve borrowed in the past and paying your bills on time.  So, be careful to keep your credit history strong.

 

Protection

The protection principle encourages us to be prepared for potential emergencies and risks. Unexpected events can truly throw a wrench in one’s financial situation. This is why it is encouraged to have protections like an emergency savings account, being cautious about identity theft, and utilizing insurance where exposure to risks exists. A best practice in financial literacy is to build a savings account that covers 3-6 months of your monthly expenses. 

 

The goal of financial literacy is to improve our financial well-being. Financial well-being can be described as having a current understanding of your financial situation and adjusting to align your money with your goals and lifestyle.

A recent CNBC survey reports the following:
•    77% of Americans report feeling anxious about their financial future. 
•    58% feel that finances control their lives.
•    52% have difficulty controlling their money-related worries.
•    Key concerns were not being able to retire, keeping up with the cost of living, and managing debt levels.

 

According to the U.S. Financial Literacy and Education Commission (U.S. FLEC), financial literacy describes the skills, knowledge, and tools that equip people to make individual financial decisions and actions to attain their goals; this may also be known as financial capability, especially when paired with access to financial products and services. The U.S. FLEC highlights five principles as the building blocks of financial literacy, known as the MyMoney Five.

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