Knowledge is Money

April 21, 2021

Financial literacy may be the quickest way to prosperity

Financial literacy is the knowledge and skill used to solve financial problems, and to attain this knowledge requires time, diligence and quality educational resources. Comprehending core concepts such as cashflow management, tax strategy, home ownership, debt management, and investment strategy as it pertains to personal risk, time horizons and values is key to understanding your money. Every financial decision made directly impacts the health of your financial future. So, it is time to reject the intimidating jargon and abstract concepts swirling around the financial industry and embrace the core concepts of finance through financial literacy.

Let’s Dig In

The founders of investment, Charles Dow and Edward Jones, helped form the Dow Jones Industrial Average aka the DOW. The DOW is a price-weighted index made-up of 30 ‘blue chip’ aka large US companies that trade on the New York Stock Exchange (NYSE). The NYSE is located on Wall Street in lower Manhattan, NY. Wall Street was named after the Dutch colonialists who built a wall in the area to guard against the British and Native Americans. Today, the wall is gone but the name remains and has become the center of the US capital market system. Wall Street is comprised of a few blocks in NY where there is a concentration of investment banks and brokerage institutions. Interestingly, women were not granted permission to trade on Wall Street until 1880 when Elizabeth Cady Stanton started her own exchange just for women. The first women to join the NYSE was in 1967 and this ‘first woman of finance’ was Muriel Siebert. While Wall Street and the NYSE are still located in NY, much of the investing today happens remotely on super computers.

Digging into your personal financial situation requires a foundational understanding of core money concepts. Deeper knowledge of the financial matters directly impacting your financial health are invaluable. To grow your financial awareness, start by opening your investment statements: recognize the risk, fees and holdings that make up your investment strategy. Next, acknowledge how tax strategies, like investment strategies, impact your financial plan. For example, if you are not sure how to structure a gifting strategy, reach out to your financial advisor for tips on passing on wealth to your loved ones, while minimizing taxable events. Finally, recognize how your business may be impacting your personal finances and your retirement goals. There are many retirement planning strategies available to help business owners plan for the future.

Build A Foundation

Financial literacy is the foundation of a healthy financial future and the ways to boost your knowledge are many! Books, podcasts, white papers and online resources make it easy to track down information on topics impacting your finances. However, a trusted fiduciary will be able to help vet the information and point you toward trustworthy financial resources. Fiduciary financial advisors spend decades building their knowledge base around retirement planning, estate planning and investment planning and can be an incredible resource for you to tap as you grow your financial proficiency. A credible guide can help you navigate the Personal Representative role in estate planning, realize the investment options surrounding inherited or divorce assets and be aware of the risk surrounding concentrated stock positions. Each person’s unique financial situation requires a fresh analysis to work toward accomplishing individual financial goals.

Give Me Shelter

Financial literacy can protect you from the risk of rampant fraud. Unfortunately, the financial industry does not treat all people equally and some may be more exposed to this risk than others. Having a core understanding of the services, investment fees and risk involved surrounding your financial options is key to clarity and financial safety. Once you have a grip on your finances, you will be able to better negotiate a salary, favorable interest rate on a home purchase and reduce fees on an investment strategy. Making wealth management decisions that align with your goals, values and time horizon improve the health of your finances and in turn the health of our communities. Being financially informed enables all of us to make better wealth management decisions that improve the health of our communities. When a community comprehends fees, debt, cashflow and risk we avoid taking out costly mortgages, overpriced insurance and risky investments which can erode our purchasing power and the quality of life in our neighborhoods.

To build your financial safety net, begin by reading the Financial Times, Morningstar, MarketWatch, CNBC Finance News, Barron’s, Dr Ed Yardeni’s Blog and many of the classics such as, Intelligent Investor by Benjamin Graham and John Bogle’s books to name a few. Since money is emotional and effects our behavior dramatically, it is a good idea to approach financial literacy from a disciplined perspective and regularly learn new concepts. Complex financial problems become clear when approached from a position of reasoning based on educational understanding. Once you’ve done your initial research, it is always a great idea to bounce your ideas off your financial advisor.

Lock It Down

Prepare for the financial surprises that life throws your way by becoming financially literate. If history has taught us anything, it is that we can never know what will happen and by building financial literacy skills, we can better navigate almost any environmental disaster and disease outbreak. That is why we should all make 2021 the year that we become financially literate.

Get in touch with SWM Connect today

Singer Wealth Management