Financial Literacy

Financial Literacy

Financial Literacy

Tallahassee -

Financial literacy refers to an individual's ability to make informed judgments and effective decisions about the use and management of their money. Like maintaining good physical fitness, financial fitness requires knowledge, planning and discipline.  But unlike physical fitness, we have not, until recently, begun to focus on educating our citizenry to make them financially literate. Things such as household budgets, savings plans, managing debt and investments, saving for retirement or children's needs can help families meet their obligations and maximize their long-term financial well-being. A surprising number of young to middle age adults have not mastered basic financial skills.

In that spirit, listed below is the list Top Ten Financial Goals Before You Reach Age 40.  The list has been compiled from the American Institute of Certified Public Accountants award winning website, http://www.360financialliteracy.org/.  Additional information can be found at http://www.mymoney.gov/ sponsored by the U.S. Financial Literacy and Education Commission. 

Improving financial health takes time and patience. Therefore, of the 10 goals, the last one bears repeating.  Relax, re-evaluate, and re-engage your financial goals. 

Top TEN Financial Goals Before You Reach Age 40

1.      Establish Priorities

• Short-term – new car, home, vacation, etc.
• Long-term – marriage, children's college, retirement, etc.

2.                                                                                                                                                                                                                     Create a Plan

• Identify wants versus needs.
• Be able to state expenses in terms of revenue.
• Create a budget.
• Balance cash flow goals.
• Understand that achieving a certain lifestyle can take many years.  Be patient.

3.      Create a Cash Reserve

• 3-6 months of expenses.
• Credit line as backup.
• NSF overdraft protection.
• Liquid reserves.

4.      Manage Your Debt

• Establish good credit, then AVOID it.
• Debt consolidation - lower monthly payments and interest rates.
• Pay highest interest rate debt off first.

5.      Maintain Insurance

• In terms of priority: health, property, life, disability, and long-term care.

6.      Save for Retirement

• Plan to spend in retirement 75% to 85% of current income.
• Plan for a long life - 15-20 years past retirement.
• Start sooner than later - create infrastructure now.
• Understand financial vehicles - 401K, Roth IRA, defined benefit plans, social security.

7.      Learn Basic Investing Rules

• Comprehend long-term compounding.
• Ride out market volatility.
• Proper asset allocation.
• Address liquidity needs.
• Consider dollar cost averaging.
• Do "buy and hold" vs. "buy and forget."
• Understand risk.

8.      Do the Legal

• Create a will.
• Consider durable power of attorney for health care and finances. 
• Asset protection.

9.      Remember Family

• If they don't do items 1-8, you may be affected.

10.  RRR's

• Relax.
• Re-evaluate.

·  Re-engage.