Financial Literacy: Why it's Important to Learn the Basics

Do you want to beat the financial crisis that we are currently in?

Or if you're reading this in the future, IE not 2022, do you want to be able to overcome any future financial crash that may or may not come?

Well this post might be for you.

As the world continually evolves, there has never been a greater opportunity for people to make money.

People are demanding pay rises, side hustles are rife; people can make money from just about anything nowadays.

And so can you.

But, what good is more money if we don't know the best way to make it work for us? This is where the power of financial literacy can come in.

You don't need to be the next Wolf of Wall Street, but understanding the real state of affairs of the economy can make a huge difference to your net worth.

Before I share my journey so far with financial literacy, I think I am legally obligated to say: I'm no expert and this is not financial advice. Please do not take it as such. This is what I've been doing on my journey and I hope it acts as a source of inspiration to research your own financial situation.

Why I'm learning the basics

We are in a financial crisis as this post is being written. It would be silly to assume that we can rely on one wage to pay for everything. A lot of the richer individuals on this Earth are widely documented to have multiple streams of income.

Now this doesn't necessarily mean more jobs, but it does mean learning more about finance and how to make my money work for me, instead of sitting in my bank depreciating as inflation increases.

We all know that the cost of things has gone up. When I was growing up, Freddo's were 17p. Now they're 75p. That's A) ridiculous price for a chocolate frog, but more importantly, B) that's inflation.

Just to briefly demonstrate what inflation is for those who don't know, it is where the cost of everything goes up.

£100 in the year 2000, would be worth £187.09 today.

So assuming you kept that £100 in your bank from 2000 and it stayed at £100. In 2022, you wouldn't be able to buy the same amount of things with the year 2000 £100 in 2022 because the cost of everything has gone up.

And to me, someone who historically has been a notorious saver, hearing that my money is actually losing value by doing nothing was daunting.

So to me, in order to maximise my chances of keeping up with the economy, I decided that finance is something I need to have a basic understanding in.

I recommend that you look into it yourself also.

I am also quite fortunate to be in a position where I have no major expenses, I have no children to look after and I have a bit of disposable income even given the trying times.

I am lucky enough to be in this position and have the money to try these new things without the need of major financial reshuffling (such as lifestyle changes or downsizing homes to minimise costs).

What Started me on my Journey?

I first learnt about investing from a YouTube video that popped into my feed.

The video was from productivity guru Ali Abdaal and it was a beginner video into investing.

And I watched it.

And it made me realise that the barrier to entry of investing, while daunting, seemed quite low.

So I looked into it and by the end of the hour I had set up a Stocks and Shares ISA with AJBell.

From there, my journey into investment had started. But it didn’t stop there.

Investments is just one of many wheels into financial literacy. Being able to understand the context of why investing is important is critical to making it work.

So my journey into understanding basic financial literacy began.

Some Financial Resources I've used

The most helpful resources I've consumed so far have been two Kindle books I've read.

'How to Own the World' & 'Live on Less: Invest the Rest' both written by financial expert Andrew Craig have been instrumental into establishing the importance of understanding finance and how to best go about my investments.

I recommend you read them in the order I stated as Living on Less is a continuation of How to Own the World and answers questions readers had after the first book.

There are also countless finance YouTubers that can help with understanding the basics of finance. I recommend you look into this yourself to see who you like. I like Mark Tilbury personally, he seems like his intentions aren't as evil as just making money.

Using Financial Literacy to Start Growing Wealth

Investing

I'm currently investing the bulk of my allotted investing money (it is important to establish what you can afford to invest every month) into the S&P 500 index fund.

I invest into a tiny portion of each of the top 500 companies in the US. The US market is relatively strong and therefore the fund has historically made back some good returns.

It is important to note that historic performance does not dictate the future performance, but it does feel like the US economy is able to recover after every major crash.

I'm also investing into Andrew Craigs index fund; find the link here.

The fund ties into his philosophy of 'owning the world' and his fund consists of a lot of assets that are located across the world to ensure that despite any crashes, it's relatively stable. If you read his books, that will make more sense, he can explain it much better than I can.

By investing in these two funds monthly, I'm looking to make use of compound interest, which Albert Einstein described as the eighth wonder of the world, so that by the time I'm older, the pot will be significantly larger (assuming that the two funds increase in value) on its own accord.

Side Hustles

I'm also exploring ways to generate multiple incomes so that I don't have to rely on just my full time job wage to support my long-term financial success.

If you've browsed my website you'll hopefully see I have a digital product through my SEO audiobook/ebook.

I think digital products are a great way to increase income streams. After the initial creation of it, you can set it and forget it (minus the marketing efforts of course!). It is a permanent asset for you once it starts working.

There is a whole side hustle world out there that have extensive resources into ideas and how you can start your own.

I'll let you research into them yourself, but if you find the right one that works for you then I'm confident that you'll be able to make it work for you.

Financial Literacy Should be Taught in School

Having started my financial literacy journey, it is has really been eye-opening to what is possible on a below-average wage. Having all of your ducks in a row and being aware of where your finances are can really see you reap many rewards if done correctly.

If schools taught this to the next generation then I'm sure the economy would be in far more competent hands and everyone could benefit from a stronger economy.