They say that money cannot buy happiness, but the truth is, money guarantees you comfort and a better life, which is as close to happiness as you can get.
In order to eat, dress, get from one place to another and enjoy yourself with your family and friends, you need money.
That is why being financially literate is a major life skill that many people strive to learn and have in turn reaped benefits from.
Take this example, two friends in the same financial situation win half a million dollars each from the lottery. They then go separate ways and reunite after three years.
Person A is now worth three times the money he won, while the other is not even worth a third of the money.
What sets them apart after three years? Their financial literacy and how they used the money at hand.
In this article, we will dive deeply into how to carve your path into financial freedom by knowing all there is about money.
These are the 5 steps to financial literacy.
Invest in Financial Books.
“The best investment you can make is in yourself. The more you learn, the more you earn.”
There’s something therapeutic about holding a book. It makes you look both elegant and classy. Books are both an inexpensive yet priceless investment filled with information and top-notch research.
Although others might opt for an audiobook, or a softcopy, having a hard copy is the best. It will be right there on your desk staring at you, pleading to be picked up, and you in turn will heed to it.
Moreover, you can always highlight the main points and jot down some notes at the side.
However, with hundreds of books claiming to be the best, how are you able to sieve through and only read the best?
No need to worry, we have selected the three best finance books to get you started on your financial literacy journey.
- Rich Dad Poor Dad By Robert Kiyosaki
There has been so much buzz around this book for the past two decades. And just like where there is smoke, there is fire, the book is well-deserving of its attention.
Robert Kiyosaki elaborates and shares financial secrets that he learned from his neighbor’s dad, ‘rich dad,’ and what he learned from his own.
The book has gone ahead to change how thousands of people view money and broadened their perspective of it even more. That is what makes this one of the best.
- The Psychology of Money By Morgan Housel.
This is both an interesting and informative read that will make you not want to put it down. The book goes into detail to explain the effects of pride on money management and how dangerous and detrimental that can be.
What makes this so amazing is the fact that it is not just one long continuous book but a collection of 19 short stories that all pour into the same river.
Therefore making this a must-add item to your booklist.
- The Millionaire Next Door By Thomas Stanley and William Danko
Want to buy a new pair of shoes for Christmas or a gift for a loved one, get the money from the profits and not the principal.
Thomas Stanley and William Danko put emphasis on the usage of profits instead of the principal.
They advise against spending the principal but focusing on the profits. This is the money that you use to treat yourself and your loved ones.
This read will enable you to make very informed financial decisions.
Have a Financial Mentor.
Rome wasn’t built in a day and it most certainly wasn’t built by a single person. If you take a look at prominent people, you’ll discover that what they have in common is a mentor.
Someone who had walked the path before them and guided them into it and they, in turn, found success.
Take Mark Zuckerberg as an example, he was mentored by the late Steve Jobs and with his guidance, he was able to grow Facebook into the billion-dollar company it is now.
Contrary to people’s beliefs, a mentor doesn’t have to be older than you. It could be someone younger but with more experience than you.
Don’t let your pride fool you into dismissing younger mentors, humble yourself and learn as much as you can.
Keep up with the Business World.
As interesting as it is to keep up with the Kardashians, this will do very little to improve the quality of your work. Save this for after you’re aware of the news in the business world.
Find out what the Big Dogs are talking about, what kind of moves they are making, and follow it up to see the outcomes of their decisions.
Is it something you can do yourself, if yes, by all means, do so. Take an extra step and follow them on social media.
Listen to their talks on Youtube, be on the lookout for financial advice from them on Twitter and Facebook too.
Surround yourself with Like-Minded Individuals.
When you get around with your crew, what do you talk about? Does the subject of money come up? Or is it just gossip?
If you feel attacked, then this is for you.
There is a famous saying that says, If you hang around with five millionaires, you’ll definitely be the sixth. This is explained by a scientific term called the principle of transference.
By hanging out and surrounding yourself with people who think in the same manner, you remain alert and grow at a faster pace than when alone.
Learn about Financial Management Tools
Just from its name, these tools help manage your finances. They work by helping formulate a budget based on your salary.
One effective tool is the NerdWallet 50-30-20 Calculator.
This calculator divides up your income into the widely known 50-30-20 method where 50 are needs, 30 are your wants and the remaining 20 are savings.
Another effective tool is Personal Capital. It is designed in a way to track your spendings, keep track of your investments and your net worth too.
To sum it up, being financially literate doesn’t happen in a day. It is a series of small steps taken that build-up to the ultimate goal.
With the knowledge acquired, one can now break free from the ‘hand to mouth’ cocoon, save enough for retirement and enjoy life sans money problems. Best of luck!