How to Improve Your Financial Literacy

I hate maths. I really do…at least most of the time. But sometimes, when I understand them, I love them.

Money always felt like maths to me: numbers related to a valuable coin. But money wasn’t a common topic of discussion in my social circle. Expressions like “Money is the root of all evil” stayed in my memory growing up, creating a negative accent around the subject. Why is money the root of all evil if we need it for everything?

The more I thought about it, the more sceptical I felt regarding those negative ideas. I knew food costed money, and nobody can survive out of water and air. I knew I would rather live in a spacious penthouse rather than a small flat, but that costed money too. I was aware that travelling made me happier than almost anything else and I would daydream about owning a small boat: money and money.

Everything, from the most basic human needs, like food and a bed, to higher layers of freedom, like saying no to a job I hated, was about money. So…how was money the problem?

I was curious, but also sensitive enough to understand that arguing with the people who had those negative points of view was as useful as trying to make a cat drink coffee.

Growing up, I learned 3 Important Lessons:

1 – No, money doesn’t change people

In fact, money uncovers the real nature of the person that owns it. Money unleashes all those limits that often keep our lifestyles low key. 

Lack of money forces us to behave better, to be a good neighbour, a good sibling, to meet the laws…all that pressure disappears when you feel like you do not have to behave in order to fit in with the crowd.

2 – The Real Root of All Evil Is Poverty and Laziness

I am sure there is a district in your city/town where you are advised not to go during the night. Those areas are often the ones where people struggle the most to make ends meet. 

Lack of money for food, or for the next month’s rent is a serious threat to our existence. 

No, being poor doesn’t mean being lazy, and to assume something like that would be ignoring the entire system that moves the world. There are too many coatings of privilege: social circle, financial status, family, health and many more that result in basic opportunity inequality. In order words, it is easier for some people to change their current situation than it is for others.

I understand that laziness is also the root of all evil because, in my experience, most lazy people don’t go through life in a very happy manner. Due to their laziness, they often feel unsatisfied with their existence. Yet, the same laziness prevents them from changing their situation and keeps them frigid, blaming everything and everyone around them for their misery and embracing the same lifestyle that provokes that misery. 

Like many millennials out there, I didn’t study Personal Finances at school. And as a good millennial, I grew up watching TV, hours of advertisements and later on following influencers triggering my consumerism regularly.

Lack of understanding of money plus an insatiable need for the upcoming Mango collection is a perfect recipe for bad financial decisions.

3.- You Don’t Need To Be A Modernized Einstein To Have A Basic Useful Knowledge

If your goal is to analyze a particular company in order to invest in it, you may need some specialized training to understand everything related to the industry: the financial ratios, the financial results of the company, the debt and red flags, the competitors, future prospects…etc.

But there is no need for deep mathematical knowledge if you only want to start investing long term in trustworthy companies. In fact, the biggest investor Warren Buffer doesn’t think that “advanced mathematical knowledge is of any use in the investment process”. 

So how can you start improving your financial literacy?

I will share the most useful practices that helped me understand how money works a bit better. On top of that, you can have a look at some of my posts related to finances and minimalism.

But first, I want to clarify that I am not a licensed financial advisor. If you need legal financial advice, you should hire a professional that can help you with your needs.

I want to start by giving Kiira from the past some credit for not feeling the need to follow trends and buying expensive brands to impress others. Whilst it’s true that I enjoy fashion and playing with my personal style, my intentions never had the purpose of keeping up with the Joneses.

Now, the most important exercise that I incorporated into my life after moving out of my parents home (and still keep doing) is to keep track of all my daily expenses in a small notebook. I religiously write down the amount that I spend every day. By the end of the month, I calculate all the money that I pay out. It’s a great way to see how much cash is coming in and out.

Tracking my finances was extremely helpful to understand my needs and spend consciously. 

A couple of years later, I was living with my boyfriend at the tiniest flat in West London. During this time, I started reading about the concept of “Minimalism”. My spending habits became more and more conscious.  I learned a lot about consumerism and hoarding. I also noticed how stressful was living too many items in a tiny space.

At this point, I was decent at saving money, the only problem is that all the cash I was saving with my frugal lifestyle was living in a savings bank account that would return less than 0.3 %  annually.

Consuming content about minimalism re-directed me to other financial articles and videos (heads up to the Search Engine Algorithms).

And that new content light up a motivation to learn more. I decided to read “Rich Dad Poor Dad”. This book not only changed my perspective of money, but it cleaned some prejudices that I had about the topic. I don’t think this is your go-to book for investments, but it explains the differences between liabilities and assets marvellously, as well as the different types of mindsets regarding money.

Reading this book lead me to read a few more books like “Think and Grow Rich” and “The Richest Man In Babylon”. And at this point, I started to amplify my knowledge. 

I also started feeling more responsible after getting my paycheck. I stopped following so many beauty YouTube channels and started spending more time watching other types of content, including channels like “The Financial Diet”, “Minority Mindset”, “Ryan Scribner” and “Andrei Jikh”. These Youtube channels have been incredibly helpful when it comes to learning about stocks, ETFs, cryptocurrencies and other types of investments.

Watching daily videos about money and realising I could understand most of them made me feel more confident. I started following news about international companies and the economy around the world.

A few months later, I started carefully investing my money. I was (and still am) pretty scared of investments. I only use the extra funds that I don’t need in the near future. Oh, and I don’t day trade! I rather invest only in trustworthy companies and leave my money there for the very long term.

Those are the steps I took from being extremely uninformed about money to at least understanding basic concepts about personal finances. I hope this post helps you get some ideas of how to improve yours! Remember to let me know in the comment section down below which books or websites have helped you improve your financial literacy.