SACRAMENTO COUNTY, Calif. — April is National Financial Literacy Month. It's all about raising awareness of the importance of maintaining smart money management habits.
Financial literacy is key to understanding how to save, earn, borrow, invest, and protect your money. It's also essential to developing short- and long-term financial habits and skills that lead to greater financial well-being.
According to National Credit Union Administration, becoming financially capable could be as simple as:
- Creating a financial plan that includes a budget to determine which expenses are flexible or fixed, as well as ensure you have enough emergency savings to prepare for unexpected expenses.
- Pulling your credit report once a year to make sure the information is accurate, complete and up- to-date. Reviewing your credit report will also help to guard against identity theft.
Financial literacy is a problem for many people, but it doesn't impact everyone equally. In the U.S., white families have, on average, eight times the wealth of Black families and five times the wealth of Hispanic families.
That's according to the Federal Reserve's 2019 Survey of Consumer Finances. It shows white people had a median family wealth of $188,200, while Black people had $24,100 and Hispanic people had $36,100.
When it comes to closing America's racial wealth gap, it can be complex due to historical injustices impacting communities of color. That includes systematic inequality, employment and housing discrimination, earning disparities in the labor force, and other institutional barriers.
Despite the hardships, money experts say, financial literacy education and job training can help people achieve financial success.
Jay King founded the Greater Sacramento Financial Literacy Group (GSFLG) in 2018 to help educate, support and empower people to succeed financially. The group offers free financial workshops and classes.
"Black people are not the only people that's poor or struggling," said King. "Barriers existed and have existed for years. But, incredible people that are part of our race have made it through because they never quit."
Patina Alston is a student and member of GSFLG. She joined the group to become financially literate. For Alston, the biggest financial challenge was overspending.
"I was barely making ends meet," said Alston. "But, we had what we needed and wanted. Once I joined the Financial Literacy Group, I learned things that I thought I'd never learn, like how to invest, how to save money, where to spend my money. I even bought my first home. I just want to make sure that when I'm gone, my children have something."
Dwight Armstrong is a student and member of GSFLG, too. He's been attending financial classes and workshops, geared towards investing. For Armstrong, he wants to build wealth for his grandchildren to inherit in the future.
"That's one of the biggest things that I learned, is how money works," said Armstrong. "I'm tired of handouts. You can give me a hand up. But, I don't need your handout, not if I know financial literacy. Today, I may not be a financial wizard, but I do understand the nuances of financial literacy."
GSFLG offers the following 10 tips for boosting financial literacy:
- Involve your significant other and children. If only one person handles the finances in your household, consider engaging everyone in some manner. You may uncover differences in opinion that need to be resolved, but the effort may define and solidify your financial goals. It may also help your children learn the value of a dollar – a lesson that is often lost as our society becomes increasingly cashless.
- Secure your financial identity. Whether you were issued a new credit card for preventative measures or you had to spend countless hours on the phone disputing charges, identity theft is now commonplace. Ensure that your accounts remain secure by carefully tracking your transactions and changing your login information periodically. You may even want to sign up for third-party fraud monitoring for greater peace of mind.
- Consume information regularly. Books, newspapers, blogs, podcasts, and webinars can all contain useful information. Just remember that you are consuming someone's particular point of view, so you should gather lots of information before you make your own judgments. For more in-depth instruction, you can seek out a financial class at a local college, church, or financial institution.
- Learn about your credit score. This one little number can impact your financial situation dramatically, especially when it comes time to secure a loan or purchase your "forever" home. The credit scoring process is complicated, so the sooner you understand the ins and outs of your score, the better.
- Record your spending. Take a moment to track your spending over a set amount of time. It may be surprising how much you spend on a particular category – like dining out – over the course of a month. Once you understand your habits, it is much easier to alter them and guide your money in a different direction.
- Develop a savings strategy. Once you record your spending, you can create a realistic budget that includes saving money for an emergency fund, a certain goal, or retirement. Even if you don't budget, it is important to implement a savings strategy. By "paying yourself" and keeping the money out of sight (and out of mind), you can accumulate a solid base for your financial future.
- Incorporate a financial management tool. There is a wide variety of both free and paid tools in the marketplace that can help you manage your credit cards, checking accounts, savings accounts, and more. While some look like fancy check registers, others have robust budgeting, forecasting, and bill-pay capabilities. Find one that works for you and your unique needs.
- Consider how to make your money work for you. While this may seem like a tip for soon-to-be retirees or people with substantial savings, the truth is that your money can begin working for you at any age. Research the benefits of compounding interest or different strategies for creating passive income. The earlier you think about "outside" revenue streams, the more wealth you can potentially accrue.
- Think long-term. It's a good idea to consider your legacy- and retirement-planning options even if you are years away from utilizing them. Tie up loose ends – such as designating beneficiaries, establishing a trust, or writing a will – now instead of later. Your plans may change as the years go by, but it is good to have your affairs in order and an end goal in mind to inspire future success.
- Ask around. Great advice can come from unlikely sources. Your friends, family, and coworkers may be willing to share their stories – especially if their stories are successful ones. You may even be able to find a financial mentor amongst your inner circle who can offer some guidance for free; keep in mind, though, that every experience is unique and your results may not be the same as theirs.
To learn more about GSFLG or to register for a free class, visit the group's official website.