Tuesday, June 28, 2011

Is Financial Literacy Out of Reach For The Ordinary Person?

Many college students have just recently completed college and have graduated. They have gained a vast knowledge of their chosen realm of study and are about to start their first job. They will be making more money than they ever have before in their young lives. Yet, for the most part will be completely ignorant about financial matters. 

These new graduates will be starting at their new jobs confused which investments are good for their 401(k) or how they should be paying back their student loans. After all that education they will be lost in all thing financial. So much time and money is spent on their chosen subject of study but almost no time is put into educating them about financial subjects.

It matters so much more these days that you know what your doing financially. Having to juggle credit card debt, student loan debt, and participation in a 401(k) can make someones head spin. Statistics show that this lack of knowledge has made them wholly unprepared for the future retirement.

Are financial subjects to complicated for us to be knowledgeable about? Yes, it is complicated for beginners, but it's something that can be learned over time. It is your responsibility to educate yourself. There can be no excuse to not learn how money works. There are many professionals who can help walk you through your financial life. Or if you are a do-it-yourself type you can educate yourself with many online services, books, and knowledgeable websites.

To get started on the financial journey I can recommend financial guru Dave Ramsey. He has a daily radio show and has written many books on financial success. He has created a plan for the average person he calls the "Baby Steps". These baby steps walk you through the process on step at a time. If done in order and correctly you will enjoy a great financial life.


Dave Ramsey’s 7 Baby Steps
  • Step 1 – $1,000 to start an Emergency Fund: Before you even get started on the rest of the plan, you need to save up a little bit of cash just in case small emergencies happen.
  • Step 2 – Pay off all debt using the Debt Snowball: You list your debts from smallest to largest. Pay the minimums on all of your debts. With any leftover money you may have you pay extra on your smallest debt until it is paid off. You then roll that amount over to the next smallest debt.
  • Step 3 – 3 to 6 months of expenses in savings: Save up 3-6 months of expenses in case of extreme misfortune like a job loss, illness or other long term problem.
  • Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement: Save for your retirement.
  • Step 5 - College funding for children: After saving for retirement you can save for your children’s education and college expenses.
  • Step 6 – Pay off home early: Make extra payments on the mortgage to pay it off early.
  • Step 7 – Build wealth and give! (Invest in mutual funds and real estate): Continue building wealth through mutual funds and real estate, and give, give give!

These steps are the culmination of Dave Ramsey's 20 years experience in financial counseling. He has written many books on this subject, I recommend you read them.






4 comments:

  1. Hi Dave,

    Love your new favicon!

    ReplyDelete
  2. Thanks. When are we going to see yours.

    ReplyDelete
  3. These steps are very useful to us.

    ReplyDelete
  4. Many college students have just recently completed college and have graduated. They have gained a vast knowledge of their chosen realm of study and are about to start their first job.

    ReplyDelete

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