Are you financially literate?

As the world becomes increasingly more financially complex those who have worked hard and saved carefully know that money is more easily lost than acquired. Relatively speaking the average earner gets poorer every time the rich get richer. Hanging onto your money requires some financial literacy. Try these questions:

• Do you know the difference between an asset and a liability?
• Can you do an internet bank transfer? Not, DO you do so but CAN you do so?
• Do you know what should guide your decision whether to take a cash dividend or the share alternative if offered?
• How much do you have as emergency liquidity?
• Do you pay off your credit card debt fully every month?
• If you had to borrow money short term where would you go to do so?
• Do you know the one figure that really matters in life or business?
• When can debt make you richer?

This is a small sample of questions to help determine if you are financially literate. Are you satisfied with your answers?

Why do you need to be financially literate? Surely you can buy financial advice just as you can buy most things? Perhaps you have noticed that when you seek advice about buying anything today it is almost impossible to get impartial advice. Everyone you ask has an agenda of their own – basically something they want to sell you. Even doctors sometimes push remedies they have available or products they act as salesmen for.

However impartial your adviser there is the underlying need on his part to earn a living. In the long run the performance of your savings will tell you if you have a good financial adviser. By then you could be broke. In the short term s/he may sell you the investments s/he regards as the most immediately lucrative for him or her. Not all advisers are like this but how can you tell which are and which are not? By being financially literate yourself, of course. Your hard-earned, painfully saved money is important. You must look after it.

Do the financial markets help you to be financially literate? On the contrary, they obfuscate the financial scene inventing new jargon daily. They do this partly to give themselves an air of superiority. Financial wizards also want to make it difficult for you to be financially literate so that you have to depend on them to sort the haircuts from the hedges.

Find money boring? Most people do. You need to motivate your interest if you are to preserve your financial assets today when cash earns no interest or even costs you money (negative interest). Money becomes particularly boring when you don’t have any of it left.

Nearly every person who graduates from school is financially illiterate. Valiant attempts are now being made to educate the young early about how to handle money. PlayMoolah is a valuable way of learning for starters. Singapore Management University teaches financial literacy to students and there are many programmes to help you understand your money.

Before you adopt one of them you might find it useful to discuss with a financially literate mentor what the issues that relate especially to you are. This way you can keep the extent of your own financial literacy within a manageable curriculum.

When you are financially a bit more literate you will sleep better at night.

We do not run financial courses or give investment advice. Our PASDAQ Compass™ addresses your Future Financial Needs via a questionnaire as part of the package. We can help you with questions you should be asking any financial adviser before appointing them.