The Five Foundations
Of Financial Literacy
Foundation #1: Save a $500 Emergency Fund
One of the first things you must do is to create a $500 emergency fund. This is a very important step. This emergency fund should not be spent on casual spending, but for actual emergencies. For example, if someone ends up in the hospital, or if you're a teenager, for a new phone. This should always be built upon, separate from your spending money. Creating this emergency fund is there for the things that can't be predicted. It is being proactive, preparing for future events that may have the probability of devastating you. A lot of emergencies could drain your wallet, so having this back you up will help a lot.
Foundation #2: Get Out of Debt
Going into debt is never a good idea. It is a huge societal norm in America right now, because so many Americans go into debt. It is the easiest way to get whatever it is that you may want. Buy the product now, then pay for it later. Consumerism is what it is. Debt is a burden that could weigh down on many for years. You should worry about many things like finishing school, or your own children; not when you have to make the next payment to a debt collector. Debt causes so much stress that it has even cause problems in marriages. A lot of marital disputes have to do with monetary problems. The best way to stay out of debt is to stay away from credit cards and paying for everything like college or for your car.
Foundation #3: Pay Cash for Your Car
Many people believe that it is okay to get loans for a new car. They don't hardly think about what it could mean for them in the future. They would have to not only pay for the car, but also pay back the loans that they had taken out. Car loans are just another way to getting into debt. The best way to avoid this is to pay for the car in cash, and to also get a USED car; not a new one. That would reduce how much you would have to initially pay. Thus, reducing your chances of debt and being financially successful. Also, there is a great sense of pride that comes out of buying something that you worked hard for.
Foundation #4: Pay Cash for College
As a student in high school, college is an idea that we have all had. Although a lot of us may want to go to college to follow our dream career path, expenses for college can get quite high. Many students in college go into debt before they graduate; which can lead to dropping out. One of the contributing factors are, of course, student loans. Most people will still have to continue paying for student loans even after they graduate. It is a heavy burden to have, and as a student it may be one that is often overlooked. Another factor is credit cards. A lot of college students will get a credit card during their time in college. They would use them for books or just for casual spending; such as clothes, food, or just hanging out for friends. Getting a credit card is never a good idea. Dropping out should never be an option, but it may lead to it. It often has nothing to do with the grades a student receives, but not being able to pay for school. That is why paying cash for school is very important. It keeps you in college and out of debt.
Foundation #5: Build Wealth and Give
Following the previous four steps will help you build your wealth. Once you have wealth, though, what do you do with it? You will give a lot of it away and rebuild it again. If you are truly speaking the language of money, you'd probably have a modest home with a modest car. That would leave a lot left over. You can, of course, save it and create a budget fitting to you. Although, giving some of it away would make yourself feel some much better than just spending it on yourself. If you can give some away that is a very good thing. After all, you could be the reason why someone else begins to learn the language of money just as you did. It does make it even more worth it.