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Six Ways in Increase Your Financial Literacy

My USAA magazine arrived in the mail today, which made me consider how a person learns about personal finance issues. I studied business as an undergraduate, and while that education does help understand a little about the time value of money and compound interest, it didn’t teach me much about budgeting, setting goals, tax planning, or real estate. Most of that I learned in other ways, either through additional education or through the school of hard knocks. I should also mention that through my parents I learned that personal finance is just that, personal and private. I knew that we didn’t have a lot of money, but we had enough.

So, with that in mind, I offer you six ways to increase your personal financial literacy.

  1. Take a class. Really, if you want to get serious about learning this stuff in an organized way, you should take a class. One option is through a local community college or public school district. In my area, for example, the Arlington VA Adult Education Center offers classes in personal budgeting, investing, managing debt, and estate planning. These classes are low cost and taught be instructors who are not peddling annuity or other financial products. Another way to take a class is online. The University of California, Irvine, for example, offers an introductory course in the Fundamentals of Personal Finance.
  2. Become a Volunteer Income Tax Assistant. The IRS offers 40 hours of instruction each year to volunteers who help others to prepare that income taxes. The program is described on the IRS web page. I did this as a second lieutenant, and it taught me things early on that really made a big difference later in my life.
  3. Read a book each month on personal finance, but be careful what you read. Not all books on this topic are created equally. Some instructed people in 2005 to borrow the equity out of their homes and invest in the stock market through a life insurance program! That would have been terrible guidance, and was certainly self-serving from the perspective of the author. The best books provide a broad overview of the topic covered and give general guidance for things you should consider before making a decision on an individual product. I’ve put together a list of my favorites on Amazon.
  4. Follow a financial pod-cast. There are free audio recording through services like iTunes and Business Talk Radio.net. My favorites include Ray Lucia, Dave Ramsey, and Brian Preston. It’s also good to listen to a variety of voices. Mr. Lucia and Mr. Ramsey, for example, have a much different perspective and their callers are very different, but they share common themes of personal responsibility, common sense, and the importance of focusing on a strategy.
  5. Take advantage of USAA’s Educational products. While USAA casts the net broadly, the professionalism and value of the companies educational materials are first rate.
  6. In an internet full of personal finance blogs written by amateurs, it’s always valuable to go to sources that are at least monitored by professionals. As you’ve read here, FINRA’s site, SaveandInvest.org, provides military members tips on purchasing a car or home, budgeting, investing, and the basics of investing.

How would you suggest that people learn the language of personal finance? Next time, we’ll talk about financial coaching.

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