The only things I remember from economics class in high school are … well, not a lot. Yet, managing your finances is one of the most important life skills you can learn. Odds are you didn’t have a class in school called Financial Freedom 101 either. So where do we learn how to manage money?
Most of us learn financial lessons from our parents, family, and friends. These are people who we view as role models and mentors, and the choices they make – whether they realize it or not – can have a profound effect on our own financial habits.
With that in mind, it’s important to acknowledge your own role as a financial mentor. You don’t have to be an expert to be a mentor. The role of a financial mentor is to act as a guide. So now that you’re ready to begin the final week of Financial Literacy Month, it’s the perfect time to share what you’ve learned with your friends and family.
Here are a few simple, but effective, steps from Financial Literacy Month that can help your loved ones get on the right track.
Appoint a family CFO. While all members should be aware of the family’s overall financial situation, choosing one person as the family CFO and conduct the day-to-day financial tasks is a good way to stay on top of things. The appointed individual should be organized and a good communicator. They should be given uninterrupted time to do their tasks effectively.
Calculate your net worth. Make a list that includes your liabilities and your assets – which is essentially what you owe and what you own. When you know what you’re working with, it’s easier to set financial goals and determine a manageable budget.
Pay down your debt. There are two popular methods used to tackle debt. The first is to concentrate on paying off the debt with the smallest balance first, which can be very rewarding because you see progress quickly. The second method is to first concentrate on repaying the debt with the highest interest rate, which will save you the most money in the long run. You should choose the method that you feel will be most beneficial to your own situation.
Expect the unexpected. You should always make sure to prepare for financial emergencies. In addition to long-term savings, financial experts agree that consumers should aim to have three to six months living expenses saved for emergencies.
Acknowledge the benefits. In addition to improving your financial situation, you may also find your money management skills can benefit other aspects of your life. Make a list of the ways you will benefit by sticking to your plan. If you begin to feel discouraged or overwhelmed, simply look at all of the ways your life will improve by remaining on the path to financial freedom.
Finally, you should encourage your friends and family to follow your footsteps on the journey to financial freedom, and take part in the 30-step program themselves. It could be the best financial advice they ever receive.
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