The Dangers of Being Financially Illiterate

Disclaimer: This does not constitute financial advice

Do you know how most people get into debt? By taking financial advice not from their family or friends but from their trusted banker. Who would think that someone who is skilled in finance would steer you wrong? Well, there is a very good reason behind this.

Debt always has a way of spiraling beyond your control, doesn’t it?

Why the Bank is the Worst Place for Financial Advice

Number one — the bank is not on your side. No matter how friendly you are with your bank rep they are supposed to have only one entity’s values in mind and that’s the banks.

So why don’t banks care about your needs? Because the only thing the bank cares about is making money. That’s why they don’t want to give you advice that might cost them money. For example, if you were to ask your bank for advice on how to save money, they would probably set you up for an account with slowly decreasing interest rates. So, you’ll save happily in the beginning not realizing you’re not getting any bang for your buck.

The money you save in the bank isn’t yours. Let me repeat…THE MONEY YOU SAVE IN THE BANK ISN’T YOURS! Especially, if you put it into a long-term savings plan. Oh, in theory, it’s yours, but to the bank, that is now their assets to do with as they please. It will do more for the bank than it will ever do for you.

Most of the people who take out loans from banks are at times forced to take loans. People who do not even have any collateral are often given loans. And a lot of us think that it is a great way of getting money or accumulating assets. In most cases, the amount of money borrowed from the bank can be tripled the actual value of the asset you bought.

Now after making that desperate choice, you have probably seen commercials for companies that help people get out of debt. Maybe you have even spoken to someone who has used their service. For those who have never been in debt, it may seem like getting out of debt is as simple as making a few payments on time. However, for those who have been in debt, the reality is a whole different story.

A mortgage is only a good thing if you live long enough to pay it off.

What It Feels Like to Be Financially Illiterate

Most people associate financial literacy with things like saving money, investing, or understanding a financial statement. However, there’s another side to financial literacy that’s often overlooked. It’s a side that has to do with using financial products to generate income or simply understanding the purpose money is supposed to serve in your life.

Here are some mistakes I’ve made while being financially illiterate: -

  • Too much trust in accountants
  • Missing out on life-changing investments
  • Living from paycheque to paycheque
  • Think loans, bonuses, and overtime is living it up
  • Scared of money-making schemes
  • Putting all your faith in your retirement fund
  • Not paying attention to bank cards and other service fees
  • Ignoring the true cost of employment
  • Not accounting for all living expenses
  • Living above your means

There are probably more signs of financial illiteracy than mentioned here. But these are more of the common mistakes low to middle-income earners make when it comes to managing their money. We all are trained to believe that taking loans and living paycheque to paycheque is how we are supposed to manage our finances until we retire.

One thing that really stands out was being brainwashed to think having more money than others or wanting to be rich was evil! Nothing says poor mindset than thinking you are not allowed to have more money than the people around you. If you have that mindset, get wealthier friends.

The taxman can actually be your friend when you know all the tax laws.

Why You Need to Know More than Just How to Pay Taxes

Financial literacy is all about possession. It’s about understanding the value of financial products and services, and knowing how to take action to get what you want out of them. Financial literacy is also about being able to recognize when something is not working, and being able to take action to change it. Financial literacy is about being able to know when to use your car when public transport is better or deciding to buy it cash or lease?

So how much do you spend every month on taxes? How much do you pay in premiums? What are your deductibles? What is your rate of return on investments?

You can save money by deducting taxes. You can also save money by paying less than you owe. You can also save money by paying down debts. If your debt is more than your income, you can pay it off even though you have a low income.

Becoming financially literate takes paying attention to every decision you make that can have a long-term impact on your life. This means where you choose to live, who is your doctor, lawyer, or accountant? The staff you hire for your business and even who you decide to have sex with. (Ask any single mother or guy who has to pay child support through the ass) Life decisions affect your finances and you may think buying a car to look cool is important now, but when service fees and gas rates climb, it becomes more of a burden than a deal.

Financial Checklist for Digital Entrepreneurship
Get a financial checklist before launching your business.

6 Steps to Take to Change Your Financial Literacy

The first step to changing your financial literacy is to realize that you’re illiterate. You may think that you know a lot about finances, but the truth is that you’re functionally illiterate. You know how to operate a car, but do you read the owner’s manual? No.

Research Your Bank

You could actually be losing money the longer you hold your money in the wrong bank. From experience, joining a bank because you love the color is bad, frequent flier miles mean nothing if you don’t spend money where they tell you, and special offer interest rates don’t last forever. Look beyond the pre-sign-up offers and chat with long-term customers about their interest rates and customer service in bad times.

Look at Alternative Saving/Investing Options

Life insurance, mutual funds, credit union, bonds, stocks, art, precious metal, weed, tech…the list goes on. Check out anywhere else you can save or invest your money other than just a bank account.

Change Your Money Mindset

Stop saying you are poor! You are financially challenged at the moment. Or cash strapped or in some financial difficulty. Stop bashing money and the wealthy! How can you attract wealth when your mindset is so against it.

Look for Tax Deductibles and Saving apps

There are so many ways to save! Long-term saving may be a dying cause, but paying full price for anything is idiotic. Tax deductibles are a good way to save. If you have a deductible for medical expenses, you can use that as your security against your tax bill. You don’t have to worry about what you are paying for, as long as you meet the deductible amount.

Have Multiple Income Sources

Working paycheck to paycheck is a death sentence. No matter how big the check, all it takes is for the real owner to take it away and you’ll end up in debt or even homeless. Remember inflation kills savings. Learn about passive income creation and get money into your accounts for the rest of your life.

Get Real Financial Advice ASAP

Find an independent financial advisor. One that isn’t linked to a bank or a government-affiliated agency. Why the government agency you ask? Taxes, that’s why.! They’ll want to take more tax rather than help you save money on your taxes.

Just a healthy reminder, this does not constitute financial advice. I am not a registered financial advisor so be sure to reach out to the true experts before you save or start a business.

Sources:

https://hbr.org/2017/04/why-you-should-have-at-least-two-careers?utm_medium=social&utm_campaign=hbr&utm_source=LinkedIn&tpcc=orgsocial_edit

https://www.statista.com/chart/18344/year-over-year-change-of-the-consumer-price-index-for-all-urban-consumers/?utm_source=Statista+Newsletters&utm_campaign=06d1791bdd-All_InfographTicker_daily_COM_AM_KW14_2022_Fr_COPY&utm_medium=email&utm_term=0_662f7ed75e-06d1791bdd-315944605

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MB Haven mbhaveninc.com

MB Haven mbhaveninc.com

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In 2016, I decided to turn my life around. So while I was pursuing my BSc, I started searching for jobs in my new field of Marketing and discovered a lifestyle!