In October 2024, I wrote an article detailing my thoughts on financial literacy. I included the following paragraph as an illustration:
- Let’s say someone was never taught about things like loan agreements, compounding interests, or return on investment. So, without that knowledge, they might, hypothetically, sign up for a loan they don’t understand and can’t afford to repay. Then, when they can’t repay the loan, their lack of understanding of financial obligations may make them feel entitled to demand that others repay it for them. At this time last year, this was happening with student debt.
In my view, financial literacy is not a complicated topic, but it is often overlooked in our society and educational programs. I feel strongly that it is not being addressed in the manner it deserves.
My definition of Financial Literacy is: knowing how to handle your money wisely and prudently.
Many people struggle with financial literacy, even as adults. This is often due to misconceptions or a lack of understanding about what it entails. The following is the most important statement I will make in this article. I always tell people there are three important factors involving the quality of your life. They are:
- Your spiritual health,
- Your physical and mental health, and
- Your financial health.
I will leave the first two factors to you, as they are personal, and I do not feel I am the right person to help with these. Regarding your financial health, I always tell my family, close friends, and business associates that no one cares for your financial well-being as you do.
In today’s world, most people are looking for ways to let someone else deal with the hard stuff. They are looking for the right accountant, lawyer, or manager to “take care of these difficult things.” It’s human nature; however, here is that dose of truth again: no one should ever be as invested in your financial future as you are.
I equate it to the fact that you can’t steer a ship if you don’t know how to use a compass. The compass, in this case, is the basics of understanding finance and financial terms. I am referring to accounting concepts, keeping your personal and business issues separate, understanding what you are signing, and understanding the basics of your business, and the problems that will affect your cash flows. One of the first questions I ask people is how they price their products, including their own services —services that, for most people, are their labor. These aren’t just chores for business owners but habits that create efficiency, security, and peace of mind for everyone.
I always hear the question, “What if I make a mistake?” My response is not to strive for perfection. I always tell people: the best is the enemy of the good. There has been only one person who has walked the earth who was perfect. Remember, no one is correct 100% of the time. The point is progress. Do things a little better than you did yesterday.
You are the captain of your ship, and no one knows where you want to go better than you do. Once you are comfortable with taking this type of ownership, then you can allow others to help you.
So, let’s look at the following questions.
Is financial literacy just about knowing how to budget?
No. While budgeting is a key part of financial literacy, it is only one aspect. Financial literacy also involves understanding concepts such as the time value of money, interest rates, credit scores, asset classes, and investment strategies.
Is it too late for me to become financially literate?
It is never too late to improve your financial literacy. You can start by learning about the basics of budgeting, saving, and spending. From there, you can continue to build your knowledge over time. The very reason I am writing this article is based on a recent conversation I had with a friend I have known for over 30 years. He is in his early 50s and just made his first contribution to a retirement account. He was stressed about his financial health.
Do I need specific math skills to be financially literate?
No. Financial literacy means knowing how to use certain concepts in your everyday life. It’s not about performing complex calculations. If you can add, subtract, divide, or multiply, then you have all the skills you need.
Is financial literacy only important for people who make a lot of money?
Nope. Financial literacy is important for everyone, regardless of how much they earn. Understanding how to manage your money will help you make the most of what you have and avoid unnecessary debt. Learning to invest your money can be a great way to grow your wealth over time, and it can be fun. Additionally, it is important to be aware of the different account and product options available to you so you can choose the one that best meets your needs.
Overall, financial literacy is about empowering yourself with the knowledge and skills to make smart decisions with your money. It is a lifelong journey, but one that is well worth taking. To illustrate this point, I recently heard Warren Buffett say that he has increased his wealth more after turning 65 than at any other time in his life. Of course, it helped that Mr. Buffett is still working at 95.
Prepared by Terry L. Stroud – November 2025
