What is the importance of financial literacy?
Financial Literacy encompasses the ultimate goal of aiding you in partaking in financially responsible decisions. These decisions pertain to every aspect of your daily life including spendings on household expenses, buying a new house, and saving up for retirement. Furthermore, understanding the basics of financial literacy is crucial in today’s society for a number of reasons. The overlying reason, however, is that the global market as a whole is evolving at an unprecedented rate and with it comes a surge of financial potential to achieve growth in almost any sector (financial service companies can be thought as brokers, which are simply a tool for an investors decisions, hence, finance companies do not really help in affecting an individual's investment decision/choice) and we as global citizens need to ensure that we can make the most financially sound decision. All in all, financial literacy is vital to having a sustainable and fruitful life and SBL is dedicated to providing you with the proper resources needed to be financially literate.
Key Concepts: The Value of Money
Money has value simply because we all agree it has value. Each and every day, our money becomes less valuable. Why? The prices of goods and the rate of inflation is constant, which means that if money isn’t invested in some sort of way, it is losing purchasing power. However, money is represented through varying currencies worldwide. Therefore, the most prominent way to determine the value of money is through exchange rate measures. This refers to how much a certain currency in comparison to an alternative one. For example, one US Dollar is approximately 107.63 Yen. With this comparison comes uncertainties as fluctuations occur constantly to change the value, or worth, of a certain type of currency due to factors such as inflation. Thus, SBL is committed to providing you with the knowledge on how to become financially literate through understanding why the value of money can make or break your success.
Money has value simply because we all agree it has value. Each and every day, our money becomes less valuable. Why? The prices of goods and the rate of inflation is constant, which means that if money isn’t invested in some sort of way, it is losing purchasing power. However, money is represented through varying currencies worldwide. Therefore, the most prominent way to determine the value of money is through exchange rate measures. This refers to how much a certain currency in comparison to an alternative one. For example, one US Dollar is approximately 107.63 Yen. With this comparison comes uncertainties as fluctuations occur constantly to change the value, or worth, of a certain type of currency due to factors such as inflation. Thus, SBL is committed to providing you with the knowledge on how to become financially literate through understanding why the value of money can make or break your success.
How typical families build wealth:
The typical American middle class family has only two ways of building wealth: their house and retirement fund. Home ownership is by far the most common way families build wealth because houses appreciate in value overtime at a rate typically higher than inflation. Side note, this is also why the 2007 Great Recession was absolutely devastating to American wealth equality. The other typical way of building wealth is through retirement savings. In the past, pensions were used to do this. However, pensions have been largely phased out except for government jobs in favor of other retirement plans that put the risk and responsibility on you. The reason these are the only two main ways typical families build wealth is because it is difficult to withdraw cash from these investments, so people are forced to save.
The typical American middle class family has only two ways of building wealth: their house and retirement fund. Home ownership is by far the most common way families build wealth because houses appreciate in value overtime at a rate typically higher than inflation. Side note, this is also why the 2007 Great Recession was absolutely devastating to American wealth equality. The other typical way of building wealth is through retirement savings. In the past, pensions were used to do this. However, pensions have been largely phased out except for government jobs in favor of other retirement plans that put the risk and responsibility on you. The reason these are the only two main ways typical families build wealth is because it is difficult to withdraw cash from these investments, so people are forced to save.
How typical families lose wealth:
Cars: The definition of the American dream and killer of it. A new car heavily depreciates the second it is driven off the lot. To avoid the bulk of depreciation expenses, consider buying a car that is at least 5 years old. It would have depreciated enough to be affordable while remaining in solid condition with most of the latest technology.
Credit card debt: This debt kills due to its high interest that traps people as well as the lowered credit score which will affect your other significant purchases such as available cars and housing. To avoid credit card debt, just avoid credit card debt…
Not investing: Wait, I’m not losing money if it’s sitting in my bank account right? That is true, however your money is worth less over time due to inflation. Remember, 20 dollars, 10 years from now will buy much less than 20 dollars right now.
Cars: The definition of the American dream and killer of it. A new car heavily depreciates the second it is driven off the lot. To avoid the bulk of depreciation expenses, consider buying a car that is at least 5 years old. It would have depreciated enough to be affordable while remaining in solid condition with most of the latest technology.
Credit card debt: This debt kills due to its high interest that traps people as well as the lowered credit score which will affect your other significant purchases such as available cars and housing. To avoid credit card debt, just avoid credit card debt…
Not investing: Wait, I’m not losing money if it’s sitting in my bank account right? That is true, however your money is worth less over time due to inflation. Remember, 20 dollars, 10 years from now will buy much less than 20 dollars right now.
Avoid these other major pitfalls:
Lack of education/skills: Whether through college, trade school, or otherwise, you need the skills to pay the bills. Lacking the means to get a job is of course the number one way to find yourself in a dire financial situation. This pitfall is one to avoid early on by thinking ahead to what career you want to pursue and ensuring you are properly prepared to do so.
Raising kids when not ready: Kids are a joy, but for financial purposes, they’re sent by the devil to kill your financial health. They cost thousands per year to raise. They require your time and they may stunt your career. Hopefully you have a team ready to support you as you raise a kid. This pitfall is one to avoid by merely not having unprotected sex.
Health problems: Narcotics and addictions will kill your physical and financial health through both the cost over a lifetime and the medical bills. The current obesity and opioid epidemic are the current prominent health pitfalls in America that will also kill financial health. Everyone knows the American healthcare system is primed to wreck your life, so minimize the opportunities for it to do so. This pitfall is sometimes uncontrollable, but best avoided by living as healthy of a lifestyle as possible, exercising, avoiding drugs, and other dangerous situations.
Lack of education/skills: Whether through college, trade school, or otherwise, you need the skills to pay the bills. Lacking the means to get a job is of course the number one way to find yourself in a dire financial situation. This pitfall is one to avoid early on by thinking ahead to what career you want to pursue and ensuring you are properly prepared to do so.
Raising kids when not ready: Kids are a joy, but for financial purposes, they’re sent by the devil to kill your financial health. They cost thousands per year to raise. They require your time and they may stunt your career. Hopefully you have a team ready to support you as you raise a kid. This pitfall is one to avoid by merely not having unprotected sex.
Health problems: Narcotics and addictions will kill your physical and financial health through both the cost over a lifetime and the medical bills. The current obesity and opioid epidemic are the current prominent health pitfalls in America that will also kill financial health. Everyone knows the American healthcare system is primed to wreck your life, so minimize the opportunities for it to do so. This pitfall is sometimes uncontrollable, but best avoided by living as healthy of a lifestyle as possible, exercising, avoiding drugs, and other dangerous situations.