Imagine operating a boat without the basic understanding of nautical rules of the road or even how to operate a boat. Scary thought.

Here’s another scary circumstance – one that is all too real. Many Americans are making financial decisions with minimal financial knowledge of investing, budgeting, and credit. The TIAA Institute conducted a survey on U.S. financial literacy, asking 28 basic questions about retirement saving, debt management, budgeting, and other financial matters. The average respondent answered only about half of the questions correctly.

Another study, conducted by Pew Research, found that one in four Americans say that they won’t be able to pay their bills on time this month.

It has been said that knowledge is power, and if that’s true, then too many Americans lack the power to control their financial futures. Financial success rarely happens by accident; it is typically the outcome of a journey that starts with education.

Talking about money is one of the most important skills to being a fiscally responsible and a financially literate person. However, 44% of Americans surveyed would rather discuss death, religion or politics than talk about personal finance with a loved one, according to CNBC.

Why? Two major reasons are embarrassment and fear of conflict, even though the consequences can be grave: 50% of first marriages end in divorce, and financial conflict is often a key contributor. Additionally, it is considered rude to discuss money and wealth.

The missing component is financial literacy education and training.

Mastering personal finance requires you to look at your financial situation holistically and come up with a plan for how to manage your money. In this TD Ameritrade video, we’ll look at helpful principles for six personal finance topics:

1. Budgeting – focus on the big ticket items by cutting cost on the expensive costs such as cars and homes
2. Saving and investing – be specific about your destination and your plan on achieving your goal and reaching your destination
3. Debt and Credit – avoid high interest debt and loans on items that will quickly lose value
4. Reduce taxes – find ways to legally pay less taxes on the income you earn,
5. Avoid insurance for expenses you can pay out of pocket – purpose of insurance is to protect you in unfortunate scenarios.  60% of all bankruptcy is related to medical expenses
6. Investing for retirement. – don’t just save for retirement, invest for retirement.

Make high impact adjustments to your finances to improve your financial future.

References:

1. https://www.cnbc.com/2019/04/30/the-us-is-in-a-financial-literacy-crisis-advisors-can-fix-the-problem.html
2. https://www.tiaainstitute.org/publication/financial-well-being-and-literacy-midst-pandemic
3. https://www.pewtrusts.org/en/research-and-analysis/articles/2017/04/06/can-economically-vulnerable-americans-benefit-from-financial-capability-services