Technology is capable of doing a lot of great things. For example, it is now possible for you to do everything from ordering a pizza to turning on the lights by speaking to a small device on your kitchen counter. Technology has linked the entire globe together via the internet of things.
One thing technology has not been able to do is produce better financial management. Sure, you can download smartphone apps that let you transfer money to friends effortlessly. You can put budgeting and accounting software on your computer. You can even pay for things with cryptocurrency.
With all this technology, personal financial management is not getting any better. Why? Financial illiteracy. No amount of technology has thus far been able to overcome our ignorance of basic financial principles.
People Don’t Know Financial Basics
Financial illiteracy is a problem of staggering proportions. According to data cited by Financial Advisor, 17% of adults admit to losing more than $2,500 in 2019 due to their own financial ignorance. Another 39% admit to losing more than $500 in the same year.
The data clearly shows that people are not only financially illiterate, but they admit to being so. They do not know financial basics like budgeting and debt management. Forget complex issues such as investing, retirement planning, and reducing tax liabilities.
It is true that you can use your smartphone to achieve better money management. But in order to do so, you have to understand what it is you are trying to accomplish. Managing your money reaches far beyond accessing your bank account online or using tap-to-pay technology.
It’s Time to Start Learning
The key to better financial management is a solid financial education. Address financial illiteracy and you will solve the problems that come with it. It’s as simple as that. If you are having trouble managing your finances, it’s time to start learning those fundamental principles that will help you overcome your troubles and get you on solid financial ground.
What do you need to learn? There are too many things to detail a single post, but try these four to get started:
Budgeting is the single most important thing anyone can do to improve financial management. It is the most basic financial principle of all. What is budgeting? It’s the process of establishing a spending plan so that your expenditures don’t exceed your income. If you are not living on a budget, you have no hope of better financial management.
Borrowing is a part of modern life. However, far too many people borrow too much. It’s time to learn about how borrowing works. It is time to learn about things like interest rates, compounding interest, different ways to borrow and, most importantly, the total cost of borrowing.
3. Debt Reduction
Hand-in-hand with borrowing is debt reduction. Most people have no idea how much it costs them to remain in debt. Likewise, they don’t realize how much money they could save by getting out of debt. Debt reduction is something everyone needs to know about.
Lastly, we Americans are poor savers. That’s not good because a lack of saving forces people to borrow or do without. Perhaps if we really understood the power of saving on a regular basis, we would do it more often.
Financial illiteracy causes a lot of problems. However, we do not have to allow those problems to continue. If we are willing to learn and make a concerted effort to educate future generations, we can make financial illiteracy a thing of the past. Then all of that technology will actually be worth something.