Importance of Financial Literacy
As a self-conscious, just-graduated-from-teenage-years young woman, we shouldn’t only be aware of how we look physically, how to put and blend the right make-up, style ourselves or post a selfie and the best duck face you could ever pout all over the internet. We should also be financially aware of where our allowances or paychecks go to. Are you a one day millionaire spending all your moolahs shopping every payday and broke for the next 15 days? Are you a breadwinner paying all your debts and bills at home without anything extra to spend for yourself and/or your girlfriend? Do you feel like you’ve been toiling and just making ends meet? It’s like putting our hard earned cash in a pocket with a hole all our lives!
My financial awareness was brought about by a book written by Robert Kiyosaki called Rich Dad's Retire Young, Retire Rich. It was recommended by a dear friend when I and my friends visited her after her surgery. I immediately read the first part of the book as soon as she handed it to me and I got hooked! After visiting her, some of my friends and I went to Bonifacio High Street to hang out a little. I couldn’t get over the book and searched for it in PowerBooks. When it’s time to go home, I still can’t resist reading the book and stayed in the bookstore to read some more. At home, I downloaded the e-book and finished it overnight! The book was very addictive and engaging that I can’t wait to read the next step to getting rich!
While reading the book Rich Dad's Retire Young, Retire Rich, it made me write a list of the things I love and hate. And my list goes like this:
Peace of mind; being stress-free
Achieving goals I've set for myself
Eating and trying out new restaurants
Make-up, fashion, photography
Not making a step to reach my goals
Getting bored; nothing to do
Not being able to work out
Not being able to eat out
Not being interested in anything
Forgetting/neglecting myself
It made me realize the things I really love and made me want to get and do all those things while also realizing that I have to get out of the situations I hate. It made me move. After making that list, I wrote some of his strong words to be put on my vision board so I can see it every day. Here are some of the things he said in the book:
“The biggest challenge you have is to challenge your own self-doubt and laziness.”
“It is your self-doubt and laziness that deny you of the life you want.”
“If you want to be rich you need to know the differences between good debt and bad debt, good expenses and bad expenses, good income and bad income, and good liabilities and bad liabilities.”
“If you stop learning, your money will soon go to someone who has continued to keep learning.”
“The people who win financially are those who are willing to do more and more with less and less, not those who wanted to be paid more and more for doing less and less.”
“What you think is real is your reality.”
It just hit me. The book made me aware of the power of leverage and identified one of the main reasons why the middle class and the poor work harder, work years longer, struggle to pay off debt and pay more in taxes is because they lack a very important form of leverage… and that is the leverage of financial education. What is leverage anyway? Wikipedia describes it as, in finance, leverage is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives. Important examples are:
A public corporation may leverage its equity by borrowing money. The more it borrows, the less equity capital it needs, so any profits or losses are shared among a smaller base and are proportionately larger as a result.
A business entity can leverage its revenue by buying fixed assets. This will increase the proportion of fixed, as opposed to variable, costs, meaning that a change in revenue will result in a larger change in operating income.
Hedge funds often leverage their assets by using derivatives. A fund might get any gains or losses on $20 million worth of crude oil by posting $1 million of cash as margin.
According to Kiyosaki, there are three things we should spend time acquiring in order to become rich. These assets are Real Estate, Paper Assets, and Businesses. I totally agree. Real estate raises their value over time while paper assets and businesses grow. I don’t have to spend all my life working as an employee when I myself can employ someone to work for me and even earn money while sleeping!
The book moved me to be financially curious and conscious. It made me hunger for financial intelligence. It made me think twice of my purchases and think even more on how to multiply my earnings. There are a lot of ways to multiply gain, we just had to have a capital and that’s where leverage comes in. That is also the part where we had to challenge our own self-doubt and laziness.
My friend from an investment company invited me for an explanation on how investing works and how your money can multiply while you’re asleep. This is the start of my continued learning. It is not enough that I am computer literate, it isn’t enough to everyone. We should all be financially literate. We should all continue to learn. If you want to tag along, just shoot me an email! The treasure hunt game is on.
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