The personal finance community is over-enthusiastic about financial literacy, and I get it. The more people know about money and financial services, the better equipped they are to manage their income and financial obligations.
But sometimes there’s a key part of the discussion we’re ignoring: financial literacy doesn’t do any good if there’s no money to manage.
There was I time when I thought financial literacy was the silver bullet to solve everyone’s money problems. Broke? Your fault, you need to budget/save/work harder!
For most of my debt repayment journey, I patted myself on the back for my discipline. I completely ignored the reality that the main reasons I was able to make so much progress were that I had a good salary, excellent benefits, and had pursued an affordable education.
Even though I’m aware of this privilege, I still sometimes only see through my rose-tinted glasses.
As advocates for financial literacy, it is important to check your financial privilege and ensure you are considering others circumstances and how this inevitably changes the ways people are able to manage money. You can’t budget your way out of poverty, and I think some people forget that.
I’ve maximized my opportunities and resources, but I’ve also been very lucky
I’ve worked hard on my accomplishments, and for that I deserve credit. But, that doesn’t take away from the fact that I’ve benefited from plenty of favorable circumstances.
Compared to American readers, I’ve enjoyed low education costs, virtually no healthcare expenses, and a tax structure that favored my student and recent graduate status.
Compared to other Canadians, living in Alberta meant I had access to both the strongest economy and the lowest taxes in the country. I’ve also never been disabled, laid off from work, or endured any other unfortunate circumstance outside my control.
What does all of the above have in common? They’re all HUGE factors completely outside the realm of financial literacy.
No matter how much you know about money, there are things that can’t be changed with money tips and tricks
It is both great and important to understand compounding interest, bank fees, the terms & conditions of your student loans, and how to budget. But, this knowledge will do little for you if you’re being crushed by an unfortunate financial situation outside of your control.
For those experiencing it, it can be hard to openly discuss the hardships of poverty and other financial struggles. But it is important to be open about money considering it is a huge stressor for most people. In fact, 1 in 7 Canadians live below the poverty line.
There are other ways you can put financial literacy into practice
Staying positive amidst an economic crisis, is no easy feat but it is vital. Things like spending and saving challenges might sound enticing to some, but if you don’t have the means, this does not necessarily mean you can’t take part in firming the grasp you have on your personal finances.
Consider gradually building an emergency fund of stuff, or even reading up on available resources to to better understand the systems that have put you in such a tight place with money.
Focusing on one financial goal at a time is a great way to start gaining more control over your finances, regardless of circumstances. If you’re drowning in debt, develop a realistic and non-straining repayment plan that is doable for you as an individual, rather than living up to the expectations of a capitalistic society.
And, there are always little things you can do like tracking your spending, using credit cards responsibly, checking your credit report annually, giving up impulse purchases, and avoiding paying unnecessary fees. These “little” things, are the most important at the end of the day.
It is important to recognize these 2 things:
- Financial literacy won’t solve all our problems
- Financial literacy is worth it regardless
For many people, financial literacy is the difference between living paycheque to paycheque or becoming wealthy. But I do wish we would stop touting it as the be-all, end-all of personal finance. Because there are people whom it helps a lot less.
Regardless, managing your finances is at the heart of financial literacy. Everyone should try to not get bogged down by the pressure of big savings or aggressive debt repayment. Instead, start with the basics to improve your personal finances. It is bound to make a positive difference!