Financial Literacy with the Happy Hour Ladies
Today is the last Friday of the month and my regular listeners know that on the last Friday of the month, I host the happy hour on the podcast where I gather great friends with me to drink cheap drinks and talk about money topics. Since this is the last Friday of April, and April is Financial Literacy month, the Happy Hour ladies and I are talking about financial literacy — when we gained it, the reason it’s a problem in our country, and ways we can get more comfortable with it. As always, this was a fun and informative conversation that I hope you enjoy.
What are we drinking?
Melanie from Dear Debt — Aviation (Gin, Crème de violette, Maraschino liqueur, and Lemon Juice)
Tonya from Budget and the Beach — Pinot Grigio
Liz, Mrs. Frugalwoods, from Frugalwoods.com — Caramel Vodka Martini (Smirnoff Kissed Caramel Vodka)
Shannon — Grapefruit Schweppes and Vodka
Podcast Notes
Liz will be at the Financial Gym on Thursday, May 2, from 6:00pm to 8:00pm, to do a fireside chat.
April is Financial Literacy Month. Shannon’s first side hustle was writing for the Young Adult Money blog five years ago.
When did you start thinking about the term financial literacy? Did you think you were financially literate?
Liz didn’t think about the term financial literacy until after she started her blog. She started Frugalwoods as a personal journey documentation and went backwards and realized she was a personal finance/FIRE writer. Liz’s early experience with managing her own money was from a place of fear: she was afraid to spend it and was afraid of debt. That is almost as unhealthy as overspending, because she felt paralyzed. She was scared every time she spent money. She didn’t receive any financial education, but when she got to graduate school, she had the thought that she shouldn’t pay for that degree, so she worked at the university and got her degree for free. Liz is surprised that she made it as far as she did with as little as she knew. She still learns every day, even over the course of writing on her blog and being on the podcast. It is a blind spot for a lot of people and they shouldn’t feel embarrassed. People don’t have access to Personal Finance 101. It is important to start at the beginning. There is no shame or embarrassment.
Melanie learned the idea of financial literacy after she graduated with her bachelor’s degree. She thought she took out $18,000 in student loans, and it ended up being $23,000 because of interest. She didn’t realize the balance was growing while she was in school. She didn’t know the concepts around interest, student loans, capitalization, filling out taxes, etc., and she had to learn it as she went. She didn’t think about the term financial literacy until she started writing about personal finance. There are so many terms we are not taught, especially around investing and credit, it keeps us in the dark and increases our shame and anxiety around money.
Tonya always had financial literacy in the back of her mind, because her old journals reference her worry about not having enough money or spending too much. It was really around the time she started her blog, in 2012. She became more financially aware at that time, because she started reading books and other blogs. It has been a slow progression. Even though you can be aware of what you need to do for good financial health, it doesn’t mean you are going to do it. It is similar to losing weight. Most people know what they need to do, but it doesn’t make it easier because there is so much emotion around it.
Shannon didn’t think about financial literacy, but she thought she was good at finances and she had a finance degree. Shannon knew she wasn’t good at the day-to-day stuff, but she thought because she didn’t have credit card debt, had a 401(k), made a bunch of money, bought at house, and had a good credit score that her finances were good. When she became a financial advisor and started working with people, she realized how little people knew about basic investment terms. Shannon saw so many people who didn’t know what equities and stocks were. She then realized that she wasn’t as far as she should be.
If you don’t know it, there is no reason that you should know it. Don’t shame yourself. Unless you were talking about finances growing up at home or at school, which most of us weren’t, you didn’t get an education on it. Billions of dollars a year are spent on advertising and marketing to get us all to spend money. The odds are stacked against us.
A big problem in the financial services community is the assumption that people are further along in their financial literacy knowledge then they actually are.
Financial literacy is just like regular literacy: it has to start at home. It has nothing to do with intelligence. The Gym’s most financially literate clients had someone at home that talked about it when they were growing up.
You can make financial conversations age-appropriate. Liz talks to her three year-old daughter about it in simple terms.
Shannon started the concept of the Financial Gym when her son was five and she has been talking to him about it ever since.
Financial literacy is critical, just like reading.
If you don’t know how to read, someone will take advantage of you. It is the same thing with financial literacy.
The Gym is producing videos for Financial Literacy Month and Tonya is editing them. Tonya didn’t know the differences between an ETF and a mutual fund until she edited the video.
If you are feeling some sort of shame because you are financially illiterate, remember that most of the country is in the same place. It is not like it was taught, but don’t stay that way! Commit to knowing.
What are things that people should absolutely know to get financially literate?
Tonya: People profit off of people not knowing. Most people jump to a financial planner without knowing about the fees and what a fiduciary is and they become frustrated and don’t know where their money is going. Don’t assume you need a financial planner. There are other routes to go. Investing is more accessible than ever to do on your own. The barrier to entry is much lower than it used to be.
Shannon: The other extreme issue is there is so much information to sort through. Investing, credit, debt, insurance, budgeting, and retirement are categories that people need to learn more about.
Liz: If you hear a term you don’t know, just Google it. Don’t feel like you should already know everything. Other than the blogs of the Happy Hour ladies and the Financial Gym, the Consumer Financial Protection Bureau has a program called Money as you Grow, which is intended for kids and teenagers, but it is a good primer. Liz recommends the book The Simple Path to Wealth, by J L Collins. Another good book is Personal Finance for Dummies. Most of us fall into pretty general categories of what we need to do with our money. It is not going to be that complicated.
Melanie: People need to know about credit utilization and what they can do to improve their credit score. Knowing about interest rates is important, especially with student loans, because interest accrues daily and that is different than other types of loans. It is important to know the basics of investing and the difference between stocks and bonds and the difference between retirement vehicles. Don’t get overwhelmed if you don’t know all of this stuff. Nobody knows about it until they start looking into it. Not everyone’s parents talk about this and it isn’t taught in school. Even if you learned it from your parents, you may need to re-evaluate the information because mindsets change.
Understand what all of the words mean and then you can apply them to your situation. Step 1 is to get an emergency fund and pay off your debt.
You need to start with the basics. How do you know if it makes sense to pay off your debt or invest if you don’t know what your interest rates are and how they impact you? It is all about the building blocks and it isn’t rocket science.
Shannon wasn’t interested in her own personal finances, she was interested in making money. She didn’t get interested in it until she started helping people with money and realized there were people who were nowhere close to where she was.
The Financial Gym exists to improve financial literacy for this and future generations. If you are not financially literate now, you owe it to yourself to learn more. You will be more calm and collected in your decision making. If you have children, are thinking about having children, or if you have nieces or nephews, you owe it to the next generation. We can’t keep letting this go on. We know better, so let’s do better.
One of Tonya’s favorite resources is Your Money or Your Life. One of the first books Tonya read on personal finance was You Don’t Have to be Rich, by Jean Chatzky. Jean writes in a very user-friendly way that made sense to Tonya. Now Tonya stays accountable by just staying engaged in the personal finance community. If she needs specific information, she will just look it up online, but she feels comfortable about the day-to-day things.
The Financial Gym offers a lot of free resources. There is a free, weekly webinar every Wednesday. There is the newsletter and a blog, and they are committed to financial literacy.
Shannon is a big fan of podcasts. Financial literacy is like learning a new language and sometimes it is difficult to read the information.
There are so many free podcast now. Be Wealthy and Smart, with Linda P. Jones, is one of Shannon’s favorite podcasts. Listen to podcasters that make sense to you. Radical Personal Finance, with Joshua Sheats, is another one Shannon recommends.
This will not all apply to everyone. You don’t need to consume everything all at once. Look into one topic at a time and only those that apply to you. Don’t fall into paralysis by analysis. Focus on a topic you want to learn more about. When you first start reading, you don’t start with Moby Dick.
There is so much information out there. What are the specific areas you feel most insecure about? Look into those first. Just start!
Don’t be intimidated by all of the information. Michael Kitces wrote an article called Backdoor Roth IRA Contributions that is complicated and Shannon has joked that it has taken her a few times reading it before she understood what he was saying. There are some things out there that are next level and you don’t necessarily need to know about them. It probably doesn’t apply to you, so don’t worry.
There is a lot you can do with what you already know. You can track your spending and know your take-home pay. You can know what your gross and net pay is. Write out every debt you have and look at your statements to figure out your interest rate. This will give you a picture of where you stand and will help you identify what you need to work on.
Tonya likes using the app Personal Capital, so she can see what is coming in and what is going out. It gives you a better appreciation of what you have. It is reassuring to have it all at your fingertips.
Don’t be afraid to consolidate into one bank or one checking account. You don’t need to have bits of money in various checking accounts.
You don’t need be a Wall Street guru to invest.
Fidelity did a study of the best performing accounts and found that the investors were dead. They weren’t actively managing or doing anything special with their accounts.
The scariest thing is not being literate. You owe it to yourself to know what is happening in your financial life and knowing what you have.
Even if you are scared, open your statements. If you don’t know what it is, call the 800 number and have them explain to you what it is that you have.
If you have an employer-sponsored account, go to the 401(k) provider. Never feel like you have a dumb question. It is their job to explain it to you.
The Federal Student Aid website is boring but has a lot of good information.
The IRS.gov website is a great resource for tax information.
Investor.govInvestor.gov has good basics of investments.
Just start. Know where you are at right now. You cannot move forward unless you know where you are starting from.
The Happy Hour ladies are all proof that you can start and learn this information later in life.
Learn more in order to give yourself peace of mind and so nobody takes advantage of you. Take some time and invest in your financial literacy. You deserve it!
TAKEAWAY: My biggest takeaway is for you to make a commitment to your financial literacy and seek out every resource you need so you are empowered by your finances rather than afraid or confused by them.If you want to work with my team at the Financial Gym to help you become more financially literate, remember that Martinis and Your Money Listeners get 15% off Financial Gym services, and my financial trainers have seen it all. No matter where you are starting, we have the tools and resources to get you where you want to go. So head over to, or send friends to, financialgym.com.If you have any topics you would like for us to talk about during happy hour, please feel free to email me at shannon@finblonde.com or tweet to me at blonde_finance or join the private martinis and your money Facebook group and let us know. Until next time, take care!!