Category: TRIO Financial Literacy

During the past few weeks, we have discussed the first component of financial literacy, earning.

The next segment we will explore is spending. By this point, you should be aware of where your income derives from and how much of it is disposable/available to use for whatever you desire. In a perfect world, all our money would be disposable and never-ending.

Who doesn’t like to spend money? That is its purpose, correct? Wrong. In and of itself, money has no real value. It is as valuable as we make it to be. Money’s purpose is not for frivolous spending,

“Money derives its value by virtue of its functions: as a medium of exchange, a unit of measurement, and a storehouse for wealth” (Beattie, 2020).

Now that we have a general understanding of money, let’s look closely at its function.

Spending money should be a well thought-out process. A process that affords you the ability to use it as a tool and not a precious possession. Spending can “be regarded as complementary to personal saving, investment spending, and production in an economy” (Investopedia Staff, 2020). In layman’s terms, spending money is/should be the perfect way to increase your overall value.

You may be reading this and thinking, “that makes no sense,” and you are correct. In this current mindset, it is insane. However, it would be best if you let go of the current definition of “spending.” Money is not spent; it is used. The value lies in what you are gaining due to using it as a point of exchange. Are you exchanging it to grow your savings, assets (anything with value) and fuel the economy so that you can make more?

It’s the idea of your money should be making money for you. If your money is not making money for you, it is not that you don’t have enough. But could it be that you don’t budget well? Good budgeting and planning are the bedrock of good spending. Budgeting is just planning how you will spend money so that you able to meet your financial goals. During the next seven days, please take a moment and seriously consider your monetary objectives, write them down.

Next week we will be taking a closer look at budgeting so that you can reach those goals. Let’s build!

References:
Staff, I. (2020, December 30). Consumer spending definition. Retrieved February 25, 2021, from https://www.investopedia.com/terms/c/consumer-spending.asp

Beatie, A. (2020, July 17). The History of Money from Barter to Banknotes. Retrieved February 25, 2021, from https://www.investopedia.com/articles/07/roots_of_money.asp

Financial Literacy is broad and deep. There is much to be understood and gained from seeking the understanding of being financially responsible. This week we will continue in exploring the first component of financial Literacy – earn.

Now that we are aware of what it means to earn money, let us examine making money. Making money is what the “American Dream” is all about. It is the cornerstone of American capitalism, entrepreneurship. For the sake of staying on topic, we will dig deeper into capitalism in a later blog. Making is “when you use your own time and energy and a bit of creativity once and get paid over and over and over again” (Donati, 2020). It is your dream and passion on display in ownership form. Making money is when you are independent of another source for financial growth.

Making money can look several ways. For example, observing a societal need and providing it need repeatedly is making money. Bottling water – think of how society has benefited greatly from one idea and think of how much money that person has made and will continue to make. That one idea has placed that person in the driver’s seat of their life related to financial wellbeing. Other examples are writing a book, starting a business by meeting a small local need, or in this digital age of being a social media influencer.

In the finance world, this is referenced as passive income. Any entrepreneur would express that there is nothing passive about making money freely. It takes grit, hard work, and dedication while earning money to keep producing cash, but it’s attainable. What is the takeaway? In whatever way you choose to get your money, be sure that it is decent. Be sure it pulls you just a little closer to financial freedom. Earning from an entity provides you with the safety net and surety that you will have an income for hours spent working. It is a great place to start if what you are choosing as an avenue to make money has a slow return. The name of the game is – earn! In all, you do make sure that you are earning. Let’s Build!

Reference:
Donati, E. (2020b, August 25). How to Earn Money vs How to Make Money. Mint.Com. https://mint.intuit.com/blog/personal-finance/yes-earning-money-and-making-money-are-different/

Welcome back to the TRIO Financial Literacy Blog! If this is your first time reading the blog, welcome and before moving forward, take a moment to read last week’s as each build upon the previous. Looking back, we learned that there are five components to financial literacy; earn, spend, save and invest, borrow, and protect. This week we will explore what it means to earn.

Before you can set a budget, pay bills, save and invest, or purchase the most amazing dessert you can find, you must know how much money you have accessible to you. Having money typically happens in two ways by earning it or making it. Understand that printing money is illegal and is NOT the same as making money. Earning is “when you trade your time and energy for money” (Donati, 2020). In laymen’s terms, you earn by the hour working during the time allotted. In these cases, you’re dependent on another entity to earn money, and that entity most likely will only pay you once per hour you spend working.

Earning money can be exciting and rewarding when spending hours working on or as something you find joy and passion doing. Both time and energy are limited resources. However, before we can move forward as financially literate people, we must know precisely where our money is coming from and where it is going. As an earner, you should be receiving a paycheck for your time and energy. On that paycheck, it is vital to identify your gross and net income, along with any other deductions. Your gross income is the total amount of money you are paid before income tax is removed. Your net income is the real money you are paid after taxes and deductions, or “take-home pay.” Deductions or withdrawals are items such as employer health insurance or retirement plans deducted after taxes before receiving your “take-home pay.”

You may be wondering why are gross, net, and deductions vital as they relate to earning. Your gross income is what you would use if you ever wanted to negotiate a pay raise or on a loan application, or when applying for a credit card. Additionally, your net income is the actual money you have on hand to make purchases and set a budget to save and invest in making more money. Who doesn’t like more money? Certainly not us! Today, don’t just glance over your pay stub or only accept your direct deposit as final; look closer. Hiding from the numbers will not change or grow them but understanding them will. Awareness is the gateway to clarity and that “clarity” positions you to make money. Let’s Build!

Reference:
Donati, E. (2020b, August 25). How to Earn Money vs How to Make Money. Mint.Com. https://mint.intuit.com/blog/personal-finance/yes-earning-money-and-making-money-are-different

The purpose of the blog is to provide you with the necessary skills for a sense of financial awareness.

We are living in a time where information is freely accessible via the world wide web. However, it can be challenging to research, then apply what you’ve gathered. What if the information is not reputable, or what if it just merely does not work for you? Navigating finances can be scary if financial literacy has not been the culture in a person’s life.

What is financial literacy? Financial literacy is “the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial wellbeing” (The President’s Advisory Council on Financial Literacy, 2008). A lack of financial literacy can make it hard to navigate proper decision making related to finances, such as choosing a bank account, school loans, credit cards, insurances, or just creating and following a day-to-day budget.

Is it possible to have healthy finances? Yes.

While researching financial literacy five key components consistently appear. The five components are earn, spend, save and invest, borrow, and protect.

During the continuation of this blog, we will investigate to better understand each of these components of financial literacy. I want to caution you that as we explore, together, that you take what is necessary for your financial health. In other words, this is not a one-model-fits-all blog. This is a person-centered-approach blog where you collect information that is beneficial for your financial wellbeing. Let’s build!

Reference:
President’s Advisory Council on Financial Literacy. (2008, January 22). Retrieved February 04, 2021, from https://web.archive.org/web/20100602010158/http://www.ustreas.gov/offices/domestic-finance/financial-institution/fin-education/docs/PACFL_ANNUAL_REPORT_1-16-09.pdf