Economic News

Celebrate 'Financial Literacy Month'… frugally

(4/6/2011) - Instead of spending money on lavish gifts and throwing wild parties to celebrate this special event, you are supposed to do just the opposite while getting financially literate.

April is National Financial Literacy Month and chances are you are already a week or more behind in the "Thirty Steps to Financial Wellness."

But that's okay, because you can start the 30-day program anytime and you should.

Understanding budgeting, the use of credit, saving, financial goals and related matters helps people stay in their homes and out of bankruptcy and other tight money spots, even during hard times.

It's why the new federal Consumer Financial Protection Bureau will include an Office of Financial Literacy.

To that end, Thirty Steps is one of many programs, events and activities designed to get you more fiscally fit.

In 2000, The Jump$tart Coalition for Personal Financial Literacy began promoting April as Financial Literacy for Youth Month. Financial literacy taught at a young age is like preventative medicine. The idea was: Teach what's right before they do wrong.

After a growing number of surveys revealed adults often failed financial literacy tests, the U.S. Senate in 2004 decided what's good for kids is also good for their parents and passed a resolution officially recognizing April as National Financial Literacy Month.

For example, the recently released National Foundation for Credit Counseling's annual Financial Literacy Survey revealed more than two in five Americans grade themselves as C, D or F in their knowledge of personal finance, acknowledging that they lack the know-how to make sound financial decisions.

At the same time, 26 percent of U.S. adults said they are spending more than they did one year ago, changing, perhaps for the worst, conservative spending habits they adopted during the recent recession.

"An admitted lack of personal finance skills coupled with increased spending is a recipe for financial disaster," said Gail Cunningham, spokesperson for the NFCC and active Financial Literacy Month player.

"The good news is that just over three in four, 76 percent, recognize that they could benefit from the advice of a financial professional. Hopefully, this indicates that Americans will take the steps necessary to improve their financial literacy instead of falling back into the financial sins of the past," Cunningham added.

That brings us back to those Thirty Steps.

Brought to you by non-profit credit counseling agency Money Management International, Thirty Steps offers a day-by-day step to financial wellness, beginning with Step 1, a gut check: Be committed to changing bad financial habits. That's easy enough, but it gets harder as the steps proceed.

For example, during the 30-day program, among other steps, you'll have to:

• Get motivated with a self assessment quiz to assess your current financial situation. Do you plan ahead for large expenses? Do you set and keep financial goals? Do you follow a budget?

• Calculate your net worth. Knowing your net worth is the best way to know exactly what your starting point is, in any financial plan you develop. Putting together a balance sheet is quick and easy, even if you aren't a finance expert.

• Create a safety net. Bad things sometimes happen to good people. To prepare, financial experts agree that consumers should aim to have three to six months living expenses saved for emergencies. A calculator helps you determine how much to set asides.

• Track your expenses. You need to know where your money is going before you can cut spending. A record of daily expenses form gets you started.

• Identify ways to reduce spending. Save loose change. Cut soda consumption. Bag your lunch. Send free e-cards instead of buying a card. Cut premium cable channels. Small changes can mean big savings.

• Consider a dream team. You don't have to go it alone to make your financial dreams come true. Get help from a tax advisor, credit counselor, financial planner or attorney. Working with one or more can help put your financial puzzle pieces in place.

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