According to Investopedia, financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.

But what does that really mean?

I think it means: how schooled are you in finance?

I makes me think of my time in school growing up.

All those classes left me fairly well schooled in those subjects – even the ones I struggled in or didn’t like (I’m looking at you math class and all those laps we ran in gym class).

Because of those experiences, I know more about these subjects. However, I never had a personal finance class.

The closest I ever came to one was a junior high math class, where one of our little projects was to pick stocks and track them for a week.

There was no guidance on how a person picks stocks or even how to interpret all those acronyms around a stock symbol like P/E, EPS, or even open vs close. It was pretty much a free-for-all where we all picked name brands we recognized and competed for who made the most gains with our super random guesses.

I suspect experiences like this might be why some people think the stock market is almost the same thing as a weekend in Vegas.

The fact is, there are a lot of really basic finance skills and information that everyone can use that we generally don’t learn – unless you really go looking for the information.

If I worked in a high school, I would propose a Personal Finance class that covers these basic topics:

• Banking
  • Savings vs. Checking Accounts
  • What are interest rates?
  • What services to banks offer?
  • Pros and cons of brick and mortar banks vs online banking
  • How to write a check
• Budgeting
  • How to make a monthly budget
  • How to make an annual budget
  • How to budget if you have variable income
  • How to identify and plan for one time annual expenses
• Saving
  • Emergency Funds
  • How to utilize savings accounts for mid and long-term goals
• Credit Cards
  • Credit Scores
  • Interest Rates
  • How much an item actually costs if you pay it off on credit
  • How to select the right credit cards at the right time in your life
  • How rewards cards work
• Taxes
  • How to file your taxes
• Retirement Planning
  • Compound Interest
  • Different types of retirement plans (IRA, 401k, etc.)
  • Strategic goals to aim for
  • Health Savings Accounts
• Investing
  • Brokerage Accounts
  • How to read and understand stock information
  • Terminology
  • Tax Ramifications

When I talk about financial literacy, I’m talking about all of those topics. They can feel really overwhelming when you don’t have any or minimal knowledge on the subject.

It can feel like trying to tackle algebra when you haven’t learned how to add or trying to read Don Quixote on your own the first day ever of Spanish class.

Neither of those things are that hard though with the correct foundation.

For those of us who are self-employed freelancers, learning these skills are even more important. If you work for a large company, there’s probably an HR rep that you can ask some questions to. Even if you never go talk to them, the company is probably set up to help you figure out things like health insurance and retirement planning – quite possibly with direct deductions from your paycheck, so you never have to really think about it.

In the freelance world, we are all on our own to figure out every aspect of our finances. You have to learn how to be as proactive on the personal finance front as you likely are in the practicing, rehearsing, making part of your business.

If you’re starting on this path from scratch, congrats – you already took step one. You’ve started to look into ways to grow your financial literacy!

If you feel your finances are super out of whack and really need a one to one session to get them sorted, your best option is probably a fee only personal finance planner.

Since they’re fee only, you’ll only get charged for the hour or two of their time you use to get your financial plan sorted out.

If you feel like you’re on okay footing right now, but want to learn more and get a better handle on things, some books you can check out include:

• The Total Money Makeover by Dave Ramsey
• The Money Book for the Young, Fabulous & Broke by Suze Orman
• Money Girl’s Smart Moves to Grow Rich by Laura D. Adams

All of those include very actionable steps you can take to put your finances in order. Like anything in life, I think there are some points in there that you can disagree with and some steps you might look at and say you can think of a better way to approach that particular goal, but if you’re coming at this with no background info, those books are good starting points.

If you’re looking for some inspiration and some ideas on the why learn personal finance, I’d recommend these books:

• The Wealthy Barber by David Chilton (this is the book that really got me interested in personal finance)
• Rich Dad, Poor Dad by Robert T. Kiyosaki (again, a few things I disagree with in here, but definitely thought provoking)

And a few others that I have found helpful over the years:

• The Broke and Beautiful Life by Stefanie O’Connell (written by a performer)
• Your Money or Your Life by Vicki Robin and Joe Dominquez

I’m much more of a reader than a podcast listener, but if you prefer to learn that way, here is a link to a website with a good list of personal finance podcasts to check out.

On a scale of 1-10 with 10 being a personal finance guru, where do you feel you are on a financial literacy scale?