There’s a troubling financial blind spot for many Americans: a misunderstanding of how financial risk works. This isn’t just about betting on the stock market. It’s also about being aware of everyday financial risks, and preparing for them accordingly–even with something as basic as a rainy day fund. It pays to be smart about personal finance and risk.
Americans received a failing grade on overall financial knowledge, say the authors of the annual study from TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) at George Washington University. According to the GFLE survey, 63% of Americans are considered financially illiterate. “The level of financial knowledge is still very low, especially for a country where we are expected to make so many financial decisions, even starting from high school,” noted one of the study’s authors, Annamaria Lusardi.
To me, these were some of the major alarm bells in the study:
If you’ve had trouble saving for a rainy day, you are not alone. Many find most of their income consumed by basic expenses like rent, so the idea of putting money aside for a downturn becomes a non-starter. However, with better cash flow management, you can work towards clear rather than fuzzy savings goals.
Take stock of bills and read credit card statements. Take control of your cash flow by asking:
…for every item in your budget.
CNBC.com recently recommended these free online resources:
As I’ve mentioned in previous posts, for your small business to thrive, you need positive cash flow so you can pay your bills faster and grow as needed. You’re also better off with a larger cash buffer. Small businesses need to build up cash reserve and figure out how to maintain consistent positive cash flow. Brigade Bookkeeping can help you strategize for these goals. Small businesses are our specialty, and we look forward to assisting you!
Additional sources:
The No. 1 Personal Finance Lesson to Take Away From the Coronavirus
5 Free Personal Finance Curses That Will Help You Get Better With Money