What Is Financial Literacy and Why Is It Important?

Hey, what's up? This is Tim Pratt Jr. I want to thank you for taking the time to listen to this content today. I hope you hear something that adds value to your life, shaping your perspective, faith, and hope, as well as the application to see it through on this thing that we call life. Enjoy. Episode 8: What is financial literacy and why is it important? So before we get into the root cause of this episode, honestly, I'm probably not about to tell you anything that you don't already know. I just hope to convey the information that basically will re-spark some things for you to basically, you know, bring back that fire to engage and really take your personal finances seriously. And another thing I want to mention is that if you're just getting into this or you're kind of halfway in it, I always recommend Dave Ramsey. Now I'll be the first to say it is some things that now I disagree with him because it comes down to my discipline of personal finance that I know that I'm not going to do. But however, I understand why he teaches the way he teaches, and I am more than fine with submitting and wholeheartedly believing, um, 100% of what he does. And mostly that primarily thing is debt. Like, yeah, I hate it with a passion. I wholeheartedly agree with that message with him. But however, it's just some things that I slightly do different because it comes down to my disciplines because of where I'm at in my life now with finances and things. So, and I love that it comes from that he understands that even with all the information out there, that's not even really the biggest problem. It only takes about 20% information, but he says 80% behavior because this thing is about seeing it through. And that's why I love the programs and the Financial Peace University and all of that. And I'm not making no money off of this, you know. Dave Ramsey is not paying me to say this at all, but it's really true because I've worked with a lot of these programs before in the past, like when I was real big on just doing like nothing but personal finance, being a personal finance junkie. But however, it is one of the most sought after when you in the ministry. I'm a faith-based, you know, podcaster, if you may say, if I may say on here. But nevertheless, I think he is one of the best when it comes, because at least I know you're not going to be deep in debt, you know, and making just stressful decisions with taking in a lot of other advice from many other different sources. And that actually leads me to one more transition with— you have a lot of so-called experts out here, as well as you have a lot of legit experts out here, coaches and so on. But I do feel like the playing field has been leveled now because that information was so scars, you know, that you had to pay all this money just to get it in order to improve your financial situation, where that's not the case anymore. But we just gotta learn how to rightly divide, and it's still very important to become financially literate even if you do turn your money over to someone, you know, Wise Counsel or whatever, because it's still your decision at the end of the day. So even if you are making a lot of money and you're just like, oh man, you know, I'ma just pay this coach or this expert to help me with this, you you still need to have some fundamental things to at least know what they're talking about, because what if they're taking away from you and you can't even detect it? So that's why it's still important. So general definition of financial literacy, we transition to the core, uh, meaning a core content of this episode is that financial literacy is knowledge that allows an individual to make informed and effective decisions with all their financial resources. To me, in the most simplest terms, is basically understanding the way money works. When you're dealing with personal finances, man, it touches from managing your banking, budgeting, automating finance, whatever one you want to use, savings, investments, estate planning, and etc. You have to be literate. This is why it's important. You have to be literate in order to make these type of decisions. Would you hire a CFO that's not literate, a chief financial officer of your company? Let's think about that for a minute. Are you a good CFO of you incorporated? Chief Financial Officer. Right now, if you had to have a meeting with yourself, say half you as the CEO and half you as the CFO, however you want to look at it, or 51/49 to make it really make sense, whatever. But I really want to put this on your mind. A chief financial officer of You Incorporated. Right now, can you honestly make a decision to say, I am happy with the way you as the CFO have been running You Incorporated? I'm happy with the way that I've been stewarding and managing over the finances. So I'm gonna extend your contract and give you a bonus, or are you saying that it's time to be fired and let go? That's a personal question. I just want you to like pause this episode and think about that. Then if you say, well, I don't have the right information, or I'm not trained and equipped, I don't really know, I can't do what I don't know, kind of go back to one of the latest episodes, one of the first two episodes I think I did. Why don't you have a coach or a mentor in this game? It's— we don't have no excuses in today's time. Uh, we're not gonna, you know, play that game. And that's one of the things that I think, you know, just with me being big on ministry, that a lot of people in local churches play. Although it's better now, but I still see it in a lot of small to mid-sized churches, is that, well, I can't do it, I don't know. Well, I'ma just— the Lord is just gonna touch my money and do it for me. God is not gonna do anything that he's instructed you to do and that he works through his people down here on this, this world. Let's just be straight. A lot of us, man, we— yes, I have a total dependence on Christ and things like that, but I understand he also gave me a mind for a reason and he works through his people. And it's a lot of good mentors and coaches that are faith-based in this world. And so we got to come up out of that and we got to plug into things.. And one thing that I'm also learning is that pay people, man. I have a heart to just help. And you know, when I transitioned to want to start a business, I would just help pour out, give a lot of free information. But as I kind of got connected with some mentors, they just started teaching me. They was like, no, Dave Ramsey, big faith-based person, very affordable, but you still have to pay. For the most part. Sometimes, you know, it's giveaways and things like that, but for the most part you have to pay because I have to make sure you have a— we have a vested interest because I can share information freely all day, but you might not see it through. You might not have the same level of accountability. But as I mentioned kind of a while back with the coaching series, is that when my wife and I signed up for a gym, or, you know, we looking for a health coach or fitness coach, something like that, Oh, we're showing up because that money is going out. But if we just have somebody say, oh yeah, I'll take you up under your wing, I'll do this, I'll do that, and we're trying to, you know, set up appointments with them and stuff like that, and we don't have that commitment, that vested interest, we might not really see it through that same way. So that's very important that you're going to have to understand when you seek out a mentor, or I mean, not necessarily mentor because a lot of times they don't charge and you have mentor programs, but a lot of times, especially with a coach Because they're going to make sure you're on the right path. You know, it's just like prime example, kind of rolling this into the CFO of You Incorporated. A lot of times when you look at it, this word or this statement, I deserve, it messes up a lot of people when it comes to having a financial literacy or a financial legacy. It's like going back to what Dave Ramsey said, the 80/20, 80% behavior, 20% knowledge. You're paying for that most of the time, that accountability. When I work with people, yes, it might be little nuggets I can drop and little things to say, oh, I didn't look at it that kind of way. Same thing that happened with me. But as I got on down into it, I didn't really need my financial coach or financial advisor, so to say, for a lot of the information now until I got like some— it is sometimes that you do, like it is some challenge. Oh man, this doesn't make sense. Can you help me? You know, make sense of this concept. But for the most part, it came down from me seeing it through and making the decision. And with them, that's one of the things I learned when I was working with this, like, kind of, I guess you could say, Dave Ramsey ELP, endorsed local provider, is that I deserve— he was like, you gotta, you have to leave that in order to get to where you want to get. So it's like, for instance, like I had bought a Camaro, just almost supposed to— almost done paying off Altima that I had, turned around and bought a 2013 brand new Camaro. And it's nice, still have it to this day, it's paid for in 3 years. But I actually lost 3 years because I almost had just paid off Altima, but I felt that I deserved when I probably could have invested that money went just as hard, you know, not paying that interest and just on and on and on. Maybe would have bought a used one, but I probably could have just went just as hard and then turned around and paid, got a better deal and paid cash and kept investing where my investments could have paid for that Camaro, you know, and just got things a lot earlier, but that I deserve. So it's like when you're maybe dating, married, you know, want to take that trip and your financial situation is jacked up, but you've been working so hard and then boom, there you go using a credit card. Then you, something comes up. You know, we use credit cards for emergency funds. That's why Dave Ramsey hates them so bad because he knows that behavior statistically, a lot of people have a credit card. And I used to hear that growing up, don't use your credit card unless it's an emergency. Well, no, you need to have an emergency fund. Yes, I still have my credit card. I pay it off every month. I don't chase airline miles. I don't believe in paying all this money for credit cards, annual fees. Although some people, executives and corporate executives, their lifestyle, like they literally spend probably in 3 months what I make in a year, you know, these $300,000, $400,000 and up people. So I can see some justification with them, true enough. But with me, I have an appropriate credit card. For my needs, for my family needs. My wife and I basically share the same one. We kind of accumulate a little bit more, and we just go from there. So get away from the I deserve. This is why it's very important to plug in with a coach, or like I say, seek out a mentor. But kind of transitioning and, you know, closing out the CFO of You Incorporated, I want to tell you just a little story that I read in this book called Legacy Journey, once again by Dave Ramsey. But it really stuck to me because I feel like this is why a lot of us are not getting ahead. And it's really not a money issue, but it's more so a contentment issue. And contentment isn't a lack of ambition or action or intensity. Contentment is just saying that, okay, my heart posture, Lord, I'm thankful, I'm grateful, gratitude for where I am, although I'm on a journey of trying to get to where I want to get to. You know, a lot of times people turn, especially in the faith-based community, they let contentment turn into complacency. Well, I'm just not going to do this. I don't believe. I'm just going to get mine on the other side. You know, no, I feel like God created us. He put us on this earth to basically have dominion. We shouldn't be in debt. A lot of times, you know, and I'm kind of going tangent, but I'm just being obedient to the Spirit, Holy Spirit. It's just that, you know, I pose a question to people and I say, hey, right now I want you to sow $300. $500 right now this month because we're gonna try to do XYZ, pay off this debt in the ministry so we can do this, or go into the community. And it's like, man, we can't. We want to, but we can't. I say, you can't? Okay. I don't want no one to basically tell me this out loud in front of all of these people, but write down your card note right now if you have wanted to. Write down how much you paying in credit card a month. Write down your mortgage. Now, hold on, with mortgage now, it is some grace with it. With debt, when it comes to debt, I feel like that the mortgage is acceptable. And even Dave Ramsey agrees. Like, if you're going to have any debt, he feels like that's okay, but you should still be striving to pay it off early as possible. But to get back on track for this thing, just write that down, but put that maybe on the side to itself, okay? Because some people— and the reason why I say that is because some of us from mortgages or even rent, we overbuy because of status. We have too much, we're house poor. You have a real big nice house to try to keep up with the Joneses, but you maybe should downgrade. That's why I say put it on the paper. Same thing with an apartment. You paying $1,300 when you should probably be living somewhere depending on where you live. I understand different type of cost of living is, but you know, you might need to be paying $800 a month, something like that. So that's why I say put that on the paper. But nevertheless, moving along, write down your student loans. So you have these credit card payments coming out, student loans, and car note for sure. Some people paying $600, $700 a month for a car that only really costs $200 a month. Should be paying $200, really shouldn't be anything. You shouldn't have one at all, but we do. And I feel like that you should be gauged by percentages, and that's what we'll get into in the next episode. Like, what I'm basically saying is that that car, you know, including insurance, stuff like that, it shouldn't be accounting for no more than 15% to 20% of your monthly budget. But however, it's taking up 50% of your budget because I deserve. You driving a car that you really, you can't afford it because you're we can't afford it truly because we're paying a note on it. But then you really can't afford it because you're paying almost like a double note on something when you probably should— you have a BMW when you should be driving a Toyota Corolla, if that makes sense. So going on and on is that that's what gets us in that situation. And so then now when it's like, hey, can you— so can you be generous or can you help this person or that person? Without looking for nothing in return, it's like, I can't. But really, you can. When a lot of times with people— and we sometimes we get even more detailed— when you go and you look through those numbers, it's like, man, dang, I'm paying everybody else and I can't really put my money where I really want to. But that's how we're conditioned, you know. We're— it's so easy to not, you know, it's like I'm not saying you should go in debt for a business, but at the same time, it's like, you know, we condition students, go pay $50,000, $60,000, $70,000 for a degree, but yet then we can't even go get a $5,000 loan to really start a business and take a risk. When you— now you stuck with $50,000, $60,000, $70,000, not including interest, with something you may or may not even be able to use. So it's like I say, it's just all the fundamentally disciplined. But kind of closing out this episode, because I try to keep these episodes no longer than 20 minutes, 10 to 20 minutes, is that I want you to think about a couple, two different couples, and one is making $40K. And this is what I kind of learned after Legacy Journey. One is making $40,000 a year, but they have no debt. They have a full emergency fund that'll last them 6 months, $200,000 in their 401, college fund for their kids. Everything is awesome. They're content. Don't have the biggest house, have older cars, but they paid off. No credit card debt, no student loans, and they're just budgeting. They might can't take trips every month, but they can take a trip maybe like once a quarter or twice a year. But you have this other couple that's making $80K apiece. So the first couple, $40K a year, $80,000 a year in the household. Both of them make $40K. Then you have the second one, both of them make $80K, which is $160,000 a year. And they're screaming for help, but they have $50,000 in credit card debt, $80,000 in student loan debt, over $30,000 in auto loan, no money in savings, which means no full emergency fund if something happens. Something probably is getting took and they have no money in retirement. I guess they feel like they're going to be able to work up until they're dead when we see that more and more homeless people are unfortunately becoming elderly people. But this is the couple that's screaming for help, but they make twice as much as the first couple. Now of course, if they were literate, financially literate, kind of the whole essence of this episode, and understood how money works they wouldn't be in this situation and actually seeing it through, seeing the information that they have been given through. And so we'll get a little bit more detail in like what this understanding financially, like what really like truly makes it up. And so we'll get into like a comprehensive financial plan and then the importance of budgeting or automating your finances in case you hate that word budgeting. So that's it. I just want you to take this episode and just think about it and ask yourself, if I was the CFO of You Incorporated, you, am I being a good steward? Do I deserve to keep my job, or is it time to basically write up that letter of resignation? Hey, thank you so much for listening to this content today. I want to encourage you, if you haven't already, to subscribe to it. And share it with family and friends on your social media feeds. And you can also go over to www.timothyprattjr.org in order to find out more about the blog as well as other things that I offer on how to connect with me. So with that being said, I hope you have a blessed day and continue to see this thing through that we call life.