Financial Literacy

Financial literacy is the ability to understand how money works in the world: how someone manages to earn or make it, how that person manages it, how he/she invests it (turn it into more) and how that person donates it to help others. More specifically, it refers to the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources.

While many organizations have supported the financial literacy movement, they may differ on their definitions of financial literacy. In a report by the President’s Advisory Council on Financial Literacy, the authors called for a consistent definition of financial literacy by which financial literacy education programs can be judged. They defined financial literacy as “the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being.”

How financially literate are you?

Here are a few simple tests of your knowledge:

http://www.usfinancialcapability.org

http://www.mymoney.gov/quiz/Pages/Quizzes.aspx 

Happy Investing!

Financial Literacy

One great benefit of a long vacation is the opportunity to catch up on reading. Here are a few more great quotes on investment and financial security from Garrett B. Gunderson's Killing Sacred Cows:

"True investors don't invest in anything that they don't know how to make productive...."

"One of the most important and effective ways to mitigate risk and identify a good investment is to understand the value proposition of any investment opportunity...."

"...If a person cannot tell you quickly and clearly how, exactly, she is creating value with her idea, she may be hiding something...."

"If we allow ourselves to fall prey to the concept that in the long-term our returns will average out, we're allowing untold and unanalyzed opportunity costs to affect the course of our lives. The bottom line about averages is that they are completely useless in making investment decisions...."

"The most important way to overcome the myth of risk is to learn how to reduce your risk to near zero in any investment opportunity. This is accomplished through education, understanding your abilities and how to produce value with them, and aligning with principle instead of being driven by technique and strategy alone."

"What collateral exists in typical stock market 'investing?' How many so-called investors can control the interest rate, payment, down payment, and time period that affect their investments?....How can this even remotely be classified as investing?"

The author loves the idea that real estate investment is secured by collateral, that bank lending is secured by collateral, and that these are all forms of protection for the investor and the lender. One of the reasons I personally believe in income-producing real estate as a path toward financial independence.

Feel free to leave your comments on investing here.

Happy Investing!