EP 152: Financial Literacy vs Financial Education for Beginner Investors

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Financial literacy vs. financial education: do they have an impact on the success of your future? In this episode of the 5 Year Millionaire Podcast, I dive deep into the concept of financial literacy (aka financial education). I provide some simple and practical advice to help listeners transform their approach to finance. Overall, you really start to see the power that investing can hold when making these financial decisions. 

I start with sharing my own definition of financial education. I frame it as the ability to understand the ramification of any decision that involves some component of money and finance. At the end of the day, any decision that you make the has to do with money, also involves a direct result or outcome from it. I go over four different decisions that can really play a role in your financial literacy:

Credit cards are quite a topic that is often up for debate. Advocates like Dave Ramsey warn against the lack of control they can create. However, with discipline and a proper system in place, credit cards can really work to your advantage. The key here is understanding your spending habits and adhering to a budget. This allows you to benefit from perks such as cashback or travel rewards without falling into the traps of overspending or accruing debt.

The choices we make when selecting insurance deductibles can have long-term financial implications. Without proper knowledge, the default choice is often the lower deductible, but we must consider the long-term savings that a higher deductible can provide. By evaluating the monthly cost savings and recognizing our own history of claims, we can make a choice. If we make the right choice, it may benefit us more over time, rather than just thinking about the immediate cost of an accident.

When buying a car, it's crucial to look beyond the monthly payment and consider the total cost over time. It might be tempting to focus just on the immediate monthly savings of a no down-payment option. However, understanding the total interest paid over the life of the loan allows us to make smarter, more financially savvy decisions.

There's a common misconception that saving for a big purchase is the end-all and be-all. However, what if instead of just saving, we could earn? By investing, we allow our money to work for us. This could potentially speed up the rate at which we can reach our financial goals. The idea is to never have to hit zero in our savings again, maintaining a principle that continues to generate income even as we make major purchases.

Unlock the secrets to earning free money and making your financial decisions work smarter for you. Whether you're a stock market trader, an avid investor, or someone just trying to learn more about their personal finances, this episode can really change your perception on financial literacy. Tune in, you don't want to miss it. 

[00:00:00] Lack of financial tracking leads to consequences.

[00:04:53] Choosing between $500 and $1,000 deductibles for car insurance.

[00:08:27] Financial awareness leads to better money decisions.

[00:13:15] Calculating interest to invest and pay debts.

[00:14:35] Better financial strategy leads to debt freedom.

[00:18:46] Understanding insurance, investing in higher deductible pays.