How Financially Knowledgeable Are You?

The top 3 tips for understanding and maintaining healthy finances

Financial literacy means having foundational knowledge and fundamental understanding of your individual financial situation. This includes a basic comprehension of budgeting, financial risks, investments, tax planning and more.

Financial literacy is extremely important. It allows individuals to make intelligent financial decisions now and gives them a better opportunity to reach their long-term financial goals, whether that be paying for kids’ college, owning their own business, retiring in the lifestyle and time they would like to, or planning what legacy they would like to leave and how.

Unfortunately, there is a lack of structured education on finances.

Concepts such as balancing a checkbook, creating a budget, contributing to an employer retirement plan, risk management, investment allocation and financial planning are not universally imparted. In many cases, if financial education is not taught at all. Individuals who feel they are lacking financial knowledge or who are interested in better financial planning should seek out the help of a professional advisor who can explain these concepts and work with them toward achieving their financial goals.


Even if you have a set financial plan and are working with an advisor, money spent on the “little things” can start to add up. A $5 cup of coffee each day, a new pair of shoes, popcorn at a movie – while these are not bad purchases, it is important to realize wants versus needs and how they can impact your long-term financial plan.

Other poor financial decisions that are all too common include taking on too much debt, not keeping enough liquid or safe money available to deal with unpredictable events and waiting too long to begin planning; therefore, missing the opportunity to take advantage of compound interest.


There is a common myth that if you are financially literate, you do not need an advisor or any help managing your money. Some of the most financially literate individuals are their own worst enemies. Money and finances are emotional topics; even if you know a lot about finances, sometimes it makes sense to separate the factual from the emotional and rely on someone else to help you make sound decisions.  

Another popular myth is that the more complex strategies are those that make you the most money. In fact, it is usually the opposite – typically the simpler strategies, given a consistent commitment and the necessary time to make them work, perform better.


  • Find an advisor who not only is knowledgeable, but who also knows you personally and takes the time to truly understand your goals and priorities.
  • Work with your advisor to establish goals, both immediate and long-term, and stick to your plan.
  • Develop and follow a routine that forces you to check in on your financial status often enough to know where you are, but not too often that it causes additional stress and anxiety.

It’s important to realize that maintaining healthy finances is a dynamic, flexible, and lifelong process and that not everything is going to go as planned. Remain confident that if you make small adjustments and continue monitoring your progress, you will stay on track to meet your goals.

Sara Fox is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley in Loveland. You can reach her at (970) 776-5506. Visit her website.

Categories: Finance