Basic Understanding of Financial Literacy and Wealth Management

3883 words (16 pages) Essay

8th Feb 2020 Finance Reference this

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Abstract

This study investigates the basic understanding of financial literacy and wealth management using data collected through ten different peer – reviewed academic journal articles. Knowing the basics of financial literacy is a critical component in one’s life to ensure a better outcome to one’s financial decisions throughout a person’s lifetime. The impact of economic choices can create long-lasting effects on how a person lives. The topics in this study will discuss critical elements in wealth management, portfolio management, financial models, and decisions that people make every day. The understanding of how to make financial decisions can enrich people  to make sound financial decisions they might encounter throughout a lifetime.

Keywords: Financial Literacy, Wealth Management, Cash-flow statements, Investments, Bankruptcy, Economic, Money Management, and Budgeting

Literature Review

Introduction

Financial literacy is the ability to use knowledge and skills to manage one’s financial resources effectively for lifetime financial security. Money does not define happiness, but it is an essential tool to help aid one’s outcome in their life. Why is financial literacy important? It is important because it empowers people to manage their finances while tackling long-lasting economic encounters and judgment in daily life, such as operating own allowances, maintaining personal banking accounts, investing and saving (Sundarasen, Rahman, Othman, & Danaraj, 2016).

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Adults must budget one’s household subject to income constraints, buy goods and services, monitor financial accounts, handle credit cards, save, invest, prepare for a child’s college, pay taxes, purchase insurance packages, and reduce overall risk throughout a lifetime (Allgood & Walstad, 2015).  This subject can be overwhelming for the young adult to manage while also ensuring all daily routines outside of financial decisions. Over the past several decades, the broader implications of financial decision making at an individual level became apparent. (Spring,2015). Financial decision making is essential mainly due to the housing crisis which resulted in in many consumers using mortgage products that were incorrect or they did not understand the concept of buying a house that one could not afford. (Spring,2015). Although wealth management is broadly taught on in K-12 and secondary education I found through research most millennials find it hard to seek out advice, in general, let alone financial advice. I believe economic help is hard to seek to do the overall awareness on the subject and where to begin. Paul Gerrans and Douglas Hershey mention a term called “financial adviser anxiety.” This type of anxiety in individuals that may have to encounter a financial advisor for assistance in financial and wealth management, even though it is always in their best interest to do so (Gerrans & Hershey, 2016).

When wanting to obtain a possible sustainable growth rate, one needs to consider four variables: Profit rate, dividend distribution rate, debt rate, and the return on assets (ROA), in the absence of increases in equity (Radasanu, 2015). Cashflow is the total amount of money being transferred into and out of business, primarily as affecting liquidity. One element of cash flow is cash flow matching which is essential when one has liabilities, such as a family or financial debt.

Knowing how much you owe on debt and what you can afford for a new home is essential when one is trying not to increase their deficit or get into a financial burden; this is why cashflow matching is critical. (Shang, Kuzmenko, Uryasev, 2016). These concepts are crucial in knowing financial literacy.

Money Management

Money management is important when dealing with accounting and tax services, retirement planning and legal or estate planning. Budgeting is important in managing your money. Budgeting might seem overwhelming to a beginner but, here are some key elements into how keep it simple. The importance for tackling those financial issues one might have  can help  prevent  future financial issues.

The envelope system is simple. To achieve this one needs to add up all fixed and variable expenses, including rent, utilities, groceries, anything that is a need to live. After doing so, subtract the fixed costs (expenses) with your income, and put each expense into an individual envelope. Next, label each envelope with its total cost, and when payday rolls around, put the specific amount of each expense in cash in each envelope. The envelope approach is a simple way of making sure a person has all the necessary necessities an individual needs for all expenses. Taking the cash out gives a person an exact view of how much one’s expenses cost and how much a person has left for saving or spending.

The 50/30/20 Rule , this budgeting technique includes splitting a person’s monthly costs into three main points in order. 50: A person should not use more than 50% of take-home pay on all the essential expenses in one’s individual life. 20: Put a minimum of 20 – 25% of each paycheck toward a secure financial area by contributing to savings or debt payments. 30:  A maximum 30% of monthly income should be spent on lifestyle choices, such as entertainment or shopping.

For the induvial already struggling with debt I would propose the snowball effect technique. This establishes a strong payment system. Start by calculating the total amount owed on each specific debt. Once the debt is figured out decide how much money will be used to make monthly payments on each specific financed item, owed to decrease the overall debt. This technique will give insights of how long each payment will take to pay off a debt. Once one debt is paid, that same amount applied will snowball down to the next.

Snowball effect example:

Financial Education

 With the amount of consumer debt rising at an exponential rate is it more critical now than ever to be financial literate. As mentioned in my introduction after the housing crisis, government officials at every level emphasize and promote financial literacy here in the united states. For example, did you know the united states of America has a Financial Literacy and Education Commission (FLEC)? That is correct, the FLEC was established under Title V, the Financial Literacy and Education Improvement Act. This ACT which was part of the Fair and Accurate Credit Transactions Act (FACT) Act of 2003, is to improve financial literacy and education of persons in the United States. This commission is comprised of 22 federal entities with the Secretary of the Treasury as head of the Commission along with its bureaus to participate in the Commission(Spring,2015). The Commission organizes the financial education endeavors throughout the federal government. The FLEC supports the advertising of economic literacy within the private sector while also encouraging the synchronization within the public areas.

Experience plays an important part in financial literacy.  For example, when we buy our first vehicle more times than not, people end up financing. There are two types of financing; Equity financing and debt financing. Equity financing is raising money through the sale of shares in a business. Equity financing means the sale of equity an ownership interest to raise funds for business purposes. Debt financing is when one needs a loan with nothing to give up front or return. In result, one  must pay back the money plus some extra. This extra amount of money you will owe refers to interest.  Interest is money regularly paid at a particular rate for the use of money lent, or for delaying the repayment of a debt. That is the downside of borrowing money. How a lender usually determines your interest is based on your history of credit and debt to income ratio. A credit score is an analysis of a person’s credit files, based on personal history of lending and repaying. Borrowing and repaying represents the creditworthiness of an individual. A credit score is primarily based on a credit report information typically sourced from credit bureaus. If one was to borrow more, then they could afford to pay back and ends up faulting on the loan the credit bureau is notified and denotes one’s credit report. This report can end up affecting future purchases that require a loan, i.e., like buying a house for a family, paying for a child’s college, or a medical emergency loan.

The credit score sits on a scale from of 330 to 830. A typical good credit score would fall between 600 and 750. According to Governing magazine, The U.S. average credit score is 687, with southern states typically reporting lower scores. Now keep in mind, checking one’s credit personally does not lower credit or hurt it in any way. However, every time a financial institution or enterprise needs to check one’s scores for loaning purposes or for approval purposes, this can, in fact, lower a score. So being  careful about how many times an institution pulls a credit report throughout a year is important. Recommendation in putting limits on getting the credit checked  by the third party to three or fewer times a year. In fact, people who get their credit checked six times or more a year are more likely to declare bankruptcy.

Bankruptcy is when a person or other entity cannot repay debts to creditors. In most jurisdictions, bankruptcy is granted by court order, often initiated by the debtor. One should understand that bankruptcy is a chance to start over, but it most certainly affects one’s credit score and future ability to use the money. Usually, up to 7-10 years in most cases. When examining bankruptcy rates on young Americans with ages between 35 to 44 years old ended up having the highest rates of bankruptcies followed by the ages between 25 to 34 years old (Gunmunson, 2015). Young adults between the ages of 18 to 24 years old are also now becoming indebted to make ends meet (Gunmunson, 2015). The 18 to 24 age group are on track to file bankruptcy at an earlier age than the current  35 to 44 age group due to the lack of financial education. Knowing financial literacy and necessary money management skills can be the difference of one person filing for bankruptcy and the other retiring earlier.

Financial advantage tools in today’s society

Millennials need to take advantage of the financial tools and technology that is provided to us in today’s technological world. For example, we have software and apps that can track our money and show our daily spending habits as well as give tips on how to save on products that consumers purchase.

Budget Pulse free online financial software that can budget one’s money automatically. This app is also exceptional for anyone who does not like to enter financial numbers manually as well as passwords to download personal transactions.  One can download bank statements from their bank and import them into the app, and it does all the calculations programmatically. Budget Pulse also tracks progress so that results can be seen for self-satisfaction and motivation.

(BudgetPulse.com, 2018)

A personal favorite is Mint. This app is an online money management software that tracks all open accounts in one place while offering some great financial tips.  Mint finds custom financial products and services that can save time and money but keeps these offers tucked away unless a person wants to use it for advice. The best part is that Mint is free and won 1st place in 2011 for “Best Online Personal Finance Software.”

 (Mint.Com, 2018)

Calendar Budget is another free application that shows financial statements as well as upcoming expenses (refer to money management section for information on what is an expense) and categorizes these expenses based on different colors.  Calendar budget gives a clear perspective on future financial management and cash-flows.

(calendarbudget.com, 2018)

Yodlee Money Center includes a consolidated point of view of personal accounts, which ties in with net worth reporting, and sets its selves apart through mobile and email alerts as well as the ability to pay bills directly through them.

Since we live in a time of social media, another advantage would be Facebook Money Management Apps. Millions of people visit Facebook every day to get status updates and news from our circle of influence. One can also track the status of their finances on Facebook, through the various money management apps and extensions Facebook offers. (Facebook.com, 2018)

Investments

An asset is a financial purchase that puts money into your pocket. A liability is a financial purchase that takes money out of your pocket. Investing is the act of spending capital or one’s personal cash to a potential or current business, project, real estate, etc., with the expectation of obtaining an additional income or profit. People invest every day and might not even notice. There are many types of investments, but this research paper only covers most of the necessary investments. Investing is considered if not the most critical part of financial literacy. The types of investments I will cover in this section include but not limited to the following: bank products, bonds, stocks, investment funds, education, annuities, insurance, and retirement.

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For example, as a current college student, I invested in education for a better outcome such as a higher paying job or to learn a particular skill. Thus, I look at school as an investment. “No other investment yields as a great return on the investment in education. Saving for college begins with a person that enters to save. Starting with how much to keep back can be daunting. So how can one know where to start?  A good starting point would be a 529 College Savings Plans and Coverdell Education Savings Accounts. A 529 plan is a tax-advantaged savings account built to encourage one to start saving for future college costs. 529 programs, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions. Account, a Coverdell ESA, a Coverdell Account, or just an ESA, is known for an individual education retirement account. This account as well is a tax-advantaged investment program in the United States designed to encourage one to save to cover future education expenses. An educated workforce is the foundation of every community and the future of every economy.” – Brad Henry

When people decide to buy a house, believe it or not, that is an investment. Statistically, since 2008, the housing market has increased in value. Resulting in one building equity and providing a nest egg for the future.

Banks and credit unions usually provide a safe and secure way to collect savings, and most banks offer wealth management as a service. Checking and savings accounts proffer exchangeability and in most cases flexible. A bond is a loan a consumer makes to an organization in exchange for interest payments over a specified term plus repayment of principal at the bond’s maturity date. Learn how corporate, muni, agency, Treasury and other types of bonds

A stock is when a consumer decides to buy shares of a company’s stock; Shares mean one merely owns a piece of that company. Stocks come in a beamy variety and often are described based on a company’s size, type, performance in the current market, and lead to short- and long-term growth.

Investment funds are funds such as mutual funds, closed-end funds, and exchange-traded funds. These funds usually come from a pool of money from many investors that decide to invest according to a specific investment strategy. These funds can offer diversification, professional advisory and a broad variety of investment strategies and mode. Remember though; not all funds are the same.

Annuities are contracts between a consumer and an insurance company, in which the company promises to make oscillatory payments. These payments can either start immediately which is defined as an immediate annuity or at some point in the near future which is described as a deferred annuity.

Retirement is something that adults need to focus on at an early age. When saving, tax-advantaged retirement options such as a standard 401(k) or an IRA can be a wise option. Managing retirement income may require one to move out of certain types of investments and into ones more suited to a retirement lifestyle.

Insurance is essential especially if one plans to have kids. Life insurance products come in many forms of fashion, which include term life, whole life, and universal life policies. There also are sub-variations on these—variable life insurance and variable universal life—which are considered securities. 

Conclusion

Financial literacy is the ability to use knowledge and skills to manage one’s financial resources effectively for lifetime financial security. Money does not define happiness, but it is an essential tool to help aid one’s outcome in their life. If knowing that lowering expenses or liabilities and gaining more assets can lead to a better financial lifestyle, one will be able to tackle financial decisions throughout a lifetime. Financial literacy is a tool that not a lot of people have in today’s society. Educating oneself of this vital essential  topic already sets an individual apart from most Americans. After reading this research paper, one should have a  basic understanding of investments, budgeting, cash-flow statements,  and debt.   Having an overall understanding of basic financial literacy will provide more confidence when making financial decisions through a lifetime of future decisions.

References

Abstract

This study investigates the basic understanding of financial literacy and wealth management using data collected through ten different peer – reviewed academic journal articles. Knowing the basics of financial literacy is a critical component in one’s life to ensure a better outcome to one’s financial decisions throughout a person’s lifetime. The impact of economic choices can create long-lasting effects on how a person lives. The topics in this study will discuss critical elements in wealth management, portfolio management, financial models, and decisions that people make every day. The understanding of how to make financial decisions can enrich people  to make sound financial decisions they might encounter throughout a lifetime.

Keywords: Financial Literacy, Wealth Management, Cash-flow statements, Investments, Bankruptcy, Economic, Money Management, and Budgeting

Literature Review

Introduction

Financial literacy is the ability to use knowledge and skills to manage one’s financial resources effectively for lifetime financial security. Money does not define happiness, but it is an essential tool to help aid one’s outcome in their life. Why is financial literacy important? It is important because it empowers people to manage their finances while tackling long-lasting economic encounters and judgment in daily life, such as operating own allowances, maintaining personal banking accounts, investing and saving (Sundarasen, Rahman, Othman, & Danaraj, 2016).

Adults must budget one’s household subject to income constraints, buy goods and services, monitor financial accounts, handle credit cards, save, invest, prepare for a child’s college, pay taxes, purchase insurance packages, and reduce overall risk throughout a lifetime (Allgood & Walstad, 2015).  This subject can be overwhelming for the young adult to manage while also ensuring all daily routines outside of financial decisions. Over the past several decades, the broader implications of financial decision making at an individual level became apparent. (Spring,2015). Financial decision making is essential mainly due to the housing crisis which resulted in in many consumers using mortgage products that were incorrect or they did not understand the concept of buying a house that one could not afford. (Spring,2015). Although wealth management is broadly taught on in K-12 and secondary education I found through research most millennials find it hard to seek out advice, in general, let alone financial advice. I believe economic help is hard to seek to do the overall awareness on the subject and where to begin. Paul Gerrans and Douglas Hershey mention a term called “financial adviser anxiety.” This type of anxiety in individuals that may have to encounter a financial advisor for assistance in financial and wealth management, even though it is always in their best interest to do so (Gerrans & Hershey, 2016).

When wanting to obtain a possible sustainable growth rate, one needs to consider four variables: Profit rate, dividend distribution rate, debt rate, and the return on assets (ROA), in the absence of increases in equity (Radasanu, 2015). Cashflow is the total amount of money being transferred into and out of business, primarily as affecting liquidity. One element of cash flow is cash flow matching which is essential when one has liabilities, such as a family or financial debt.

Knowing how much you owe on debt and what you can afford for a new home is essential when one is trying not to increase their deficit or get into a financial burden; this is why cashflow matching is critical. (Shang, Kuzmenko, Uryasev, 2016). These concepts are crucial in knowing financial literacy.

Money Management

Money management is important when dealing with accounting and tax services, retirement planning and legal or estate planning. Budgeting is important in managing your money. Budgeting might seem overwhelming to a beginner but, here are some key elements into how keep it simple. The importance for tackling those financial issues one might have  can help  prevent  future financial issues.

The envelope system is simple. To achieve this one needs to add up all fixed and variable expenses, including rent, utilities, groceries, anything that is a need to live. After doing so, subtract the fixed costs (expenses) with your income, and put each expense into an individual envelope. Next, label each envelope with its total cost, and when payday rolls around, put the specific amount of each expense in cash in each envelope. The envelope approach is a simple way of making sure a person has all the necessary necessities an individual needs for all expenses. Taking the cash out gives a person an exact view of how much one’s expenses cost and how much a person has left for saving or spending.

The 50/30/20 Rule , this budgeting technique includes splitting a person’s monthly costs into three main points in order. 50: A person should not use more than 50% of take-home pay on all the essential expenses in one’s individual life. 20: Put a minimum of 20 – 25% of each paycheck toward a secure financial area by contributing to savings or debt payments. 30:  A maximum 30% of monthly income should be spent on lifestyle choices, such as entertainment or shopping.

For the induvial already struggling with debt I would propose the snowball effect technique. This establishes a strong payment system. Start by calculating the total amount owed on each specific debt. Once the debt is figured out decide how much money will be used to make monthly payments on each specific financed item, owed to decrease the overall debt. This technique will give insights of how long each payment will take to pay off a debt. Once one debt is paid, that same amount applied will snowball down to the next.

Snowball effect example:

Financial Education

 With the amount of consumer debt rising at an exponential rate is it more critical now than ever to be financial literate. As mentioned in my introduction after the housing crisis, government officials at every level emphasize and promote financial literacy here in the united states. For example, did you know the united states of America has a Financial Literacy and Education Commission (FLEC)? That is correct, the FLEC was established under Title V, the Financial Literacy and Education Improvement Act. This ACT which was part of the Fair and Accurate Credit Transactions Act (FACT) Act of 2003, is to improve financial literacy and education of persons in the United States. This commission is comprised of 22 federal entities with the Secretary of the Treasury as head of the Commission along with its bureaus to participate in the Commission(Spring,2015). The Commission organizes the financial education endeavors throughout the federal government. The FLEC supports the advertising of economic literacy within the private sector while also encouraging the synchronization within the public areas.

Experience plays an important part in financial literacy.  For example, when we buy our first vehicle more times than not, people end up financing. There are two types of financing; Equity financing and debt financing. Equity financing is raising money through the sale of shares in a business. Equity financing means the sale of equity an ownership interest to raise funds for business purposes. Debt financing is when one needs a loan with nothing to give up front or return. In result, one  must pay back the money plus some extra. This extra amount of money you will owe refers to interest.  Interest is money regularly paid at a particular rate for the use of money lent, or for delaying the repayment of a debt. That is the downside of borrowing money. How a lender usually determines your interest is based on your history of credit and debt to income ratio. A credit score is an analysis of a person’s credit files, based on personal history of lending and repaying. Borrowing and repaying represents the creditworthiness of an individual. A credit score is primarily based on a credit report information typically sourced from credit bureaus. If one was to borrow more, then they could afford to pay back and ends up faulting on the loan the credit bureau is notified and denotes one’s credit report. This report can end up affecting future purchases that require a loan, i.e., like buying a house for a family, paying for a child’s college, or a medical emergency loan.

The credit score sits on a scale from of 330 to 830. A typical good credit score would fall between 600 and 750. According to Governing magazine, The U.S. average credit score is 687, with southern states typically reporting lower scores. Now keep in mind, checking one’s credit personally does not lower credit or hurt it in any way. However, every time a financial institution or enterprise needs to check one’s scores for loaning purposes or for approval purposes, this can, in fact, lower a score. So being  careful about how many times an institution pulls a credit report throughout a year is important. Recommendation in putting limits on getting the credit checked  by the third party to three or fewer times a year. In fact, people who get their credit checked six times or more a year are more likely to declare bankruptcy.

Bankruptcy is when a person or other entity cannot repay debts to creditors. In most jurisdictions, bankruptcy is granted by court order, often initiated by the debtor. One should understand that bankruptcy is a chance to start over, but it most certainly affects one’s credit score and future ability to use the money. Usually, up to 7-10 years in most cases. When examining bankruptcy rates on young Americans with ages between 35 to 44 years old ended up having the highest rates of bankruptcies followed by the ages between 25 to 34 years old (Gunmunson, 2015). Young adults between the ages of 18 to 24 years old are also now becoming indebted to make ends meet (Gunmunson, 2015). The 18 to 24 age group are on track to file bankruptcy at an earlier age than the current  35 to 44 age group due to the lack of financial education. Knowing financial literacy and necessary money management skills can be the difference of one person filing for bankruptcy and the other retiring earlier.

Financial advantage tools in today’s society

Millennials need to take advantage of the financial tools and technology that is provided to us in today’s technological world. For example, we have software and apps that can track our money and show our daily spending habits as well as give tips on how to save on products that consumers purchase.

Budget Pulse free online financial software that can budget one’s money automatically. This app is also exceptional for anyone who does not like to enter financial numbers manually as well as passwords to download personal transactions.  One can download bank statements from their bank and import them into the app, and it does all the calculations programmatically. Budget Pulse also tracks progress so that results can be seen for self-satisfaction and motivation.

(BudgetPulse.com, 2018)

A personal favorite is Mint. This app is an online money management software that tracks all open accounts in one place while offering some great financial tips.  Mint finds custom financial products and services that can save time and money but keeps these offers tucked away unless a person wants to use it for advice. The best part is that Mint is free and won 1st place in 2011 for “Best Online Personal Finance Software.”

 (Mint.Com, 2018)

Calendar Budget is another free application that shows financial statements as well as upcoming expenses (refer to money management section for information on what is an expense) and categorizes these expenses based on different colors.  Calendar budget gives a clear perspective on future financial management and cash-flows.

(calendarbudget.com, 2018)

Yodlee Money Center includes a consolidated point of view of personal accounts, which ties in with net worth reporting, and sets its selves apart through mobile and email alerts as well as the ability to pay bills directly through them.

Since we live in a time of social media, another advantage would be Facebook Money Management Apps. Millions of people visit Facebook every day to get status updates and news from our circle of influence. One can also track the status of their finances on Facebook, through the various money management apps and extensions Facebook offers. (Facebook.com, 2018)

Investments

An asset is a financial purchase that puts money into your pocket. A liability is a financial purchase that takes money out of your pocket. Investing is the act of spending capital or one’s personal cash to a potential or current business, project, real estate, etc., with the expectation of obtaining an additional income or profit. People invest every day and might not even notice. There are many types of investments, but this research paper only covers most of the necessary investments. Investing is considered if not the most critical part of financial literacy. The types of investments I will cover in this section include but not limited to the following: bank products, bonds, stocks, investment funds, education, annuities, insurance, and retirement.

For example, as a current college student, I invested in education for a better outcome such as a higher paying job or to learn a particular skill. Thus, I look at school as an investment. “No other investment yields as a great return on the investment in education. Saving for college begins with a person that enters to save. Starting with how much to keep back can be daunting. So how can one know where to start?  A good starting point would be a 529 College Savings Plans and Coverdell Education Savings Accounts. A 529 plan is a tax-advantaged savings account built to encourage one to start saving for future college costs. 529 programs, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions. Account, a Coverdell ESA, a Coverdell Account, or just an ESA, is known for an individual education retirement account. This account as well is a tax-advantaged investment program in the United States designed to encourage one to save to cover future education expenses. An educated workforce is the foundation of every community and the future of every economy.” – Brad Henry

When people decide to buy a house, believe it or not, that is an investment. Statistically, since 2008, the housing market has increased in value. Resulting in one building equity and providing a nest egg for the future.

Banks and credit unions usually provide a safe and secure way to collect savings, and most banks offer wealth management as a service. Checking and savings accounts proffer exchangeability and in most cases flexible. A bond is a loan a consumer makes to an organization in exchange for interest payments over a specified term plus repayment of principal at the bond’s maturity date. Learn how corporate, muni, agency, Treasury and other types of bonds

A stock is when a consumer decides to buy shares of a company’s stock; Shares mean one merely owns a piece of that company. Stocks come in a beamy variety and often are described based on a company’s size, type, performance in the current market, and lead to short- and long-term growth.

Investment funds are funds such as mutual funds, closed-end funds, and exchange-traded funds. These funds usually come from a pool of money from many investors that decide to invest according to a specific investment strategy. These funds can offer diversification, professional advisory and a broad variety of investment strategies and mode. Remember though; not all funds are the same.

Annuities are contracts between a consumer and an insurance company, in which the company promises to make oscillatory payments. These payments can either start immediately which is defined as an immediate annuity or at some point in the near future which is described as a deferred annuity.

Retirement is something that adults need to focus on at an early age. When saving, tax-advantaged retirement options such as a standard 401(k) or an IRA can be a wise option. Managing retirement income may require one to move out of certain types of investments and into ones more suited to a retirement lifestyle.

Insurance is essential especially if one plans to have kids. Life insurance products come in many forms of fashion, which include term life, whole life, and universal life policies. There also are sub-variations on these—variable life insurance and variable universal life—which are considered securities. 

Conclusion

Financial literacy is the ability to use knowledge and skills to manage one’s financial resources effectively for lifetime financial security. Money does not define happiness, but it is an essential tool to help aid one’s outcome in their life. If knowing that lowering expenses or liabilities and gaining more assets can lead to a better financial lifestyle, one will be able to tackle financial decisions throughout a lifetime. Financial literacy is a tool that not a lot of people have in today’s society. Educating oneself of this vital essential  topic already sets an individual apart from most Americans. After reading this research paper, one should have a  basic understanding of investments, budgeting, cash-flow statements,  and debt.   Having an overall understanding of basic financial literacy will provide more confidence when making financial decisions through a lifetime of future decisions.

References

  • Alaminos, D., del Castillo, A., & Fernández, M. Á. (2016). A Global Model for Bankruptcy Prediction. Plos ONE11(11), 1-18. doi:10.1371/journal.pone.0166693
  • Allgood, S., & Walstad, W. B. (2016). THE EFFECTS OF PERCEIVED AND ACTUAL FINANCIAL LITERACY ON FINANCIAL BEHAVIORS. Economic Inquiry54(1), 675-697. doi:10.1111/ecin.12255
  • Andruszkiewicz, G., Davis, M. A., & Lleo, S. (2017). Risk-sensitive investment in a finite-factor model. Stochastics: An International Journal Of Probability & Stochastic Processes89(1), 89-114. doi:10.1080/17442508.2016.1139115
  • Cheema, M. K., MacQueen, G. M., & Hassel, S. (2015). Assessing personal financial management in patients with bipolar disorder and its relation to impulsivity and response inhibition. Cognitive Neuropsychiatry20(5), 424-437. doi:10.1080/13546805.2015.1076722
  • Chu, Z., Wang, Z., Xiao, J., & Zhang, W. (2017). Financial Literacy, Portfolio Choice and Financial Well-Being. Social Indicators Research132(2), 799-820. doi:10.1007/s11205-016-1309-2
  • Clinton G. Gudmunson, PH.D., Iowa State University; VIRGINIA SOLIS ZUIKER, PH.D., Family Social Science Department; University of Minnesota; MARY JO KATRAS, PHD, Center for Family Development; University of Minnesota Extension and MOHAMAD FAZLI SABRI, PHD, University Putra Malaysia (2016) ENHANCING PERSONAL AND FAMILY FINANCE COURSES USING CASE STUDIES 
  • Gerrans, P., & Hershey, D. A. (2017). Financial Adviser Anxiety, Financial Literacy, and Financial Advice Seeking. Journal Of Consumer Affairs51(1), 54-90. doi:10.1111/joca.12120
  • Grechuk, B., & Zabarankin, M. (2017). Synergy effect of cooperative investment. Annals Of Operations Research249(1/2), 409-431. doi:10.1007/s10479-015-2051-x
  • Gudmunson, C. G., ZUIKER, V. S., KATRAS, M. J., & SABRI, M. F. (2015). ENHANCING PERSONAL AND FAMILY FINANCE COURSES USING CASE STUDIES. College Student Journal49(3), 321-330.
  • Mishra, A., Garbajosa, J., Wang, X., Bosch, J., & Abrahamsson, P. (2017). Future directions in Agile research: Alignment and divergence between research and practice. Journal Of Software: Evolution & Process29(6), n/a. doi:10.1002/smr.1884
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