Financial literacy would make American well

From the morning e-mail ... In stark contrast to Jerome Corsi ("Seer or scare-monger on the housing crisis," below), financial planner Bill Losey deems financial illiteracy to be the source of our economic misery:

The "Real" Financial Crisis in America

By Bill Losey

We have a big financial crisis in America.

It’s not the weak housing market, rising unemployment, inflation, gas prices over $4 per gallon, the collapse of Bear Stearns, fall-out from the sub-prime mortgage fiasco, declining home prices, stock market volatility or geo-political unrest in the Middle East. Sure they have made front page news; however they’re not the real issue. They are symptoms of the “spending crisis” in America. They are symptoms of the real issue … we are a country of financially illiterate people.

In the June issue of the Journal of Financial Planning, Elisabeth Donati, Founder of Creative Wealth International said “The statistics on financial well-being and young people are alarming. There’s a rise in college suicides because of credit card and student loan debt, young adults under 25 are now the fastest-growing age group filing bankruptcies, and more kids now see their parents file for bankruptcy than file for divorce. Less than 10% of our high school graduates take any courses on money management or wealth creation. Most of our country’s social problems stem from financial problems”.

The issues are easy to identify:  the government and millions of consumers alike spend more money then they bring in or make. When the government needs more money they raise taxes or go further into debt. When Americans need more money, they charge it or take out more of their home equity.

The solution is also easy to identify: financial literacy. Unless and until basic financial literacy education becomes mainstream and required in our schools and businesses, Americans will continue to rack up lots of debt, fall behind on their bills, lose their homes and have to work themselves to death to try to keep afloat.

Spending less money than you earn is fundamental to your basic financial health. Having written financial goals and understanding your options and timeframes are keys to financial success.  Differentiating between needs and wants is critical in your financial goal-setting process.

Setting money aside from each paycheck you earn is basic. It is the medicine that will treat our symptoms; but fundamentally ignored by millions of American’s who are either living paycheck to paycheck, delaying retirement, or spending out of control to garner immediate gratification. Something’s got to give.

How uncomplicated would it make our lives if we (and the government) just spent less than we made and saved/invested the difference for our future?  How great would it be if every American knew, understood and was able to articulate the difference between positive and negative cash flow? (I recently conducted a brief survey with ten people at random and asked them to explain how their net worth is calculated. Only one person out of the ten could answer the question with any authority.) How much brighter would our future look if we saved even a little today?

So, what do you get when you combine a weak housing market, rising unemployment, inflation, gas prices over $4 per gallon, the collapse of Bear Stearns, fall-out from the sub-prime mortgage fiasco, declining home prices, stock market volatility and geo-political unrest in the Middle East? The opportunity of a lifetime to promote financial literacy and potentially save a life. Maybe, just maybe, financial literacy could be the solution to many of our country’s social problems.

Losey  is the author of "Retire In a Weekend: The Baby Boomer's Guide to Making Work Optional."

Comments?

In the June issue of the Journal of Financial Planning, Elisabeth Donati, Founder of Creative Wealth International said “The statistics on financial well-being and young people are alarming. There’s a rise in college suicides because of credit card and student loan debt, young adults under 25 are now the fastest-growing age group filing bankruptcies, and more kids now see their parents file for bankruptcy than file for divorce. Less than 10% of our high school graduates take any courses on money management or wealth creation. Most of our country’s social problems stem from financial problems”.

The issues are easy to identify:  the government and millions of consumers alike spend more money then they bring in or make. When the government needs more money they raise taxes or go further into debt. When Americans need more money, they charge it or take out more of their home equity.

The solution is also easy to identify: financial literacy. Unless and until basic financial literacy education becomes mainstream and required in our schools and businesses, Americans will continue to rack up lots of debt, fall behind on their bills, lose their homes and have to work themselves to death to try to keep afloat.

Spending less money than you earn is fundamental to your basic financial health. Having written financial goals and understanding your options and timeframes are keys to financial success.  Differentiating between needs and wants is critical in your financial goal-setting process.

Setting money aside from each paycheck you earn is basic. It is the medicine that will treat our symptoms; but fundamentally ignored by millions of American’s who are either living paycheck to paycheck, delaying retirement, or spending out of control to garner immediate gratification. Something’s got to give.

How uncomplicated would it make our lives if we (and the government) just spent less than we made and saved/invested the difference for our future?  How great would it be if every American knew, understood and was able to articulate the difference between positive and negative cash flow? (I recently conducted a brief survey with ten people at random and asked them to explain how their net worth is calculated. Only one person out of the ten could answer the question with any authority.) How much brighter would our future look if we saved even a little today?

So, what do you get when you combine a weak housing market, rising unemployment, inflation, gas prices over $4 per gallon, the collapse of Bear Stearns, fall-out from the sub-prime mortgage fiasco, declining home prices, stock market volatility and geo-political unrest in the Middle East? The opportunity of a lifetime to promote financial literacy and potentially save a life. Maybe, just maybe, financial literacy could be the solution to many of our country’s social problems.

Losey  is the author of "Retire In a Weekend: The Baby Boomer's Guide to Making Work Optional."

Comments?