A recent study produced by Wallet Hub, listed New Mexico as the 49th least financially literate state out of the 50 states plus Washington DC. The two states worse than NM were Arkansas and Missouri. According to their research, the top financially literate states were Minnesota, New Hampshire and North Dakota.
As a native New Mexican, this study does not come as a complete surprise. In fact, I have come to expect seeing New Mexico land on the low end of these studies. Maybe I am wrong in my expectations but year after year of these studies listing NM so low, this has become expected. One of my former bosses used to quote, "A point doesn't make a trend but a trend makes a point". I think that we have seen enough of these points that we see a bad trend for NM to be in.
So do we just sit around and accept the norm?
Onward Financial was created to bring financial planning coupled with financial education. Financial education is not very common and when there are available resources, most people tend to charge.
So how do we change the trend?
Here are a few thoughts on how you can become more financially literate with your every day money.
1. Where is your money being spent?
Many people cringe at the use of the word budget, so I am not going to use it. But do you know where your money is being spent? Here is a simple exercise that will take 10 minutes to complete.
- Write down how much you think you spend each month in these two categories: Eating Out (this includes Starbucks) and Groceries.
- Pull up last month's bank statement. (Most banks offer this view through their mobile app)
- Use a calculator and begin first with Restaurants. Be honest as you punch in the numbers in your calculator.
- What # did you get?
- Next, do the same thing with groceries.
- What # did you get?
- Were you higher or lower than your original guess?
- Was there any trends that was revealing in your spending habits last month?
Almost every time when I do this exercise with my clients, they always guess way under than what they actually spent. This is often due to the fact that we mentally disregard any purchases under $5. For some reason, those "little" purchases don't seem that big of a deal but when you add them up at the end of the month, they can quickly add up as a big expense.
2. What are your financial goals?
"Goals" are another one of those taboo words that we don't like to use but need to have in our financial arsenal.
"People Don't Plan To Fail, They Fail To Plan"
Goals should be simple, tangible and attainable. They don't need to be complicated or complex. An engineering degree shouldn't be necessary.
Where to Start?
- Write everything down.
- What things did you want to do or have this past year but couldn't because of no money?
- Is it something you still want? If so, what will it take for you to save and get it?
- Put a deadline on meeting those goals.
- Celebrate when you complete a goal.
- Finally, be accountable to someone with your goals.
- Whether you are single or married, share with someone what your goals are going to be and how you are going to accomplish them.
Not sure how many advisors would tell you this but make time to reward and celebrate your success. If we worked hard to set our goals and worked even harder to achieving those goals, then we should celebrate the victories of meeting our goals. This not an excuse to go buy that new Tesla (unless you saved for it) but rather this is a way where we can reward ourselves for completing something. Often times, this celebration for me usually looks like a nice night out with my wife or an inexpensive weekend getaway or even as simple as grilling up that T-Bone steak. Simple little rewards continue to re-enforce the positive behavior of completing your goals
4. Keep learning
Don't stop here! I repeat "DON'T STOP HERE"! Continue to fuel the desire for financial literacy. There a bunch of resources available from many different authors who come from different experiences and perspectives on money. You may have heard me say it before but there is not one way to manage your money. There is not one magic product that you can put your money in. There is not one person that is the end-all-be-all for financial education. Surround yourself with a team of professionals who specialize in different areas in the financial industry. This can only help you in your gain of knowledge for more financial literacy.
Here are some resources that I frequently use in my daily reading and education for finances:
- Onward Financial Blog (shameless plug)
- Listen Money Matters
- They have a weekly podcast that they put out and a bunch of amazing resources for you to take your financial knowledge to the next step
- Mint Budgeting App
- Credit Karma
If you have any other resources, tools or books that you have found helpful in your financial journey, please comment below and share. Helping each other grow in our financial knowledge will be the only way we can change the "norm" of New Mexico's financial literacy deficit.