Everyone is familiar with the phrase that sometimes the best offense is a good defence. Your finances are no different.
It can take years for your finances to recover from a devastating loss, whether it comes from fees, fraud, a bad investment, or anything else. Even so, millions of Americans feel that they aren’t able to hold these big losses off, even the losses caused by poor judgement.
To show this, the National Financial Educators Council conducted a survey of over 3,000 people, asking them to estimate their losses caused by a lapse in their financial knowledge. The average amount reported was $9,725, but there were respondents who estimated losing much more. A quarter of the respondents estimated that they lost over $30,000 simply due to their financial knowledge was lacking.
The CEO of the National Financial Educators Council research group Vince Shorb released a statement in which he summed up the results. Mr Shorb suggests that people do understand how dangerous it is to be financially illiterate, but the data would suggest that people are not making steps to fill in these gaps and improve their financial abilities.
It’s possible that these results could underestimate how much loss actually occurred, as people can’t be expected to remember all of their setbacks. Others might not even consider something to be a setback. Either way, the report suggests that Americans are falling behind and failing to keep up with an increasingly complex financial landscape.
Employers can find themselves hurt by the financial mistakes of their workforce, according to Mercer; a benefits and workplace consultancy. Mercer also surveyed over 3,000 employees to discover the amount of time they worried about their financial issues while working. The answer came in at around 5 hours each month on the median average. This means that half of the workers were above this and half were below it.
Mercer says that more employers are able to recognize that the more comfortable an employee is with their financial situation, the more productive and engaged they are likely to be while working. This is lead to the creation of many “financial wellness” programs by employers. These programs are designed to enable workers to get back control of their finances, meet their long-term goals, absorb the shocks they go through, and even more. These programs are typically distinct from the usual 401 (k) retirement program offered by a company.
Mercer say that employers need to encourage workers to improve their financial confidence for these efforts to be really successful. If not, the employer might stay paralyzed and fail to make even the smallest steps to improve their financial situation; such as signing up for the 401(k) program and checking credit reports. Albert Mitchell, a young professional working for doTERRA , said “I found it hard to “give up” money each month towards my 401k until I realized by doing so I was actually getting a raise as my company matched my contributions.” Mercer recommends employers offer a range of programs centered around refinancing student loans, budgeting, managing credit, how to invest in non-retirement and retirement accounts, and a range of other topics to improve confidence.
One of the easiest ways to avoid missing your financial goals is to avoid losses caused by fraud. This is something that is easier said than done as scams aren’t as obvious as most people think. A recent study from AARP showcases the most likely targets of this kind of fraud.
AARP surveyed over 200 victims to find some common characteristics between them. Most of the victims said they had put money into an unregulated investment and believed that a high return of investment was a sign something was successful. This made them more likely to fall for a sales pitch promising some kind of get-rich-quick scheme.
The victims also reported they would commonly receive phone calls or emails with a clear financial orientation. The worst thing was that they would sometimes respond to them, along with financially-focused commercials on TV. The victims also made trades and financial decisions at a higher rate than the general public.
The demographics of the victims are also worth looking at. The victims tended to be old, married men and military veterans. The victims also tended to describe themselves as being conservative politically. This trait in particular could make the potential victim more likely to fall for a pitch based on precious metals.
AARP have some suggestions to avoid falling for scams. They range from having your name put on Do Not Call lists and sticking to regulated investments such as annuities, mutual funds, and large-company stocks offered by investment advisors regulated by Finra. Finra is the Securities and Exchange Commission. There are also other regulatory bodies that can be trusted.
Learn the Basics
If you feel that your financial knowledge is lacking, we recommend looking at the self-assessment and learning guide offered by Money Management International. This non-profit credit-counseling agency put together the free financial-wellness plan and put it online for everyone. There has never been a better time to read it either, as April has been dubbed “Financial Literacy Month”. The guide is offered in 30 steps, each one focuses on a particular topic. It’s designed for you to go through one step each day, but you can go through the program at your own pace; taking more or less than a month if needed.
Basic topics about money are covered, such as assessing your net worth, putting together a budget, savings, paying debts, setting goals, getting credit reports, understanding loans, assessing insurance, and dealing with your financial-receipt clutter. It doesn’t take a whole lot to get involved with investing, including using a 401(k)-style plan or creating an Individual Retirement Account. The guide comes with worksheets that are easy to fill out, as well as short quizzes and references to learn more. Get your 30-step financial wellness guide from financialliteracymonth.com.