by Sarah Eadie

Painless Steps to Developing Your Own Financial Literacy Plan

Two stools by a window

What is financial literacy? What does it mean to be “financially literate”? Those are awesome questions, with an unfortunate lack of awesome answers.

In research, the given definition of “financial literacy” is usually prefaced with a caution that it is very much a work in progress. It’s usually fractured into different “types” of financial literacy. A person who is proficient at the different types is considered a financially literate individual.

But it’s not a destination

The progressive nature of “financial literacy” is one of the reasons why it’s hard to pin down a definition.

As you become more financially literate, and accomplish more with your money, you may want to test different ways of making your money work for you. At the point that you begin considering more complex solutions, your old place of “financial literacy” isn’t sufficient anymore. You need to up your game.

For these reasons, it can be more helpful to think of financial literacy in stages, rather than as a destination. You don’t arrive at financial literacy; it’s a skill you build over the course of your lifetime.

Stages of financial literacy

Think of financial literacy as a five-step process of:

  1. Developing the right attitude
  2. Growing your awareness
  3. Increasing your knowledge
  4. Turning that knowledge into behavior
  5. Achieving financial success

Together, these stages form an upward spiral. As you approach your finances and begin to develop your financial literacy, you will notice yourself moving through these stages. When you find yourself becoming successful in an area, try approaching a new topic and moving through the stages again.

Let’s talk about each stage, and how one leads into the next in a way that helps you build confidence and grow your wealth.

1. Mindset

Getting into the right headspace is the cornerstone of the rest of your work here. How you think about money can make or break your journey to financial literacy.

One of the most important things is to stay open. Money is personal and intensely emotional, so sometimes the information you read, advice you receive, or success stories you hear can seem alienating.

Try to stay open. Be an alchemist, transforming any positive messages or nuggets of wisdom into materials that will build the world you want to live in. “How can I make this work for me?” is your new mantra.

For a deeper dive into the money mindsets that will help you be successful, give our “4 Money Mindsets” post a read.

2. Awareness

Many of us didn’t receive any formal education in money management, so there are a lot of things we don’t know that we don’t know. Developing awareness is about uncovering those blind spots. You’re figuring out which topics you want to dig into and the resources available to help do so.

Talk to people. Talk to your parents, your fiscally responsible friends, personal finance bloggers—everyone you think might have a helpful opinion. Then ask them to recommend one or two of their favorite resources.

Keep a mental (or physical!) list of resources and services they mention or vocabulary they use and start to Google those things. Document any “aha!” moments: times when you discover things that are especially helpful or interesting in driving you forward.

3. Knowledge

Once you’ve developed a broader awareness of the personal finance landscape, you’ll want to dig deep into the topics that seem most relevant to your situation.

Like any research project, it can be helpful to read three to five of the most popular books on the topic (or Google a book outline online) and then dig into online discussions about those books.

Have people in a situation similar to yours acted on the advice presented in these books? What were their results?

Once you’ve dug deep into those resources, check out one or two of the books that influenced the popular literature you read. Learning more about the ideas that informed popular personal finance literature can add depth to your knowledge.

4. Behavior

This is where the rubber meets the road. Are you ready to rock and roll and do this thing? Can you take what you’ve done and put it into action? I bet you can.

You’ve gathered all of this knowledge; now what? Sometimes having an abundance of knowledge can make you feel more anxious initially. You may have a hard time knowing where to start!

The first thing to do is to start small, and make time to do it. Put a regular block of 30-45 minutes on your calendar once per week.

Look over any notes you’ve taken and blog posts or books you’ve saved. Mark all of the things you can do right now, stack them according to priority, and schedule time to do them over the course of a couple of weeks.

If there’s advice that you can’t implement right away, it’s helpful to write out a set of contingencies to revisit, like: “When I’ve saved up X amount, I will do X,” or “My plan for funding my emergency fund over the next six months is…”

Remembering to revisit these resolutions is the important part! Set a calendar event three to six months out to help spur you to action.

5. Achievement

This is the most fun of the five steps. You are a more financially literate person than ever. Pop champagne!

Each time you make a savvy financial step or accomplish a task on your money to-do list, take time to celebrate. Whether it’s paying your credit card bill on time or paying off your student loans, it’s worth taking a moment to thank yourself.

Then, take a look around. Are there things you can do to further improve your financial status? Are there new opportunities or achievements to unlock? Hop to it! Keep moving along that upward spiral.

What are you working on?

Are there specific challenges or topics you’re struggling with? How have you approached learning more about those things and changing your behavior? What’s worked and what hasn’t? Let us know on our social channels.

Disclaimer: Hey! Welcome to our disclaimer. Here’s what you need to know to safely consume this blog post: Any outbound links in this post will take you away from, to external sites in the wilds of the internet; neither Simple or our partner bank, BBVA USA, endorse any linked-to websites; and we didn’t pay/barter with/bribe anyone to appear in this post. And as much as we wish we could control the cost of things, any prices in this article are just estimates. Actual prices are up to retailers, manufacturers, and other people who’ve been granted magical powers over digits and dollar signs.