There is more information available to the average UK citizen than at any previous time in history. With just a few taps of a screen we can now access information on a whole range of retail investment opportunities; information on savings accounts, stocks, ISAs, PIPs, bonds, investment trusts and REITs is readily available and more accessible than it has ever been before.
So why is financial literacy as poor as it ever has been?
In my opinion, the biggest reason for this is an in-built ‘fear’ of the world of finance. My generation has graduated into a world of low interest accounts, a finance industry replete with market crashes and miss-selling scandals, and a media industry constantly pumping stories about how we’re never going to get onto the housing ladder.
This constant negative spin on the world of finance has led people to switch off from asking the important questions needed to understand their finances;
- How much money should I be earning?
- How much should I have saved?
- What do I want to do with my money?
- Why do I want to do it?
- Do I think it’s possible to do these things, or more importantly, do I understand how?
If someone walked up to you today and told you that they thought you had the potential to earn £500,000 a year, plus a 10% pension, private healthcare, company phone and driver, how would you react? What if someone told you that they earnt £25,000 a year from investments, and only worked 2 days a week in a job they loved? Would you congratulate them, and try to learn from their success? Or would you feel bitter and disadvantaged, ruing inequality and the fact you weren’t so fortunate?
I’ve always been a big advocate of surrounding yourself with more intelligent people than yourself, who are hard-working and can teach and develop your personality and understanding of the world. If you’re serious about learning from those around you, you would only respond to the previously question positively, by stating that of course you’d seek to learn how your new acquaintance had found such success.
When I was younger, I wasn’t actually a naturally positive person. It took many years of hard work and determination to change my mindset and transform into the more positive and inquisitive personality that I have today. When it came to finances, I didn’t often think about what I wanted to do with my money – I found a thing I liked, and I paid whatever price it happened to be, without ever considering whether it really represented ‘good value’ for me at the time.
As I got older, I began to think about what I was doing with my money and why I was doing it. I began to learn about concepts like financial freedom, passive income, above-average returns, real returns and financial risk. I ran models on my income and savings, trying to forecast what my returns might be, and how much I needed to save to hit targets.
The more I learnt about finance, the less afraid I became of it – I learnt how to track down good returns, beat inflation, and pursue income generated opportunities to supplement my main source of finance.
Learning new concepts and ideas from people more successful than myself was (and still is) the best investment I can make. Without continual learning and development, I believe my enjoyment of the world around me would be greatly stifled and I would miss out on a whole host of opportunities present around me.
Challenge yourself to take charge of your finances and invest in your understanding of how you can improve them. When looking at opportunities, it’s often easy to miss the biggest opportunity of them all; your own understanding and mindset. Instead of focusing on how hard things are, focus on how to improve them. Instead of lamenting the success of friends and colleagues, learn how they did it and try and emulate them. Only by doing that, will you capitalise on the best investment opportunity.