Good morning! Today, I’ve teamed up with some other bloggers from The Heavy Purse to help promote Financial Literacy Month. So, what is financial literacy? Simply put, it’s about understanding how money works. This includes earning, managing, investing, and even donating it to help others. It refers to the skills and knowledge that enable someone to make informed and effective financial decisions.

In other words, it’s all about knowing your money. I’m not an expert, but I learned something crucial early on: to spend money, you need to make money. Sounds obvious, right? And to make money, you have to work!

If you’ve been following my blog, you know I’m a confessed procrastinator, almost lazy. I don’t mind working for my money, but I hate working more than necessary to get the same thing for a higher price.

Here’s a simple example. Suppose you earn $10 an hour and want something that costs $100. Ignoring taxes and other deductions, you’d need to work 10 hours to afford it. However, a bit of research and an online coupon might get you that same item for $90. Now, you only need to work 9 hours to get it.

That’s my approach to finances: trying to pay the least amount for a product that meets my needs. This doesn’t mean buying the cheapest item but rather a reliable product that will last. For instance, if you buy a $100 cast iron skillet with a lifetime guarantee, you’ll use it for the rest of your life. So, your $100 investment ends up costing you $2 per year over 50 years. Conversely, if you buy a $25 skillet that you replace every three years, you’ll spend the same $100 over 12 years, which averages more than $8 per year, and you’ll need to buy another skillet after that.

Now, let’s go back to that $100 item you want. If you put it on credit and only make minimum payments, it might take months or even years to pay it off. Convenient, yes, but it will cost you much more! With credit card interest rates often in the high teens, that $100 item could end up costing you $125 or more. So, you’d need to work 12.5 hours instead of 10 to get the same benefit out of the same product. Who wants that?

This is why I care about financial literacy. You shouldn’t have to work more than necessary to get what you need. Those extra hours spent paying off interest are a waste. You’re getting nothing in return for your extra effort.

A good exercise to put things in perspective is to calculate your real hourly wage. Let’s say you earn $10 an hour and work 8 hours a day. But you spend an hour commuting and another hour decompressing from work, making it 10 hours spent to earn $80, effectively bringing your hourly wage to $8. Include lunch breaks, commute costs, taxes, car depreciation, daycare, work lunches, and similar expenses, and your real hourly wage might be even lower.

You might find that you’re actually working 15 hours for a $100 product if your effective wage drops to $6.5 an hour.

Being aware of this lets you make better decisions when buying something, deciding if it’s really worth it, or skipping the purchase altogether. Understanding where your money comes from and where it goes each month is the first step. Making deliberate choices to maximize your fun money and fund your long-term goals is the next. Before you know it, you’ll have more freedom, more time, and more money.

Why do you care about financial literacy?