Money affects much more than our bank accounts; it also has a powerful impact on our emotional health, well-being, and moods. Our financial situations trigger emotions because, as humans, almost all of our personal needs are affected by money. Because personal finances are so interconnected with our human needs, we often make emotional money decisions that can be illogical and damaging. This module will help you better understand the root causes of your money decision-making processes and adjust them to live a more fulfilling life.

This module is intended to take you on a journey of self-assessment, discovery, and understanding that will arm you with a better view of why you make financial decisions - both good and bad. As you progress through this module, please take the time to engage in the activities and thought cues. You will be asked at the end of the module to construct your own short personal money story that will help to guide you toward better financial decisions and help you achieve financial success and well-being.

Your money mind will always be with you. By taking the time now to learn and understand what drives your decision-making, habits, and behaviors concerning your finances, you will be better able to make choices that are consistent with your goals and dreams. If it was only a function of having the knowledge you need, then financial security would be easy to achieve. It is not that easy, though. You need to gain that knowledge and assess your money mind in order to make the best decisions possible.

You need to know, understand, and incorporate five core competencies into your behaviors to live with a high degree of financial well-being.

The Five Core Competencies of Financial Literacy

Earning

Spending

Saving and Investing

Borrowing

Protecting

When you begin to think about these five core competencies and how they interact with your money mindset, you are on your way to making more optimal financial decisions. When you are going about your day-to-day activities think about how each financial decision you make impacts these core competencies. When you are more intentional about your financial decision making you set yourself up for long-term financial success. Next, we will break down each of these competencies so that you have a more detailed understanding of each one.

Earning

When you think about earning, you probably consider income from your primary form of employment. For a vast majority of individuals, this primary employment is their main source of income, but other forms also need to be considered. Self-employment, gig jobs, investment returns, and other forms of passive income are also forms of earnings. When you think about earning, you obviously want to maximize the money coming to you. Another consideration should be the impact of taxes and deductions on your earnings. On average, you can expect to pay between 25-30% of your gross income in taxes and deductions. This is a vital consideration for anyone who wants to make sound financial decisions. It’s very hard to make appropriate financial decisions if you begin with an incorrect understanding of exactly how much money you have to work with.

Saving and Investing

This core competency is all about how you decide to make your money work for you. To understand saving and investing, you should have a grasp of the concepts of compound interest and the time-value-of-money. Even if you do not yet understand these two important aspects of saving and investing, you can still begin to secure your financial future by saving and investing as early as possible. For the rest of your life, you are your own most important creditor. Treat yourself as the most important person you own money to and commit to paying yourself first before making other purchasing decisions. It is recommended that you save and invest a minimum of 10% of every single dollar you will ever make. If you do this, you will be helping to ensure your financial well-being and security for the rest of your life.

Spending

When it comes to our MONEY MINDS, spending is the most impactful and influential core competency. Our spending is directly linked to our personal values, habits, behaviors, emotions, and upbringing. When you think about your needs vs. your wants the decision-making process seems simple. But put yourself in front of that new jacket you have wanted, that all your friends have, and all of a sudden, your money mind starts to act in ways that you didn’t expect. Through sound budgeting (spending plan), you will be able to gain some control over these impulses and better align your spending to your overall goals.

Borrowing

When you borrow, you are using debt to acquire goods or services. This borrowing can be from loans, credit cards, lines of credit, or other structured debt instruments. Almost all forms of borrowing share one commonality: you will pay interest for the privilege of using credit or debt to pay for something now that you could not afford to purchase on your own. Not all borrowing incurs interest, and not all debt is bad debt. Sometimes it is in your best interest to borrow to acquire assets, education, business opportunities, or a home. The key is having a money mindset that focuses on using good debt while minimizing the amount of bad debt you acquire.

Protecting

Risk management and mitigation is how you protect yourself personally and financially. Your personal attitudes and values directly impact the steps you will take to protect your identity, assets, and health. You can avoid identity theft, scams, losses, and financial distress by making decisions about insurance, asset allocation, and personal security. These actions help you live the life you envision for yourself while having the peace of mind that you are protected.

[Chapter 1] Finances and Emotions

[Chapter 2] Dreams and Goals

[Chapter 3] Financial Influences

[Chapter 4] Behavior Change

[Chapter 5] Your Money Story