How Financially Savvy Are You?

While some American families are fiscally fit and confidently executing their plan for retirement, unfortunately that is not the case for far too many Americans. A cursory glance of newspaper headlines or surfing news sites on the Internet on any day of the week communicates that very clearly.

After reading numerous news stories and based upon lots of conversations with family and friends, my experience has been that most families generally fall into one of five groups.

The first group simply has no understanding, and no real desire, to learn more regarding saving and investing for their future. Often their focus in on living solely for the moment, certain that things will somehow work out in the future. Winning a lottery perhaps? Or maybe hitting it big in Las Vegas?

Nicola Tolin

The second group understands that they should be doing something, but are not sure where to start. They may have little money set aside in a savings account but aren’t committing any money to an investment or retirement account.

The third group is saving and investing something; however, they are doing it blindly and could not tell you why they chose their particular investment products, have no discernible way to tell if they are saving enough for retirement, and they do not know how much they will need to sustain them in retirement.

The fourth group has at least the broad outlines of a plan in place, has used some type of calculator to quantify how much they should be saving, and is actively engaged in managing their finances with an eye on the future.

Volkan Olmez

The final group is well on their way to being financially independent and are looking beyond their own retirement and mortality; they are actively engaged in planning for generational wealth transfer. We’ve discussed the topic on multiple occasions here at RetirementSavvy. The importance of estate planning and wealth generation in black families has been covered; as has dealing with inheritance taxes; and establishing family values and retaining family unity to ensure a successful transfer.

I think it’s safe to assume no one from the first group visits this blog or is reading this particular post. Do you belong to group two, three, four or five, dear reader?

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

8 Comments

  1. Hey, James. I love this topic. And I’m particularly interested in those at the bottom of our society. I like to think that their financial woes are largely the result of ignorance and culture. They’ve never been taught the fundamentals of personal finance and they’re just copying the poor financial decisions they see being made all around them. And I fully understand that they’re sometimes the victims of systemic cruelty. But I also understand that they’re sometimes the recipients of systemic kindness. In fact, I would say the instances of systemic kindness far outnumber the instances of systemic cruelty. But our media only focus on the systemic cruelty. Meh. Anyway, those are my pathetic thoughts. I cling to the notion that it’s largely about ignorance and culture, because if that’s the case, there’s hope. What say you, my friend? I say anytime a poor person starts adopting good financial habits, his or her financial position will surely improve. Or am I a total ignoramus? Perhaps we could explore this in a series? Would you be interested? Let’s talk.

    • Agreed that one component is education/financial literacy. I am all about education and I do all I can to help those within my sphere of influence. However it is a tough, tough topic and a tough conversation – especially via a blog – particularly because it touches significantly on race and the impacts of racism. My experience has been that most people aren’t ready (truly ready IMO) to have that conversation.

      I’ll give your proposal some thought about how we might execute a series on the topic.

      • Thank you, James. I really appreciate your thoughts. I hear ya about a blog not necessarily being the best place to have this discussion. Too fraught with emotion. But I am genuinely interested in this matter and know I have a huge blind spot. Can’t blame a fellow for seeking wise counsel. Hope all is well in AZ, my friend. Talk to you soon. Cheers.

        • We’ll talk soon. Be well, my friend.

  2. You’re on to something here, James.

    I’m hopeful when I see folks who are in groups 2 and 3. They want to learn and they’ve begun taking action. The more they see how their efforts can help them chart their own course, the more likely they are to keep learning.

    I consider Mr. Groovy and me to be in group 5, and I wish I could say once you reach this level you can set it and forget it. But that’s not true. However the lack of money-related stress is priceless.

    • ” … I wish I could say once you reach this level [group 5] you can set it and forget it.” So true, my friend. You always have to be prepared for the proverbial curve ball to maintain your financial well-being.

  3. We are in the fourth group, however we just stepped inside of it 😉 We are definitely using the information shared here on Retirement Savvy as well as advice from our accountant to make the best educated decisions as we continue to eye our future.

    • Great to hear, my friend. Best of luck as you move through four, on your way to five, and look to facilitate generational wealth.

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