Why You Need Financial Literacy Skills For A Wealthy Early Retirement 

Invest in financial literacy skills and you will soon appreciate how well you deployed your resource of time and money. This will put you on a right path to making informed decisions on how to gain wealth or financial freedom towards an early retirement.

The key principle in wealth accumulation is the rate at which your capital grows.

This is largely a function of your financial intelligence. You must learn before you can earn.

It is possible to profit from any market condition if you know what you are doing (although, admittedly, some market environments are easier than others).

Every investment in your financial literacy skills will pay dividends for a lifetime.

I recommend that clients regularly contribute to their financial intelligence by taking coursesreading, and researching so that their financial intelligence grows faster than their wealth.

What you know influences how much you earn. Don't forget to invest in financial education. 

This is critically important because financial intelligence cannot be developed overnight any more than wealth can be accumulated overnight. It takes time and disciplined effort.

The earlier you learn your lessons, the less they will cost you. You’ll gain experience on smaller investment decisions, where mistakes can be offset by new savings.

The longer you wait to learn these lessons the more they will cost you. That cost comes in the form of years of missed opportunities and mistakes made with big investment decisions later in life that can’t be offset by savings.

There is a time in your life where you need to be honest with your self and decide whether your financial literacy skills are adequate enough to help you understand the adequacy of any wide range of investment plans presented to you.

You May Need A Financial Mentor To Boost Your Financial Literacy Skills

Folks —  To help you appreciate why I’m emphasizing the importance of acquiring basic financial skills, I suggest we do a self check and pause for a simple quiz.

Kindly answer the following three questions:

1. Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After five years, how much do you think you would have in the account if you left the money to grow (more, less or the same)?

2. Imagine that the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year. After one year, how much would you be able to buy with the money in this account (more, or less)?

3. Is this statement true or false: “Buying a single company’s stock usually provides a safer return than a stock mutual fund.”

4. The cash flow quadrant is a business model that describes employment and professional practice(self employment) as high risk career options for those in search of financial freedom. It recommends network marketing as the easiest and cheapest way for an employee to join the league of financially free millionaires. Have you read about it? Do you Know the author of this model?

Most of you probably think you can provide the correct answers — 70 percent of Americans think they have above the median level of financial knowledge, according to a recent national survey on financial literacy.

But if that’s true, why is it that just 65 percent of the survey respondents were able to give a correct answer to the first interest rate question — which doesn’t even ask for an actual calculation of return? (You would have more money, of course — $110.51, assuming compound interest paid monthly and a constant interest rate.)

Just 64 percent had the right answer on inflation (you’d be able to buy less); 20 percent got it wrong; and 14 percent couldn’t provide any answer.

Only 50 percent got the answer right on diversification (the mutual fund is safer), while one-third couldn’t answer at all.

Only 15 percent got the answer right on Network Marketing being termed as the business of the 21st Century and the best financial plan for early retirement by celebrated business gurus’s like Robert Kiyosaki, Oprah Winfrey and Yes! Donald Trump.

The questions and responses are among the highlights of new research by two of the nation’s top experts on financial literacy: Olivia Mitchell, a professor at the Wharton School of the University of Pennsylvania and Annamaria Lusardi of Dartmouth College.

Their research began in the wake of the 2008 financial crisis

The researchers wanted to understand what is stopping Americans from saving enough for retirement.

The initial research focused on people over age 50 but not yet retired. “The results were shocking,” Mitchell says. “We have profound levels of financial illiteracy, which helps explain how we have people winding up with no saving for retirement and high levels of debt.”

Experts often point to poor financial decision-making as a cause of the retirement security crisis. 

“Do a budget, and keep track of what you spend,” Olivia Mitchel says. “It isn’t fun, but it’s important. Will you have enough to retire? Do you need to work longer? What will be the impact of taking Social Security or a pension later?”

Has there been any progress in closing the knowledge gap? Not surprisingly, Mitchell says, men and women with higher levels of education know more about personal finance than those with less education. 

There is nothing more financially dangerous than an investor making a million dollars’ worth of decisions with a thousand dollars worth of financial literacy skills.

When it comes to investing, a little knowledge can be a dangerous thing, and a lot of knowledge can be a profitable thing. Get financial literacy knowledge and in particular on how the trappings of the modern economy are likely to influence your early retirement plans

By growing your financial intelligence every day, you are investing in your financial future. Are you living in integrity with this wealth-building principle and regularly learning about investing and personal finance?

Return from financial literacy to early retirement