Financial Literacy Lessons - A Q1 Recap
I’m Andy Temte and welcome to the Saturday Morning Muse! Start to your weekend with musings that are designed to support your journey of personal and professional continuous improvement, and to improve financial literacy around the world. Today is March 29, 2025.
Okay - so it’s time to take a beat and recap our financial literacy journey during the first quarter of this year. What follows is a brief synopsis of the topics we’ve covered thus far.
Point 1 - The Definition of, and Ingredients to Success
We started the year off with a multi-part series of episodes that asked listeners to think about what success means to them. The main point of that series was to recognize that you’re a one-size-fits-you human and to recommend that we avoid the trap of adopting someone else’s version of success. Societal expectations and peer pressure can lead us astray and take us down roads we really don’t want to be walking.
We’ve also talked about the courage it takes to write and live your own, authentic story. To be true to yourself, live your purpose, and to adopt an agile, growth mindset. To recognize that our minds are filled with bias and we must be willing and able to challenge the biases that constrain us and lead us to make suboptimal decisions.
We completed our discussion about success with a list of ingredients to success—the traits, skills, and attitudes that most successful people share, irrespective of how success is defined. In addition to courage, those skills/traits include grit, determination, persistence, perseverance, drive, resilience, grace, lifelong learning, curiosity, communication, showing up, and financial literacy.
It’s the last item—financial literacy—where we’ll be focusing our attention for the foreseeable future. Why? From my Muse of February 1, 2025:
Successful people know the value of money and they understand that it is a tool to help them achieve their goals. They understand the concept of living within their means, they know when to spend and when to save, they understand the strategic use of debt and leverage, and the long-term benefits of building equity or an ownership stake. Note what I didn’t say. You don’t have to be a financial expert to be successful, but you do need to be financially literate and savvy.
Point 2 - Is Success Dependent on Financial Literacy?
This then led us to the question: Can you be successful without being financially literate? The answer was a resounding maybe, but highly unlikely. Why? From my Muse of February 15, 2025:
You are the product of your upbringing/environment plus the stack of decisions you make, and your actions based on those decisions once you become an adult. Successful people make more magnitude-weighted good decisions than bad. Since many of the most consequential decisions in your life are financial or have financial aspects to them—housing, education, food, clothing, retirement, heck, just about everything—financial literacy, or the lack thereof, is a key determinant of whether you will end up making more magnitude-weighted good decisions than bad.
Point 3 - Value Analysis and Decision-Making
This then led us to explore the concept of value analysis and its impact on improving decision-making. I asked the question: Why does understanding the concept of value and value-addition matter to building financial literacy? From February 22nd:
As humans, we tend to not put enough thought into the worth or value we assign to the products and services we purchase. We’ll make better decisions on what we purchase with our hard earned $$ if we take a bit more time to consider how we place value on the things we buy. The interesting thing about finance and financial literacy is that it is equal parts objective evaluation of our financial position and our behavioral perspectives about our personal economy. How we feel about money, investing, and consumption is as important as the numerical and analytical side of working with our finances.
It’s this last bit that’s key. There’s a common misperception that financial literacy is all about math and numbers. While mathematical literacy is a critical component of financial literacy, how we process our feelings toward money and understand how a laundry list of subconscious or cognitive biases can lead us to make poor financial decisions, is of equal or more importance.
Point 4 - An Introduction to Behavioral Finance and Cognitive Bias
Two weeks ago, I introduced listeners to the founders of the behavioral finance movement. This quote from Richard Thaler sums it up best:
“People often make poor choices—and look back at them with bafflement! We do this because, as human beings, we all are susceptible to a wide array of routine biases that can lead to an equally wide array of embarrassing blunders in education, personal finance, health care, mortgages and credit cards, happiness, and even the planet itself.”
While there is an incredibly long list of potential biases an individual can suffer from, I’m recommending that listeners focus on the primary culprits that lead to poor financial decision-making. They are confirmation bias, decision fatigue, the disposition effect, the messenger effect, optimism bias, the sunk-cost fallacy, loss aversion, anchoring bias, herd mentality, overconfidence bias, choice paralysis, and the endowment effect.
Point 5 - The Difference Between Needs, Wants, and Impulse Consumption
We wrapped up Q1 with a discussion about how to alter consumption behavior by more carefully scrutinizing the difference between needs, wants, and impulse purchases. We pee a lot of money down the drain because we don’t evaluate our spending habits on a routine basis with an eye toward reducing impulse buying and ensuring what we are buying is adding value to our lives.
Next week, we’re going to begin talking about risk and risk aversion. Again, if you’re just joining us on the journey to building financial literacy and personal success, I recommend that you go back to the beginning our our lessons on the subject that starts on January 4, 2025 with The Secrets to Your Success, Part 1.
Until then… Grace. Dignity. Compassion.
