THE NEED FOR LITERACY IN THE AFRICAN-AMERICAN COMMUNITY

Financial illiteracy can lead to under-achievement and economical deficiency. That is why there is such an important need in society for literacy to be at the forefront of education, especially in the African-American communities. A vast amount of income is passed through African-Americans hands on a yearly basis. However, this money can be put to better use if the people are more financially astute. Minority communities do struggle when it comes to implementing financial strategies. Simply because they may be illiterate about the benefits of the correct procedures concerning financial planning. Consequentially, without financial literacy being established and taught correctly to the community it will only end in financial failure amongst its peers. Financial literacy to a person is being able to possess the skills and knowledge that allows that individual to make informed and effective decisions with all of their financial resources. We, as a minority community must raise interest in personal and business finance to ensure our peers can prosper. We must understand the basic concepts before moving on to more advanced financial systems. It is a fact that people who have learned the appropriate literacy are then capable of making better financial decisions and they manage their finances much better than those who unfortunately have had no such training. It is my opinion that we should campaign for a for a financial literacy education that is more oriented and broader in focus. The African-American community should be offered a curriculum that helps each individual, no matter of their schooling, to better understand financial factors and the risks in not having sound financial judgement.

The Organization for Economic Co-operation and Development started an international governmental project with the initiative and objective of providing ways to improve financial education and literacy standards. But unfortunately many individuals within African-American communities are still not receiving this exposure to help educate them. This may be due to personal circumstances including their family life, school life or even gang life. Yet we must try to persist and educate the people until everyone is capable of financial prosperity. We must offer a wealth of information to the country as a whole and be confident that financial training is available to all.

Measures have been put in place to support further financial literacy education and many organizations have empowered the literacy movement. They may differ somewhat on their definitions of financial literacy but the President's Advisory Council on Financial Literacy has called for a consistent definition of financial literacy by which all financial education programs can be judged. It is now defined as 'the ability to use the knowledge and skills to successfully manage financial resources effectively for a lifetime of financial well-being'. However the Council for Economic Education in the United States found that out of 44 states that currently have K-12 personal finance education and its guidelines in place, only 17 states actually require high school students to enrol on a course in personal finance. This may be the reason why so many people are failing with their personal finances. Or maybe it is because students, especially in the minority communities are dependent upon the initiative of their local schooling board and its awareness to employ the proper financial learning facilities to the student.

The current approach therefore may be lacking in its ability to inform the students and the educators are performing their duties from a deficit perspective. Hence, the educator is seen as the expert providing the knowledge to a passive student who may not realize the true benefits of what is being taught. For that reason the student can lack interest. We must find a way to change this mentality and recommend an approach that would incorporate a transformative learning framework with its basic fundamentals as per the National Endowment for Financial Educations model. Which is the framework that is most established with adults who fully understand the benefits of financial education. Within that framework, students have embarked through the correct psycho-cultural process of acquiring new and revised interpretations of financial beliefs, attitudes and perspectives that help to shape their financial behavior. These kinds of alternative approaches can help individuals to examine and re-evaluate their current thoughts and mindset about personal finance. It helps to increase self-awareness and empowers people from all walks of life to establish the benefits of applying long-term positive money habits that can assure greater financial security and personal lifestyle stability. This is certainly so, and that is exactly what we should aim for within the African-American community.

Our aim for the economy should be to learn our diverse communities about the importance of financial literacy and the correct procedures concerned with the management of their personal finances. The procedures should be taught to colored youths as well as Caucasians from an early age such as in high school. Whether that be an expensive private school or a public school, financial education is a must. Because, all should know the true value of money management.

Financial literacy is key to creating and sustaining wealth for the African-American communities in the US. It is a legacy that must be passed down like an inheritance in the family. From an early age we should educate our children about financial literacy and the need to be financially literate in our economy. This will strengthen the African-American community and provide our peers with the possibilities and opportunity to create future wealth.

WHAT IS YOUR FINANCIAL PSYCHOLOGY?

This is the key question individuals must ask themselves because once that question is debated and finally answered, the person will then understand the reasons behind their spending habits and current financial circumstances. The majority of people who suffer with financial problems can be due to the result of their psychology. Factors including, where you were raised, what you were taught in childhood, family attitudes and subconscious beliefs towards spending and saving money can have a huge impact on your mindset and behavior.

The two biggest problems concerning financial issues in America are spending too much money and not saving enough for the future. However, in the minority communities this may slightly differ to include a very low-level of income and lower net worth due to lack of education, employment and bad financial behavior from an early age and into adulthood. Which has resulted in not enough funds in the first place to even contemplate saving for a rainy day and/or a higher crime rate in the community due to individuals trying to solve their money problems.

Should the minority blame the government for their financial difficulties?

Should they blame their childhood and their parents?

Or is it the individuals character and personality type that is to blame?

Well, the answer could be yes to both but the blame is substantially down to poor financial psychology. Therefore if the minority can be taught a different psychology from childhood to adulthood it will help to identify money management issues and how they relate to financial problems. This identification will lead to resolving financial matters in the person's favor.

The correct financial psychology procedures will address the issues associated with bad money management. Firstly, one must try to recognize the forces that influence the decision-making process, which can be down to past experiences, etc. Then, one must realize the psychological effects that are connected to loss or gain and the outcome the decision will have, either positively or negatively on your income. With that in place, you can be confident to make the correct decision to suit your needs. Nobody likes to experience loss therefore it is a no-brainer because you were able to apply the right psychological thought processes related to constructive financial management.

It is basically behavioral finance, which is the application of concepts and principles connected to the psychology of the understanding and management of money. How we think and feel about it will have a significant impact on our decisions concerning income. On an individual basis, personal misperceptions about finance and the correct psychology behind it, can have a detrimental effect and profound impact on the individuals life. Surprisingly, money management means different things to different people. To some, good money management means safety and survival. To others, money and the management behind it can mean superiority and power over peers because earning money and managing it better than others is how they rate their self-worth.

Understanding your financial psychology could be extremely beneficial as it can save you a lot of money. There are many different personality types that determine a person's financial psychology. And there are different psychological theories and economic surveys that further explain these types in more depth. However, I have chosen snippets from an article that I read some time ago in the Financial Times to help you to understand the basics and try to determine the fundamental aspects of the question, 'what is your financial psychology'?

• Are you someone who always picks up the bill on a night out? If so, your extreme generosity may not stem from huge wealth, but from status anxiety.

• Do you always check your bank balance or investment portfolio? You may feel like a spreadsheet specialist but in fact, you may be over-compensating for a lack of control elsewhere in your life.

• Maybe you consider yourself as a budgeting champion because you know how to spot a bargain? What if your drive to spend money on things that you don't really need and this could signify loneliness and/or a lack of self-esteem.

The above is a form of financial psychology at work. Factors like that can certainly be overlooked by a financially uneducated individual. But if the individual is offered this kind of education they will understand how they think and act can influence their financial environment. This knowledge will affect how they control their future finances.

Why?

Because the individual now has the superiority to control it instead of being controlled by their usual financial behavior. This will then turn the person to appreciate the importance of good money management and it may lead to rational investments, more savings and those impulsive spending sprees can become a thing of the past. Risky patterns like addictive buying or getting into debt will surely be eradicated if the person can recognize their financial psychology plays the most important part. Because of its underlying issues that trigger problem behavior.

So with that in mind, let us investigate some of the personality traits that psychologists and economists suggest are the most popular in financial psychology.

1. The Anxious Investor; although anxious, this personality trait is a lover of risks. They believe that they have an edge over others. Overconfidence can cloud their judgement leading to failure in markets. This kind of psychology is extremely common among affluent investors.

2. The Hoarder; money represents security for this personality trait. They avoid risks and tend to stockpile cash that they would be better off investing. If a person was raised in a family where money was extremely tight, they may have this type of personality that needs a lot of security and stability.

3. The Social Spender; shopping make this personality happy. Thee individual may frequently buy loved ones presents and blow their budget on occasions like birthdays, etc. This type of frequent spending boosts self-esteem. But it is financial psychology that can cause addictive behavior leading to lack of personal funds. It is the same trait as the 'cash splasher'. They view themselves as generous but flashing the cash is usually to make people think more highly of them.

4. The Financier; Checking the bank balance and tracking all purchases and spending activity is this personality traits forte. It is a kind of financial psychology characteristic that can make an individual become obsessed with comparison sites, credit card points and switching providers to make them feel more in control of their finances, etc. It can be simply down to the desire to control, however this behavior's real trigger could be about anxiety in other parts of their life.

The above is just a short list of the personality traits considered in financial psychology. Albeit, financial psychology is a relatively new field of study, however there are many different personality traits considered by psychologists. All integrate psychology with financial management. It is a different way to look at financial and emotional well-being and to process the beliefs, emotions and behaviors related to money.

Applying the correct financial psychology can lead to more power, freedom and many other things. Therefore an individual must seek to understand their own financial psychology and implement techniques and strategies to help them to change direction if need be. This will positively affect their decision-making capabilities and lead to beneficial financial management in the future. The key to making better choices and decisions about money begins with understanding your own approach to spending, earning, saving and investing. Once that is understood, you can start to develop a positive style of financial management.

THE NEED TO BUDGET

The need to budget is of great importance, especially in the current turbulent economy. Budgeting money will help to create stability and security. It is a systematic approach that will help you to stay on top of your finances and pay the bills, etc. If an individual can manage their money effectively it will certainly contribute to their current lifestyle situation and future wealth and well-being. By understanding where and when money is coming in and where/when it is going out, it will enable a person to have full control over their personal and/or business finances. Good money management is essential to avoid and eradicate debt which may cause serious concerns to the person, like mental health issues and financial disaster. There are so many benefits from budgeting your money and by creating a spending plan it allows you to determine in advance whether you will have enough money to cover your needs and to do the things that you want to do. Budgeting is simply balancing your expenses with your income.

The most common types of budgeting include:

• Personal budget

• Master budget

• Operating budget

• Cash budget

• Static budget

• Flexible budget

• Capital expenditure budget

• Program budget

There are many reasons to why there is a need to budget and some include:

1. It ensures you don't spend money that you shouldn't.

2. It helps you to keep your eye on the target and end goal.

3. It can lead to a happy retirement.

4. It helps to prepare for unexpected emergencies.

5. It sheds light on spending habits.

6. It creates financial awareness.

Maintaining a budget on a regular basis will help you to keep track of personal/business expenses, analyze your income and anticipate all your present and future needs. The five main steps to preparing a budget are:

Step 1: Identify your goals

Step 2: Review what you have, i.e. income

Step 3: Define your costs

Step 4: Create the budget

Step 5: Keep track and stay on top

Creating a budget is a great tool that will help with decision making and this kind of good money management is a means to monitor personal and business performance.

It will help to assess the current situation and to plan effectively to combat any financial difficulties helping towards a profitable outcome for the person or business at hand. Because if you are able to track how much money you have coming in and you know your recurring expenses, then you will find it much easier to live within your means.

Everybody should create a budget plan and monitor their finances.

Although you can live without a budget, if you do, it is like flying blind. Without a budget plan in place, it is difficult to assess what your financial situation really is. A budget provides an individual with the important information that is needed to make positive financial decisions.