We all make financial decisions every day. We just don’t necessarily think of them as such. What and where we eat are financial decisions. How we dress, what we drive (even if we drive), where we live — all financial decisions that we have made and continue to make.

Certainly, many of these decisions are more than strictly financial — there are other important factors beyond the economic. But whether or not we are conscious of the financial ramifications of these decisions, they still exist.

What Does it Mean to be Financially Literate?

What's the difference between people who are financially literate and those who are not? Financially literate people generally consider the monetary ramifications of their decisions. Financially illiterate people generally don't. What that doesn’t say may be as important as what it does say.

  • It does not say that financially literate people have vast stores of financial knowledge, wisdom, or experience.
  • It does not say that financially literate people spend an inordinate amount of time on small decisions.
  • It does not say that financially literate people always make the best decisions.
  • It does not say that financially literate people live frugally.

How Can We Make Better Financial Decisions?

Here’s the rub: People with lots of financial knowledge and experience can still make bad financial decisions. No one is immune. But failing to think of a decision’s monetary consequences increases the likelihood of a bad choice. So what do we do?

The National Endowment for Financial Education’s Smart About Money program has you begin by reflecting on your money habits.

Meanwhile, the Financial Literacy & Education Commission’s MyMoney.gov website uses five building blocks: earn, save and invest, protect, spend, and borrow.

Both of these programs start with basics. There’s really no reason to understand markets or derivatives if you can’t budget and save money. It’s not glamorous, but it’s reality.

Achieving Financial Literacy

By making financial decisions every day, even the least financially literate people already know something. We all have a base of successes and mistakes.

The beauty of this is that your financial education can begin from wherever you are.

Perhaps you have a lot of experience making informed financial decisions, but need some help with tax concepts or retirement planning. Great — start there. Or maybe you have little experience in considering the financial aspects of your decisions and need help right from the beginning. That's good, too. You can also start there.

No matter where you stand, it really comes down to one thing: To become financially literate, you simply have to decide to do so. Decide to be master of your finances rather than letting your finances master you. Then — from wherever you are — consider the monetary ramifications of the decisions you make. Use websites like CentSai and MyMoney.gov to help on your journey to financial literacy.

Becoming financially literate is a result of a decision to do so. It is perhaps one of the most important decisions you will ever make.