At this early part of the year, and given the current level of debt-induced stress that engulfs the leading economies of the world – a situation which can easily affect everybody in this highly-globalized and interdependent society – it looks advisable for us to take stock and reflect about what we really are after. What is the thing we really aim for?
We have defined early in the game that investment literacy is what this blog cares about, and I assume that is what you, my dear reader, mainly cares about, too. Otherwise, you would not have bothered reading this post right now.
In one of the earliest posts, we defined investment literacy as the level of knowledge or proficiency in the rudiments or basic principles of handling income that results in substantial improvement in the economic well-being of the person.
By this definition, investment literacy is a “means” that subsumes an end in itself. The “means” is the level of knowledge or proficiency in the rudiments of handling income or money. The subsumed “end” is “substantial improvement in the economic well-being of a person.”
In specific terms, “substantial improvement in economic well-being” can take many forms:
• Owning a home and being able to provide comfortably for one’s family;
• Being free from debt and able to navigate the shocks of life without getting reduced to penury;
• Being able to send ones children to college;
• Investing wisely and growing one’s nest egg;
• Opening and operating a business successfully;
• Attaining social mobility and being able to maintain it.
On the “means” side, the rudiments or basic principles that one needs to know or be proficient about, have been fairly known and snippets thereof have appeared in the “scriptures” and many other books:
• Saving at least 10% of earnings and saving upfront;
• Living generally below ones means and being able to distinguish needs from desires;
• Investing carefully what one saves;
• Avoiding businesses where one is not familiar;
• Seeking the advice of men wise in handling money;
• Avoiding debt wherever and whenever possible;
• Avoiding “impossible earnings” schemes
The list is non-exclusive and there are no ironclad rules.
The items in the list are practically all grounded on just plain common sense. Nothing is rocket science, nothing difficult to understand and nothing arcane or esoteric.
While sounding so simple, these are, of course not easy to implement in actual practice, courtesy of human nature’s inherent weaknesses: the predisposition to overindulgence; the penchant for the easy; the desire for quick riches; the propensity to follow the herd; sheer recklessness; and at times, outright folly.
The rewards for studying and getting proficient with the rudiments come through time as surely as day follows night.
Substantial improvement in ones economic well-being – that is the result.
There is, however, a greater end which only investment literacy can bring: financial independence.
In simple terms, financial independence means being able to live your life without the necessity of working or having a job.
Of course, it does not preclude your continuing to work because you love to work or because work gives you a kind of “high”. Or you continue to work in any way because working makes you strong and prevents your body from deteriorating.
It simply means being able to live your life as you please but at the same time being able to provide for your family.
It means not having to worry about earning the daily bread or getting the money for month-end bills to be paid, credit card charges falling due, the fat landlady coming for the rent, paying for your kids tuition fees, and so on.
That is what financial independence means.
Fortunately for us, there is a way to attain financial independence…and here is where investment literacy comes in.
Since the time of the ancient Babylonians where life was so hard and getting sold to slavery was common occurrence, becoming literate in investment offered the sure way to financial independence.
In fact, investment literacy is the only way …not counting cases where one is born with a silver spoon, so to speak. And even in the latter case, one can easily lose the freedom that he has by sheer recklessness, overindulgence, lack of discipline or by outright folly.
Financial independence is the ultimate goal but even if this is not attained, one is already ahead in life; he is already substantially free from sufferings and general wretchedness that lack of literacy brings.
Being literate in investment is the only way to financial independence.
That is the truth, a simple yet far-reaching truth.