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Guest Commentary / Money smarts

Leaven financial 'literacy' with wisdom

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By Fred Sirianni
We hear a lot about financial literacy. More and more, schools, media and other organizations are working hard to help consumers learn basic money concepts. (By the way, why is it economists and the media refer to us as consumers? Why not savers, or better yet givers?)
Teaching financial literacy is a positive trend -- but financial literacy often focuses on head knowledge. As author/teacher Dave Ramsey puts it, 80 percent of our success with money comes from our behaviors; only 20 percent is head knowledge. (Take that, talking heads on CNBC and Fox Business!)
And much depends on the quality of our literacy. The road to financial ruin -- think 2008, local bank stocks and 0 percent-down mortgages -- can be paved with what's called financial literacy. Plenty of folks who followed the touted financial norm got burned.
Maybe we should think in terms of financial wisdom.
Maybe we're at a turning point, a point of inflection. Huge economic changes have occurred in the last five years. The next five might have us singing happy days are here again, or maybe we're in only the 4th or 5th inning of a tough cycle. Economies are unpredictable, markets are too - and no one guarantees normal.
Regardless of where we are, the financial choices we make now -- as individuals, families and as a community -- will have a lasting impact rippling down our family trees.
Think this isn't a local issue? Government services are wonderful -- but as we've seen, the varied and vast services that city, county and state governments provide require lots of money. When the tide goes out, and less tax money is available, something has to give. Our vulnerable neighbors, our children, our elderly (not to mention parks and roads, and the list goes on) still have needs, but money is limited. That leads to cut-backs (or borrowing or tax-raising) that affect everyone.
Families, churches, service clubs and other groups who have their financial act together can play a crucial role in meeting the financial needs of their neighbors. But, as another Ramsey-ism goes, "Broke people can't give."
Think of a door hinge. The forces that push a door one way or the other are not unknowable; they are not random. It's simply force applied in a particular direction. What are the directional forces that lead to getting our financial acts together, especially in a time of inflection?
•Build (or maintain) your emergency funds.
Reduce your spending.
Increase your saving.
Have appropriate insurances.
Maximize your ability to earn.
Excel at work – reduce your risk of layoff.
Avoid withdrawing retirement savings for current needs.
Avoid incurring new debts.
Maximize your debt repayment.
Be intentional -- plan ahead.
Give generously -- successful people do this.
At the end of the day, everything we do with money boils down to these. We earn it, we give it, we save it, we spend it, and (all too often) we go into debt with it. We owe it to ourselves and our families to gain financial wisdom in each of these areas.

Fred Sirianni, CWS® is a Vice President, Financial Consultant at D.A. Davidson & Co., member SIPC, in Everett.

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