Money; simply put, is the answer to all of man’s material needs. The value of money makes it a prerequisite for our daily lives; hence the justifications for a pervasive hanker towards wealth. In crude terms, wealth is the excess of money. I’d rather view wealth from the economic lens of asset valuation- that is, the total value of assets owned by a person.
The everyday hither and yon of millions around the world is in pursuit of wealth- to have financial capabilities to cater for themselves and their families. But, how does one undertake this pursuit? Get a decent job, spend less than you earn, and you’d be positioning yourself to lead a life devoid of lack and want. But, add financial literacy to the mix, and you should enter the realm of financial excess and surplus.
But, what is financial literacy? The National Financial Educators Council defines personal financial literacy as: ‘possessing the skills and knowledge on financial matters to confidently take effective action that best fulfils an individual’s personal goals’. And, the Cambridge Business English Dictionary views financial literacy as: ‘the ability to understand basic principles of business and finance’.
Two things I want to point out in both definitions. In the former, ‘knowledge’ of financial matters and in the latter, ‘to understand’ basic principles of business and finance. Financial knowledge and understanding.
The Warren Buffet example
I was amazed to recently learn that Warren Buffet has only one predefined item on his itinerary- getting a haircut. The bulk of his time, he spends reading and thinking (and taking action).
Naturally, this shouldn’t pique any attention, but him being the third richest man in the world and widely acclaimed as the best investor alive, means we ought to take a closer look at the rather unconventional way he spends his time.
In reading ‘annual reports’ and other financial resource materials, Warren builds up a repository of information. And, it is this wealth of knowledge that provides the basis of his unique investment understanding.
The reason why the greater part of the world’s wealth is concentrated in the hands of a few is essentially because they know how to not just acquire wealth; but, grow it.
They, like Warren, have learnt how to grow and keep wealth. And, it would seem that the money gravitates towards them. This concept of money gravitating towards financial knowledge is consistent with the events described to us in George Clayson’s ‘Babylonian parables’, ‘acclaimed as the greatest of all financial books on the subject of thrift and financial planning’, where Arkad, ‘the richest man in Babylon’ is portrayed as one who learnt and observed the laws governing the building of wealth. Antediluvian as the tales may be, he became ‘the richest man in Babylon’.
There are several means through which financial literacy can be obtained. Old fashioned print-reading works perfectly fine. Moreover, the contemporary age, as in many disciplines, provides tools and resources to aid the average man in his quest to acquire sound financial knowledge.
Many applications and websites have been specially designed to make financial decisions easier, and our fiscal erudition would no doubt benefit from these.
In truth, the unequal wealth distribution in the world is a consequence of an unequal financial literacy. Money, like we’ve established gravitates towards the financially literate. For this reason, in our pursuit of wealth, we ought first to monetarily enrich our minds, then as sure as night precedes day, wealth will come along.
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