Financial literacy is everywhere—taught in schools, promoted by institutions, even given its own month. Yet since 2020, it’s been declining.
That matters, because knowledge alone isn’t enough.
Understanding money is one thing. Using that knowledge to consistently make better financial decisions—and actually achieve your goals—is something else entirely. That’s the difference between financial literacy and financial proficiency.
And right now, too many people lack both.
If you want to move beyond knowing to doing, read on to learn about three practical steps to build real financial proficiency.
Fin Lit versus Fin Pro
Understanding fundamental concepts of personal finance such as spending, saving, and investing is the core focus of financial literacy (“Fin Lit”) education. Financial proficiency (“Fin Pro”) means effectively applying financial literacy knowledge in real-life situations to make sound financial decisions and achieve financial goals.
To help you understand the difference, we can use “driving a car” as an analogy. Knowing the rules of the road and how the primary features of a car work is like being financially literate. Being financially proficient is like being a skilled driver who can navigate various road conditions, make quick decisions, and reach their destination safely and efficiently.
Having a driver’s license and a car doesn’t make you a “good” driver. If you live in these states, then you really know what I mean.
Progressing from literacy to proficiency
Becoming proficient at personal finance requires both literacy and the discipline to plan for your future and consistently track your progress towards life goals at all ages. It means not only knowing what to do, but doing it.
Only through continuous learning can one become more financially proficient. Financial proficiency isn’t a static state. The financial landscape and your situation are constantly evolving, so a commitment to ongoing measurement and learning is crucial.
This progression may seem daunting. To help you develop the discipline necessary to achieve financial proficiency, I’ve streamlined the process into 3 steps:
- Test your literacy
- Plan for the life you want
- Track your financial condition and goal progress
You can learn more about these steps in this information sheet.
Your path to financial proficiency
By combining self-reflection with assessment tools and an honest look at your financial behaviors and outcomes, you can gain a solid understanding of your current financial proficiency level and identify areas for improvement.
Using the information and tools in my books and on DIYmoneytrack.com will help you formulate the plans for reaching your life goals with financial proficiency.
It Pays to Know!
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