Get Shameless About Money

Replay: It's Financial Literacy Month so how do you know if you're financially literate?

April 06, 2023 Brunch & Budget
Get Shameless About Money
Replay: It's Financial Literacy Month so how do you know if you're financially literate?
Show Notes Transcript

I feel like people toss around the phrase financial literacy and everyone nods along and says, “Oh yeah, I need that.” But what exactly is THAT? How do you know whether or not you’re financially literate in the first place? Do you take a quiz? And if so, which quiz do you take? Is the […]

Unknown:

wasn't seven minutes Good afternoon and welcome to brunch and budget on bonfire radio with your host pemilik. A palette, a certified financial planner here to help take a bite out of your budget budget. Budget God calm on your sound provider dialect. And here's your host, Pamela capelli.

Pamela Capalad, CFP, AFC:

Thank you, dialect and thank everybody for tuning in Happy April. It is April it is spring, and it is Financial Literacy Month. In case you didn't know. We just had

Dyalekt:

the financial literacy. Every month is a thing every month is

Pamela Capalad, CFP, AFC:

a thing. I bet April is also something else besides Financial Literacy Month, but that's the only one I care about. Right? Financial literacy.

Dyalekt:

How do you know it's not also cute puppy month? Oh,

Pamela Capalad, CFP, AFC:

I care about cute puppy.

Dyalekt:

Don't yell at your mom. That's every month. Really? Is that every month? Is that every month? Don't yell at your mom.

Pamela Capalad, CFP, AFC:

I think I know. But you shouldn't yell at your mom. So it's like Earth Day just don't know. Yes. Earth days in here too. So earthy and financial literacy. Yeah, April. So I actually wanted to talk today about financial literacy and what financial literacy actually is, what it looks like, what it feels like, how do you know that you're financially literate? There's so many tests out there every other month, I feel like I see a study that says 53% of Americans don't know their financial literacy Enos or couldn't pass the financial literacy test that was administered by some arbitrary company or organization that has financial in the Word. So let's talk about what financial literacy is, does it matter whether or not you know, compound interest, or how to calculate compound interest? I feel like those were half the questions. I'm like, What is this weird math problem that I have to figure out? To make me financially literate? I don't know how to do it. I'm gonna pull out a calculator. So let's start there. Today. Well, actually, I actually want to start with an investment appetizer before we go into all of this madness. So today, I want to talk about employee stock options. Now employee stock options,

Dyalekt:

our stock options. Yeah, I know about that. That's the thing that they offer. That's supposed to be much more better, much more better. Right? Right. If you watched your 80s 80s business movies, it

Pamela Capalad, CFP, AFC:

was all about stock. You know, that is how CEOs got really, really rich. Well, I know that story, too. Yeah. Yes, yes. If you don't listen to was it planning money, they have a good podcast on how CEOs got super, super, super rich, and their competition got out of control, because they were issuing stock options. employee stock options are a pretty common thing to give employees though. And that's why you hear stories about like janitors, and Microsoft becoming millionaires, for instance. So the one liter cheaper for

Dyalekt:

the Yeah,

Pamela Capalad, CFP, AFC:

it doesn't actually cost them anything out of pocket, they're just like, here's some options to buy later. And what that really means is, so you can compensate an employee, by giving them the option to buy stock in the company later at a lower price. That's what the part of that's what's the option part of stock option is, you have the option to buy this later at this price now. So usually, with the stock option, that stock is priced at right around what the market prices today are a little bit lower. And you have to wait for usually about one to two years to be able to exercise the option to buy it. And then the the eventual hope is that in one to two years, the stock price has actually risen, but you can still buy it at the price from two years ago. So just to give you an example, for instance, let's say that you have the option to buy stock at $50 a share, right? And you can't buy the stock until two years from today. So two years passes, and now the stock is worth $100. So you have the option to buy something for $100 at $50. Well, that's good. Yeah, you basically made money. Now the thing is that you also have to have the money to buy the stock option. Right? Yeah, yeah. So that is one thing about stock options. It's kind of tricky in terms of compensation, is you have to have the actual money to put down to buy the option and then and then hold on to it for at least a year.

Dyalekt:

Well, it's I figured why I mean, theoretically, at least it's it's not that it's compensation. It's it's a form of showing that you have put equity into the company. And therefore we give you you know, an option to get down, you know, have your way in the theatre world and acting and TV and film and stuff. They have the right of first refusal.

Pamela Capalad, CFP, AFC:

Ah, that's a good equivalent. Yeah, that's a big

Dyalekt:

deal. Yeah, you want the right of first refusal, doesn't mean that you're actually gonna go and produce the thing that's still you know, time and budget out of you.

Pamela Capalad, CFP, AFC:

Right, right. No, I love that. I love that analogy. because it's really similar. It's like, Hey, you stuck around you were loyal to the company. So we want to compensate you at a future date, basically. And in some ways, it does count as compensation. Because if the company is doing well, and you've been a part of it, then you get to reap the benefits on the other end of it.

Dyalekt:

Yeah, I guess I just think if it's less compensation, because you're still required to do another thing?

Pamela Capalad, CFP, AFC:

Yes, yes, you are. Now, there's a difference between Stock options and stock awards. So some companies will just say, Hey, we're just going to give you stock in the next two or three years, it's going to take two or three years for you to get all of it. But if you stick around, then you just get the stock. And those are stock awards. Yeah. So basically, the stock cost you nothing. And by the time it vest is the word by the time it vest. So by the time it's yours, essentially, because you put the time in the company, then you just get to take it and decide whether or not to keep it or sell. It sounds like compensation. Yeah. Yeah, exactly. They just want you to stick around for a little bit, you know. So that's stock options and stock awards. Now, that was some financial literacy for everyone. Right? You just learned a little bit more about stock options and stock awards. And

Dyalekt:

well, today is what is financial literacy, right? Because it's, it's one of those phrases, that sounds lofty. But can we often talk on the show, I think about definitive definitions that are specific to things versus colloquial definitions. And then something something literacy gets bandied about a lot. It does. And there's a lot it generally means understanding, but it bends to whatever the viewer wants.

Pamela Capalad, CFP, AFC:

And it's also one of those phrases where you like nod along like you understand what that means. But everyone has this weird, everyone has a different definition of it in their heads. And I feel like I want I want to unpack that because it's it's gone from really strict to the other end of the spectrum, which I really like people have started using the phrase financial capability, more than financial literacy, it's still not as prevalent as financial literacy. But I feel like that that is really how you know that you understand your finances when you feel capable to take action based on the information. You know,

Dyalekt:

that's good and specific. The thing about literacy is, well,

Pamela Capalad, CFP, AFC:

do you know stuff? Oh, yeah.

Dyalekt:

Yeah, it sounds like I've read up on it. And yeah, exactly. Doesn't mean that I have any sort of plan of action. Yeah, it doesn't feel like that.

Pamela Capalad, CFP, AFC:

Yeah, exactly. And there's, I mean, the definition is, what it sounds like, in a lot of ways it's like, is the ability to understand how money will how money works in the world, how to manage or earn it, how to make it, how to invest it, how to donate it. And then more specifically, it refers to a set of skills that helps them make an informed and effective decision about their financial resources. So that is kind of both sides of it is like the knowledge side, and then what to do with it afterwards.

Dyalekt:

Right? Because, you know, that's kind of the thing. Right, right. You

Pamela Capalad, CFP, AFC:

can't just like memorize a bunch of words, because that still means you. That still doesn't mean you can read a book. Well,

Dyalekt:

also. Well, I mean, more specifically. Well, yeah, I mean, yeah, always good to remind you. There's a difference between memorizing and learning. But I mean, if we're just studying it abstractly, and not being shown how to apply it, isn't that economics? Right, exactly. That's what I'm saying about just being something different.

Pamela Capalad, CFP, AFC:

Yeah. And that's why I like like, in researching what people are talking about, when it comes to financial literacy, I found the phrase financial capability, which I feel like I want to start using more in general because financial capability is you have financial literacy, and you feel confident to take your financial literacy and actually utilize it. Yeah, yes, extra. There's this extra it's like the combination of attitude knowledge skills, and self efficacy is the official definition. That to be my new rap name. Again, attitude, knowledge, skills and self efficacy.

Dyalekt:

The combination of Oh, yes, yes. Oh, what

Pamela Capalad, CFP, AFC:

does that acronym can access CACs

Dyalekt:

access CACs. Either $2

Pamela Capalad, CFP, AFC:

Oh, that's the combination of yeah,

Unknown:

oh, coax, coax.

Pamela Capalad, CFP, AFC:

He's getting better, keeps getting better. That's happened here, guys.

Dyalekt:

It's just great in specific, it is just throwing next analogy I loved I feel like a jerk is I forget where I jack this from. But instead of calling things racist, or saying people are using racism, Afro phobia,

Pamela Capalad, CFP, AFC:

Afro phobia, I also like white supremacy.

Dyalekt:

Right, but Afro phobia is more fun. And you've got a visual,

Pamela Capalad, CFP, AFC:

you get it. It's true. So just to demonstrate, I know right, just to demonstrate the difference between financial literacy and Financial Capability. I want to read you a couple questions from one, something that called themselves the financial literacy test. And on the other side of it something that called themselves a financial capability test. Okay, I

Dyalekt:

thought you were throwing shade something that calls themselves a financial Yeah, no, but

Pamela Capalad, CFP, AFC:

Well, I mean, here's the thing. So this was a global, global financial literacy test that actually went out to different people around the world. Can you do they 150,000 people were tested in 140 countries last year. And these were the questions that were asked,

Dyalekt:

before you get to that, can I can I ask you real quick? Yeah. So we can color for people? Because I don't know this? And I don't know if anybody? Can you do that? For the world? Well listen to the questions because I think you can, okay, I just want to know if if that's a crazy person's idea or not,

Pamela Capalad, CFP, AFC:

no, no. Questions are not like they're not dollars and cents or anything like that. It's more like concepts that they're testing. Like, do you understand the concept of diversification?

Dyalekt:

Okay, I got I just figured, because, you know, we have so many different economic models and governmental models that, you know, communist societies might not even be able to relate and things like that, right. No, I just wondered. Yeah. Okay. So if it's great if it's not crazy, that's not crazy.

Pamela Capalad, CFP, AFC:

Yeah. I don't think it's too crazy, because the questions are pretty general. So one of the questions is, suppose you have some money? Is it safer to put your money into one business or investment or multiple businesses or investment? Okay, yeah. So that's one. Another one is suppose over the next 10 years, the price of the things you buy double. If your income also doubles, will you be able to buy less than you can buy today, the same or more? That's asking you about inflation. Then they go into numeracy. Suppose you need to borrow $100, what is the law amount to pay back 105 US Dollars or 100? US dollars plus 3%. So he want you to know how to calculate interest. Compound Interest, there's two compound interest questions. I'm not even going to read them to you. Yeah. Well, it's just okay. So I'll read one of them to you. Suppose you put your money in the bank for two years, and the bank agrees to add 15% per year to your account? Will the bank as more money to your account the second year or will add the same amount of money both years? Right.

Unknown:

Well, how would you Oh, no, no, no.

Pamela Capalad, CFP, AFC:

Yeah. I know. Well, the thing is compound interest. I feel like they focus too much on the concept of it. And it's not emotionally appealing, or irrationally appealing to human being. Yeah, it's just math, though. It's just math. Like, do you know math? Yeah, math is cool. Does it make you want to say,

Dyalekt:

saying, yeah, yeah, that's true. One thing that's really interesting, I found running around with you. And pockets change, even when times when I didn't work with you guys, is how many times people would say, oh, financial literacy, math. Yeah. Which I understand that

Pamela Capalad, CFP, AFC:

logic train. Right, exactly. It's like, oh, there's numbers involved. So

Dyalekt:

you best numbers, and it's normally about numbers. So yeah, right, right. Yeah. So I guess now I really understand your problem with compound interest. It's that the fact that it's based in math veers you away from the real point.

Pamela Capalad, CFP, AFC:

Yeah, exactly. Just because you understand how compound interest works doesn't mean that it's compelling enough for you to actually save more or invest. You know, you lose the point. Well,

Dyalekt:

I mean, forget even like, yeah, compelling. You just doesn't do anything for you. Right, exactly,

Pamela Capalad, CFP, AFC:

exactly. So that was the financial literacy tests. And of course, everyone did poorly, and blah, blah, blah, and all this stuff. Like if you click on the answers,

Dyalekt:

nobody knows. Yeah, you're good on the compound interest, right? At least.

Pamela Capalad, CFP, AFC:

Some countries didn't. Some countries did it. Israel really got the compound interest. One. Bosnia, did not. Maybe, maybe so that was the financial literacy test. This is the financial capability test. So they do have a compound interest question. It's the first one. How much do we have over seven years? It's kind of a ridiculous question. Which of the following represents skill, a skill building method? Attending college surfing the web, hanging out with people who have skills you're trying to develop? What are the functions of a business plan? How can automating my finances save me time, protect my credit and earn me extra money? What is the safest initial step that I can take to start building my credit? What are the benefits of networking? What is the first thing I should do before searching for a job in my chosen career path? What steps can I take now to increase the chances of getting the job that I want? That's that's like a sampling of 30 questions. It's

Dyalekt:

funny that very few of them are multiple choice.

Pamela Capalad, CFP, AFC:

I mean, they're all multiple choice. Oh, okay. Yeah, they're all multiple choice. So yeah, it's a little difficult to see. You kind of have to guess what the writer is thinking. I guess. So just to give you an example, what steps can I take it increases to increase my chances of getting the job that I want networking with others in the field, building your skill set by doing volunteer work, practicing your job interview skills, all of the above.

Dyalekt:

Although, you know, I still feel like I get why this is a A clear step in the right direction.

Pamela Capalad, CFP, AFC:

It still should it be multiple choice?

Dyalekt:

Yeah, I mean, the first one that you mentioned, we started mentioning the things like what are skill building things? Certainly, you know, hanging out with your friends all of the above. Right? that the answer is probably all of the above. One thing also interesting about financial capability, financial literacy. Yeah. It's very difficult to standardize.

Pamela Capalad, CFP, AFC:

It is that's the thing is like, and it means it's just the same question you were asking about the different countries, right? Everyone has everyone's economy works differently, and the culture thinks, and the people in the culture think about money differently as

Dyalekt:

well. Your Money personalities are going to be very different. Yes, different contexts in other country. Yeah,

Pamela Capalad, CFP, AFC:

absolutely. Absolutely. And this financial capability test is national financial educator Council, and they're based in the US. So this is all about how to network how to get a job, you know, like, how do you how do you make yourself like a valuable, you know, part of the workforce in a lot of ways, too. So, I mean, it's give and take it is definitely a step closer in the right direction. I feel like it's less back base and more like, Hey, do you recognize that this is what you need to be doing? Yeah, word. Yeah. Are these are the kinds of steps that you need to take towards this kind of, towards, like, thinking about money more positively and more confidently?

Dyalekt:

Yeah, I guess, man, just the context, in terms of the other countries that really matters.

Pamela Capalad, CFP, AFC:

It really does. Like you can't give the same you can't give the same financial capability test to anyone else in the world. I feel like we're

Dyalekt:

even trying to make it allegorical. You know, like, yeah, you you run on an agrarian economy, you're still doing networking, because you sell one crop and your neighbor, but like, outside of those very small moments, right? There aren't moments correlation.

Pamela Capalad, CFP, AFC:

Yeah, yeah. It's really crazy. It's really crazy. So I guess at the end of the day, it's one of those things where we're gonna explore a little bit about financial literacy and financial capability in general and also for us in the US since that's where we are what kinds of things could should you start knowing I don't want to say the word should because I feel like that's like oh, like you know, wagging my finger but there are certain basics that I found are helpful in terms of getting to the point where you're like, Okay, I understand these basics I can call myself financially literate and start building the capability part of it right so I want to go into that process I like it is it's very much

Dyalekt:

process should we be should we be used again? Would you like to music

Pamela Capalad, CFP, AFC:

I would like to music a little with casks or coax so

Dyalekt:

yeah, let's cook some music speakers here. And we're gonna start off with our financial crisis by society. Oh, record pass do check it out. We'll talk in a minute but your budget

Unknown:

Bro Bro Bro Bro bro come on bro day what they talk about financial crisis, folks Ben Bernanke it's the cost of living rises probably more often than large and causing the source of the problem outsourcing jobs and then we Dominus damn good that's my whole life depends on the time me better but I'm gonna did you get this out Washington DC 60s And Hobbes just things to get out of this race in the American dream and nothing wrong with that diversity is key we have spoken plus that the Logitech pass keep them on give me all of that promise me you'll be there for me when I fall catch 22 on the cusp of trying to keep a truck payment easy thing to do to educate you to get in and you're broke my brothers walking out the liquor store with lotto tickets California jackpot I think we got a chance to win it imagine that what we could do with millions like get out of debt or just imagine that feeling cash to be real money Jay real yo was shit goes down on the count your people. Trust me y'all, the money ain't worth nothing. What's your body your car your home health insurance the school the ball your phone your freedom your clothes your weed your nose and probably everything else you might owe. How could something it's not to become every day because a piece of paper but people who do this shit don't make sense to me that money to get that Queen get it you're broke What's

Dyalekt:

up Welcome back Brunchy budget bomb Fire Radio that was society with the song financial crisis from his record past due which we have that stands for persistent, authentic, soulful, timeless, dedicated, universal evolving.

Pamela Capalad, CFP, AFC:

All that stuff is past.

Dyalekt:

Right? It's all so late. But society Yeah, society

Pamela Capalad, CFP, AFC:

to good,

Dyalekt:

heavy name it is. By the way, I also wanted to note that it is not just financial literacy month, as you guys know that they're

Pamela Capalad, CFP, AFC:

sharing Financial Literacy Month with who?

Dyalekt:

Well you're sharing Financial Literacy Month with Arab Awareness Month. Oh, God, Arab American month. Okay. All right. That's what you're also sharing it with Autism Awareness Month.

Pamela Capalad, CFP, AFC:

Okay.

Dyalekt:

I don't know if you'd agree with this next one. We're also sharing it with Confederate History Month. What? Yeah, they lost. I don't know. What. Wait it Earth money time. Earth Day Earth Month? Yeah. There's also jazz Appreciation Month. Okay. It's mathematics Awareness Month, not, not not mathematic literacy, just mathematic, mathematic awareness. You just need to know that it's a thing. National 911 Education Month, and I don't think they mean, the bombing in New York, it says, like,

Pamela Capalad, CFP, AFC:

dialing emergency 911 Like, this is when like, second graders learn about 911 or whatever

Dyalekt:

grade you learn. Okay. You're right. You're right. It's also National Child Abuse Prevention Month. If that fails, it is also National Poetry Month. And if that fails, it's also National Volunteer month. Oh, gosh, okay. Oh, no, we're not done yet. It's Parkinson's Awareness Month. April, this is all April, all April. It is prevention of animal cruelty month, Sexual Assault Awareness Month, Sexually Transmitted Disease Awareness Month. And then finally, I don't even know what with your life, your choice Awareness Month. What does that even mean? I know it has meanings in context of the last few other months are related to each other

Pamela Capalad, CFP, AFC:

pro choice. I guess they would just call it that. And I would have gotten to know for Planned Parenthood.

Dyalekt:

A lot of months, this month.

Pamela Capalad, CFP, AFC:

This month, one of them is financial literacy. month two, you're talking

Dyalekt:

about spending at least three or four days about Yeah, a few

Pamela Capalad, CFP, AFC:

days, at least today, at least this hour. Let's talk about

Dyalekt:

what you can do simultaneously. I mean, like after this, you know, you can go appreciate some jazz.

Pamela Capalad, CFP, AFC:

Yeah, you could appreciate some jazz while you're listening to this. I guess the beds be cool, though.

Dyalekt:

Well, the roots of the jazz Yeah, they're

Pamela Capalad, CFP, AFC:

pretty jazzy. See, look at that. Two out of the 35 or

Dyalekt:

however many. And we mentioned compound interest. So that's math. We did that's math awareness. You don't even have to know what it is. We said all of these and let's not go. Let's get back to talking about financial. Yes,

Pamela Capalad, CFP, AFC:

let's do that. So

Dyalekt:

what is that? What is financial

Pamela Capalad, CFP, AFC:

literacy? Well, we talked about a little bit before the song, and just the idea of having a certain knowledge base so that you feel like you can make certain financial decisions and move forward with them. And I feel like that we we didn't learn financial literacy in certain right. It's just so you can make financial yes, you could make financial decisions. And basically he made for you. Yeah, yeah, that's yeah, that's good. And also, I feel like the other side of it is knowing when you need to seek professional help. On the financial tip, because you don't want to be financial literate, you don't need to be a financial expert. And I think that's what's that's what the line is. It's like it's kind of The gray line, but you don't need to know everything to be literate at something. Right?

Dyalekt:

Well, you don't need to be mechanic to change your oil. Yeah. And I think that's what it is, is the reason that financial literacy erupted as a thing I've heard from you many times reason why you do your thing is because people aren't versed in it. Right?

Pamela Capalad, CFP, AFC:

Exactly, exactly. And if you know a little bit more about it, then you can confidently ask questions to learn more. So that's what you don't need to know everything, you just need to know enough so that you're competent. And that's why I really liked this financial capability component is that you combine this knowledge with having the right attitude about it. So understanding your relationship with money, I feel like it's really critical. And we talk about that a lot on the show is really understanding how you interact with money, your skills with it. So are you are you do you know how to save? Do you know how to manage your expenses? Do you know, you know, do you know how to like go to the bank and open a credit card and things like that. And then the self efficacy part the like, I can't do this part of it. That's, that's really what it is. It's like, understanding like, Okay, I know enough so that I can move forward. So one example of self efficacy, for instance, is, or lack of self efficacy is this is on a, this is on a great site called the Center for Financial Inclusion, and they actually do a great job. This is where I got the definitions for financial capability from. And one of their examples of lack of lack of self efficacy is that Mary learns a simple way to track her money in a savings group. She thinks it'll really help her. But she's worried that she won't be able to do it properly. So she never tries. Oh, yeah. So that's the other side of financial capability,

Unknown:

Mary, while you buggin I know,

Pamela Capalad, CFP, AFC:

she can do it. Well, that's I mean, that's how you have to feel too is like, there's also this fear of trying something that you don't feel totally confident about, where you learn something and you like not along, and then you go home and try and do it yourself. And you're like, Wait, what just happened?

Dyalekt:

Well, just notice that the fictional Mary person, you just gotta, you know, we got all emotional about her lack of efficacy. It's a really easy thing to put on other folks. Yes, exactly. Like volunteer and for going up in front of a crowd. Whenever someone's like, Can I get a volunteer? Everybody got stuff to say about the person who goes up there? Right? Right, get up there. That's a whole

Pamela Capalad, CFP, AFC:

other thing. That's a whole other thing.

Dyalekt:

Again, like the mechanic stuff, you get you learn some auto things so that you don't get screwed when you go to the auto mechanic. You learn enough about your body so that when the doctor says you need a backyard, dummy, you don't you know, you you know why? You You can tell them if that's crazy.

Pamela Capalad, CFP, AFC:

Yeah, totally. And the thing about money is, it's not an instinctual thing. And I, I want it natural. Yeah, exactly. Like, I want to remind people of that all the time. Because it's not something that you just should know or not know, it's very much a learned thing that we've we've constructed in societies that we can function in a certain way.

Dyalekt:

And the thing about it, that makes it a necessary thing to learn is the way that people play with it being that it's not natural. We will accidentally use our natural stuff, our instinctive tendencies to play with it. Yes. And that can get us in trouble when people use their rational minds and aware of us using our instinct. Right, right. And that's how people get played. Yeah, and it's not like you're and then that makes you afraid. No, it's not when a thing when a coffee place put says that they have the best cup of coffee in all the world. You're not a jerk for being like oh, it's the best cup of coffee. Yeah, exactly. Why your coffee? It's them preying on language to take advantage

Pamela Capalad, CFP, AFC:

Yeah, it's the same way and if you can't tell the difference between what is okay and what is not okay then that's when someone can take advantage of you. And it's not again it's not something that you can just like guess on necessarily

Dyalekt:

well and things that exist in the wild that or even like commerce, like scarcity. Those are things that can be manufactured.

Pamela Capalad, CFP, AFC:

Right, exactly like

Dyalekt:

diamonds word. Yeah,

Pamela Capalad, CFP, AFC:

yeah. So and we all got tricked there. So some basics I want to go through some basics in terms of like understanding money and finances and kind of some things you should know in each category categories I'm going to go over earnings spending, debt, saving, investing and insurance and back in January we actually did a four part series all month five part series actually all month on financial planning and all the different aspects of financial planning and so there's way more detail in those shows about this stuff, but to really be financially literate

Dyalekt:

these are this is the bullets Yeah,

Pamela Capalad, CFP, AFC:

these are these are like the baseline. So like understanding this stuff will give you a baseline so that you can detect in most cases, whether or not you're getting screwed.

Dyalekt:

Well, I love a good baseline. Yeah, me too. Hey, yo.

Pamela Capalad, CFP, AFC:

So in earning, one thing you should understand is how to read a paycheck. So if you've never looked at your paycheck before, if you don't know all the different parts of it, I would take a look and see what comes out, you should see four different taxes come out, you should see federal tax state tax unless you live in a state that doesn't have income tax. So federal tax, state tax Medicare and Social Security. And so you should see those come out the other things that you should be able to see listed in your paycheck or other things that an employer is taking out on your behalf. So things like health insurance comes out of your paycheck. How much is that? You know, sometimes I meet with clients, and the first time they've ever known how much is getting taken out is when they look at their pay stub because I asked them, hey, how much is your health insurance? So know how much how much is coming out for health insurance? Know how much is coming out? Are you did you sign up for disability insurance or life insurance and you didn't know it, you might be paying for it and you didn't realize it. So the pay stub will show that kind of stuff to it'll show your 401 K contributions or other retirement contributions, that's going to come out of your paycheck. Also, it'll show what your employer is contributing to your retirement accounts, because that counts is compensation as well. So there's all these things that you'll see going through that will give you a better understanding of what benefits you're getting at work and what kinds of things you're paying for. And you'll understand, like, why is my paycheck this number? You know, yeah, so

Dyalekt:

knowing the real numbers rather than just net vs. Gross.

Pamela Capalad, CFP, AFC:

Yeah, exactly. Exactly. Because you should also know how much you're actually paying for certain benefits and certain services, because

Dyalekt:

that's math, too. I feel like I learned in economics they were doing, we talked about debt versus growth. And that's it, right? Yeah, that was the end of Yeah, yeah. So you know that you get your debt out of the gross,

Pamela Capalad, CFP, AFC:

right? It's like, oh, it lands in my lands in my account, direct deposit. So that's what I get. I guess it's like, what other stuff are you getting? You know, and what are you paying for that? You're like, ooh, do I even need that? Like, do you need to pay for life insurance? Yeah. And,

Dyalekt:

you know, I know, we're like, yeah, there are things that just exist. So it doesn't matter what I know, all that matters is what I get out at the end of the day. But there have been a number of big, I think, a TNT recently. Well, not recently, a couple years ago, but they got caught throwing an extra charge on him. And it was like some like $5, it was a small amount that they put on everybody's bill and no one was looking big and taking a ton of money from it.

Pamela Capalad, CFP, AFC:

Yep, totally. Because that adds up. That's the other side of it, too, when we talk about spending is looking at your bills and knowing knowing what you're looking at. And I'm not

Dyalekt:

saying your boss is stealing your money. But just like, you know, to not to lock your car. That does mean you assume everyone's gonna try to steal it.

Pamela Capalad, CFP, AFC:

Yeah. Yeah, exactly. The other thing is, and having a basic understanding of taxes and how taxes work. So I don't even do my own taxes. We don't do our own taxes, we hire an accountant to do it. But we understand the general principles of how taxes work, especially when you're an employee and taxes get taken out automatically. Right on your first day, you probably fill out a form called a W four, told you how much to withhold in taxes and all of that kind of stuff, you may get a big refund that you count on at the beginning of every year, and you're like, I'm going to file my taxes. So I get this refund and understanding really what a refund is. What if you you know, if you want to keep more money throughout the year, if you're like, No, I need this and like what to do with that big chunk of money at the end of the day as well. Because I feel like every year refunds just appear and then somehow disappear. What if instead of instead of letting the government for

Dyalekt:

purchasing? What do just go right back out?

Pamela Capalad, CFP, AFC:

Yeah, exactly. You're like, Oh, I've been wanting this thing. And now I have the money for it. It's like what if instead of letting the government hold on to your money for you for no reason, you use that as an opportunity to develop a savings habit, for instance. So understanding how taxes work, how you're overpaying or underpaying? Yeah,

Dyalekt:

yeah. Because you know, it's a forced savings account. I'm making my but what did you just say that whatever you write yourself, do it?

Pamela Capalad, CFP, AFC:

Yeah. What if your paycheck increased a little and now you actually do have money to save every single month? And what would that feel like? Right? And that's, that's the financial capability side of financial literacy is I found this extra money and I know what I'm going to do with it, and I feel confident in this decision. The other thing is understanding inflation and how inflation works. That's another important part of earning is just understanding like, hey, these things are gonna cost more in the future and every dollar is gonna have less earning power. So that's one thing for earning as well and what

Dyalekt:

that really means, right? No, it blew my mind when I was told you If you don't, if you just sit on your money in a shoe box, you will have less money.

Pamela Capalad, CFP, AFC:

Yeah. If you're not using it for something, then it's still gonna go down in value who

Dyalekt:

haven't heard of this? Right? What I just said sounds crazy. Yeah. By the

Pamela Capalad, CFP, AFC:

Yeah. And then you think about how much milk cost 20 years ago versus now or 50 years ago versus now that's inflation. Straight up. So crazy. So after you understand a little bit about earning now, think about spending. So spending a lot of spending more has to do with understanding how you deal with money, what your wants and needs are, we talked about the urgent, important matrix a lot. And understanding, okay, so this is where my money is going, is this where I actually want it to be going. And part of that is examining your expenses, looking at them actually tracking them for a little bit. And just really being aware of them. So the spending part is really more of an awareness thing than a knowledge thing. Other parts about spending, though, include finding a bank, what to look for in a bank, are they charging you fees? Are they treating you? Well? You know, is it difficult or easy to bank with them? Understanding that you can shop around for a bank, things like that banks are

Dyalekt:

so not the same? Yeah, they're really not. I feel like and this is because of older stuff again, but not instinctual stuff. And just a couple generations, people think of banks. And I know, I felt like that people think of banks, like they're localized things like their cable companies. And you've just got a couple right? Wall in a place, you don't have too many options, right short distance

Pamela Capalad, CFP, AFC:

with the internet, though, do you have more options, there's a lot of online banks out there that you know, you give up certain things like being able to deposit cash or, you know, being able to get a cashier's check that same day, and things like that. So there's like little inconveniences that come with that. But online banks usually don't charge you fees, they usually, you know, don't charge you ATM fees, don't charge you monthly fees, things like that. So understanding what a bank is charging you and how to look for a different one, and what kinds of things you should be looking for what kinds of things are important to you, based on how you bank is another part of financial literacy? And then a dialect mentioned earlier, like looking at your bill. If it went up $5, then why when it's been the same for the last six months, and suddenly there's a$5 extra charge on it, find out why know what your actual monthly bill payments are and what the averages are for the utilities and things like that. So if it's crazy one month, then you should look into it. Shut

Dyalekt:

out to my money, monks, I know we don't talk a lot about personalities, but my monks who are listening and being like, Yeah, but I don't want to know all the details. It's gonna make me into the type of person who thinks about the details of the money. Well, this is why if you aren't paying attention to the details of what the money is, then the people who are paying attention to the details can take advantage of you. And tons of other folks. Yep. And I know you ain't into that.

Pamela Capalad, CFP, AFC:

Yeah. Nobody is not cool.

Dyalekt:

I mean, the people doing it.

Pamela Capalad, CFP, AFC:

Yeah, well, yeah, they're chillin.

Dyalekt:

Yeah, those guys. I mean, I don't know if y'all are listening to us, because I guess you probably spend lots of money things. But then like,

Pamela Capalad, CFP, AFC:

don't tell anyone. And that's the other part of financial literacy is to know if someone's trying to take advantage of you. So especially I want to talk about debt next. So especially when it comes to taking out credit cards, and understanding the understanding what you're looking for in a credit card, as well, just like you can shop for a bank, you can shop for a credit card, right? They're trying to get your business. So keep that in mind. Keep that in mind, and they're trying to keep your business. So if you're an existing customer, and you're a regular customer, then advocate for yourself. One thing is understanding how interest rate and APR works with credit cards, and also understanding how to speak to somebody. So we've done a show on how to dispute a charge. I recently had to dispute a charge because I missed a late I missed a payment and I got it. I got an interest rate charge and finance charge. And I literally just called them and I said I'm sorry, I made a mistake and they reversed it they reverse $62 and one five minute phone call. You were their dialect keyword.

Dyalekt:

Yep. Well, again, that's because of how much people care.

Pamela Capalad, CFP, AFC:

Yes, it's true. And I have self efficacy in this in this kind of stuff. So it's one thing to listen to a show about disputing a charge and being like, Okay, that's cool. It's another thing to get to the point where you make the phone call and you Try it out and see what happens.

Dyalekt:

And also so also my people on the opposite side of the spectrum who were like, Well, wait, why would I dispute a charge? If I was rightfully yada, yada and all that? You got to think of all of this as an opt in thing. People only can charge you the fair amount. But if you opt in, if you don't opt in, they'll throw some other charges. Yeah, they'll have reasons that sound kind of validated. But in reality, they're just trying to take as much money from the people who pay the least attention. It's true, it's the same exact way to go. It's the same exact mentality that runs those free to play games.

Pamela Capalad, CFP, AFC:

The freemium stuff, yeah,

Dyalekt:

what I didn't, I didn't realize is they're each one they're like banking on personal benefactors. because there'll be like a million people playing the game. And maybe 1000 of those people have spent like 2030 bucks, or lifetime. But there's one or two guys are like they're like upset, spend 1000s and 1000s on the thing.

Pamela Capalad, CFP, AFC:

And that's how they make their money. So I love that you said that, to me, they're taking Yeah, they're taking advantage of people who are paying the least attention. And if you're paying attention, and you practice making these phone calls, and kind of understand that it's going to be awkward at first, then you can get, then you could get better at it. And you can advocate for yourself more. And that's, that's the financial capability part of all of this. So on the saving side, saving is another thing that is more, it's an awareness thing. And it's a big habit building thing. So one thing I want you to remember about saving is that choosing not to spend money is different from choosing to save money. So saving is not just not spending money, saving is an active thing. Saving is not a passive thing. Saving is a choice. Yeah, saving is a choice. Now you can automate it and make it easier and not feel like that you actively have to do it can't do that with love. No, you can't. Just saving. But the thing with saving is that part of saving is I think that I'm going to want something in the future. And I'm going to give up something now, to have it. And switching your mindset from i this $10 in my hand is going to disappear to I'm going to put away this $10. So that I have it later, is a very difficult thing to switch. And one of the things that we're about to hit our 100th episode. And on our 100th episode, we're actually going to start a four part series on generational poverty. And one of the things about this, no, we got to do it now that you said, I know now we got to do it. And what Well, one of the things about poverty and staying poor is this idea that I have the money in my hand now. So I should get what I want now. Because who knows if I'm going to have it later, you know, and with saving, you're consciously saying, You know what, I'm going to have more money. And I'm going to put it towards this thing that I want the future, whatever that is. And it doesn't have to be a thing, it can be a feeling, it could be like a sense of security could be a sense of freedom, whatever it is worth saving. It's a matter of understanding what your goals are, what your wants and needs are in the future. And being able to give up a little bit of that. The other part about saving is it's an exercise in delayed gratification. So that's something that I feel like a lot of people talk about, and it's like, oh, it's so hard, blah, blah, blah, we are very much instinctually an instant gratification type of species. You know, we're like, why can I just have it now? I want it now. It doesn't make any sense for me to wait, that that's dumb. But it's here right now,

Dyalekt:

that whole brain thing where we think of future you as a whole different person? Yes,

Pamela Capalad, CFP, AFC:

absolutely. So there's so many things that go into all of this. But yeah, so saving is a is a is a big part of it. The other thing is to understand saving on the financial literacy tip is to understand how much you're spending. So one of the big questions that I always get is, How much should you have saved? How much should you have saved? And then the next question is like for what what are you actually saving for? So understanding how much things will cost in the future, understanding how much your lifestyle costs now and what you want that to look like in the future. That's a big part of this financial literacy, financial capability thing, and then understanding how to set that all up for yourself. So figuring out the amount, understanding what bank accounts to open, understanding how to automate stuff, and having the discipline to not dip into it. And all of this, of course, is easier said than done. And all of this is a process. It's very, very much a process. So we're actually going to roll those songs before we talk about the last two, two areas of financial literacy investing and insurance the two eyes I guess Yeah, we're gonna keep going with

Dyalekt:

financial literacy without a lot of eyes.

Pamela Capalad, CFP, AFC:

That's really true

Dyalekt:

I know well in speaking other countries we're gonna go to Sydney Australia. Oh yeah, it's all for the base side records

Unknown:

their song financial review, check you've got your budget bomb by radio Let me introduce myself right away from the prom way back in the day I end up at the play of binders more than one person safe to speak up now. You don't want to hold me pray for you on the same screen to the claim that needs decimal place of residence rempah my phone nonton President said in the previous life what to do on the money they made When the smoke clears next move on to the next club and we chased a billion so there ain't no love it's the scene it was supposed to be better or don't wrap the credit credibility which account withdrawal from establishing safety financial view I couldn't have began to Just Dance in an Episcopalian protest drags you can lie you can take great you can do whatever you think it takes to be happy when the money goes wrong man to say the thing of around me cream get the money got the money everything around me cream get the money around the money thinking around around around. Around around around your welcome back rent and budget. Bonfire radio. That was

Dyalekt:

Bayside records.

Pamela Capalad, CFP, AFC:

Yes, it was. The Ag said they wrapped their Australian accent so

Dyalekt:

don't you love it when Australian rappers rap like Australia? Doesn't really do. Anyway. Yeah, that was their financial review.

Pamela Capalad, CFP, AFC:

Yes, it was it was a good review. I felt it. I wonder how much they know about investing?

Dyalekt:

Well, you know, this one, the first joined by society was talking a little bit more about specifics and finance. They were just doing more of the whole like, I want to do what I want no matter being broke. It was more like it's ill to artistic take as he decided it was like, Yo, you know, be broke. But that's okay. Broke is okay. Regardless of the money that I have, I'm going to do what I want, which is very financially

Pamela Capalad, CFP, AFC:

illiterate. Yeah. And financially capable.

Dyalekt:

The records they are they're kind of aboard the concept in general. And they were like, Yo, I hate being broke. But other stuff is more important than money. But I'm still hating being broke. still sucks. But you know, it's not everything is you know, dealing with the dilemma. Yeah,

Pamela Capalad, CFP, AFC:

I feel that I feel that, that kind of stuff that you wrestle with, too. And understanding where you are at with all of that stuff is also part of financial literacy and financial capability. I feel like in general,

Dyalekt:

well, that's one of the parts of growing as a business growing in your position and stuff. I mean, you don't always want the race and the promotion that comes along with it. Right. You don't always want the big gig where you oversee. You know, if you're a musician, you don't necessarily want to conduct the orchestra. Yeah.

Pamela Capalad, CFP, AFC:

Yeah. So really? Yeah. What is it?

Dyalekt:

What is going to be happy? Now my new is always an equation of balance for us. So it's like, yeah, I may not really want to do all this. But if you give me a certain amount of money,

Pamela Capalad, CFP, AFC:

right, then that changes how I feel about it a little bit. But

Dyalekt:

even with that, that's something that you need to be I mean, that's the thing where I would say literate is really important.

Pamela Capalad, CFP, AFC:

Yeah, yeah, definitely. Well, and yeah, and that it's like emotionally literate to on some level. It's like understanding like, what what you're okay with, like, for instance, you know, if I, if I didn't want to make financial planning affordable for people, so I would have just kept working wealth management and charging people $12,000 a year, you know, and it's up to you each each. It was a lot,

Unknown:

just to steal time right?

Pamela Capalad, CFP, AFC:

Now, right?

Dyalekt:

What was funny about like, I'm making jokes and all, but what's ill is, our thresholds tend to be crazy low. Especially for stuff we like. I mean, like, what will take us to change our to absolute money stuff. And I think that that's where we often do ourselves a disservice.

Pamela Capalad, CFP, AFC:

So yeah, knowing yourself and reflecting on how you feel about whether or not you do want to take this gig or this job, and if more money will actually make a difference, or if it's just a temporary fix, because that's really what money is, it's like, Oh, you think I'm valuable enough to do this for you? You know, that's, it's a self worth thing in a lot of ways that we tend to tie to like how much we're making or how much we're earning. And to be able to separate that. And really think about what your values are, I feel like is one of the more important things to figure out.

Dyalekt:

I think, you know, the word earned is always funny. Because yeah, we tie the money that we're getting, but whether we're doing the same amount of work doesn't really matter too much. Right. You know, more work. And, you know, we, I mean, we remember the times when we were working more and getting paid less, and oftentimes when you're getting paid more, you're not working together anymore.

Pamela Capalad, CFP, AFC:

Yeah, it's true.

Dyalekt:

So you know, it's weird how we borrow, there's like that.

Pamela Capalad, CFP, AFC:

Yeah, yeah, it makes no sense. So now, are you talking about investing? Speaking of making more without doing more stuff? I used to do some stuff. Yeah, it's true. So the thing was investing, I think feels like this big, wide ocean of information that you're just never gonna get all of. And that's true. There's so much complexity to investing. That to feel like you need to know everything before you start means you're never going to start. So this is why we do an investment appetizer in as many shows as we have time for. And it's also why it's important to just get started and kind of see what's out there. And what's going on to start investing with things we talked about before with acorns, with gold being with Robin Hood, with companies like that with Motif Investing and just kind of get an idea of how companies work within the stock market. So one thing, certain things about investing that you should understand is diversification. Understanding what retirement accounts are the difference between a retirement account at a brokerage account, understanding the relationship between risk and reward, and also compounding interest. So I don't like the word interest is kind of wrong in the sense, it's really the fact that compounding return on investment. So the thing is, if your account value is $1,000, when you start and it's now $1,100, then you're gonna have $1,100 in the market instead of $1,000. So basically, your money, and the amount that you and the amount of return that you make is gonna be based on that $1,100 amounts and$1,000 amount. And that's just kind of what happens. It's not something that you actually have to do anything about, as long as you don't take that $100 out that you made. you're participating in compound interest.

Dyalekt:

Yeah, I mean, that's, that sounds like the gambling thing. Yeah, exactly. So

Pamela Capalad, CFP, AFC:

just leave everything in there and let it do its thing. Yeah, that's investing. It's not too much, you just kind of have to understand the fact that things need to be diversified. Get an idea of the difference between a stock and a bond, just so you know, what a stock is, and what a bond is. Those are the two basic investing vehicles,

Dyalekt:

things that they used to put you in when you committed crimes. It's super tiny. It's not a stock. Yeah.

Pamela Capalad, CFP, AFC:

Ah, yes. Very true. Very true. And then the last thing is insurance. Now insurance doesn't feel like a financial thing, but it very much is. It's protecting what you have. It's protecting your assets, it's protecting your income. And so just understanding the different types of insurance and what they're for and when you need them. So things like life insurance is such a thing, isn't it? Is it really is it? Is it something that people don't often think about I feel like when they're thinking about finances and saving and spending and you know, it's not something we necessarily include in our financial literacy workshops for kids but to understand that you know, there are these products that can protect you in certain situations but also understand that the insurance industry is a very lucrative industry and a very non transparent industry as well. P and understand how people make their money off of selling things to you. I think that's the other part of it.

Dyalekt:

And what's it all about? And I have had trouble wrapping my head around it. I'll tell you a little it's how it is product.

Pamela Capalad, CFP, AFC:

Yes, insurance. Just very much a product,

Dyalekt:

if so, ever since it's not a service. Yeah, insurance is not people doing stuff for you. In case stuff happens, yes. It's like a box that springs

Pamela Capalad, CFP, AFC:

thing, you get like a pile of papers and you're like, now you have insurance Exactly. Well, and a lot of things like, if you think of them more as products, versus like, these ethereal things that like happen to you, a bank account is a product. A credit card is a product, a savings account is a product, you know, an investment account is a product, all of these things are things that someone is trying to sell to you essentially, you know, like, yeah, your objects in that community. Yes, yes, exactly. And they're all things that people are making money off of you having these things and buying these things from them. So keep that in mind, for sure. And, you know, we got to wrap up here a little bit, but I wanted to really spend time on what financial literacy is and financial capability because at the end of the day, if you know all the stuff, but you don't do anything about it, then what's the use of being financially literate, right, you have to take it to the next level, you have to take action, you have to take a little bit of risk, it's definitely going to feel scary to do it because it feels like you could mess everything up and I promise you, that's most likely not going to happen. And you can always fix it, you can always go back you can always keep moving forward. So I want you to really keep that in mind as you go through your financial literacy journey and become more financially capable. They do want to you know, go through like attitude, knowledge skills and self efficacy. Those are all the things that make up feeling financially capable and you can't just know a bunch of stuff and then not do anything about it. I can't stress that enough. So it's not I want to rename this month let's add another let's add another thing to the April month and let's let's call it financial capability month, let's call it what we're actually trying to build instead of keeping people in the dark and having them you know, understand inflation, right? If you understand these things, but you don't act on them, it doesn't matter. So act on it. Build up your self efficacy start to feel more confident. Yay, financial capability,

Dyalekt:

yay, financial capability. And we're gonna leave you off with financial freedom out of France. ROTC yeah yeah, you know, we went from society and financial crisis and then the bass side record bring us the financial review and finally financial freedom and yes, it can be that easy for you if you follow these now don't follow the steps just just learn stuff all month and then other months we'll talk to you next week. It'll still be financial something or we'll go talk yes budget budget by by radio check us out on iTunes and download us there leave comments but just leave comments on wherever because we don't know we don't know. And if you if you hate things he comments if you love things that you say nice stuff no. I was like to your next Yeah, check you later

Unknown:

got you pull XL a male to perception job Sam way up on my skin loves to defend the person to say done the cells and o'clock so right now a nod to Blackbell CI zero dash ma gag reflex must be so late. If you're jealousy dog shows up here please develop the norm allows you to sell sell I'll just be taking my shot we'll get back towards the city would have a series of debt to solve difficult to demolish personal debt when it's paid off as your soothsayer defaults. Crash busted again. An economist said you Afghan Supreme Court Trump's have gone the pocket ban on day one