EP88 What They Didn't Teach Us: A Guide to Building Financial Literacy for Latinos

It is Financial Literacy month and it's time to start building it! Financial literacy means understanding how money works and making strategic decisions about spending, saving, and investing. This episode is your guide to building financial knowledge, perfect for beginners and first-generation immigrants who may not have received financial education growing up.

• Focus first on learning about financial issues directly affecting you now 
• Understand how inflation and taxes affect your money
• Learn to differentiate between "good debt" and "bad debt" 
• Understand what affects your credit score
• Invest in retirement accounts 
• Plus financial literacy resources from Latino voices including books, podcasts, and online content

More on the blog!

Don't forget to share this episode with someone who might benefit, and tag me if you share it on social media to help reach more of our community with financial literacy information.

Chapters

• 0:00 Financial Literacy Month Kickoff
• 2:11 What Is Financial Literacy?
• 5:45 Auditing Your Current Finances
• 12:44 Understanding Income, Inflation and Taxes
• 16:40 Managing Debt and Credit Cards
• 19:30 Investing and Savings Strategies
• 30:12 Resources and Final Encouragement

Transcript

Speaker 1: 0:00

It is Financial Literacy Month, and what better time than now to start learning how your finances work. So I'm going to give you kind of like a to-do list, a list of all the big major areas of you so you can start learning about how your finances works as a beginner, plus a few tips and tricks and some resources. Hola, mi gente, welcome to the money chisme podcast, where we spill the real chisme on building wealth without the bullshit. Whether you're trying to invest, grow that side, hustle finally get your money right or, my favorite, buy rental properties, you're in the right place. I'm your host, violeta, a first-gen Mexican immigrant, real estate investor, entrepreneur and your financial hype woman. Get ready for tips, tricks and expert advice straight from nuestra comunidad, porque el dinero es power and we're here to claim it. Don't forget, you can always find helpful resources down in the show notes and in descriptions, so make sure you check that out. Hola, hola, welcome to another episode.

Speaker 1: 1:13

It is April, it is financial literacy month. The day that I am releasing this episode is April 1st, so happy April Fool's Day, pero sabes que we are not going to be fools about our money. I know it's a little corny, pero you know, staying on theme with, you know, financial literacy month. I am going to, you know, share some tips and tricks of you know, how to learn and about how your finances work and build that financial literacy. But first, I always forget to do this, siempre se me olvida. But do me a favor and share this episode with someone that you think you know it might be helpful, or maybe on your social media or whatever, and definitely tag me on there. I think you should be able to tag me, but you know, it helps me grow and reach more of our community. So that way we can, you know, uh, keep building this financial literacy for um in our community, because, you know, um, we are pretty behind with it. So, which is the point of this episode, and so, yeah, and if you have some time, rate the show, rate the episode, it also helps. All right. So April is financial literacy month and, um, this is very important in the Latino community because most of us, especially if you are first gen, uh, we didn't really get much of, you know, a financial education. Um, we basically just, you know, know a little bit of the basics, like you know, save your money and basically just avoid debt. But oh, you know, now, growing up there, you find out that finances is a little bit more complicated and there is a lot and it could get overwhelming.

Speaker 1: 3:13

So I wanted to make kind of like a quick como to-do list or guide of the big major categories that you can start off with to start learning of how your finances works and start building financial literacy. And with that, let's first start off with what you know. What is financial literacy? ¿qué es eso? Like what does that mean? And financial literacy basically just means that you can understand how money works, how your finances work, and you manage your money and make better financial decisions and you basically learn how to strategize and plan on how you spend your money, things like knowing how to create a budget, knowing about how investing works, like a 401k retirement, knowing how money works, like what about inflation and things like that. So all of that kind of falls under financial literacy.

Speaker 1: 4:23

It's a pretty big umbrella Y, como te digo, it can be pretty complicated and sounds pretty overwhelming at first. Okay, like it does. I felt the same way al principio when I had to start learning about everything and you feel so behind. But let me tell you todo, poco a poco, you know, paso, paso, like, just take your time and you will eventually learn pretty much a lot of it, like I. It's crazy how much I know now. I mean, look over here, I'm over here con este podcast, but I started off with not knowing shit, like no sabía nada, and it was scary and it was a lot, pero you can do it. Lo bueno que we have a whole bunch of resources now, que I'll get to uh later in this episode, but let's talk about the first thing to do as someone, that only que you, you know barely the basics.

Speaker 1: 5:22

Okay, also, if you hear my daughter in the background, she just woke up from a two-hour nap. She had a good-ass nap, so ahorita tiene una energía. And pobrecito my husband. He's over there in the background trying to, like you know, keep her entertained. So I could do this episode real quick, so you might hear her in the background, okay, so the best way to get started in, you know, building financial literacy is to start with your current finances.

Speaker 1: 5:52

You're going to audit your finances and this is going to do two things, because as you audit your finances, you're going to go through and start looking up about what's going on, right, like, look up terms and things like that. But as you're auditing your finances, you're also setting your foundation of what you're doing with your money, and then you're going to, as you learn more, you're going to adjust and set financial goals and all that. So we're going to start off with auditing your finances, but before you start, quiero que tengas, like you know, take a moment and set, you know, I guess, the mood. I would say pon una musica or something that's calming. I like to do things when I need a focus, to do like lo-fi music. But the thing is que when you're going through your finances, some emotions might come up.

Speaker 1: 6:57

Right Is that we have our, you know, our community deals with some financial anxiety and financial trauma. Sometimes, and la verdad, sometimes you just feel bad for past financial decisions that may not have been so good. Now, you know hindsight and I know I did every time I do that, even to this day, like I was you know I'll feel guilty for spending something, and that might happen as you go through this, because you are going to go through your finances and see where your money has been going and you might see something and then, like, towards the end, you'll see that oh, wow, I'm thinking que gaste, you know, $20 a week on food and really I've been spending way more than that. You know, feelings might come up, you might feel guilty, pero the goal is not to do that, you know, not to beat yourself up. Those feelings are going to come up, but don't let them overwhelm you and and take away from what you're trying to accomplish, because you might end up going into a negative mindset. So that's why I say, you know, mentally, prepare yourself and do whatever it is, go outside or whatever that's going to help you maintain focus on what we're actually trying to do and not, you know, relive all these past traumas or have your anxiety come up.

Speaker 1: 8:25

So just a little quick disclaimer okay, okay, and so what you're going to do is go pull up like maybe two to three months worth of bank statements, credit card statements, whatever financial statements you have. You're going to, you know, print them out or just pull them up or whatever, and you're going to go through, whether it's you you use like a piece of paper, or maybe you go get like a spreadsheet, create one or whatever. The idea is to start figuring out what have you been doing with your finances right now. What kind of financial obligations do you have like, do you have a mortgage, do you have student loans, a car payment or whatever? And so you're going to basically create a budget, but I don't want you to do anything yet. Like, don't change anything right now. Just pull up. Maybe, if you want to do like a piece of paper, if you like spreadsheets, if there's apps out there as well just go and put everything in the different categories like income, debt, savings, all that right, and just put what you are currently doing. Don't focus yet anything about, you know, figuring out debt or interest or anything like that. I just want you to set up the, like I said, the foundation, basically.

Speaker 1: 9:58

So set up your little budget and put whatever it is that you're doing currently, and so you'll have like a rough draft of a budget of what you are currently doing right now, and so I want you to look at it and see of the things that are affecting you right now. Is it like debt? Do you have a lot of debt? Are you just not saving enough? Did you find out that, okay, I don't have a lot of debt, or I don't have a lot of credit cards or whatever, and but you know what? I'm not saving up as much or whatever Like, figure that out.

Speaker 1: 10:39

Because I want you to focus on learning about those things first, the things that are actually affecting you right now, because I don't want you to get distracted Again. Like you know, I talked about real estate, investing or whatever. Or you might see on social media that so-and-so is, you know, investing in blah blah or cryptocurrency or whatever. Those things, ahorita, no, like, are not affecting you right now, but something that's affecting you right now might be that you have, um, a lot a high balance on your credit cards and it's messing up your credit score and blah, blah, blah. So I want you to focus on learning those things first, so that way you can start adjusting and creating a plan on how to, um, you know, make changes and things like that. And so now I'm going to go into the I don't want to call it a step-by-step because it's not necessarily like hey, step one, you're going to do this, step two, you're going to do that.

Speaker 1: 11:42

It's more of a guide, a kind of like checkoff list, I guess, of the big major areas that you want to focus as a beginner on, on building financial literacy and knowing how finances work, and so that's why I had you go and audit your finances, so that way you can see, okay, you know what. I have a lot of debt. I want to learn about debt, how I could reduce my debt and how it works and blah, blah, blah. And you know, go focus on that, because I don't want you to go like step by step here, because I don't want to be like, hey, go figure out about cryptocurrency when, uh, you should focus first on, you know, reducing debt or maybe boosting your credit score or whatever. So, um, pick whatever is going to help you right now, and then you're going to build on that.

Speaker 1: 12:40

So one of the areas that you want to understand is about your income. Uh, you want to know how money works, uh, how things like inflation, what is inflation and how it affects your money, because that comes later into play when you look at things of investing and savings and things like that, because inflation is going to affect how you know the buying power of the dollar, of your money, affect how you know the buying power of the dollar, of your money, and so you're going to want to take steps to reduce the impact of inflation, and so you want to know what that is and know how it affects you so you could make you know, educated decisions on what you want to do with your money. The other thing that affects your money is taxes. So you want to learn just the basics of taxes, because it can get a little bit complicated.

Speaker 1: 13:43

So at the beginning you just want to know how taxes work, because there is a misconception that if you're in a tax bracket it's like a flat fee when it's more of a ladder, so it let's say you make a hundred thousand a year and there's different tax brackets. Now I don't have it in front of me to off the top of my head. So, um, but you know there's different tax brackets. Let's say, from $15,000 and under, let's say it's 5% taxes and then $30,000 is like 10%. So it's not that you're going to get. And let's say $100,000 is 25%. It doesn't mean that you're going to get 25% of your income, the whole 100,000 tax. It's going to get laddered. So your whole 15,000 and below is taxed at the 5% that I said, and 30,000 below but above 15,000 is going to be taxed at the 10% or whatever it may be. And so it goes there all the way to a hundred thousand. So you're not taxed 25% for the full 100,000. And again, so understanding this can help you make decisions, because there's some people that will not take a pay raise or whatever because they feel it's going to put them at the next tax bracket and they don't want to fall into a higher tax bracket and have their whole income taxed in that tax bracket when really the only thing that's going to get taxed at that higher amount is going to be that extra amount that is above the previous tax bracket, if that makes sense. So, yeah, just get a basic understanding of what taxes are, how it works, how what you know a tax return is and you know, for example, april 15 is the deadline, and you know what kind of deductions and things you might be eligible for. And don't get too in depth with it, because later on you will start learning as you start doing more things with your money on how you can reduce your tax liability and things like that. But once you get to that, usually you want to talk to like a CPA to help you strategize with that, because you don't want to take no chances and you don't want to leave money on the table. So I always use the CPA because with all my investments and stuff. It gets kind of like complicated.

Speaker 1: 16:29

The next category is debt and credit cards, and I'm lumping them together because they are both, you know, debt and the second part of credit cards. I'll talk in the next category, but for here, you want to learn of you know, how to manage debt, what is debt and how it affects you. So there's two types of debt. There's the good debt and then there's bad debt. Bad debt is consumer debt, like you know, having a credit card for Kohl's or something, or Ross or TJ Maxx or whatever. They're always, you know, trying to get me to get their credit card. And you know debt can be like student loans, any other type of loan, like a car loan or whatever. And understanding the differences of that debt, because some debt can be used for the positive, to your benefit, for example, credit cards. A lot of credit cards have rewards and certain type of, you know, perks that you can use, like you know, for travel or cash back.

Speaker 1: 17:41

But the idea is to do it strategically and that's what I want you to learn is understand. You know, okay, if I put a balance on this credit card, when do I need to pay it off? When I need to pay off the balance, so that way the interest doesn't hit, but I get those points, I get that cash back. So I do that with one of my credit cards. That I have for cash back is I pay bills on it little things and I pay it off and I have yet to be charged interest, but I get cash back all the time on it. I think right now I'm at like almost $400 at this point and I use that, you know, to buy me something nice or towards something that I might be saving up for, and so you want to be strategic and that's what you want to learn about.

Speaker 1: 18:32

Also, if you have bad debt, how are you going to pay it off and what kind of strategies do you want to use? Because you might want to target high interest debt first. You also want to understand that minimum payments just going to keep you paying that debt for a really long time. So you want to know, like, how much extra do you need to pay on top of the minimum payments so that way you actually pay it off and stop accruing that interest? So that's the big major things with credit card and debt, which brings me to the next category that you know goes along with it, but I want to have it as its own category because other things affect credit score your credit, affect credit score, your credit.

Speaker 1: 19:30

So you want to start learning of what a credit score is, how it's calculated and what affects it. And you know there's the main one, fico score, and I will include that in the blog, which I always forget to mention, that most of my episodes always have a blog on my website and that's where I'll put like extra resources and things that I find that might be useful. But that usually doesn't fit in the description or the show notes of this episode or of the episodes. So make sure you always check those out if you want more like tools and resources. But I'll put the FICO website on there or you could just like Google it. But there's a lot of good resources and it gives pretty good breakdowns of what you know the score is, how it's calculated and how things affect it.

Speaker 1: 20:21

Because one of the things that I didn't know is they'll say like, hey, you know, don't go above 30% of your credit limit because it negatively impacts your credit score. Well, I assumed that it was your credit limit combined. So if you have like two credit cards, you know 5000 credit. Each. That means 10,000. And I was like, okay, you know 30% of that, but no, it's 30% of each credit card. So, um, I I had to learn that, uh, the hard way. Um, so, just understanding these things and that way you can make better financial decisions when you're using your credit cards or you're using debt, things like that, understanding how debt affects your debt to income ratio, which that comes into play when you're trying to get, you know, loans to buy a house, things or invest in real estate.

Speaker 1: 21:20

And lastly, the last thing I'll mention about credit is to make sure that you go check your credit report, at least yearly, I would say, because you could get a free credit report annually at I think it's annualcreditreportcom, but again, I'll have that on the blog, a link to that. But you could pull that report for free every year and just go through it and make sure that everything that uh is there should be there and, if not, disputed things like that also. You know another. That's another one, like figure out, um, what you can dispute and how, um, things that go into collections, how that works and how you may want to address that, because paying the collection agency that doesn't mean that they'll remove that from your credit score. Most of them are, you know are assholes. They purposely put those things on your credit report to scare you into paying them and stuff like that. But there are certain things that I won't get into that you could figure out how and actually in that FICO website actually has a list of people that you can talk to for things like that. So check that out. But that's pretty much it with credit.

Speaker 1: 22:43

And the last big major category I am lumping together investing and savings because they can go hand in hand. You can be saving up for college for your kids through an investment account, right. You could be saving up for retirement through retirement investment accounts. So that's why I have them lumped together. And with that you want to know what is available to you and what you are trying to do.

Speaker 1: 23:17

So the first thing I would check is to see if, where you're working or maybe you already know this if you have a 401k, make sure and audit that as well to make sure that you are contributing to it to the max potential. So, whatever you can afford to invest and that you could take advantage of, afford to invest and that you could take advantage of. Make sure that you are putting money to it and check if your company matches your investment that way and, if so, how much and for how long. Blah, blah, blah. Check all of that and make sure that you are taking full advantage of that, but also make sure that it's getting put into an actual investment, because I know sometimes they'll pull the money but you still have to go into your account and allocate those funds to whatever investments investments you want and I did that with my thrift savings plan, which is basically kind of like 401k for the military, and I was contributing. But the problem is that it defaults to the safest fund, which is the G fund, is called government fund which gave me very low return and I had it there for like eight years. So make sure you're not doing that.

Speaker 1: 24:50

Finally moved it after I figured it out, which is why I say, like, start with your own finances, start learning about your own stuff, and so learn about what an index fund is stocks just the basics. What an index fund is stocks just the basics. Avoid falling into the traps of. I call them, you know, they're called the stock bros. You know the ones that are telling you, like you know, get this stock or that stock, like avoid going into individual stocks, especially as a beginner. That's more of like expert level and to me, like a lot of that takes a lot of time and effort and most of us you know we are working, you know families or pets or whatever that we have to take care of. Like I do not have time to be like tracking all this stuff for individual stocks so I can make a few extra bucks, like for the most part, just doing basic investing is going to be sufficient enough for retirement. And understand just the basics of the stock market, especially with the recent, I guess, drama of the stock market taking a nosedive. But understand that you are investing for the long term. So it's going to go up and down. So don't you know panic, sell and things like that, because then when you come back you're paying higher and you know it's historically it's going to come back up. So, um, understand things like that.

Speaker 1: 26:32

Uh, figure out what your goals are as far as investing and what investment options are there. Because, like I said, there's the 401k, that's for your retirement. You can, if you're like self-employed, find out what, um, you know what uh investments are available to you? Uh, cause I know there's some. I forget what they're called. They're like self-employed, self-directed IRAs or something like that. I forgot what they're called off the top of my head. But figure out what your options are.

Speaker 1: 27:06

If you have, you know, kids, if you want to save up for college, look up things like a 529, which is an investment account that saves up for a college. There's also investment accounts for your kids that, if they're working, you could put money in there, and things like that. So just you know, start with the basics of yourself. What can help you right now? And then expand from that as you get more knowledgeable and start wanting to make you know bigger money moves and then you can even get things into things like real estate investing. And when you get to that point, you know, let me know and I'll help you out, because I love real estate investing. That's probably how you found me for the most part. But yeah, understand that.

Speaker 1: 27:59

And then, when it comes to savings, which kind of goes back a little bit with the inflation part, because you want to understand to not have it in a general bank account savings account If you want to keep it there, have it for certain things like maybe you're saving up for new tires or whatever. That's very short term. But if you're having it there for an emergency fund in case like there's a leak in the roof or whatever extra emergency that you don't, you know first of all it's an emergency, so you never know when it's going to hit. It might be, you know, next week, it might be in a year from now. So you don't want to have those funds in a regular savings account because these bank accounts are not going to give you much of percentage back is usually less than 1%. You want to move those types of funds over to a high yields savings account. So if you're like saving up for a down payment for a house, saving up for a new car, things like that, move those types of savings or again, your emergency fund, move that over to a high yield savings account because that's going to at least keep up with inflation.

Speaker 1: 29:19

The one I use is called upgrade. Right now I think it's at 4.14%. I believe it's gone up over 5%. That was last year, but that's the one I use. It's online, it's so easy. If you're interested, the link is in the show notes or in the description, and the good news is we both get a kickback if you sign up and start using it Again. That's down below. So those are the big major categories to start building your financial literacy and the best part is that we have so many more resources available to us, whether it's books, podcasts, youtube, things like that that are, you know, from our own uh community. There's Latinas, there's other minorities that are out here writing books, like you know, cultura en Cash um Financially Lit, which, by the way, she just released it in Spanish, so if you know anyone that wants the Spanish version she just released that.

Speaker 1: 30:30

Get good with money and we should all be millionaires are two other favorites of mine, if you want to. You know, build a business. There's Hefei in training. If you want to learn more about you know the stock market, you can read Wealth Warrior. That's a good one, and she also has a podcast as well for that. And speaking of podcasts, you have of course I'm going to plug this one in you know Money Chisme. You have Yo Quiero Dinero podcast. You have Say Hola, wealth podcast, like so many different podcasts now available from our own community that you know talk about all types of finances, building businesses, investing, things like that. And again, I'll have all these resources and a list of books to read that I've been creating on the blog. So if you're interested in all that, I'll have all that there, but overall, remember it's going to.

Speaker 1: 31:40

You know, take some time like you're not going to know everything you know. Take some time like you're not going to know everything like off the bat. Some things might be easier than other topics. Just take your time and don't let yourself get so overwhelmed, because then when that happens you tend to avoid.

Speaker 1: 31:57

I know I did like, for example, with, you know, investing in my TSP, which again is similar to the 401k, because that just sounded so overwhelming to me and then when I actually started learning about it, like I stuck to the basics and I was like, okay, this is actually not that bad, like I could just do something simple. And I did. I moved it into an index fund, yeah, and I've been making great returns since and I still keep that mentality to this day. I like to always say that I'm a lazy investor. I do things the easier and most simple way. That's still going to be beneficial to me.

Speaker 1: 32:39

I'm not over here trying to be a day trader and be a flipper or anything like that, uh, and so do the same, start with the basics with yourself and, um, figure out what you can do, uh, what changes you can do right now. That little small steps again, little by little, uh, and then you know, build from there and then, if you're interested, then you could get into the more complicated financial stuff. But really, just all these basics are good enough, like we don't all have to be out here doing all this crazy day trading and cryptocurrency stuff, like little things that we can do now. It still works right. So don't let yourself get overwhelmed, don't let it get too complicated. And, yeah, hopefully this was helpful. Again, don't forget, the blog will have all the resources that I talked about and more and a little bit more information. But other than that, don't forget to share this episode. Tag me if you share it on social media and I will see y'all in the next episode. Bye.