Updated: Jul 13
'Financial Literacy'. Two words are often associated with corporates or investments, even though they play a major role in how we manage our day-to-day lives. In fact, in 2020, the total amount of student debt outstanding amounted for nearly $1.6 trillion dollars in the US alone, with 54% of university students taking up a student loan to fund their education. While everyone may have different financial circumstances, many students also find themselves living paycheck to paycheck during their time at college and after graduation, struggling to manage their expenses and begin investing. Why's that? Is it fair to simply label these behind poor spending habits? Unless you're a student enrolled in a commerce, finance or accounting degree, chances are you would not have significant study experience with topics such as taxes, budgeting, banking, loans, securites and real estate. I know I don't, numbers weren't always my strong suit. But that's what we're going to be discussing a little about in this article.
To help expand on this topic, I'm joined by Riley Oickle, an experienced entrepreneur, having owned and managed multiple business over the past few years. His recent venture focuses on teaching people how to manage and purchase income properties profitably and passively, with a portfolio of over 70 doors across South Western Ontario, Canada. His business aims to help private lenders and partners to safely grow their wealth through obtaining a better understanding about the real estate market.
What is Financial Literacy?
Well, the textbook definition goes something like: 'The ability to manage one's finances effectively, to accomplish long term financial goals.' The whole idea is to ensure that people make informed decisions and better purchase decisions to strategically manage, save and invest money to be more productive or be less stressful. In fact, many individuals who support financial literacy gravitate towards incorporating more finance-based courses in school and university for students to learn. While that could potentially be a starting point, financial literacy is one of the many topics that needs to go beyond the classroom. The high amount of debt in the world today likely correlates with poor mental health, dissatisfaction and stress amongst students and graduates.
One wouldn't want to graduate with significant amounts of debt because that would only hinder their ability to save and invest money further once they graduate. Of course, no one willingly chooses and wants to remain in debt, but shining some light on a few methods in which we can all learn to effectively manage our finances can go a long way for helping us reduce the stress associated.
"I was in my first year at university, and found myself spending a lot of money on what you typically would at that age. I was in debt, didn't have a clue about what financial literacy was, wasn't tracking my spending, etc. I didn't wanna end up at the age of 35 with a whole lot of debt, so I knew I had to do something. I managed to find work at a tire factory, which paid about $18/19 an hour. It wasn't bad, but wasn't going to help pay off all the tuition fees. That's when I started my first entrepreneurial venture, offering to help people in the community with cleaning windows, pressure washing, and so on. One thing led to another, and I managed to hire two other students to work with the business. Fast forward to today, I've got 12 students I coach, we do 6 figures a year and that really led me on the path to buy property, invest in real estate and rent it out to tenants."
University life and students in general are a good example of why the topic of financial literacy is important. While students may be coming from different cultural and financial circumstances, most of us tend to share a lot in common when it comes to our general expenditure. Tuition fees, rent if you're living away from parents, food and utilities, transportation, insurance, and so on. These are what I would classify as the 'essentials', and what most of us would be paying. Then we have the additional stuff, you know, sports, gyms or club memberships, online or app subscriptions, visits to cafes, restaurants or bars, anything that's not essential but that we choose to pay for. The first step towards being more financially literate, is to be more conscious of one's own spending before making any changes. A simple 'cash-in & cash-out' approach would suffice, and isn't too difficult to incorporate with the technologies and apps we have at our disposal these days.
Learning about Financial Literacy
As mentioned earlier, many of those who talk about the importance of financial literacy suggest that universities and schools should incorporate more ways for students to learn about this topic. Even students who are not necessarily enrolled in commerce or finance-based programs, should be exposed to some basic information and guidance as to how to best manage their own finances. While this does sound like a useful approach on paper, financial literacy is not too different to any other topic in the sense that theoretical learning is not quite the same as experiential learning. There's only so much you can pick up from a finance course or a textbook, which would also most likely largely consist of information pertaining to the financial industry or the corporate world. Learning how to manage one's own finances is a lot about being exposed to certain experiences, and then being able to decide what the best course of action might be.
"You can take finance courses in school, read it and learn about it; but when the rubber hits the road, you might be surprised by what you experience. The best way to actually start learning about your finances, is to simply just track your expenses. Get an expense tracking spreadsheet, find something online and download it. There's tons of videos and articles out there showcasing how to use them and understand them. People don't usually think about the stuff they're buying. When I started using these spreadsheets, I didn't realise how many subscriptions I was paying for without even using them. Starting off with these in great detail can really help understand how much money you're putting in, versus how much you're putting out."
It's safe to say that nowadays, there's an app for pretty much anything. Budgeting or financial management are no different. The most basic principle of commerce and accounting is that of cash in and cash out. Every time we indulge in buying something materialistic thinking it can make us happy, doesn't always end up the way we expect it to.
One way that I've managed to incorporate over the past few years is to look at everything I purchased and think about how much I've used them over the course of a week, month or a year. The idea is to calculate a return of investment (ROI) of sorts. We all have that one piece of clothing that we love to wear everywhere. The ROI of that clothing item would be high, but any other items that we don't wear that often, may not be as high. Finding this out can help decide about future purchases and also set us off on a trajectory to better manage our finances. Whether it's investing in shares, applying for a credit card, trading cryptocurrencies, etc.
What we can do?
If you're thinking of starting a business, ask yourself this: 'Can I see myself doing this for the next 5-7 years?' We can all blame social media for painting a picture of entreneurs driving Ferraris and enjoying life on yachts. There's no way around the grind, and that's what we should prepare for when deciding about a business.
"If you're looking to start a business, know that you're going to need to be in this for the next 7-10 years if you want it to bear fruit and success. Elon Musk talks about this quite a bit. Whatever you want to do: clothing, technology, accessories, services, know that you're competing. You're going to be in a large pool of businesses. It's at least a 5 year grind if you really want to do it. That's the reality, not you laying in a Ferrari so keep that in mind."
Competition drives innovation. Everything we see around us today has sub-divisional categories where people specialise. With clothing for example, you have sustainable clothing, ath-leisure, gender-specific options, and so on. With apps, businesses are offering special apps to address each and every need out there. Innovation is constant, but ever changing at the same time.
With regard to renting your first place off campus, it can be difficult but it's part of the experience. Depending on the real estate market, prices and budgets, we can plan how to rent our first place. Once the budgeting starts, there's a lot more we can do with our finances and spending decisions.
One step at a time.
I'd like to offer my sincere gratitude to today's guest- Riley Oickle. Check out:
Riley's website: https://www.rileyoickle.com/