The most important financial tool
Math skills don't mean much if you're not self-aware.
My immediate answer: awareness.
It doesn't matter how good you are at math, or how many personal finance books you read, if you're oblivious to the reality of your funds. Right off the top of my head I can think of four vital types of financial awareness.
1. Awareness of where your money goes. Big expenditures are easy to spot: rent, utilities, car insurance. But how often do you leave the house with a couple of twenties and return with some crumpled singles -- and no idea where the rest of it went?
Time to pay attention to your spending. Do this on paper, or do it with budgeting software like Mint.com or Adaptu. But do it.
2. Awareness of why you buy. Before unlimbering that debit card, take a couple of seconds to consider whether you really need that new T-shirt/paperback/DVD. Would your life be diminished if you didn't get it? Can you wait a couple of days, then see if you still want it? In other words, stop swiping on autopilot.
3. Awareness of a financial future. Got goals? Or do you just drift along from month to month, with no long-term plans? Maybe you're one of those people who figures to tackle saving/investing/retirement "later." Unfortunately, "later" generally translates as "sometime between next week and not ever." (Post continues after video.)
If you think you're the exception, that you'll definitely take care of it by the end of the year, ask yourself this: Why can't you start now?
4. Awareness that sometimes a want is a need. You should certainly enjoy the fruits of your labors. Just do it mindfully, not reflexively, and get the most for your money. Research major purchases, use a price-comparison website to find the best deal, and pay with a discounted gift card when possible.
And do it after you've taken care of business, which includes funding those long-term goals. Sometimes it's hard to imagine how the sacrifices you make today will pay off decades down the road. But you are responsible for that future, which means being responsible in the present.
Readers: What money skill do you think is the most important? How did you learn it?
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Donna Freedman, a writer based in Anchorage, Alaska, writes the Frugal Nation blog for MSN Money. She won regional and national prizes during an 18-year newspaper career and earned a college degree in midlife without taking out student loans. Donna also writes about the frugal life for her own site, Surviving and Thriving.
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