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The most important financial tool

Math skills don't mean much if you're not self-aware.

By Donna_Freedman Sep 14, 2012 12:20PM
Image: Pie Chart (© Christine Balderas/Photodisc/Getty Images)

Recently the Daily Worth personal finance website posed a question to its readers: "Which basic money skill do you think is the most important?"

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 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.

What money skill do you think is the most important? How did you learn it?

More on MSN Money:

Sep 14, 2012 10:02PM
Another good bit of advice from Donna. Keep it up.
Sep 16, 2012 4:21PM
Another question I ask myself before buying something is "how OFTEN am I really going to use this thing?"  This will help you prioritize your purchases, and you'll get the best value for your money.  There's no point in spending good money on something that you'll almost never use.

The only exception to this rule is buying some tools, generally if the tool will pay for itself the first time I use it, then I don't worry about the cost.
Sep 19, 2012 9:09AM
Awareness is #1 with Discipline being a close runner-up at #2.  As the old saying goes 
“A computer lets you make more mistakes faster than any invention in human history-with the possible exceptions of handguns and tequila”

Having a computer or a tool (Mint, Quicken, etc) doesn't really make a difference if the operator is making bad decisions.  If you can make good decisions, (i.e. keeping your awareness level up), a pencil and paper work great.  

I started with trying to teach my kids the 'want' vs 'need' when they were younger... and it's a lesson I keep needing to remind myself now that they're grown.

Great article.
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Donna Freedman's Frugal Nation blog is for readers who want to live cheaply -- whether due to necessity or a lifestyle choice. It explores living sustainably and making life more meaningful at the same time.


Donna Freedman

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.