Morgan Stanley
Wealth Management

6 Steps to Financial Literacy

Apr 22, 2025

Take control of your financial future with this personal finance checklist, whether you’re just starting out or preparing for retirement.

Key Takeaways

  • Tracking your monthly income and spending habits can help you make informed financial decisions.
  • Once your budget and savings are in place, you can consider investing excess income to achieve long-term goals like retirement, buying a home and future education costs.
  • Having a financial plan that encompasses your goals can help you stay on track, plan for the unexpected and prepare for major life events.

Financial literacy isn’t just about crunching numbers, but about making informed choices that lead to financial security and long-term success. Having a strong foundation in financial literacy can help you feel more confident and in control when you’re starting your financial journey.

 

Getting started early is often the key to success. According to a Morgan Stanley Financial Planning Research Survey, 76% of investors with a financial plan said they wish they began planning when they first started their careers, but only 28% did. 1 But even if you’ve been managing your finances for decades, it’s never too late to check in on whether you’re planning effectively.

 

Despite its importance in everyday life, personal finance is rarely taught in school, leaving many people to navigate this complex subject on their own. From budgeting basics to planning your legacy, use this checklist to assess your progress and identify opportunities to improve your financial outlook. 

  1. 1
    Nail Down Your Cash Flow

    Your daily income and spending habits can be two factors that impact your ability to save and invest. Understanding your cash flow is essential to making informed decisions, including avoiding unnecessary debt and setting realistic financial goals.

     

    Creating a household budget lets you easily visualize your spending patterns over time. Once you understand where your money goes on a monthly basis, look for opportunities to free up cash for an emergency fund that can cover unexpected expenses like medical bills or job loss. Having three to six months’ worth of funds available in a savings account can help you keep minor issues from becoming major financial setbacks.

  2. 2
    Enroll in Your Company’s Retirement Plan

    Putting aside some money for retirement on a recurring basis can help you build your nest egg. Even if you’re decades away from retirement, getting started early–even if it’s small increments–can go a long way.

     

    Most people begin their retirement journey by participating in employer-sponsored 401(k) plans. Many employers offer matching contributions, allowing you to earn extra money from your company while saving more for retirement.

     

    In addition, some employers offer equity plans that allow employees to invest in company stock, providing another way to prepare for the future. Keep in mind that the funds you invest in a 401(k) or equity plan may not be accessible until you reach retirement or meet specific vesting requirements, such as working for your company for a certain number of years.

  3. 3
    Put Excess Cash Toward Investments

    Once you’ve established your budget, savings and retirement allocations, you can start putting your excess income to work through investing.

     

    Saving and investing are very different financial strategies. Having a savings account can help you access money for short-term needs or emergencies. With investing, you’ll have the chance to earn money on your investments over time, with potential returns that may surpass a high-yield savings account. This can help you kickstart your pursuit of long-term financial goals.

     

    Investments can climb in value when financial markets are doing well, but there are some risks to consider. Your investments may fluctuate as the market experiences volatility. It’s important not to panic in times of market uncertainty. Your Financial Advisor can help you navigate market fluctuations by keeping your goals and risk tolerance in mind. 

  4. 4
    Plan for Milestone Moments

    In addition to building wealth, it’s crucial to plan ahead for major life events like marriage, buying a home and saving for your children's education so you’re financially ready when the time comes.

     

    Different goals may require different strategies, depending on how much you need to save and how much time you have. For example, saving for a wedding or house may only take a few years, while saving for a child’s college education can take decades. The good news is, there are savings tools that can help you achieve these goals. For example, a 529 Education Savings plan can be a tax-advantaged way to save for future education costs.  

  5. 5
    Consider the Role Taxes Can Play

    Taxes influence nearly every aspect of your financial life, from your investment choices to your retirement strategy and estate planning.

     

    Implementing tax-aware strategies as part of your investment approach can help you keep more of your portfolio returns while potentially reducing your overall tax burden. You can also consider tax-advantaged strategies such as annuities to help make your savings last.  

     

    Your Financial Advisor and tax advisor can help you identify strategies that make sense for your wealth, including helping reduce taxable income and help mitigate capital gains taxes.

  6. 6
    Think About Your Legacy

    As your life becomes more complex, whether that’s a growing family or the accumulation of more assets, you’ll want a plan in place to help ensure your assets are protected and your family is secure. It’s never too early to start estate planning, regardless of how much–or how little–wealth you have. An estate plan can include a will and trust, which can help you plan and provide for loved ones, including seeking to minimize the tax burden from inherited assets and quell any disagreements over dividing funds.  

     

    Life insurance can also help protect your family’s financial future after you’re gone. You can revisit your policy and tailor your coverage depending on what you may need at different stages of life. 

How a Financial Plan Can Help

Personal finance habits evolve as your life gets more financially complex, and having a good understanding of financial literacy can help you make more informed decisions. The good news is that you don’t have to navigate the process alone. By working with your Morgan Stanley Financial Advisor, you can create a financial plan that helps keeps you on track while giving you the flexibility to adjust as your needs change.

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Footnotes:

1 Source: Global Investment Office, Financial Planning Research Survey in Partnership with Ipsos, Q4 2024, was conducted from September 27 to October 11, 2024, with a random sample of 1,013 respondents across the U.S. In order to qualify for this study, respondents were required to have $250,000 or more in household liquid investable assets and be between the ages of 25 and 75 years old. 

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Morgan Stanley Smith Barney LLC (“Morgan Stanley”) and its Financial Advisors and Private Wealth Advisors do not provide any tax/legal advice. Consult your own tax/legal advisor before making any tax or legal-related investment decisions. 

This material has been prepared for (informational)\(educational) purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (“Morgan Stanley”) recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. 

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