One of the most common feelings about money is that there is this “mystery target” out there somewhere… and that as soon as our bank accounts reach that magical number, all of our financial troubles and worries will be over and we won’t have to spend time dealing with our finances anymore.
Here’s the truth…
- Everyone – no matter how wealthy – worries about money sometimes; and
- We will always have to “deal with” our finances.
Financially successful people may not be worrying about credit card debt, building an emergency fund, or struggling to make sure every bill is paid. But more often than not, if you dig deep you’ll discover that they have meticulous systems for monitoring their financial picture. They face any challenges head on, and work to respond to them quickly, to reduce the possibility that a small financial hurdle snowballs into a full fledged money disaster.
Contrast this with the person who’s always disorganized and can’t seem to ever get ahead in their financial life. He or she consistently complains, “I hate it when money comes up…it’s too depressing.” Maybe. But hiding our eyes won’t make our money concerns disappear.
In a wonderful book, The War of Art, the author, Steven Pressfield, says that success at anything is like planting a tree. The higher the tree grows, the bigger the shadow it casts. It’s the same with money. Don’t care for money topics now? If we’re going to grow financially, we have to be willing to accept that growth brings higher level challenges, rather than eliminating them.
So really, when it comes to financial education there are two basic approaches:
- Leave it to chance that someday your ship will come in and your financial problems will go away.
- Realize that every stage of life comes with financial problems. By committing to continued learning and expansion – you’ll be ready to not just survive them – but rather to actually thrive in the process.
It is true that even choosing the first approach, at some point, you may be blessed to receive significant money. Maybe you’ll book a huge job or sell a script. Perhaps you’ll score a well-deserved raise or commission or even receive an inheritance. But if you don’t know how to interpret the world of money, how will you ensure that it won’t slip through your fingers? It’s extremely likely that you’ll simply find yourself peddling harder in your new lifestyle but not feeling any better about yourself or your financial situation.
Jump In! The Water’s Warm!
To beginners, the world of money can feel like a bundle of jargon and bankers trying to gouge you for every last nickel. And it’s true, there are horrible amounts of jargon – from “401k” (who thought describing a retirement account as a combination of numbers and letters was a good idea?) to “dollar cost averaging” (huh? Let’s entice people with the most boring three words ever!) – even the terms alone can be intimidating. But here’s what’s surprising. Like anything, if you decide to start at the beginning and not try to learn everything about money in a single day, or even a week or a month, it’s far easier than you may think.
I was sharing the idea of this article with a friend, and he compared it to wine (which he knows very well). Wine also seems forbidding to a newbie. Wine experts use big terms when little ones will do. They talk about the nose and fragrance, and about how some wines are bold and others thin. I taste wine and taste…well…wine. No flowers or apricots or peaches… just wine.
But he says knowing more about vino is actually really easy and fun, and it all starts with learning to pair foods with types of wine. Once you know a few combinations, you get more excited, and soon finding yourself asking what he says is a key question, “What fun things to eat does this wine pair with best?”
Listening to him, I realized that maybe there are key questions like this in personal finance:
- What’s the best way to control debt? I love this framing because the answer is in the question: I have to budget, plan and decide which debts, if any, are suitable for my situation.
- What investment types can most reliably get me to my goal? This question considers the fact that investing success lies not just in selecting a particular investment (maybe a certain stock or CD), but also in deciding the type (exchange traded fund, bond, mutual fund, annuity) that is most suitable for your particular time frame. It also assumes that we are clear with regards to our financial goals. This is an excellent way to invest!
- If I die, how do I make sure the right people receive my stuff….and that it’s enough? This question leads you toward estate plans and insurance, and helps you to protect your assets and define exactly how you want them passed on.
Instead of looking at money as this big, huge, overwhelming world, ask a simple question and explore the answer. Then ask another question. If you start with questions that affect your personal finances, you’ll quickly pick up basics. Over time, the financial pages of newspapers won’t be so scary and you’ll realize that talking about money is a critical piece of the growth that you seek.