3 “To-Dos” on your Path to Financial Literacy (unabridged version)

Want to win with money? What to experience financial wholeness? Here are 3 tips to help.

Just recently I provided a few tips on how to become more financially literate.  It was such an interesting exercise for me because I wanted to boil it down into three succinct points.  After all, who wants a big list of stuff?  When I finished the email, I thought it would make for an interesting topic in this blog with just a bit more expansion on each idea.  So, here we go…

1. Take some time to explore your “money mindset”.  I find that a lot of clients often view money differently on paper than they do emotionally.  Like anything in life, money has feelings around it and sometimes those feelings are from false notions.  What false notions?  Usually, they are called “biases” or filters. (I’ve written about this in a previous post.) But the point is that they keep you from seeing something from what it really is.  When it comes to money and finance this can happen.  For example, if you grew up poor you may have the mindset (or bias) that causes you to live in a place of “scarcity”.  I find that these people, unless corrected, will always feel that they never have enough regardless of how much is in the bank account.   But like you can probably guess, the “enough” really doesn’t have anything to do with money.  The feeling of completeness and wholeness has to come from another place.  On balance, you have to be able to find a way to spend some, save some and give some. Ideally, we should be more neutral about money and realize it is just a tool or a “means to an end”, rather than having overly negative or positive notions about it.

2. Look to get a professional’s opinion on your situation.  Sometimes it can be difficult to sort out #1 without intervention. The beauty about having another person “in the room” to help you talk through that exercise is you are less likely to succumb to your biases. This is why I would recommend hiring a financial professional to handle your money goals.  Why?  Well, you would never consider playing the role of dentist and fill your own cavity or give yourself a root canal.  I mean, even dentists have their own dentists.  Same as physicians, lawyers, etc. and the logic is fairly sound.  The risk of messing up the procedure is high without some assistance or oversight. The money a dentist could save doing his own dental procedure does not outweigh the benefit received from letting someone else do it.   Conversely, however, nearly everyone tries to handle their own finances without professional advice.  (Clue:  It is not a money issue, it is a control issue.) You can argue that although not as potentially damaging as trying to drill on your own teeth, a wrong move financially has social, psychological and possibly physical ramifications also.  The bottom-line is that a good financial advisor can help you establish realistic goals and provide accountability while preventing you from making a costly error when life throws you a curveball.

3. Be Different in All the Right Ways.  I know, I hate clichés also.  And although this seems counter-intuitive, it makes a lot of sense.  Generally speaking, I find that most people are very reactive with their money.  I mean they let things happen to them instead of happening to things.  For example, funding an emergency fund of 6-12 months of living expenses seems to be common sense.  But, this is something that often doesn’t get completed for various reasons, when in fact, emergencies happen more often than people think.  I would say that at least 40% of all people I speak with (even more of my peers) have not completed a will, health care directive or power of attorney.  However, if any one of them were to become incapacitated, it would be very difficult to act on their behalf to fulfill their wishes.  My advice, instead of being reactive, be proactive.  Instead of being on the defensive, be offensive.  One thing is for sure, following the “herd mentality” usually doesn’t help you become the millionaire next door.

Plain old common-sense is often not “common” at all when you dive into the behavioral aspects that keep people from winning with their money.  It is a matter of becoming really smart around your feelings and removing mental obstacles that keep you from doing the right things even if it takes a little coaching to get you there.