An often cited statistic is that somewhere between 70-90% of all adult drivers consider themselves to be above average in driving ability. We can all chuckle at that one – by definition, only 49% of drivers can be above average – but I bet that secretly, while chuckling, most people continue to think they're in that top 49%.
But that's not the case when it comes to estimating how well people manage their money. Even though every adult interacts with money virtually every single day, the majority of people worry at one point or another (or all the time) that they're not doing enough or the right things when it comes to personal finance. My hunch is that most people would rate themselves as average at best when it comes to money.
I think there are two big reasons why so many people feel stressed out about living with money: 1) nobody wants to talk about it, so there's no context for how you compare with your peers, and 2) we have this insane idea that learning to use money means being skilled at math and numbers.
To the first point, all I can say is: it's ok to talk about money. Really, it is. That doesn't mean you have to make your financial life an open book to every stranger you meet, but you absolutely can have meaningful conversations about money with the people you care about most. (If you have a question, my metaphorical door is always open. Send me an email, sign up for weekly Office Hours, or schedule a one-on-one meeting. No pressure, no judgement.)
When most people are taught about money (to the extent that they are taught at all), it's usually in an academic, non-emotional, and math-heavy context. All of the textbook material assumes that people make financial decisions using cold, rational logic and pour over spreadsheets to find the best way forward. And there is so much emphasis on running equations and learning formulas. Real analytical, left brain stuff.
In practice, though, everyone considers emotional impact when making financial decisions. And, because too many people conflate understanding how to use money with being good with math, a lot of super talented, competent, right brain-dominant people come to believe that they just aren't "good at money".
I've said it before, I'll say it again: that's a bunch of horse baloney.
While money always has a number attached to it, very little about learning to live with money depends on your ability to remember numbers or use a calculator. (If that were the case, the richest people in the world would be mathematicians. As a former mathematician, I can confirm that they are not.)
Interestingly, not only is being "good at money" unrelated to with being good at math, it's also largely uncorrelated with earning lots of money or having lots of money. Plenty of smart, capable, high earning, and high net worth people are stressed about money, worry about not having enough, and make terrible decisions that lead to massive financial loss.
I'm reminded of a quote from Phil Jackson, legendary basketball coach of the Chicago Bulls and Los Angeles Lakers: "Not only is there more to life than basketball, there’s a lot more to basketball than basketball." Not only is there more to money than the numbers, there's a lot more to money than money.
So what does it take to be "good at money"?
Living with money is a life skill and, like all skills, it needs to be practiced. You'll be interacting with money for the rest of your life, so you need to treat it like any other lifelong skill. And, just like other skills, you can get better over time by just continuing to show up with intention and practice.
Luckily, the principals needed to build good habits are easy to understand, exceptionally light on math, and apply to anyone at any income level and stage of life.
Spend a little bit less than you want to.
Save a little bit more than you have been.
Pay off debt a little bit faster than you need to.
Invest what you can when you can for the rest of your life.
Those four simple practices will take you surprisingly far in life. And, when it comes to being "good with money", they are much more important than how skilled you are with a financial calculator, how much money you make, or the kinds of spreadsheets you use. Thanks!
Thanks,
Timothy Iseler, CFP®
Founder & Lead Advisor
Iseler Financial, LLC | Durham NC | (919) 666-7604
Iseler Financial helps creative professionals remove stress while taking control of their financial lives. We'll help identify your current strengths and weaknesses, clarify and refine your long-term goals, and prioritize decisions to improve your financial well-being now and later. Reach out today to take the first step.
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