It is a quote often attributed to the Buddha, or more likely to a 1970s kung fu movie: “When the student is ready, the teacher will appear.”
Unfortunately, when it comes to personal finance, the classroom appears to be empty. According to a new survey, nearly 7 in 10 Americans have less than $1,000 to their name. What’s even more disturbing is that 44 percent of those earning between $100,000 and $149,000 reported having less than $1,000 in savings.
I know this is old news, Americans don’t know how to save. How do we fix this problem? The answer is financial literacy – the ability to understand how money works in the world.
What you don’t know can hurt you. If you don’t understand budgeting and prioritized spending, saving and investing, responsible debt management, etc., you will always struggle to build wealth. Without appropriate insurance protection, you will always be a crisis away from financial destruction. Without a disciplined investment strategy, you will be an emotional investor, buying and selling at the wrong time, speculating on get-rich schemes, etc.
Financial literacy plus life experiences (especially failure) lead to wisdom. Then if financial wisdom is not applied, that can only be attributed to denial, arrogance, stubbornness or some combination of the above.
We have to seek knowledge by listening and learning. I frequently talk to young people who describe themselves as “continual learners” yet they never seek out senior family members, co-workers or managers. They don’t ask for coffee talks or lunch meetings and arrive with a list of questions under the heading “teach me.”
“Too often, busy financial veterans do not offer mentorship. Hopefully, when the student is ready, the teacher will appear, but I challenge myself, my peers and our elders to appear anyway.”
Indeed, learning can be a self-directed classroom. Explore the gaps in your knowledge and experience. Seek to learn: read financial books and blogs, listen to podcasts, and ask family and friends to share their financial wisdom. When appropriate, talk to a professional (tax, law, investing, insurance, financial planning).
Finally, to start a far-from-comprehensive list of financial education resources, check out websites such as Vanguard, MSN Money and Yahoo Finance. If you are comfortable with the spiritual components, Dave Ramsey’s tools including talk radio, books and seminars are down-to-earth and useful. Ditto on resources from Crown Financial Ministries. Anything written by Vanguard founder John Bogle is loaded with investment wisdom. More advanced investors should read Burton Malkiel’s classic, “A Random Walk Down Wall Street.” And, a daily subscription to the Wall Street Journal is profoundly enlightening into the worlds of personal, national and global finance.
Seeking and applying financial wisdom is a lifelong journey. As with any journey, it starts with the first step. Take it for yourself, or help someone else, especially a young person, take their first step.