George walks into the office for the first meeting with his new financial advisor, Dina. As the meeting unfolds, George shifts uncomfortably in his chair. Dina notices that George starts to look upset and frustrated.
When she asks George about it, George sighs. “Sorry. I just feel like I should already know all this stuff. I must look pretty stupid, huh?”
Dina smiles reassuringly. This exact conversation has happened many times, because finance is one of the most difficult things to learn.
What does it take to learn something?
To understand why we’re all in this boat, let’s take a look at what it takes to actually learn something.
Psychologists point to two things that need to happen in order for learning to happen:
- Repeated attempts.
- Feedback on each attempt.
Let’s take a look at what this looks like in real life.
If you’re learning a sport, your coach probably makes you run drills. For instance, if you’re playing basketball the coach might make you practice shooting free throws over and over.
That sounds a lot like repeated attempts.
And while you’re practicing free throws, the coach might give you pointers. They’ll tell you to square your shoulders, or to bend your knees more.
And there you have feedback on each of your attempts!
Let’s look at another scenario: School.
In school as you’re learning a specific unit, the teacher might give you homework, pop quizzes, essays, and a test.
Repeated attempts to master the topic.
And after each one, you get a grade, along with notes on how to improve.
Photo by NeONBRAND on Unsplash
What does learning look like in finance?
Here’s the challenging thing about learning finances: people get few opportunities to do repeated attempts at something, and even when they do, there’s very little feedback.
How often do you buy a house? Maybe a few times in your entire life! You have very few opportunities to repeatedly attempt mastering the home buying process, even though it’s one of the most important moments in your financial life.
Alternatively, you probably go grocery shopping once every one or two weeks. That happens relatively often, so we have repeated attempts to learn and get better at it, right?
However, we typically don’t get feedback on our shopping trips, unless we end up on Supermarket Sweep! Did we make the most out of our budget? Did we miss opportunities, or did we overspend in some areas?
Speaking truthfully, I am incredibly guilty of always buying too many bananas. No matter what, it seems like there’s always one banana that goes uneaten.
And this is one of the spending activities that I do most!
You can see that in the real world, it’s incredibly difficult to find yourself in a situation where any learning can happen at all!
What can be done about it?
There’s been a recent push to include financial literacy in school, which is overdue in many people’s opinions. This could fill the gap that many people need!
Pushing for classes focused on finances will hopefully lead to a generation of people who will feel much more confident in how they handle their finances.
But it’s important to remember that this will not be a cure-all. The world of finance can change very quickly (For instance, Roth IRAs are a popular tool now, but have only been around since 1997. I’ve had cars older than Roth IRAs! And as we all learned in the past few years, the tax code can change, even in the middle of tax season.) but curriculum usually takes awhile to develop.
We can already see the difficulties this poses through courses available through “gurus.” Even though the field of financial planning has developed the idea of Good Debt vs Bad Debt, popular courses still promote the obsolete idea that all debt is bad.
Chances are, even after these finance courses become prevalent in high schools, they’ll still fall behind.
Fortunately, you don’t have to become a finance expert, just like you don’t have to become an expert carpenter to live in a beautiful house.
The purpose of a fiduciary financial advisor is to have an expert help you make the most out of your finances. They’ve put in their 10,000 hours so you don’t have to. Through courses, and repeated experience helping numerous people, financial advisors have the opportunity to learn.
This is the reason that George, at the beginning of this article, found a financial advisor! There’s nothing to be ashamed of – Dina is there to help.
If you’re interested in having an expert help you out, click here to sign up for a FREE Bronze Account. A financial expert will reach out to schedule a complementary strategy meeting with you.