Although most people will agree they should learn more about it, most people aren’t interested or motivated to learn about personal finance and apply the knowledge to their lives. There is obviously an overwhelming amount of information available online, yet seeking it out is a problem for many. At the same time, there are large communities of what we might call enthusiasts or “hyper-financially educated people,” such as Mr. Money Mustache.
The problem is: How do we bridge the gap between the financially illiterate and the financially hyper-literate?
The majority of people reading this website or others on personal finance probably have caught the financial “fever,” so to speak. However, to bridge the gap for the uninitiated, some strategies might be:
1. Being educated by a family member, mentor, or friend
2. Engaging in “information-seeking behavior,” which involves asking questions, searching online, and finding consensus from multiple sources
3. Reaching a tipping point where you are “fed up” with your financial life and actively seeking a change
4. Personal finance is eclectic and pervasive—it touches all areas of life. Therefore, many other skills are important to being financially successful, such as being organized, a good negotiator, and possessing both written and quantitative literacy.
Strategies of prime importance are to seek information, seek second opinions, and give oneself time to think when it comes to financial decisions. Personal finance is not “common sense.” For example, American credit scores work in a manner that is convoluted and arcane to most Americans. If you haven’t actually sought out information on this, you might think paying your utility bills on time helps your credit score (it doesn’t), or that spending a lot on your credit cards builds your credit (it doesn’t—owing more than $0.00 on your statement each month and then making a payment does).
Many Americans don’t investigate or put up a fight when getting a raw deal when it comes to their finances. For example, hospitals might over-bill you for services not received, or fail to process your insurance correctly, resulting in a higher bill at chargemaster pricing that ends up going to collections and damaging your credit. Although you can intercede by contacting the medical billing company to correct your insurance information, by negotiating a lower bill, or later on, by disputing the derogatory marks on your Equifax, TransUnion, and Experian credit reports if they are erroneous, many people simply don’t look into this.
Although knowledge is power, inquisitiveness is a prerequisite.
Many people focus their energies on working harder rather than smarter. If the options for using your time are (a) pick up over-time shifts at work or (b) call your credit card and auto loan issuers and get your interest rates reduced from 20% to 15% with a few simple phone calls, clearly Option B is the better use of your time. Yet, doing more of the same is the easier, more comfortable option.
The returns on becoming financially educated and putting this knowledge into action are huge. It is perplexing to me that so many people find it boring and unmotivating. For instance, many Americans are working extra hours to bring in more money, while failing to claim their tax refunds, and, in aggregate, leaving billions of dollars on the table.
It is completely senseless to work more hours to make $15 per hour when doing some financial reading might be worth $500 per hour, in the long run. If this insight alone is not enough to incite Americans to want to learn about personal finance, then the cause might be hopeless, and the efforts of financial educators might be better focused on taking those who are already financially literate to the next level.