From what I can tell, there are three basic reasons why people struggle financially. These reasons are lack of financial knowledge, fear, and entitlement. Individually, each one of these can seriously impact your financial well-being in a negative way, but should you experience all three at once, this will likely equate to a financial catastrophe in your life.
Consider first the issue of financial knowledge, or lack thereof. The most effective form of financial education begins at home or not. This is why lack of financial knowledge is number one on my list of reasons people struggle financially. Think back to your childhood. Did your mom and dad sit down with you and demonstrate how to balance a checkbook, or take time to explain how interest works on a credit card or mortgage payment? A lucky few of you will answer “yes”, but most of us are victims of financial ignorance being passed on from generation to generation. Our parents’ generation is barely managing to keep their own heads above water when it comes to finance, let alone show the next generation how to be financially responsible and wise. As a result, too many of us feel overwhelmed by the idea of making decisions around choosing the right retirement savings option or an investment strategy.
The way I view it, the story of money and finance is told in the language of numbers. We learn to speak this language from our parents, grandparents, and school teachers. The source of our financial woes is two-fold: 1) fault lies with those responsible for setting good examples, but more importantly, 2) fault lies in us for either not paying attention or in simply showing a lack of initiative to self-educate. Regardless of who you are or how you were raised you must have come in contact with someone, somewhere that could have helped get you further along than where you are now. The bottom line is this – we have to know numbers in order to clearly comprehend the impact that our daily decisions have on our financial well-being.
Money is mathematics. For example, when I hand a teen-aged employee at the local ice cream shop $1.04 in order to pay for my $.49 cone, I should not have a pair of glazed eyes looking over the counter at me unable to comprehend the premise that I want two quarters and a nickel back. And yet that’s exactly what happened. Valuable time was wasted as I watched America’s youth scramble for a calculator. And what if you asked the average sixteen year old boy if the car he wants is an asset or is it a liability? I’m sure you can imagine the sort of clueless expression I would be met with.