I believe in asking questions and not taking things at face value. Just because most people are doing one thing, doesn’t mean it’s right. This is behind the premise of why I believe everyone should question their personal finance knowledge.
After all, people used to believe the world was flat and that the car would never replace the horse and buggy. There are myriad scientific theories the majority used to believe that were proven false. So it’s worth questioning things, evolving, and getting better.
What is Personal Finance Knowledge?
Personal finance knowledge is our knowledge and understanding of money. In other words–financial literacy or education. It’s an understanding of how money works, including but not limited to:
- Debt
- Compound interest
- Investing
- Budgeting
That’s just basic personal finance knowledge. There are also many more moderate to advanced concepts such as leverage, creating systems, and various types of alternative investments.
Why Question Personal Finance Knowledge?
Things rarely stay the same. Ideas change and evolve, and things that used to hold as absolute are long-forgotten about theories of the past. It’s no different in the personal finance space. For example:
- Pre-1900’s, “retirement” as we know it didn’t exist
- The pensions our grandparents and great-grandparents earned are becoming few and far between
- Many younger workers are choosing the gig economy rather than working for one company
Related:
- Gig Work: 28 of the Best Jobs & Opportunities for 2021 and Beyond
- My Biggest Issues With Retirement–And It’s Not Even During Retirement
These big changes have all occurred in the past 150 years or less. Leading me to believe more big changes will be seen throughout my lifetime and yours.
That means everyone should question their personal finance knowledge. The remainder of this post will address seven more reasons.
Number 1: You May Not Be Right
This one might be a hard one to swallow for some of you–you may not be right! What you thought you knew, or took as fact, might not be correct.
Humans have been wrong about a lot of things in the past. Which isn’t necessarily a bad thing because everyone is going to be wrong sometimes if they are going to continue to learn and grow. A child taking their first steps is going to fall, a kindergartener is going to make math errors, etc.
I encourage everyone to acknowledge you may not be right. I blog and wrote a book about personal finance, and I’m fully aware that some of the concepts I teach and write about may not be correct in the future.
Which might be embarrassing since this is all in writing (and I wrote it), but it’s important to have the humility to know you may not be right.
Number 2: Growth Mindset
In her book Mindset: The New Psychology of Success, Carol Dweck writes about having a growth mindset. Some of the key principles to having a growth mindset is learning from your mistakes, using failure to learn and get better, and the overall mindset to keep improving and growing.
For example, a young student with a growth mindset who gets a math problem incorrect in school would use that opportunity to learn and get better. They likely wouldn’t make that same mistake again and would soar in their learning.
Contrast that to a student with a fixed mindset who gets a math problem wrong. That student is likely to fixate on getting the problem wrong and feel bad about it. While the whole time it’s a missed opportunity to improve.
This is exactly why it’s important for everyone to question their personal finance knowledge. It’s an opportunity to get better and learn–likely leading to prosperity. Where not questioning things often leads to stagnation and lack of progress.
Number 3: Things Evolve
Things change and evolve. Very few things remain static. The same goes for personal finance.
What was a good strategy 50 years ago might not be the best strategy today. Or what used to work for your grandparents won’t necessarily work for you.
I believe in timeless personal finance principles such as automate, pay yourself first, invest a portion of your income, etc. are here to stay. What is done with that money is what changes and evolves.
For example, the way a large number of Americans used to pay themselves first was via a pension from work in which their employer automatically deducted a portion of their paycheck. Now people are paying themselves first by investing in other things.
I’m not saying one way is better than the other, but things change so our strategies need to change as well.
Number 4: Ability to Learn From New People
Number four on the list of why we should all question our personal finance knowledge is the ability to learn from new people. With new people comes new ideas and concepts. Some of which we had no idea existed, or how to implement them.
Jim Rohn said we are the average of the five people we spend the most time with. As we spend time with new people, it’s natural to pick up new ideas and evolve in our way of thinking.
For example, a couple of years ago I joined a mastermind with a group of people pretty far ahead of me professionally. As I have spent more time with them, I am beginning to learn new concepts and ideas I never knew existed.
Even though I consider myself to be very well versed in the personal finance space, I am still learning new things and improving my current knowledge.
Number 5: Catch Things Before They Get Out of Control
Life has a way of just happening. The next thing we know, five to ten years has passed and things aren’t what we thought they would be. It’s easy to explain–everyone gets busy and just kind of forgets to check up on the important things.
This is where it really helps to question our personal finance knowledge. Every so often, take a step back and think about what you know and the actions you are taking.
- Are you investing an appropriate amount for your income level?
- Is your living situation what you want it to be?
- Are you on track to meet or exceed your long-term financial goals?
Questioning is a way to prevent situations from getting out of control. A really quick example to illustrate the point. I have heard more than one story of someone doing what they think is the right thing, and putting their money in a Roth IRA or IRA. They contribute the maximum and “set it and forget it.”
The problem with these stories is that they forgot to invest within the Roth IRA or IRA. Simply putting money in an IRA account doesn’t mean the money is invested. You have to invest within the IRA to make your money work for you.
If people in this situation went through and questioned their financial decisions, errors like this would be caught quickly. I’ve even heard of people making this mistake for 10 plus years, meaning they missed out on massive growth opportunities, especially after the financial crisis of 2008.
Note: I don’t recommend specific financial products or investments, this is just an example to illustrate a point.
Number 6: Improve by Small Margins
If you’re not questioning, you’re not improving. The way most people improve is by small margins. All the clichés apply here: one step at a time, one game at a time, day by day.
The reason these clichés exist is because they are true. The way to improve is by small margins. So many people look at famous, or highly successful people, and see an overnight success.
- “He’s a natural talent.”
- “She has such a beautiful voice.”
- “Must be nice to be able to shoot a basketball like that.”
What people don’t see are the marginal improvements and day to day grind successful people go through. An author doesn’t write a book in a day, a professional basketball player doesn’t practice once a year and maintain their skills, and a great singer doesn’t walk from her car to the stage and just start belting out tunes.
This stuff takes work and small, incremental improvements. One percent better every day, better week by week, etc. Question your personal finance knowledge and aim to get just a little better.
Book Recommendations:
Number 7: Nobody Can Possibly Know It All
Next on the list is something most people know, but often forget. And that is nobody can possibly know it all. This is precisely why everyone should question their personal finance knowledge.
There is always more to learn. Whether you’re a world-class scientist, a professional athlete, a renowned doctor, or anything else–nobody can know it all.
Same in personal finance. No matter how much you’ve studied or think you know, there’s always something more. A new concept, a new idea, a better way of doing something–there is always opportunity to learn more. Nobody can know it all, and nobody expects you to.
Conclusion
It’s important to question our personal finance knowledge. In this post, I listed seven reasons, but there are so many more. Before ending this post, I’ll use myself as an example.
All throughout my 20’s and early 30’s I never questioned a thing about money or my behavior around it. Consequently, I had many years of paycheck to paycheck and lost opportunities to invest and secure a more secure financial future.
I feel like I’ve recovered but it was a harder battle than it needed to be. Simply questioning some of my ideas and behavior around money would have changed my course.
That was the inspiration behind this post–my hope is that you question things earlier and more often than I did so that your trajectory reaches higher and higher.
What’s one way can you question your personal finance knowledge?
