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Money management is such an intimidating topic. I write a blog about finances and the world of investing still intimidates me! There’s definitely a learning curve and it’s not something that most of us want to jump into with any uncertainty because there’s too much at stake. We’re terrified of making a huge mistake, and that’s not necessarily a bad thing. The good news is that you don’t have to figure it all out on your own or even all at once.
Start in the Beginning
If you have debt besides your mortgage, we have to start there. We cannot ignore the elephant in the room any longer. Debt is going to keep you from moving forward and building wealth because it is sucking up your money in interest. I encourage you to read these articles first and then come back to this one:
Healthy Fear is a Good Thing
Your financial future is very important. When someone approaches you about investing in their start-up emu farm (any FRIENDS watchers?) and you feel uncomfortable about putting your money there, listen to your gut. You get to make decisions about where to invest (or not invest) your money and it needs to be in a place you feel is safe. I do, however, encourage you to do something a little more risky than keeping it taped to the back of your toilet. There’s a happy medium here. You need to stay sharp as you listen to financial advice. Weigh everything against what you know and gut check it before you do anything.
My best advice for safe money management is to start slow and grow. Run away from “get rich quick” schemes as these are often ultra-high risk investments and they have the potential to ruin your finances. Don’t buy things you can’t afford (that means stop accruing debt). Start your investing in relatively low risk, long term funds like your 401(k) and a Roth IRA. Get your feet wet in a safe environment before you start taking greater risks. As you educate yourself and gradually increase your net worth, you’ll have a better idea of exactly what the risks are with different investment opportunities and you can pursue what you wish. As Warren Buffett says, “Never invest in a business you cannot understand.” This is our cardinal rule for smart investing.
Never Be Afraid to Ask for Help
There are a million aspects of “adulting” that are just plain hard. It would be ridiculous to approach it without asking for help. In a span of about 5-10 years for most of us, we have to learn how to be a great spouse, parent, professional employee, new home owner, smart car buyer, financial planner, investor, and well-adjusted member of society with a minimal number of emotional meltdowns. (Good grief! When I write it all down like that, I feel much more forgiving toward myself). There’s no way to be a master at all of it right out of the gate and that’s okay.
When it comes to most of the things on that list, we find the help we need to be successful. Sometimes that means calling the women in our lives who are really awesome mothers and wives and asking for advice. Other times, it involves reading books about how to become a stand-out employee and finding a mentor in your professional field. We research and interview and ask questions to learn what we need to know. For some reason, people seem to feel like they should automatically know how to manage their money without this kind of help. I suppose that’s because it’s a personal topic and has traditionally been kind of a taboo subject for conversation, but that’s not entirely true anymore. I’m not suggesting that you broadcast your income and net worth at the water cooler at work this week, because that’s certainly inappropriate, but I do encourage you to seek help. No one expects you to figure out money management by yourself.
How to Find Good Help
We’ve established that this is important, we can’t possibly know everything, and we need help, so now what? Smart financial advice is hard to come by. Here’s a list of guidelines to help you find reliable, trustworthy advice:
Ask Wealthy People
I just finished reading a book called, Rich Like Them by Ryan D’agostino. In this book, D’agostino traveled around to the 100 wealthiest zip codes in the US and knocked on the doors of mansions to ask people how they came to live in such a house. He was told some fascinating stories of successes and failures and was given excellent, sound financial advice that he compiled into this book. While I recommend this read, his method is not the best way for the rest of us to ask wealthy people how they became wealthy. The idea, however, is so obvious, it makes me wonder why I hadn’t thought of it before.
If you don’t live in 90210, finding wealthy people may be tricky because most of them don’t advertise their wealth. They don’t necessarily drive flashy cars or wear expensive clothes, but they can often still be spotted. These are the people who bring their lunch to work and drive used vehicles and retire early to travel. They don’t join in lunch-time conversations about how broke they are or about how they only have a few bucks to last until pay day. Their kids likely don’t wear brand name clothes very often. It’s not that they never enjoy their wealth or buy nice things, but they usually do it without much fanfare (and with coupons!). If you can find these people at your workplace, in your neighborhood, or in your church, they can be dear friends and mentors to you. Aside from having their own mistakes and success stories to share with you, they can also be your comrades for frugal living.
Exercise Great Caution with People who have Something to Gain from You
There are excellent financial advisers out there so please don’t think I’m bashing them here. I just want you to understand that they are benefitting from your investment with them and that might bias their advice. They are paid a commission because of your investment, but that may not be the smartest move for you to make at that time. The best advice I can give you in that situation is to listen to their advice, take plenty of notes, and then do NOTHING until you take time to go home, research, ask your mentors, and talk to your spouse. I have been in these meetings before and come close to moving substantial amounts of money from one company to another, only to come home and realize that it would have been a costly move for me. These advisers are often in a great hurry to get you to do things and that should always be a red flag to you. Big financial decisions are not something to rush into and you should be able to take a little time to think and evaluate before making them. Remember the cardinal rule: Even when you are paying someone to help you with your finances, you should not invest in things you do not understand.
Read Reputable Financial Books
My husband and I love Dave Ramsey and we trust his financial advice. He gives simple, reasonable, and conservative money advice that even beginners can understand and I appreciate that. His books are an excellent place to start understanding financial and investment basics. Here are some other books I recommend:
In all honesty, if you stroll the personal finance section of your library, I’m sure you will find a ton of great, reliable books that I haven’t yet read. I’m hesitant to suggest resources with which I’m not familiar, but there are plenty out there. Stay away from titles including catchphrases like “Get Rich Quick” or “Make Money with Hardly any Work” or “How to Gamble your way to Retirement” and you should be okay. The more you learn, the more confidently you can plan your financial future.
Be Careful about Accepting Advice from Family
Family members and close friends often have the most advice about how you should be living your life. There are often a lot of unsolicited suggestions about your cleaning, parenting, decorating, spending, and even your investing. The problem here is that it’s almost impossible to remain objective about their advice. There are a million emotional factors like the desire to impress, the fear of failure, the need for approval, and the fear of disappointment that are influencing your financial decisions and they have no place in your money management. You love these people and you’re hardwired to want to please them, but we do NOT make financial decisions based on our need for approval from the in-laws. That is definitely not a part of our investment criteria.
There are a few exceptions to this rule. If your family is wealthy, they may be an excellent source of financial advice. No one has your best interest more at heart than they do. Even in that case, you need to try your hardest to remain objective and do your research first. Again, refer back to Buffett’s advice above: If you don’t understand it, don’t invest in it no matter who encourages you to do so.
Time to Get Started
I sincerely hope this has given you some resources and information to help you take your first steps in financial planning. Money management doesn’t have to be scary or intimidating. No one’s asking you to go from where you are today to navigating Wall Street tomorrow. All you need to do is learn a little more each day and grow your investment portfolio along the way. There’s no short cut through knowledge building and we’re all having to start this way. As always, feel free to ask questions or leave suggestions in the comments below.
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