How do you learn about money and finance? Even though the United States is the world’s richest nation, most Americans know little about personal finance. Our financial knowledge doesn’t always come from formal education, but from informal influencers.
Learning is strongly influenced by those you trust. They could be a parent, teacher, friend, peer, or anyone whom you think has a greater understanding of money and finance.
Trust vs. Competence
Research indicates that most of us rely on family members, friends, and close associates. That’s a problem. Why? Most people are not qualified to provide personal finance advice. The unfortunate reality is that most people have poor money management skills. Yet they are identified as people we should follow. Be careful. Just because you trust someone to know a little more than you, doesn’t mean you will get the best advice for your situation.
Before taking advice or following the strategies other people use to manage their finances, be sure to accurately identify whether they qualify as experts. The good news? Your trusted individual does not have to be a friend or family member. You can look to a trusted advisor, a financial author you relate to, or a media personality – anyone you feel you can learn from can help you. Consider an experienced Certified Financial Planner (CFP®) or another certified expert. It may take a while to find a financial mentor, but locating a qualified expert will help you pick up much-needed knowledge.
Outside influencers also shape our financial behaviors. Media and online outlets often focus on bad habits. It’s a sad truth, but people tend to copy what is covered—and bad news sells. Advertisers contribute to poor money management habits too. You are exposed to millions of advertisements in your lifetime. There is a war for your wallet, and you need to protect yourself.
Social media represents a huge potential influencer. Messages posted though Facebook, Instagram, Snapchat, and other peer sharing forums influence people’s financial habits. Social media increases peer pressure. People post their best experiences online. This creates a false image of “normal” life—encouraging more spending and less saving. It’s understandable. Many people have a natural desire to have similar possessions to their peers and friends. This desire can lead to decisions that may offer short-lived gratification, but will take them off-course toward their financial goals in the long run.
Staying in Control
Over time all these different influencers shape your financial behaviors. You start to develop your own money personality, which influences how you manage your finances and daily lifestyle choices. This influence extends to anything from spending and saving habits to how you think about money. A great first step? Be aware of your influencers.
The key to managing your own financial psychology is to use your money in a way consistent with your values, beliefs, and desired lifestyle. Stay on target. Choose experts and mentors who will encourage you to focus on your ideal life and help you resist the negative influencers we are exposed daily. Set clear financial goals, assess your current situation, develop a plan, and continue to learn about money. You might become another person’s mentor.
To learn more, consider supporting financial literacy worldwide by becoming a monthly donor. Your donation of $11.99 each month supports our financial literacy outreach programs in the United States and Internationally. As a THANK YOU, you will have full access to our online learning curriculum, and tools to help you save, plan, and get better organized. Click HERE to learn more.