Happy New Year to everyone. My apologies for not posting last week (at least someone checked in on me thank you Paul) but my laptop was on the fritz, I had a couple of advising sessions before school, and I decided to take the week to relax before the semester starts within a week or so.
I hope everyone who reads this had a wonderful holiday season. And as I was thinking about different money goals for the coming year I thought about all of the things that get thrown at people regarding finances. People want to save more, pay down debt, buy a house, etc. And with each of those topics there comes specific terms that one needs to know about like mortgage rates, mutual funds, municipal bonds, return on investment, etc, etc. In other words, there are a lot of specific items that people are expected to know about when they are learning about finances.
I mean think about it. Think about the very first thing that you purchased on credit or the first loan you took out? More than likely it was a student loan. Did you fully understand all of the things that went on with that? I mean you might know the basics like how much money you took out, what the interest rate was, and so forth? But did you know what it meant to put your loans into forebearance? How long your grace period was? Did you fully grasp the financial ramifications of that student loan or credit card that you first got?
I think for a lot of us the answer is a big fat NO!
I am sure a lot of us got the basics, but I think that one of the reasons why money is a topic that we don’t talk about in America is because a lot of the jargon and vocabulary is like learning a new language.
Over 75% of Americans don’t speak a 2nd language of any kind. Speaking a 2nd language (and I do speak a 2nd language) can make you much more sensitive to cultural issues, mindful of different surroundings including your own, and can just be beneficial all around. However, the vast majority of students that come through our orientation sessions will never explore a 2nd language. They think they don’t need it. It is boring. It is unnecessary, etc.
So you want to know why many Americans are financially illiterate? I think a good part of it is because many Americans don’t speak a 2nd language. They don’t know how to speak MONEY!
Because let’s be honest money and its accompanying vocabulary can be confusing. It is like learning a 2nd language and a lot of people get scared by what they don’t know.
Most of us aren’t brought up talking about money, just as we are not brought up in a household that speaks another language at home. And because we are not familiar with the language of money we often get frustrated with a lot of the concepts that come with it, particularly saving and investing. Most of us understand the spend part pretty well, but the saving and investing, which can involve much more technical aspects of the money language can be difficult.
What Can We Do to Learn This Money Language?
I really am convinced that talking about money is like learning a new language. Considering it is such an important topic in our lives it becomes imperative that we learn at least some of the basics so we can survive within this world. So what steps can/should we take?
First, learn basic vocabulary.
How do you approach learning anything new? You start with the basic vocabulary. I fully admit I am a technological moron. My wife has to help with a lot of things. For the longest time I didn’t have a smart phone because I thought it was a waste of money and I didn’t want the hassle. The truth is I was kind of scared. Yes, I know stupid right. I was scared to learn about apps, downloading things, etc. I can barely master Microsoft Word and you want me to enter the world of smart phones? Well, I finally gave in last year and I am an idiot. They are basically idiot proof. I don’t know what took me so long, but once I learned some basic items I was set. In fact, my wife says I spend more time on my phone than she does. That isn’t true, but whatever.
Money is the SAME thing. You need to learn some basic vocabulary. What is a mutual fund? What is return on investment? What is an IRA? Mortgage? etc? Getting some of those basics down makes you much more literate and ahead of your peers.
Second, READ, READ, READ!
I am fortunate that this blog has helped me gain a little gravitas with friends and family regarding financial issues. Over the holiday break my father-in-law asked me to take a look at some things regarding finances. It wasn’t big or anything, but it made me feel really good. My father-in-law was asking me for advice. Part of that comes from this blog. I have always been interested in finance and learning new things, but my financial intellect has jumped 10 fold over the past 5 years from reading personal finance blogs and books. I know so much more today than I ever have before.
I am an academic. That means I like to do research. It is one of my favorite things to do. So in order to put out a personal finance blog I needed to read a lot. And read I did and I still do. I consume a lot of financial information.
One of the ways to learn about this money language is to READ! You don’t have to read whole books on the subject, but there are all kinds of personal finance websites that offer great information. For example, Investopedia is a GREAT resource for someone who wants to learn and define basic financial topics. In order to learn this money language you have to do some reading. It doesn’t have to be novels, but probably light bathroom reading wouldn’t hurt.
Third, converse with others.
You can have all the knowledge in the world, but if you don’t talk with other people and apply what you know than it is all for not.
I have a Spanish degree and at one time I actually translated for migrant farmworkers in my home state. I loved that job. It was great because I really got to improve my Spanish skills. However, I work in an environment where I don’t use it a lot today. Thus, my Spanish abilities are way less than fluent. It would take my awhile to get back to where I was. And the reason for that is because I haven’t applied what I knew. I haven’t spoken Spanish with regularity in years. I haven’t conversed with others.
The money language is the same thing. If you don’t apply your new knowledge, talk with others, then your new vocabulary skills might actually atrophy. You should try to apply what you have learned through others. And that could be simply opening a new account somewhere and having someone walk you through the process or talking with friends. You must apply what you have learned and the best way to do that with a language is to converse with others.
Finally, model what others do.
One of the ways we learn is by modeling and rehearsing. In other words, if we are trying to learn something new we might model ourselves after someone we admire or someone who gets great results. I think the same can be said for learning the money language.
Model yourself after others. What are some of the practices of people that you know who are successful with money? What do they do?
Ask them? Share a conversation with them. Learn from them.
And then model their behavior/practices.
Now you might be asking what kind of behavior should I model?
Well, I can’t answer that for you. Because that is, in some respects, a values question.
Do you want to save 50% of your income like some financial bloggers? Then I would read how they go about doing so?
Do you want to get the best bargains on vacations? Then find people who are doing that?
What do you want to do with your money? What stage are you in with your money?
The answers to some of those questions then can give you the answers to who’s behavior you may model or may talk with in learning a new language.
For example, I plan on writing a post or two about travel hacking. I am fascinated by it and the folks over at ChooseFI have a couple of FANTASTIC podcasts on it. I want to learn more. I am not sure I will do it, but I have a ton of questions because I love to travel and would love to do more.
I will be modeling what folks in the travel hacking space are doing that is specifically right for me.
And that is a key you don’t have to do every single thing they say, but adapt it to what your goals are.
The Bottom Line:
I am sure there are other important steps to learning a new language, but the world of finance is like learning a new language. Most of us can be confused by it. Most of us don’t want to pay attention to it so we bury our heads in the sand or don’t deal with it. But it is too important topic to avoid. So maybe we have to approach it like learning a new language. Start with the basics, read more, converse with others, and apply our knowledge, and model positive behaviors from others to at least get us started.
What do you think? How comfortable are you with the money language? Do you help others? What more can you learn?