There are times when navigating your financial life may feel easy and straightforward, producing confidence. However, it is inevitable that the times will come to navigate complex financial decisions. Many people find themselves feeling queasy at the prospect of having to make financial decisions that fall outside their comfort zone. That hollow feeling in the stomach comes from three colliding separate but related factors:
I need to deal with this topic. I don’t know enough about all the issues to make an objective decision. I should know this.
The first two statements are true. The third statement, the feeling that you should be an expert when it comes your financial life, is what leads to big mistakes.
I spoke with a CEO the other day who told me he wanted to come in for a meeting. He made sure to tell me, “I’m a very good CEO and leader of my company, but I feel badly that I don’t think I’ve covered all my personal bases.”
My response: “Of course you’re a great CEO, that’s what you do. Just like a physician knows medicine and a mechanic knows machines and programmers know computer programs. Would you expect physicians to know astrophysics? Would you expect a top mechanic to know dentistry? You can stop feeling bad now, it’s not your expertise.”
When it comes to most areas of knowledge (think anything from physics to pest control), most people are content knowing that they are not experts in these fields. If your computer breaks, chances are you are not going to be replacing the motherboard yourself anytime soon.
But somehow, when it comes to money and financial matters, there is a major disconnect of expectations of the knowledge and competencies you should normally possess.
To navigate your financial life and answer all the challenges appropriately, you’d need to have a solid working knowledge in the following areas:
- Budgeting and cash flow management
- Estate planning
- Elder Care planning
- Income Tax planning
- Investment management
- College cost planning
- Retirement planning (social security, Medicare, etc.)
- Risk management (as it pertains to insurance and investments)
- Employee benefits
- Special needs planning
- A solid understanding of how markets work and what influences market movement (beyond the headlines, of course)
There are more areas to assess, but these are the biggies. Now, who still thinks they should be able to do this themselves?
The elephant in the room is the idea of objectivity and your ability to see your situation from a dispassionate point of view. Most people fail because their money mindset, which was created in their youth, shades their perspective by their particular belief system. For example, if you grew up hearing that investing in the stock market is so ultra risky, chances are you will keep your money under the mattress before investing in the equity markets. What you heard or interpreted from your parents about money when you were a child formed the foundation of your money beliefs, behaviors, and habits. If your parents were DIYers, then chances are, you are too; because that’s normal. But that doesn’t make it appropriate or in your best interest.
We cannot be good at everything; it’s silly to even try; and it’s a formula for a life of dissatisfaction. Instead, leave the job of pharmacy to pharmacists, oil drilling to oil drillers, let auto mechanics fix your car, and you focus on what brings your life the greatest level of satisfaction. That is not to say you should not be aware, informed, and possess knowledge about personal financial issues—doing so is vital. When you surround yourself with the best doctors, computer techs, carpenters, or estate planning attorneys, you have confidence that you are getting the best advice and service possible. What is THAT worth?