"If you want to hit me with logic I don't want to chit chat."
"The more you explain it, the more I don't understand it."
I'm in my grandmother's kitchen stuffing my face with dumpling soup. It's the mid 1990s and I ride my bike everywhere and am gone for hours. My grandmother knows I love her dumplings and makes it sometimes to get me to come over and visit.
While I'm eating she tells to slow down and maybe not eat so much. She doesn't want me to gain weight. I ask how I could get fat and she tells me that food has calories and I don't want too many calories. I ask how many calories are in the soup and she doesn't know exactly. It's all a mystery to me.
Fast forward several years and I learn about food labels on the side of packages. These labels not only tell me how many calories are in the food, but also the breakdown of those calories into fat, carbohydrates, and protein. I also get to learn how much sodium, calcium, and cholesterol is in the food.
Now I'm an adult and, unfortunately for my waste-line, all this perfect information has not changed how much or what I eat. It seems information isn't enough.
The same is true with your money.
Myth: More Information Is Needed
There is a common belief that if we want to make smarter decisions with our money, we need more information. Many of us think that money issues are there because we don't know what to do.
I overspend because I don't have enough information about budgeting
I don't save enough because I don't have enough information about savings options
I lost a lot of money in the last bear market because I didn't have enough information about investing
I fight about money because my spouse doesn't have enough information about how money works
The myth lies in the differentiation between exterior and interior finance. All the information, or exterior financial knowledge in the world isn't going to do any good if we are unable or unwilling to implement it.
Too Much Info Can Be Bad
One of the biggest issues with information is that we can very quickly get too much information. As the amount of information increases, the complexity of the decision often increases. While the nuances of the complexity may be important to some people, it's not helpful for most of us. In fact, it often leads to a crippling effect, sometimes called analysis paralysis or choice paralysis. This happens when the potential outcomes keep us second guessing ourselves to the point that we just do nothing.
Information Is Necessary...
Now, just because information is not enough doesn't mean information is not necessary. We do actually need to know how financial products and services work and how that relates to our personal economy.
There is a problem with financial literacy. We aren't taught the basics of personal finance in school, so the onus for learning about money comes from our upbringing. The issues with that, of course, is that our parents didn't get a good personal finance education, either, so we're only learning partial truths, if anything at all.
With all the confusion out there related to finance, just a little bit of financial education can lead to much better decisions.
...But Not Sufficient
In order for the financial knowledge that we've gained to make any difference in our lives, we have to be able to implement it. That means we need to have the motivation and ability to make change. Further, if we have destructive beliefs and unhealthy behaviors around money, those beliefs and behaviors threaten our ability to implement the changes we want to make.
Once we have a solid foundation upon which that information can sit, we can then start to gain the information we need.
Just like knowing about how many calories and how much fat is in my food isn't enough to get me to change my diet, more knowledge about finance will only help if you have the ability and willingness to do something different.
And if you still think information is enough, find someone with opposite political views and try to change their mind with logic, facts, and information. I'll wait.
You only have one life - live intentionally.
Dan Ariely, Jeff Kreisler: Dollars and Sense
Brad Klontz, Ted Klontz: Mind Over Money
Sarah Newcomb: Loaded
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