As I’ve mentioned in a prior post, one of the biggest failures of the education system is the complete inadequacy of preparing youngsters on how to manage money effectively. I came through the UK education system, where personal finance wasn’t a mandatory subject, nor was it even bloody optional for those that wanted to pursue it. The closest you could get to learning anything regarding how to manage money was an optional business or economics course, which most didn’t pursue and doesn’t really scratch the surface of personal finance anyway. But at least it drills home the importance of how to manage money effectively.
If learning about personal finances isn’t even an option during education, most people never actually appreciate the importance of it, how it can affect their life in dramatic ways and the significance of starting early when it comes to getting your finances in order. Young adults are hurled out of education into the real world, with the ability to take on insane amounts of debt at the drop of a hat, without actually realizing the drastic implications this could have on them long-term.
If you’re lucky, you might realize some of the important concepts of how to manage money early on through common sense thinking like “debt is bad”, “saving for home ownership is good” and so on. Even then, these are typically very narrow-minded views, as often debt is good and buying a house is a terrible idea.
So where do people actually learn how to manage money if it isn’t through the education system? I think I’ve got a few ideas, and I firmly believe this is the primary reason topics like financial independence are never at the forefront of the majority of society’s mind.
Their “Successful” Parents
Parents obviously influence our lives in innumerable ways, and personal finance is right up there with the rest of them. Now that’s not to say you will definitely end up like your parents. The three generations of wealth concept actually argues that children of wealthy parents are quite likely to spend all their inheritance on useless junk because they’ve grown up thinking money is easy come, easy go. There’s also an argument to be had for children of lower class families striving to “better” their parent’s situation, and work hard to build a wealthier life for themselves.
But let’s look at the average middle-class family, not the wealthy or the poor. What do children see in this family in regards to personal finances? They usually see their parents working until their mid-60’s before they retire, owning their own home, usually a few cars and generally living the typical middle-class life. They don’t actually get involved in any financial decision-making, and their parents don’t usually teach them how to manage money as it’s often a taboo subject. All they have to go on is what they physically see themselves.
This is why the vast majority of people end up essentially copying their parents, and then their children do the same, and their grandchildren, and so on. It’s a never ending cycle because they see and are taught no other way of doing things.
Their Judgmental/Drone Friends
Because of the above, friends are essentially mindless drones who copy their parents too. When people see all their friends buying houses, owning cars, going on vacations, not saving much money and being satisfied working until their 60’s, people generally think this is the way it’s meant to be, and in fact, this is the ultimate measure of success. Without this, you are a bloody failure, society tells you!
Friends can be judgmental, and people are generally fairly self-conscious about how they fit in socially. If you don’t aspire to own a home, you’re losing the battle. If you don’t have nice cars, you must be poor. If you don’t go on three international vacations every year, you’re missing out. If you don’t eat out at nice restaurants every week, you have a feeble palate.
So yes, your friends might be great people with sparkling personalities, but know they are most likely inadvertently (or blatantly) encouraging you to follow the “norm”.
Their Significant Others
Again, this comes down to society as a whole dictating what is considered successful and what isn’t. Since your significant other has been raised in a dronelike world as described above, they are highly likely already on the bandwagon of locking themselves into a life of getting shafted until their 60’s. Even if you have somehow managed to learn this isn’t the only way, and financial independence at a significantly earlier age is possible, convincing your significant other of this can be quite the battle.
I’ll probably cover articles on the fine art of this later, perhaps with a few guest posts from Mrs. Miser, as it can be a fairly long and intensive process to drill societal expectations out of somebody. Luckily, financial independence makes a shit ton of sense when you learn about it, so you will have plenty of strong points to back you up.
The Bloody Bank/Financial Advisors
Many people realize they don’t have much nous when it comes to managing their money, so they turn to people they think are well-versed on the subject. They might go to their bank, or even find an independent financial advisor to help them manage their money. What they likely don’t know is that a financial advisor* often has absolutely no personal finance certification, and are in fact just a salesperson aiming to get their unsuspecting victim to invest in their shitty products they are selling at a commission. They don’t give two shits about you or your money and are probably the worst money grabbing vultures you can ask to help you!
Pro tip: Do not touch a bank or financial advisor other than to open a checking account, a mortgage, a HELOC or a credit card that offers excellent rewards. Never, ever get persuaded into anything they’re offering. Make your own, informed decisions.
The Internet/Independent Research
Congratulations! You’ve made a damned good choice if you opted for this. Independent research can often be time-consuming and usually mind-numbingly boring. Personal finance is hardly a trip to Disneyland but it is important you learn independently how to manage your money and to make your own choices. This is why blogs like Money Miser are around, and many of them are extremely successful at making topics like finance not only interesting but palatable to read.
If you’re lucky, you will have undertaken this endeavor early in life and have a lifelong appreciation for money. If you’re not so lucky, you might already be somewhat set in your ways. The good thing is you’re here now and it’s better late than never. Just by reading this blog and any other finance blogs, you’re likely a hundred times more informed than the average Joe who has learned about finances from any of the above methods.
There’s a part of me that thinks society doesn’t want people to change their mindset when it comes to finances. Most societies are based on the same concept. Learn until you’re an adult, get a job, pay taxes, buy things like houses and cars so other people have a job and also pay taxes, rinse and repeat until you’re about 65, receive government pensions, die. I somewhat wonder what would happen if society suddenly shifted from this conventional path to a more radical one like financial independence.
It’s pretty evident there is a typical pathway most people take in life when it comes to managing their money. If they don’t question the norm and do some independent research, they’re almost guaranteed to end up like the rest of the mindless zombies out there, mired in debt their whole lives and forced to work to their 60’s or longer just to pay for things they don’t actually need.
Where did I learn about personal finances? Well, I think it was a culmination of sorts. To begin with, my upbringing was always fairly frugal. Money was always treated with respect in my household, we did not live lavishly, and as such, I was raised to value it deeply. As a result of this, I’ve always found it difficult to part ways with money, which I consider to be a good thing! Then, I chose to study subjects like business/finance when I went to University, which gives a nice broad respect to the importance of financial decision-making. Finally, once I started working in accounting, I decided it was time to take control of my own finances, where I stumbled across a whole online world of personal finance/FIRE/early retirement blogs, and it just skyrocketed from there. Thankfully, I discovered this world younger than most, for which I am extremely thankful as it has put me in a position to hopefully retire decades before most.
* In Canada, a financial advisor has no fiduciary responsibility to act in their customer’s best interest. Essentially, they can sell you shit without having any responsibility as to whether it’s a terrible idea or not. A financial adviser, on the other hand, is an accredited title and does have a fiduciary responsibility to act in their customers best interest. Unfortunately, the vast majority of these people are advisors and don’t give a flying fig about your money.