Is it possible you are too embarrassed to ask about financial matters you think you should know?
After talking with a very bright and successful neighbor earlier this week about how bonds work and their inherent risk, I was reminded that most bright people don’t know nearly as much about finances as one might assume. In this person’s case, he was wise to have delegated most of that responsibility to his financial advisor rather than trying to become an expert himself. This is an admirable decision.
I’m still curious why adults don’t ask more questions about the financial instruments that are such an impactful part of their life. My best guess is either a fear of some embarrassment, a lack of comfort in asking those types of questions or not knowing someone they can go to for answers. Being timid to ask is not surprising as it happens from the time we are kids when we didn’t raise our hands to ask our teacher to define or explain something we should understand, but do not.
As adults, I have found this trait seems to be deeply ingrained in people. Is ignorance really bliss when it comes to finances?
Believe it or not, your neighbors (maybe you too) are likely to have a pretty low money I.Q. You are not alone!
Could you succinctly describe:
• the specific differences between a stock and a bond and what causes their prices to go up or down?
• how your retirement income plan will hold up if your investment portfolio drops significantly in value?
• what ETF’s are all about?
• the difference between an IRA and a Roth IRA?
• what a health savings account is all about?
• how whole life insurance compares to other forms of permanent insurance?
For most people, the answer to most of these questions is “no”. Since you are not a Certified Financial Planner(CFP®), I wouldn’t expect you to know all these answers, unless you are going it alone. What I have found is that many well-educated people are completely in the dark when it comes to finances and have decided that ignorance is bliss as they go it alone, rather than engage professional help and dare to bring their true financial situation to light. THIS IS SHOCKING TO ME. Just like when you shied away from raising your hand in middle school to ask a question, you may be embarrassed to ask or seek help, don’t be. The consequences of not doing prudent planning are far too great.
Do you think you don’t have enough money to engage with a CFP?
That’s not likely to be true. Many planners do not have asset minimums and would be happy to work with you. Could you imagine a doctor pre-qualifying you based on your net worth before wanting to treat you? I want to help anybody that seeks help and will work out the financial arrangements to make them a win/win. Link to Planning Site
I’ve also recently started working with my client’s twenty something year old children and found that to be very rewarding. For those of you that do engage with a CFP® for your planning and investment guidance, I commend you and encourage you to seek understanding of your plan and its components. Take ownership of your future by defining your life goals and prioritizing them. Armed with that information a good CFP® will be able to guide you toward financially related success.
How would you describe yourself?
Work with a CFP® to quantify your planning and portfolio – all good
Scared to know the truth about my financial situation
Don’t know a professional I can trust
Ignorance is bliss
I do my own planning and have the time, temperament and talent to confidently go it alone
In summary, financial ignorance is not bliss and those that are doing it themselves either need to educate themselves or engage with a professional to help them. Those that partner with a CFP®, stay on top of your planning and work closely to continually monitor your plan. In either case,
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