Managing money is an essential life skill, yet most US adults fail financial literacy tests. Consider the results of a survey aimed at measuring financial literacy called the TIAA Institute-GFLEC Personal Finance Index. On average, a U.S. adult will answer only 50% of her financial literacy questions correctly in 2022.
In other words, you’re not alone in your money worries. But the puzzling reason may have more to do with how the brain works than with money. Understanding some of the common barriers and strategies for dealing with them can help you finally get your finances in order.
money is the new language
If you know a little Spanish, you can’t expect to maintain fluent conversations in Madrid or Mexico City. Similarly, personal finance is full of terms, jargon, and concepts that take time to master.
“Stepping into the world of money is like entering a whole new culture and learning a new language,” says Ed Coambs, a certified financial planner and couples therapist in Charlotte, North Carolina.
You shouldn’t feel stupid if you can’t understand everything immediately. However, learning can be more difficult when you encounter people who are critical, condescending, or dogmatic. Unfortunately, it describes many people who are proficient in the jargon of personal finance.
“Many money professionals, professional or not, can be authoritarian to varying degrees.” Yes, I know what’s best for you. Here’s what you should do That’s it,” says Coambs.
People who take a rigid approach to personal finance may not understand the culture and life experiences that shaped you. For example, you might claim to put all your money into paying off debt or saving for retirement, but it’s important to tithe your church or help your aging parents. You may feel.
Rather than dictate how money should be spent, helpful advisors help people learn, says Rachel Deleon, interim director of the Association for Financial Counseling and Planning Education, a nonprofit foundation that administers financial counseling qualifications. He said he would meet him where he was.
“It’s about understanding. What are your values? What’s important to you? And how do you make it work within your own financial situation?” says Deleon.
money is emotional
For many people, money is a strong and often negative emotion. For example, if you have trouble managing your money, you may try to avoid talking about it or even thinking about it because it’s embarrassing.
“That’s what really keeps people from making money,” says Coambs. “They are ashamed of what they don’t know and feel they should know.”
Coambs, author of “The Healthy Love & Money Way: How the Four Attachment Styles Impact Your Financial Well-Being,” says that early painful experiences often shape how we view money. Hearing your parents fight over money or struggle financially can be traumatic.
Coambs suggests discussing your feelings about money with supportive and caring people. This could include an empathetic financial advisor, a financial therapist, or a trusted and knowledgeable friend.
“Behavior is premised on feeling safe for many of us,” says Coambs. “Until we feel safe and accepted, we often feel stuck and stuck.”
money is cooperative
Fear is another common emotion people experience with money. Fear of making a mistake, not having enough money, being deceived or deceived.
“There are so many predators in this space that it’s hard to know who to trust,” says DeLeon.
Educating yourself is very important. DeLeon says you can learn the basics of personal finance from trusted sources such as the Consumer Financial Protection Bureau and her JumpStart Coalition, which focuses on youth financial literacy.
But you can also hire people to help you. DeLeon recommends commission-only advisors. This means that Advisors are only compensated by fees paid by their clients and not by fees or other financial arrangements that may affect their advice.
Find an advisor who is a fiduciary. That means they have to put your interests ahead of their own. Fiduciary advisors include CFPs and others with qualifications offered by DeLeon’s organization, her AFCPE, such as certified financial counselors and financial fitness coaches.
AFCPE is now offering free virtual financial counseling sessions. For more information, please visit the AFCPE site. Additionally, your employer, 401(k) provider, bank or credit union may also offer free or low-cost financial advice.
When it comes to money, knowing who to ask is more important than knowing all the answers yourself, Deleon says.
“Everyone doesn’t have to be a personal finance expert,” Deleon says.
This column was provided to The Associated Press by personal finance website NerdWallet. Liz Weston is a Certified Financial Her Planner and author of “Your Credit Score” She is a columnist for NerdWallet. Email: lwestonnerdwallet.com. Twitter: Liz Weston.