When I started learning about personal finance, I felt accomplished opening my no fee chequing account and first credit card. I was a student then. I graduated, got my first apartment, then bought a house. We’re familiar with all those things growing up, if only indirectly. It’s exciting opening a bank account — to deposit your first pay check. You want to build up your credit score — credit card is an excellent starting point (let’s assume happy path and you don’t carry a balance). Purchasing your first house is the next logical step in society — we’re familiar with mortgages. Sure there’s a lot more to it. But those first steps aren’t scary. We’ve understood the concept, if at a high level since childhood and they’re attached to exciting things in our lives.
Memories of my first foray into finances, beyond the few exciting events, is generally associated with stress and anxiety. Stressed about filing taxes incorrectly. Anxiety I’ll owe more than anticipated. What about you? Most of us have had no exposure. Most adults in our lives don’t understand it, or don’t talk about it and it’s not taught in schools. So it feels like you’re walking through a fog. You can’t see where you’re going. If you’re about to trip on something. Sound travels differently and can be distorted…
What Area’s Of Personal Finance Are Scary?
There’s a ton of areas in personal finance that we could understand better. Credit Cards. Loans. Mortgages. Purposefully spending money. Effects of emotional triggers on finances. I feel like taxes aside, investment and retirement is one of the scariest topics in personal finance.
Even those that grew up in fiscally responsible households often have a blind spot here. Sure some of that is choice, but it had me wondering
“If you grow up with parents that set themselves up in a comfortable retirement, why is it still so confusing, scary and filled with people that miss the mark?”
There can be many reasons. But let’s take out personality, circumstances didn’t lend themselves to allowing this, etc. out of the equation
Maybe the landscape of how you save for retirement has changed?
Most of the previous generation didn’t spend their time becoming gurus at investing… It used to be that you’d graduate, then find a job where you most likely worked all your life and retire on a healthy pension. Sure not everyone was so lucky, but it was often the most likely scenario for comfortable retirees.
That’s a stark contrast for most today.
You don’t work at a single company all your life. Retiring on a company pension is a rarity. Old age security, or whatever other government retirement fund is in most cases insufficient.
So we need to re-define what security and stability means to us. And learn new skills to go along with that. Skills that perhaps the previous generation didn’t need to have. So if these new investment skills are key to financial stability and a comfortable retirement, why is it so scary that we avoid it?
It’s Not Related To An Exciting Goal
In the beginning of the article, I mentioned a few personal finance skills everyone is eager to achieve and master. For example, opening a chequing account or getting your first mortgage if that’s your thing. Money is a means to an end. We’re motivated and excited to learn knowledge and skills for something we want. Especially if the goal is within reach in the next 2 – 5 years.
Retirement on the other hand, is a whole other beast. If we’re talking FI, then there is more motivation to learn now. Even if it’s a decade or so away, there’s an immediacy to the goal of not having to work in the much nearer future. Even though more and more people are become aware of this option, most won’t pursue it. And it’s not necessarily because they don’t think it’s possible. They’re simply not interested in it for a variety of reasons. So retirement, or coming to a point where you need to financially sustain yourself without a pay check, is a long way off. Like 20, 30, 40 years off.
So not only is retirement not an exciting goal, there’s also no immediacy to it.
Because of this, we push it off. There’s time for that later. And life happens in the meantime. The thing is, it takes some time to build a retirement fund. If you don’t want to be scrambling and stressed about whether you’ll have enough for a comfortable life after you stop working, don’t let this false sense of ‘having lots of time’ catch you off guard. Find a reason for it to be exciting! Even if it’s just watching your balance grow.
Investing Is Boring
What makes anything interesting? An exciting goal, passion, curiosity… If investing isn’t tied to an exciting goal and you have no innate interest, how do you get past this hurdle? For me “I’m an adult and it’s the responsible thing to do” was not enough. It didn’t make investing any more appealing.
There’s no quick way around it initially if this applies to you. What I can say, is that once I started scratching the surface, I found sparks of interest in it. And slowly, like a fire, if you don’t choke it out, it grows. Not everything immediately catches your interest. But that doesn’t mean there isn’t something there for you. It might become the math behind figuring out your retirement number, learning what to invest in, magic of watching compound interest at work, the sheer satisfaction of learning something new, or any other number of things. Either way, once you start looking into it, the fog lifts a little, and you’ll find that magic to keep you going. Even if it’s to facilitate finding an investment advisor you trust and have confidence in your approach.
You Don’t Know Where To Start
Remember that picture way back at the beginning of the article? When you have no context or experience with investing, not only can it seem scary, unexciting as a long term goal, and boring, you also have no idea where to start. Ok I admit the fog looks lovely in these pictures, and investing is creepy foggy, but hang in there. There’s a reason I chose these pretty pictures!
Figuring out where to start can feel defeating and is the hardest place to be. Though it’s changing a little, the industry doesn’t make it easy for a self starter. They much rather have you feel that this is beyond you and you need professional help. There are two things on your side here, compared to previous generations: resources available on the internet and ability to connect and share. Here are a few tips:
- Google is your best friend. (Sounds obvious I know). Start playing around with some search terms until something sticks and you start feeling grounded. Some key words: equity vs bond, risk tolerance and asset allocation.
- Pace yourself. A foundation is built one brick at a time. Try to jam too much stuff in your brain at once and you’ll get discouraged and overwhelmed.
- Know that understanding one thing will build your confidence and make tackling another term easier.
- Everyone has started at zero. We’ve all known nothing and have been confused with the same things.
And Before You Know It…
What seemed scary and incomprehensible slowly emerges into a tantalizing scene.
The fog lifts a little to reveal scenery that draws you forward. Before you know, you’re looking out at a beautiful surrounding…. err… You find investing and retirement planning aren’t so shrouded in a thick fog. You figure out how to get started, learn a few things, gain some confidence, find an aspect that sparks your interest and before you know it, have a goal. It may be exciting or maybe it’s a pragmatic goal but you get satisfaction out of knowing you’re setting up your future self for a comfortable life. And that doesn’t sound so bad right?