I once heard Dave Ramsey say that when it comes to getting out of debt and staying out of debt, it is 20% knowledge and 80% behavior. Just look at anyone who’s ever said “I know I shouldn’t (insert bad financial habit here) but I just can’t help it!” Anyone can learn all they want about personal finance and still be in financial trouble if they never apply what they’ve learned to their own life. It’s still important to seek out financial advice, but more important than that is actually putting that advice into action.
There are many reasons while people don’t put into practice the things that they learn. First of all, there are those people who simply don’t want to change their habits. These people usually learn smart financial principles on accident by watching tv or hearing someone talk about it in a conversation. They hardly ever seek information out on the subject because they simply aren’t interested. Unfortunately, there is not much that can be done to help these types of people besides just wishing they would want to help themselves.
Then there are people who seek out the knowledge, but simply can’t figure out how to put what they’ve learned into practice in their own lives. There are certain financial books and TV programs that can seem like they are in another language if you are not familiar with the specific topics they are discussing. But there are some steps that you can take to ensure you have the knowledge and ability to apply the principles you learn.
Make sure you are reading/watching at your level. I’m not talking about your school reading level, I am talking about your current financial level. If you are a beginning investor I would suggest staying away from books that talk about aggressively buying, selling and trading stocks because you are simply not there yet. Keep in mind where you are financially at and aim for books and teaching that is on par with where you are.
How can you do this? First of all, if you find yourself reading a book or watching a speaker who has you totally confused, I would suggest putting the book down or turning off the program because you will likely just end up more confused and possibly even feeling guilty for how “far behind” you are. If you are deep in debt, reading about making money in real estate is not going to help you. We are constantly inundated with too much information as it is and there is no need to add more useless information if it won’t help your current situation.
I would recommend asking people and reading reviews online of certain teachers, authors and books. Obviously there are going to be varied opinions on everything, but you’ll most likely get a consensus about who is easy to understand and follow. I personally like Suze Orman and Dave Ramsey, but that is only my personal opinion because I find their books and teachings easy to follow.
A great resource for books reviews is amazon.com. You can usually search through best sellers (which is a good indication that many people have enjoyed the book) and read the reviews that people have posted on each particular book. People tend to be pretty honest in their reviews so if the book is not easy to follow or practical, they will usually write that.
When reading a book or watching someone teach, be sure to not only jot down notes, but jot down specific steps that you learn that you can do in your own life. You may read some suggestions that you simply can’t do right now (like putting 15% of your current income towards retirement or maxing out your Roth IRA) but when you come across things that you can do immediately, write them down somewhere that you will see again later after you are finished reading the book or watching the teacher. If you do come across a suggestion that you can’t immediately put into practice, take a few minutes to stop and think about possible steps you could take to start the process (like put 1% of your income away towards retirement- or even just opening a retirement account somewhere).
Realize that a small step is better than no step. Sometimes I can be an all or nothing person and I think that if I’m not doing something extremely significant then there’s no point in doing it at all. Unfortunately, this thinking often gets me in trouble as you can’t walk a mile without taking the first step. Even if you are only able to save $5 extra a month, it’s still a step in the right direction.
A third main reason that people don’t follow through on sound financial principles is that they paralyzed by fear or past failures. These are the people that have tried, but haven’t succeeded or have gotten out of debt only to get right back in. They know what they should do but for some reason they are too scared or overwhelmed to do it. This is most often caused by previous mistakes and the fear of making those mistakes again. If this is the case, a plan of attack can be very beneficial.
Take time to recognize mistakes and negative behaviors that you’ve had in the past and try to figure out what caused those mistakes and what you can do in the future to prevent them from happening again. This puts you on the offensive instead of the defensive so you can be ready to deal with and handle whatever would come your way that could trip you up. It’s hard to overcome your past mistakes and habits if you don’t have a plan.
Researching personal finance is a great way to learn what to do and what not to do in your financial life to be successful. However, if your learning never turns to action, you’ve in essence wasted your time because you aren’t producing results from your efforts. And if you continue to seek more knowledge without putting the basics into use, you’ll be full of useless information that won’t help you at all. So when you are reading and listening to others teach about finance, be sure you actually take the steps to do what you are learning.
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