Do You Have to Be Financially Inept to Go Broke?

recordnumbersgoingbroke 425x250 Do You Have to Be Financially Inept to Go Broke?

Why do I keep reading, especially during financial literacy month,  statements like this from respected journalist and personal finance experts all across the blogosphere; the next generation is growing up as financially inept as the last.

Does anyone really believe that every person over the last 2 decades of this “so called” financial literacy movement that have “crashed and burned” like I did were financially inept? Do you really think no Doctors or Lawyers, or Educators or PhD’s have filed for bankruptcy or had their homes foreclosed on over the last 2 decades?  Of course they have! And many were financially literate by any benchmark set by the financial literacy movement – and I know this first-hand!  Yet it still didn’t prevent them from going broke!

Let’s Start With the Name

The term “financial literacy’ in itself sucks and suggests that you become literate/educated in finances. So let me see if I understand this correctly; people financially “crash and burn” only because they don’t have or show any skill with finances?  I don’t think so!

They fail because what the financial literacy movement has been teaching over the last two decades is mechanics; the basics of economics and finances or what I call “financial functionality”.

Here’s What’s Missing

The argument is far deeper than anyone is writing about in the blogosphere, but a good start would be to give the behavioral component as much importance as the mechanical when it comes to teaching truly comprehensive financial life building skills – not financial literacy.

We should be teaching our kids to bullet-proof their mind from the psychology of consumerism from the moment they can say “I want”.

We should be teaching them that everything they do in life, not just finances, comes down to learning critical decision making skills; that by asking questions and learning to “pause and reflect”, decisions to consume are made deliberately and with purpose!

We should be teaching them conscious frugality so the only luxury they are chasing when they graduate school is “choice”!

What do you have to say?  Speak up and be heard by leaving a comment below!



Comments

  1. Good point! It’s like saying that the fact that we still have a lot of young people who choose to take up smoking is an educational failure–that they just must not know better. But the truth is that, like many bad habits, poor money management doesn’t happen because people don’t know any better but because they don’t want to know any better, at least at the point while they’re still making the poor decisions.

  2. This is very true about money management Jenny and thanks for the comment. My point in writing the article was that too many are blaming poor money management, or financial ineptitude, for going broke as thought that’s the only reason it happens.

    What many people who go broke, regardless of income, education, or financial literacy aptitude fail at, is managing consumption. I speak with experience! The need to live an acquisitive lifestyle with no purpose will lead many to financial ruin and it does not discriminate.

    This blog and it’s content is meant to help those people who have gone down that path or are at the brink to say – Never Again! Learning this takes cognitive behavioral education and if we start teaching our kids at an early age how to fight the psychology of consumerism, then they can say – Never Ever! :)

  3. I love the fact that so many financial experts point to literacy as the primary problem. The fact is that the system is broken for most folks. Unless you have already accumulated a great deal of wealth, you will be faced with a barrage of salespeople masquerading as ‘advisors’. These people have minimal training, an immature understanding of personal finance, and are compensated in ways that are rarely aligned with the interests of their customers.

    Taking a step beyond that, many who are relatively well off (either by way of income or assets) falsely believe that those who go broke are solely to blame. More often, it’s the result of a systematic failure in our economic system or a circumstantial meltdown of one sort or another. Nice post. I’ll be sharing soon.

    • Thank you for the excellent and in-depth comment Michael. It sounds like you have seen this first hand and I appreciate you sharing it with our readers.

      One thing is for sure; there’s plenty of work to do if this movement is to truly be effective, which right now it is not.

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