In a recent interview I gave to ThriftCultureNow.com, I was asked to comment on three causes of poor money management in America, and offer some solutions for each issue.
Let me start by backing up to another question that summarized how I feel about American culture in general when it comes to money. From the interview linked to above:
“…it’s sad to see that with so much freedom and choice, Americans have largely chosen over-spending, over-borrowing, under-saving, lack of financial education, and other poor money habits. This has resulted in actually limiting the choices we have because we’re stuck in an eternal rat race with fewer and fewer ways out.”
The ultimate paradox, in my mind, is how we’ve dug ourselves into a hole by insisting that we get a shovel. But that’s a discussion for another day. Here are three reasons I gave for the problems Americans face and the solutions I proposed:
#1: Ignorance and Lack of Direction
Ignorance is such a dirty word, but it just means we don’t know—in this case, I believe we don’t know what we should know. Personal finance is such a wide field that “without a game plan, we’re simply trying to float our heads above water and hope luck comes our way and bails us out.” Without continuously learning more, we’ll just keep doing everything we’ve always done.
My solution proposes basic financial education as a part of life growing up, both at home and at school. Throughout our life, we need to read about and practice good money management, investing, frugality, and more—just like we better ourselves in other areas.
#2: Analysis Paralysis
On another level are those people who understand what they need to do–some understand it very well. The problem is that we can very easily get overwhelmed by it all. There are too many choices, too many things to do, and too many “personalized” routes we can take.
Instead of breaking down all of our financial goals into small, manageable pieces, it’s easier for us to ignore our money (good and bad) entirely, and maintain the status quo. This kind of “analysis paralysis” isn’t a good thing–we need to consistently make choices and be actively involved in our money, for better or worse.
One of the solutions I proposed is that we need to make money management simpler. Goals, guidelines, and paths to success should be easy to understand, straightforward to follow, and most importantly–able to adapt to each of our unique situations without losing the principles that drive it. Presenting these kinds of ideas on a more specific level is one of the core goals of this very blog.
#3: We Love Buying Stuff
We are simply too attached to the pleasure we derive from buying stuff. Sometimes, this is a good thing—it drives us to excel and shoot for more. Other times, it’s a crutch and drives nothing but jealousy and regret.
Since birth, we’ve been taught that the best reward for earning money is spending it:
“I worked hard for this money, and I deserve to buy this.”
This is repeated by dads, moms, bosses, employees, college kids, retirees—it seems no one is immune. No one also considers that the best peace of mind comes from the feeling of having enough—enough to buy, but not having to; enough to cover emergencies, but not having to; enough to enjoy almost any luxury in life because we’ve saved diligently for it.
It’s another interesting paradox—we try to get pleasure and comfort from buying, when the real comfort comes from not.
What would make your list?
Your turn to do a little blogging: suppose you had to name three reasons why we’re doing such a bad job with our finances as a country. What would you say? Share your thoughts in the comments.
Photo by epicharmus