And as some of you jump up and start shouting “Wrong!! Zuckerberg and Gates got rich dropping out of college and by following their dreams”. Simmer down; I’m not talking about a college degree. No, not saying it’s bad as it certainly served me well but of all things a college degree can get you, financial freedom is probably at the bottom of the list. The current price of a college degree and crippling loans associated have that effect.
What I’m talking about is education of yourself about yourself, education about your own behavior and specifically education about your own financial habits.
Like most of us, you go through life doing the things you do and you don’t stand still at what it is you are doing exactly. To elaborate a little about myself first:
By trade I am a Software Architect designing and deploying Business Rules Management Systems (BRMS) (computer programs for the novice). What are those? Well Business Rules Management Systems allow companies to have their business experts capture and execute their vast repository of expertize as part of software processes. Think of GEICO determining to accept your insurance application in 15 minutes or less (that is done by a BRMS). Think of how the IRS goes through millions of 1040s in search of Fraud, that is done by a BRMS. All this knowledge was extracted from business experts and translated into business rules to be subsequently executed by software programs.
In the early days, part of my job was to talk to other business experts and figure out how they conduct their business. That particular role in the job was also known as a knowledge engineer. Knowledge engineering is a bit of an art and without it projects were bound to fail. Why you ask? Why could these business experts not simply write down how they conduct their business and let the programmers take it from there? Well, business experts, as good as they are at what they do often don’t realize how they conduct their own business. Their job has become second nature to them and as a result they barely think about how they do it. They just do it. It has almost become like a muscle reflex to them. Even though they do the things they do, day in, day out they have almost become oblivious to it. That’s just how the brain works.
The example we were given as junior knowledge engineers and one that probably relates closer to you was the following question:
Q: when you drive your car and you have to turn right, what do you do?
A: Well durr, you turn your steering wheel to the right.
Q: Okay sure, but how far do you turn your steering wheel?
A: Oh like uhhh,wait a minute uhhh, hmm not sure…..
And this brings us back to you: We’ve all taken that car around the corner plenty of times, we all know where to steer the wheel but we don’t think about how much we need to pull it. We simply do it, without giving is a second thought (actually not even a first thought).
That exactly how many of us treat our financial lives. We may know kind of how much we spend but do we really? If I ask you how much your house costs every year you may jump to answer and say “I know that one, we pay $1400 in mortgage every month”.
How about the property taxes you pay? How about the home insurance you pay twice a year? How about the maintenance you perform? Did you think about those?
If I ask you how at what interest rate your mortgage was refinanced I’m sure you can answer that: “I know that one, that was $260,000 at 3.9%”. We all take pride in how low we refinanced. If I ask you how much interest you pay in dollars every month, can you answer me that one? Or for that matter, over the life of the loan do you know how much you pay in interest? Would it shock you to know that repaying a $260,000 loan over 30 years at 3.9% will actually run you over $440,000?
This is the kind of education I am referring to. In order for you to take control of your financial destiny, in order for you to turn your financial goals into reality, you need to educate yourself on your own behavior, specifically your own financial behavior.
How much do you spend on groceries every month? How much should I be spending every month? Is there someone who can tell me what I ought to be spending as a family of 4 (I can point you in the right direction in my post on Gwyneth Paltrow and your groceries )
How much have I been spending on everything for any given year? Is that what I should be spending and can I control it? (I might be able to help you there with my post on Creating and maintaining a real budget )
How do I start saving money to I can pay myself first? How and why should I be paying myself first? This blog has several posts on how to save money. My book has even more. I even have an article on paying yourself first. I have some thoughts on that in my post on paying your self first
By now you may think I’m a know-at-all that has all the answers. Well I’m not and I don’t, but I certainly have educated myself over the last 17 years. My plan to turn my goal of becoming a millionaire into reality forced me to educate myself on our habits and behaviors. Some lessons were learned up front and some where learned after the fact.
This also brings me to the root of this blog and my book. I write about the things I’ve learned over the last 17 years. Things I’ve educated myself on, on our path (a successful path I may add) to becoming millionaires.
When I write about Gwyneth Paltrow and the USDA it’s because we used the USDA food plans as a guide for our shopping budget. When I write about how we saved $4000 by getting memberships, I write exactly about that. Not how you can save $4000 but how we saved $4000 and how you might too. If I write about depression and money it’s because I went through depression for a large portion of the years it took to complete out plan. When I write about how KISS applied to my investments, it’s because I educated myself on my investments and how they may have looked different had I followed a different strategy.
All the articles I’ve written up to date are part of my education, on my behavior and specifically my financial behavior.
In order for you to reach your financial goals you will need to educate yourself on your behavior. Feel free to use this blog to learn some lessons I learned along the way but in the end this will be your plan and your education.
Good luck reaching your financial goals.