I've helped hundreds of people fix their finances. Here's the worst advice I've seen
Isn’t the internet awesome? All the information on the planet at your fingertips.
I’m just old enough to remember when I had to flick through an actual encyclopedia.
So why is it, even with all this information, most people still feel lost when it comes to their finances? Well, I have a bit of insight into this.
A few years ago, I started a financial education platform to help people take control of their finances. I worked with financial professionals to pull together our flagship Mastering Money program. We’ve now helped hundreds of people save and invest tens of thousands of dollars.
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The problem with the internet is that it doesn’t discriminate between good and bad, fact and fiction. It just has everything. Talk about the perfect recipe for overwhelm and confusion.
So today, I’m tackling some of the not-so-great financial information out there.
‘You just need a budget’
Ahh yes, the go-to solution for everything. Got debt? You need a budget. Can’t save? You need a budget. Can’t afford a house? The problem must be your budget.
The truth is, most people fail at budgeting. So many people have confessed to me that they’ve tried countless budgets and cannot get it to “work”. They feel embarrassed, frustrated, confused.
Seems like a cruel joke, right? You have to have a budget, but you can’t get a budget to work. So, are you doomed to be a financial failure?
We’ve helped hundreds of our students start saving thousands of dollars, and budgeting plays a pretty small part in how we help them achieve that.
A budget is just one tool. It’s a bit like a treadmill. Can a treadmill help you on your fitness journey? Absolutely. Is it the be-all-end-all? No. On its own, a treadmill cannot make you also eat better, sleep well, and all the other things you need to do to transform your health.
In the same way, if you’re ignoring all the other areas of your finances, then a budget on its own is not going to be the magic solution that fixes everything.
This obsession with having the perfect budget can distract from the real, underlying causes of financial mismanagement. For example, if looking at your bank account fills you with dread, you may first need to address your emotional relationship with money.
If you don’t know where your money goes each month, you first need to get visibility on your cash flow and create systems to manage it effectively.
Once you fix other areas of your finances, you may find you don’t even need a budget!
‘Real estate is the best investment’
Have you ever noticed there are successful, multi-millionaire investors in every single kind of investment and they all claim their chosen investment is the best?
And yet, for every successful real-estate investor, there are 10 who bought dud properties. For every happy ETF investor, there are 10 who panicked and sold when the market dropped.
The key ingredient is the investor, not the investment.
Two people can buy the same investment but have a different outcome based on their capability as an investor. Maybe one person reinvests returns, the other doesn’t. Maybe one sells in a down market while the other doesn’t.
Think about it this way: if billionaire investor Warren Buffet said, “you can either have my investment portfolio, or my brain”, could you successfully manage his portfolio without his brain? No? So is the real asset his portfolio or is it his brain and the decades of learning, research and analysis he has accumulated?
An uneducated investor can make a mess of even the best opportunities, whereas an educated investor can find a way to succeed regardless of the investment asset class.
So don’t focus on finding the “best” investment (because it doesn’t exist). Focus on becoming an educated investor, and you will inevitably get better results.
‘You only live once’ (aka YOLO)
You’re only 20 once, so do you spend the money and create memories, thinking you’ll make money later? Or do you save and invest today for a comfortable financial future?
How about both?
Where did we get the idea that you have to choose one over the other? Ahh, I know: YOLO. Just “live for the now”, right?
YOLO creates cycles of ‘feast and famine’. You’re living it up one minute, broke the next. That new car feels great, but then you dread looking at your bank account.
It is actually possible to enjoy today, while building towards a better future. You don’t have to deprive yourself or make big sacrifices, or live a ‘beans-and-toast’ lifestyle.
I’ll give you an example. Many of our students are like Sara, who used to be a ‘spender’ and was fed up with being broke. Once she learned how to save, within 2.5 years, Sara grew her net worth to $80,000, while still going on a holiday to Europe and getting married.
She doesn’t regret trading her YOLO lifestyle for one of financial comfort. Putting a little away for tomorrow hasn’t made her life boring. In fact, now she has more money to live her life.
Living like you only have one life isn’t about maximising today at the cost of tomorrow. It’s about living the fullest life you can, and I don’t see “spending until you’re broke” listed as a prerequisite.
Paridhi Jain is the founder of SkilledSmart, an independent financial education platform helping adults learn to save and invest their money. For more money tips, you can get a free e-book on “5 Money Mistakes Costing You Thousands” via their website, and follow them on instagram.
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