It’s easy to get intimidated when you’re starting to get knowledgeable about a new field or topic. There’s vocabulary and shorthand to learn, multiple theories and perspectives to digest, and zillions of websites, videos, and articles to take in. Personal finance is no different, and many people understandably find this overwhelming and back away from the information overload. The problem is, unlike learning about French cheeses or Peruvian basket weaving, learning about personal finance isn’t really optional. Sooner or later, you’re going to have to figure out how money works.
But I have great news: you don’t need to be a genius – math or otherwise – to rock at personal finance. Yes, you might be bowled over by all the information that’s out there, at least at first. Especially if you read the investing blogs – those geeks* get really into the numbers. But they do the number crunching and tracking because they like to (they’re geeks**, remember?), not because they have to. And neither do you. In fact, you can rock at personal finance with very, very little knowledge about the subject.
The basics of personal finance are elementary – literally. You only need to possess basic, elementary math and reading skills to understand them. For example:
- Take in more than you’re spending every month (simple subtraction, income minus bills and expenses)
- If you’re taking in less than you’re spending, adjust your spending or take in more (again, simple addition and subtraction)
- Make the gap between your income and obligations as wide as possible, then save or invest the difference (this mostly involves reading about basic savings and retirement accounts – easy). Make sure you do this every month.
And…that’s pretty much it. If you want to get fancy and read all about dollar-cost averaging vs. lump-sum investing and ETFs vs. index funds and Roth vs. traditional IRAs, you certainly can. I mean, hell, I’m a personal finance blogger, so I get a kick out of that kind of stuff. But you don’t have to; all you have to do is figure out how to do a few simple things, then keep doing them over and over again. If you manage to make this happen, you’re going to come out ahead. And the truth is, you’re going to come out way ahead of all the people who tried to get too sophisticated too fast and ended up getting so freaked out by the nitty gritty details of their finances that they gave up and went back to their head-in-the-sand ways.
Dave Ramsey sums it up best when he says that personal finance is “80% behavior, 20% head knowledge.” I probably would have worded it differently (is there another type of knowledge besides “head knowledge”?), but the sentiment is so, so true.
Very few financially successful people are geniuses. You don’t have to be either.
*I’m a total geek, so it’s ok for me to use that word
**I should also mention that investing geeks are the best kind of geeks because they’re, you know, rich. I am not this type of geek. Drat.
