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Managing money is an essential life skill, yet most U.S. adults would fail a financial literacy test. Consider the results of a survey meant to measure financial literacy, called the TIAA Institute-GFLEC Personal Finance Index. On average, U.S. adults correctly answered only 50% of its financial literacy questions in 2022.
In other words: If you find money confusing, you’re far from alone. But the reasons you’re baffled may have more to do with how our brains work than how money does. Understanding some of the common barriers, along with strategies to cope, could help you finally get a handle on your finances.
Money is a new language
You wouldn’t expect to carry on a fluent conversation in Madrid or Mexico City if you only knew a few words of Spanish. Similarly, personal finance is loaded with terms, jargon and concepts that take a while to learn.
“Entering the world of money is like entering a whole new culture and learning a new language,” says Ed Coambs, a certified financial planner and couples therapist in Charlotte, North Carolina.
You shouldn’t feel stupid for not understanding everything instantly, and no one should make you feel that way. However, learning can be more difficult if we encounter judgmental, condescending or dogmatic people — which unfortunately describes many people who are fluent in personal finance lingo.
“Many money experts, professional or non-professional, can become varying degrees of authoritarian: ‘Yes, I know what’s best for you. This is what you should do,’” Coambs says.
People with a rigid approach to personal finance may not understand the culture and life experiences that shaped you. They may insist you funnel every possible dollar into paying off debt or saving for retirement, for instance, but you may feel it’s important to tithe to your church or support your elderly parents.
Rather than dictating how you should spend your money, helpful advisors meet people where they are, says Rachael DeLeon, interim director of the Association for Financial Counseling & Planning Education, a nonprofit foundation that administers financial counseling credentials.
“It’s figuring out: What are your values? What’s important to you? And how do you make that work within your own financial situation?” DeLeon says.
Money is emotional
For many people, money evokes strong and often negative emotions. For example, if you struggle with managing your finances, you may be so embarrassed that you try to avoid talking or even thinking about money.
“That’s what really stops people from making money progress,” Coambs says. “They feel ashamed that they don’t know, and they feel like they should know.”
Painful early experiences often shape our view of money, says Coambs, author of “The Healthy Love & Money Way: How the Four Attachment Styles Impact Your Financial Well-Being.” Listening to parents fight about money or suffering financial hardship can be traumatic, leaving us convinced that money is dangerous or shameful.
Coambs suggests discussing your feelings about money with supportive and compassionate people. That could include an empathetic financial advisor, a financial therapist or trusted, knowledgeable friends.
“Action is predicated on feeling safe for many of us,” Coambs says. “Until we feel safe and accepted, we’re typically going to feel stuck and stalled.”
Money is collaborative
Fear is another common emotion people experience around money: fear of making a mistake, not having enough, or being scammed or misled.
“There are a lot of predators in this space, and knowing who to trust is hard,” DeLeon says.
Educating yourself is crucial. You can learn about personal finance basics from trusted sources, such as the Consumer Financial Protection Bureau or the JumpStart Coalition, which focuses on financial literacy for young people, DeLeon says.
But you also can hire people to help you. DeLeon recommends fee-only advisors, meaning they’re compensated only by the fees paid by their clients rather than by commissions or other financial arrangements that could influence their advice.
Look for advisors who are fiduciaries, which means they are required to put your interests ahead of their own. Fiduciary advisors include CFPs and people with the credentials offered by DeLeon’s organization, the AFCPE, including accredited financial counselors and financial fitness coaches.
Currently, the AFCPE offers free virtual financial counseling sessions. You can learn more at AFCPE’s site. In addition, your employer, 401(k) provider, bank or credit union may also offer free or low-cost financial advice.
With money, it’s more important to know whom to ask than to have all the answers ourselves, DeLeon says.
“Not everybody needs to be a personal finance expert,” DeLeon says.