It’s easy to fail at personal finance.
Most people think they’re above average in intelligence, relationship status and professional achievement. Social scientists call this “illusory superiority.” My business partner Scott Puritz, has found the one area where even above-average people, objectively smart, rich, successful professionals, seem to wave the white flag and admit to not understanding — money and investing.
“One of the most shocking things is the low-level financial literacy throughout our culture,” Puritz told the Washington Post. “It’s independent of education. Doctors, MBAs, corporate executives are incredibly competent in everything they do. But when it comes to investing, you run into this cauldron of mostly negative emotions, embarrassment, frustration, guilt. It leads to paralysis.”
Sound like you? If so, don’t worry. You’re not alone. Two-thirds of Americans can’t pass a five-question financial literacy test, according to FINRA, the industry-run regulator that oversees stockbrokers.
And that’s because the fundamentals of finance are boring, and aggressively so. To understand it you need to grasp the interplay of money and time, and that’s just hard for humans to do. Both money and time are abstractions. Figuring out how they relate is a real challenge.