Financial Literacy

It has become clear over the past 18 months, if not over the past 30 years that we are becoming less financially literate as time goes on. I say this not to provoke anyone, it is a fact...a sad fact. The truth is that many people believe they are fully financially literate and there in lies the problem.

There are so many aspects of wealth and financial literacy, it is tough to be competent in all areas, but that shouldn't stop us from pushing ahead and learning more. There are many places that we can get an education with regards to financial literacy, that it is almost overwhelming just trying to find the right place.

We can always go to a broker or a licensed agent, but then we might be wondering what the motivation is to give us information. It is always curious that in most cases the advice that we receive leads us right into a product line that suits our "needs." Don't get me wrong, I know we are all trying to make a living out there, but when the only advice we receive, leads us into a product line of the person delivering the pitch, you have to feel compelled to at least get a second opinion.

Then there are the industries that don't even require the marketers, or sales reps to have any sort of licensing requirements. In this case, I am speaking of loan officers. There are many loan officers that are experts out there...you know who you are. But for every expert, there are a dozen or more that don't truly understand how money works and furthermore, how to build wealth. Part of the problem is that good loan officers know how to get a loan through and that is what people come to them for. The mistake most people make is to start asking for financial advice from someone who knows how to get a loan processed. This is not a good approach.

The psychology behind it is certainly solid. Consider that an individual has to go to a loan officer to get a loan and they end up telling their entire financial story as well as many personal details of their life to the loan officer. These become psychological tethering lines to the relationship. Why wouldn't the person ask for financial advice after building a relationship like that? Also, who wants to give all those details again to someone else who would either charge for the advice or try to sell a different financial product?

When you look at the mortgage industry from that perspective, it is easy to see how some people go down the path of bad advice. To be fair, I don't think any loan officers wake up in the morning and say to themselves "I am going to give some bad financial advice today," unfortunately, that is exactly what ends up happening. The path to hell is paved with good intentions, as they say.

But the problem is much bigger than that. There are many people who never even get to the point of home ownership and never learn or even understand what it means to build equity. This is also one of those sad facts. It is sad for many reasons, but the biggest reason in my mind is that this ignorance is handed down from generation to generation. The mindset of these people is supported, encouraged and imprinted into their psyche until the thought of building wealth is never even considered.

Most people have more insurance on their vehicle than they have on their lives. Let's face it, protection is as much a part of building wealth as making money. If I had to guess, I would have to generalize and say that many people consider insurance an unnecessary expense. On the other hand, the wealthy consider it part of their estate and wealth plan.

All I am saying is that there are principles like protection, taxes, assets and liabilities to name a few that many people, too many people, know little to nothing about. I still have a lifetime of learning and I learn something new everyday and I am in this industry. If we commit to making our financial education a lifelong endeavor it doesn't seem so overwhelming. Find an area that you can use some more information on and begin your education. Don't trust one source either, get your information from different sources and don't be afraid to ask clarifying questions. The right adviser will be patient and understanding. Impatience is a sign of ignorance and you should be wary of anyone who handles your questions with impatience.

In all that you do as a real estate professional or investor, encourage and support financial literacy at every opportunity; it's good for everyone.

Thanks and have a great day

Robert D. Cass