Not knowing how to manage your money properly – financial ignorance – could be costing you money. This is especially the case when you’re an investor. Here’s how you can put an end to the losses.
Financial ignorance makes great clickbait
Yesterday my husband sent me a link to a news article and it immediately hit a nerve. If you know me a bit, you know that I can be very – let’s call it passionate shall we? – worked up about certain things.
The article was about pension funds and the fact that they’re performing very poorly this year. The heading was very daunting: pension funds barely getting any results, what should you do? Is it worth wile to keep on saving?
Angry
At first I felt angry. My initial reaction was “Why would they do that, why would they bash on the stock market like that?! It’s only going to cause more panic reactions.” But I slept on it and realized that of course they are just answering peoples’ questions and using it as clickbait. It’s what every paper or magazine does.
What did get me is that I hear this question a lot. As someone who works at the customer service of a bank I deal with a lot of distressed people. Everyone’s worried about their money.
The reason for these worries? Financial ignorance. I know that sounds harsh but hear me out: if you don’t possess the proper knowledge about something and shit hits the fan, you panic. That’s only natural.
I am mad about the fact that society decided that our system is money based and that again and again they refuse to educate us about it.
Whose fault is it then?
Don’t get me wrong: I’m not mad at you for not knowing. I am mad about the fact that society decided that our system is money based and that again and again they refuse to educate us about it.
I really struggle to understand why schools still don’t teach financial education. They teach us what to do to find a job and hopefully get that big fat salary. But earning a lot of money does not mean you can automatically handle it well. It’s not a skill you were born with. It’s a skill we all need to learn, such as cooking or getting dressed.
Stop losing money!
First of all: why is financial ignorance costing you money?
Let’s get back to the article. It was about pension funds (like a mutual fund but with tax benefits), fiscal constructs that allow you to save up for your retirement. Fact is that they are not performing well. Why? They depend on the stock market and the stock market in general has not been performing well this year.
Covid, war, inflation… have the economy in the ropes, but ups and downs are normal.
Ask yourself: are you productive all day, every day, your whole life? I don’t think so. And who impacts the economy? Exactly: people. The stock market reflects…us.
Understanding what is happening with the economy will put your mind at ease. It will also prevent rash decisions, like selling your investments at a bottom price out of panic. You see: ignorance will literally cost you money.
What can you do?
Simple: educate yourself. This is important for two reasons:
- Knowledge will protect you from taking emotional decisions that lead to losses, such as selling at a low price out of fear and buying again at a high price. Understanding how the economy works helps to put bad times into perspective.
- The economy and the stock market are driven by people, by us. The more educated decisions we make, the more the economy will benefit.
Conclusion
Is this a good year for the stock market? No. But does that mean you should hold your breath and wait for numbers to go back up again? Also no. This is actually a great time to get started. Prices are down so you could find some serious bargains. Now is the time to sow. You won’t be rich by next year but that is not what investing is about. Think long term and reap the benefits later.
Learn about the stock market and start building wealth today!
