Avoiding Avoidance
I had a conversation with a client a few months ago. We were discussing a mortgage and I told him he would have a problem because of a prepayment penalty. He said “Prepayment penalty?”. So I explained what it was. A few minutes later I told him that his options were limited because of the prepayment penalty. He said “Prepayment penalty, what’s that?”. Bad enough, but that happened a third time in the conversation, enough that I started to worry if the guy had Alzheimer’s.
But then a mini epiphany hit me, and I understood a little better about many people’s relationships to money. It was not that my client couldn’t understand, it’s that he didn’t want to. He’s an intelligent guy, runs his own business. But there are some aspects of finance that his mind just glosses over. And I realized this is true of many people. Not just that they don’t have the education or the interest, but that they actively don’t want to know about it.
I realized that that is the source of many financial problems for people. Not really wanting to understand that mortgage or variable annuity opens them up to being taken. If you find your eyes glaze over as soon as someone says “401-k, 12b-1”, here are some ways to help avoid the avoidance.
Get someone else involved
It’s always easier to share the load. Maybe you need to share more about your finances with family or friends or your CPA. Get some help from people you trust. Share the pain and the boredom of your finances.
Concentrate on what’s important
If you’re buying a mutual fund, you don’t have to understand every single thing about it. But you should have a sense of what it costs to invest, and what kind of things they invest in. If it’s a mortgage, know the fees up front, if there is a prepayment, and what happens if interest rates rise or fall. You don’t need understand every nuance, but get the important stuff wired.
Simplify
If you’re a person who likes working the system, it’s fine to have 5 credit cards and accounts at 3 different brokerages. But if you’re not, you’re setting yourself up to have your avoidance factor kick in. It’s more important to have a handle on your finances than it is to get another 5,000 frequent flyer miles. So if this is a problem for you, simplify and consolidate some of those accounts.
You work so hard for your money. So avoid your money avoidance as much as possible to keep a handle on your precious assets.