You can learn about money and finances your entire life and never make it to the next level. It’s not until you connect the core principles (dots) that the next level becomes attainable.
Having an impressive credit score, stashing your cash, being the best budgeter and following it to a tee but not understanding that bank interest isn’t the same as brokerage account interest even though they both compound, will never get you to the next level because the rates of return vastly differ.
In most of my previous jobs, the people I worked directly with each day did not have financial work experience or education. Their expertise was elsewhere but each had income, expenses, capital and budgets they were responsible for. Every month I would lead a financial income statement review and for this type of review it was never a PowerPoint presentation. We would sit around the outer edge of connected tables that formed half a square. Informally, not classroom style learning.
We’d review where we hit our budget targets and where we significantly missed them and why. Most times it was circumstances beyond our control, weather events, equipment failures and the occasional squirrel. Sometimes, however, it was due to lack of attention or mismanagement. These financial reviews gave the management team the big picture overview instead of only their contributing piece of it. They understood connecting the entire financial income statement of how income must exceed expenses in order to recognize profit consistently and how they contribute to that and to the longevity of the business (unit).
Connecting this to personal finance, if you only know how much is spent and not what income comes in and never put them together month over month to see the big picture, you will miss critical insight of why your profit (savings) isn’t increasing. The same is true for your personal balance sheet / net worth statement.
Explaining to my husband recently that a person in our life has never worked in a business setting and has never done any of their personal finances. This person can write checks and use a credit card but has absolutely no point of reference or understanding of how that fits into their overall financial well-being and security.
The AI summary of connecting financial concepts was a basic overview of the time value of money, saving and budgeting, investing, risk and return, diversification, asset valuation, risk management, debt management. None of the supporting sources cited understanding financial statements, instead, classroom style textbook learning, not real-life scenarios. You need people to do that.
In my rudimentary drawings of financial priority pyramids, I tried to show where many get stuck because of competing priorities. To expand on this concept, I designated levels (no triangles this time). As you connect the core financial principles, you are able to move up to the next levels. The biggest leap is from Level 4 to 5. So many online resources focus on Level 4. Once you experience Level 5 whether at work, by educating yourself or with a mentor, Levels 6 – 8 become less daunting to navigate.
Level 8 Legacy
Connection, Impact
Level 7 Preservation
Security, Time, Reward
Level 6 Accumulation
Investing, Growth, Assets
Level 5 Building
Skills, Knowledge, Income, High-Yield Savings
Level 4 Managing
Income, Expenses, Debt, Savings, Cash
Level 3 Implementing
First real jobs, Spending, Saving
Level 2 Learning
Lemonade stands, Summer jobs, Internships
Level 1 Awareness
Observing, Imitating, Allowances
If you are one who has reached the upper levels, to share your knowledge, experience and insight effectively, you need to figure out how your most treasured personal connections will be interested in advancing their financial expertise. I guarantee it won’t be a PowerPoint presentation.
Or I could be completely wrong.