"We need to learn that personal finance advice is not simple, it can require life-altering changes, discipline, and a lot of learning. We can never assume success is easy to achieve and everyone will end up millionaires."

By: Allan R. Kirby

Difficulties with Personal Finance

With the proliferation of personal finance information on the internet such as blogs, YouTube videos, podcasts, TV shows as well as financial software, you would think everyone would be experts at personal finance by now. Yet this has not happened. The reality is that many people struggle with their finances and will continue to struggle even with the vast array of information available. The question becomes why?

To answer “Why” people have difficulty in finance when there is an abundance of information available, I only need to look at my own experience. As I journeyed through the labyrinth of personal finance information to achieve my own financial success, I found myself frustrated at times with some of the approaches taken in the personal finance field. I found many experts well-intended or not seems to:

1. Assume success in personal finance is easy.

2. Highlight mistakes and create guilt.

3. Over simplify investing and rate of returns.

#1 Assuming that success is easy to achieve

It is sometimes assumed in the personal finance industry that following a simple set of rules will lead to success and financial freedom. But is this really reflective of what will happen? I am not so sure this is the case, not because readers do not understand the advice, it has more to do with their situations. People will continue to struggle with their finances due to several reasons that might be outside of their control such as:

• Low wages, working part-time, seasonal work.

• Inability to save or invest money.

• High credit card and personal debt.

• Low Investment returns.

• High expenses and bills such as medical and education.

• increasing medical, education, and housing expenses.

All these issues will put tremendous pressure on household finances and simple advice might help with the economic realities of household financial situations. Additionally, some people may find it difficult to do their finances themselves. The advice might seem easy but when put into practice many people find it's a little more difficult than they thought. But this comes as no surprise to me because I learned long ago personal finance can take time, patience, and a lot of learning. I also learned early in my career I needed to make some big lifestyle adjustments which can be difficult for some people to do.

#2 Highlighting mistakes

I have read countless articles with titles such as “Mistakes Most People Make…”, which sometimes even frustrates me after reading. They are good eye-catching headlines but do nothing to help people with their finances. Yes, I agree it’s a mistake to use and carry a balance on a high-interest credit card but there are situations when people are struggling which necessitated the need to leverage high-interest debt to pay bills and buy food. Life is not perfect for everyone and many people will find themselves in bad financial situations due to unexpected issues such as:

1. Health problems.

2. Job loss.

3. High credit card debt and loans.

4. Taking care of family members.

5. Unexpected expenses.

All of these issues highlighted may not be the fault of the individual, so experts providing personal financial advice need to have more empathy and understand that bad things will happen. Therefore we need to stop making readers feel they are to blame for their situation. Basically, I think we need to encourage and guide people in their quest to improve their financial situation and stop highlighting money mistakes because this type of approach does not work for everyone.

#3 Oversimplifying investing and rates of returns

I could write a book on investing, not on how easy and successful you will be, but how difficult it actually is. There is an incredible oversimplification from many personal finance experts on the "average annual returns," you may get with your investments. The reality is mistakes will happen when investing which include:

• High fees on mutual funds and ETFs you invest in.

• Poor returns on your investments.

• Bad advice or making bad investments.

• Investing in risky assets and not being well-diversified.

Not everyone is going to pick the perfect investment that will yield the best returns over their lifetimes. They will likely have some successful investments while others may not do as well. Additionally, I have also found many experts seem to use long 20 to 30-year time periods with annualized returns of 8% or more. This is great if your young, but if your close to retirement your returns, as well as the types of investment you need to invest in, will be in some cases significantly different.

So what happens if you follow advice, did everything right and you're ready to retire, only to see your retirement funds suddenly go down 50%. due to a market downturn. Think this has never happened, think again, it's happened, worse I have seen some people lose almost everything when they have invested their money in a single stock.

We cannot predict the future nor can we know what will happen to the investments we have, so you could do everything right and still be out of luck. For example, even if you move to an index to eliminate single stock risks, not all mutual funds and ETF’s are created equally. You may or may not get the same return expected, so never assume every investment will average out to 8%.

Final Thoughts

I believe there is a lot of good personal financial advice available to help people become successful in reaching their financial goals, but there are problems. As I have mentioned some personal finance advice assumes success is easy and can create guilt and highlight mistakes while also oversimplifying investment returns. However, the reality is that you need to be committed, disciplined, and continually following up on your finances to succeed. It's not as easy as some people think and it could mean lifestyle changes that are a little more difficult to do than you thought when you started. This is why many people who try to follow advice end up frustrated and giving up. Ethier because it's more difficult or complicated than they thought when they started. I learned long ago that personal finance is not a sprint, it’s a journey that takes time and in some cases, success may be measured in years. However in the end it's worth learning how to deal with your household finance and learning from experts, you will end up better off.

Good Luck!

This is a MySmallBank.com blog written by Allan Kirby, who writes and produces Personal Finance and Money Management articles and videos.