Dear Readers, I recently had an interesting conversation with the daughter of a friend of mine. Like so many in her millennial generation, she has a real entrepreneurial spirit and was excited about a new business venture she was planning. When I asked her a couple of questions about how she would be balancing her own financial needs with the capital-intensive nature of starting a new business, she faltered for a moment, and then said she’d be hiring the best people to take care of all of that stuff and that she was laser-focused on her product.
While I applauded her dedication to creating a superior product, I talked to her a little bit about how important it is to understand and control your own finances, even if it isn’t your area of specialization. However, here’s the dilemma. To learn about your finances, you first have to be willing to ask questions. And that’s where a lot of people hesitate because they don’t want to appear unknowledgeable. So how do you get past that obstacle?
Whether managing your personal finances or starting a business, it’s always great to get advice from true experts. But to make any conversation effective, you need to know what questions to ask them. This is also a good way to determine who the right advisor may be to help get you where you want to go.
So don’t worry about what you don’t know. To put yourself ahead of the game, start by asking the basic questions and arm yourself with as much knowledge as you possibly can. There are many areas in your financial life where the right information can save you from making costly mistakes and accelerate your earnings.
Every question is important. What’s the best way to save for retirement? How will the demands of starting a business affect your personal finances? Can you balance savings versus spending? Every question you have is worth asking because it can lead you to a greater understanding of the world of finances and help improve your ability to navigate that world to your best advantage.
And that’s the goal: understanding where you are with respect to your finances, knowing where you want to be in the future and creating an attainable road map to reach your destination. There’s a popular adage ‘fake it ’til you make it.’ Let’s be very clear that the folks offering this advice are not talking about financial decisions!
So if you aren’t sure about how much money you should be saving each month for retirement, but care about your future security, the best thing to do is ask. Don’t know the difference between a CD and a bond? Find out. Uncertain whether to invest or simply save your money? Learn the pros and cons of each and how you can benefit from both.
The internet is full of advice and, while much of it is good, there’s a lot of misinformation and conflicting information out there. So, yes, do your own online research, but remain skeptical. Be sure to look for other sources. Ask your parents or a trusted friend. Ask a financial professional (after you’ve understood how to vet them to make sure there’s no conflict of interest).
And please send me your questions. In the coming months, I plan to focus more regularly on questions that are particularly relevant to millennials. But, of course, youth is a state of mind. There’s no age limit on types of questions or the value of just asking.
It’s also important to be your own advocate. It’s sometimes embarrassing to feel like you don’t already know the answers to things you feel that you should. The real truth is that no one knows all of the answers, and you’re your own best advocate.
People can get into trouble by pretending they understand something they don’t. A good way to avoid costly mistakes is to ask all of the questions that come to mind, even the ones you might think are silly. If you find a simple answer to a simple question, so much the better. But often what you’ll find is a complicated series of choices you need to make depending on where you’re starting from — and you’ll be very glad you asked.
Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER ™ is president of the Charles Schwab Foundation and author of “It Pays to Talk.” You can e-mail Carrie at askcarrie@schwab. com.