What you don’t know really can hurt you
An old proverb says, “Arrogance diminishes wisdom.” Rich dad believed that arrogance also diminished your riches. Applying this to money, rich dad said, “What I know makes me money. What I don’t know loses me money.”
At some point in our life, we’re all arrogant. I’ve found that people most often are arrogant when they don’t know something, especially when it comes to financial education. They may have a little bit of knowledge but not enough to be an expert. Instead of being humble and admitting they are not an expert, they are arrogant and try to make you think they are an expert.
As a young man, when my Velcro wallet business was failing, I met with my rich dad to talk about the business. My hope was to get some advice to turn the business around. So, when he told me the business had terminal financial cancer and that I needed to close it down, I was not happy.
In my arrogance, I tried to convince him that it wasn’t as bad as it was, but the truth was I couldn’t read my own financial statements as well as he could. One look at my financial statements told him that my ignorance and arrogance had clouded my judgement. I eventually liquidated the business and paid off over a million in debt. If I hadn’t done that, things would have been much worse.
“Every time I’ve been arrogant,” said rich dad, “I have lost money. Because when I’m arrogant, I truly believe that what I don’t know is not important.”
I find this very common in people when they talk about money. This is especially true with people who have made a little bit of money and begin to think of themselves as rich. For instance, I knew many people during the housing bubble who were making money from flipping houses. When they asked me if a deal was a good one or not, I would say I never liked deals that relied on appreciation instead of cash flow and wouldn’t invest in them. These people would scoff at me, telling me how much money they’d already made doing these types of deals.
When the housing market crashed, these people weren’t scoffing any longer. Many of them lost all their money and their assets. It is sad because if they had stopped for a minute and really listened and learned, rather than arrogantly trying to come off as an expert when they really didn’t know what they were doing, they might have become rich and stayed rich, even during the financial crisis. Their ignorance and arrogance made them poor.
Got a Financial Education?
Again, I have found that most people use arrogance to hide their ignorance. This is also especially true when it comes to so-called financial experts and financial advisors. They try to bluster their way through discussions. It is clear to me that they don’t know what they are talking about. They’re not lying, but that are not telling the truth.
There are many people in the world of money, finances, and investments who have absolutely no idea what they’re talking about. Most people in the money industry are just spouting off sales pitches like used car salesmen.
That is why it is extremely important for you to be financially educated. Just like going to a car lot without any knowledge will get you a bad deal on a used car, talking to financial advisors without any knowledge of money will get you bad investments.
If you want to be rich, you need to be humble enough to admit that you don’t know enough about money and smart enough to begin increasing your financial IQ through financial education. In fact, the best investors I know are the ones who, even though they are extremely rich, still talk about how much they have to learn. They are hungry for knowledge because they understand that knowledge is truly what makes them rich.
This New Year, I encourage you to overcome your arrogance with financial education. Don’t act like you know what you’re talking about. Actually know what you’re talking about.
What are you going to do today to increase your financial education?