Why knowledge is the wrong starting line
There is a massive gap in how we talk about money. Only 57% of adults in the United States are deemed to be financially literate. That is a statistic we certainly need to address. However, if you Google "financial literacy," you will find there is no agreed upon definition.
If we can't define it, we can't measure it. And if we can't measure it, we can't manage it.
We do know one thing for sure. The lack of personal financial knowledge costs U.S. households over $350 billion per year. That is a real cost to real families.
However, traditional programs treat this as a knowledge problem. They assume that if you just learn the math, you will fix the money. This ignores the reality of being human. Money is often a source of stress, worry, fear, and even shame. These deeply rooted emotional issues and limiting beliefs about money are what keep most of us from making healthier decisions.
Here is the reality. 90%+ of the decisions we make are driven by emotions and not by logic. Existing programs start with the math, but they need to start with the mindset.
Why information doesn't equal transformation
Tony Robbins once said, "Knowledge is only potential power. Action is power."
It is not what you know that matters. It is what you do with what you know. Traditional literacy programs focus on potential power, which is the raw data of finance. They fail to provide real power, which is the behavior change necessary to put you in control of the life you want to live.
Consider this. Studies have shown that improved financial literacy can explain just 0.1% of behavior changes that occur.
That number is incredibly small. It tells us that our behaviors are driven by a complex web of values, attitudes, and beliefs. If we don't understand how those feelings drive our actions, reading more financial definitions won't help.
We have to stop hacking at the leaves of change and strike at the root. If you don't change your mindset, your habits, your systems, or your environment, all the information in the world won't lead to better outcomes.
The bigger picture of your financial life
We see financial literacy as just one small piece of a much larger puzzle. It is part of a "continuum of care" that leads to true financial wellness. When we put all the pieces together, we get a complete picture that includes:
- Psychology: Understanding your beliefs, cultural values, and sentiments.
- Literacy: Having appropriate levels of education on money topics.
- Tools: Access to resources and management systems to apply your knowledge.
- Environment: Creating the right surroundings to support healthy habits.
- Planning: Ongoing financial planning to adapt to your constantly evolving life.
When we focus only on literacy, we fail because we are looking at only one aspect of this continuum. It mirrors a common problem in the financial services industry where advice focuses only on investments. We need guidance in all aspects of our lives to achieve true independence.
How Facet approaches your financial wellness
We believe the biggest challenge facing financial health comes down to three words: access, inclusion, and integration.
First, we need greater access. This means opening the door to expert advice and financial tools for everyone, not just the ultra-wealthy. Second, we need greater inclusion. This brings all communities through the door to participate in the economic ecosystem. Finally, we need integration. We must thread together the technical side of money with the human side of your life.
At Facet, we don't just hand you a textbook. We pair you with a dedicated CFP® professional who helps you navigate the intersection of your money and your life. We don't focus on literacy in isolation. We focus on helping you eliminate financial stress so you can live the life you want.
