💰The Hidden Costs of Relying on Others

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In my early days of learning personal finance, I always relied on others to grow my money. This is why I fell for scams, bought expensive but inadequate insurance, locked myself into a 15-year savings plan with the risk of losing more than half of my money if I stopped my contributions, discovered my advisor's dishonesty, and purchased a property without stable employment.

Unfortunately, just like me in 2015, many people don't take control of their finances. They rely on their relatives, spouse, friends, financial salespeople, real estate agents, and other professionals to make financial decisions and manage their money.

The primary reason is the perceived complexity of financial management.

Many people feel overwhelmed by the jargon, numbers, and decisions involved in managing their finances. As a result, they turn to professionals for help.

Here are a few other reasons people don't learn to manage their finances:

• Reason #1: They believe they don't have the time to learn about personal finance.

• Reason #2: They think they need a lot of money to start investing and managing their finances.

• Reason #3: They're afraid of making mistakes and losing money.

• Reason #4: They don't know where to start or what resources to trust.

But don't worry! I'm going to explain how you can overcome these challenges and take control of your finances.

The Hidden Costs of Relying On Others

The Monetary Consequences

• Professional Fees: Financial professionals offer valuable expertise, but their services come at a cost. According to a report by Cerulli Associates, the average financial advisor fee in 2020 was 1.17% of assets managed. But that is in the US! If you check the savings programs that are sold in the market today, you will see management fees ranging from 2 to 7%! Over time, these fees can significantly reduce your savings or investment returns.

  

  Source: Washington Post

• Lost Opportunities: When others manage your money, you might not be as tuned into the financial world. You could miss out on new investment opportunities or tax breaks. A study by the National Bureau of Economic Research found that individuals who manage their own investments tend to outperform those who delegate this task.

The Non-Monetary Consequences

• Lack of Financial Knowledge: Delegating your financial management can mean missing out on learning crucial financial literacy skills. If the person you rely on to make financial decisions is no longer available or your financial situation changes dramatically, you could be left with a series of unsteady financial judgments.

• Dependence and Vulnerability: Relying heavily on others for financial decisions can make you more vulnerable. You could be more susceptible to financial fraud or feel helpless if your financial advisor retires, moves away, or dies sooner than you.

• Loss of Control: There's a psychological cost to feeling like you're not in control of your own financial destiny. This can lead to stress, anxiety, and dissatisfaction.

Now, I'm going to tell you exactly how to avoid this mistake.

Don't Delegate Your Financial Management Completely

#1. Educate Yourself About Personal Finance

Understanding personal finance is crucial.

• Read books about personal finance to understand the basics.

• Follow financial news to stay updated about the financial world.

• Attend financial literacy workshops or webinars to enhance your knowledge.

As for me, because of my unfortunate experiences, I decided not to just learn by the books. I “infiltrated” the insurance, investment, and real estate industries by getting employed at a financial brokerage company and a real estate development company. I paid for mentorships and took certifications too to make sure that I gave myself sound financial advice.

#2. Be Involved in Your Financial Decisions

Even if you have a financial advisor, it's important to be involved in your financial decisions.

• Regularly review your financial statements to understand where your money is going.

• Discuss your financial goals with your advisor and understand the strategy to achieve them.

• Ask questions about any aspect of your finances that you don't understand.

Just a tip, when hiring an advisor, go for someone who charges a fixed fee, not on % AUM (Assets Under Management).

#3. Regularly Review Your Financial Plan

Your financial plan should evolve with your life circumstances.

• Review your financial plan at least once a year to ensure it aligns with your current goals.

• Update your plan after major life events like marriage, birth of a child, or buying a house.

• Consider getting a second opinion on your financial plan to ensure it's optimal for your needs.

The Hidden Benefits of Taking Control of Your Finances

• Increased Financial Literacy: Managing your own money can lead to a better understanding of personal finance. This knowledge can be beneficial in a variety of situations, from negotiating a salary to planning for retirement.

• Greater Resilience: Taking control of your finances can make you more resilient to economic downturns, job loss, or other financial shocks. You'll have the knowledge and confidence to navigate these challenges.

• Empowerment and Satisfaction: There's a sense of empowerment and satisfaction that comes from knowing you're in control of your own financial future. You're not just a passenger on your financial journey, you're the driver.

Looking back at my original mistake, I want to encourage you to take control of your finances.

You've spent years working hard for your money; dive into personal finance, no more fear, no more relying on others.

Your money is your responsibility. It's your journey. Learn, make decisions, and grow your wealth.

It's not as daunting as it seems, and the rewards are well worth the effort.

You're capable of managing your finances, and you deserve the peace of mind that comes with financial independence.

Your financial future is in your hands.

Take the wheel and drive.

Whenever you’re ready, here are two ways I can help you:

• 1-on-1 Personalized Coaching: A three-session coaching program where we’ll discuss your financial goals, build your own money management system, improve your money habits, and guide you on how to invest on your own.

• Group Coaching: Four live 60-minute Zoom calls that will guide the students on the step-by-step guide to improving their finances.

Learn more by scheduling a 15-minute discovery call here.