Although most people will agree they should learn more about it, most people aren’t interested or motivated to learn about personal finance and apply the knowledge to their lives. There is obviously an overwhelming amount of information available online, yet seeking it out is a problem for many. At the same time, there are large communities of what we might call enthusiasts or “hyper-financially educated people,” such as Mr. Money Mustache.

The problem is: How do we bridge the gap between the financially illiterate and the financially hyper-literate?

The majority of people reading this website or others on personal finance probably have caught the financial “fever,” so to speak. However, to bridge the gap for the uninitiated, some strategies might be:

1. Being educated by a family member, mentor, or friend
2. Engaging in “information-seeking behavior,” which involves asking questions, searching online, and finding consensus from multiple sources
3. Reaching a tipping point where you are “fed up” with your financial life and actively seeking a change
4. Personal finance is eclectic and pervasive—it touches all areas of life. Therefore, many other skills are important to being financially successful, such as being organized, a good negotiator, and possessing both written and quantitative literacy.

Strategies of prime importance are to seek information, seek second opinions, and give oneself time to think when it comes to financial decisions. Personal finance is not “common sense.” For example, American credit scores work in a manner that is convoluted and arcane to most Americans. If you haven’t actually sought out information on this, you might think paying your utility bills on time helps your credit score (it doesn’t), or that spending a lot on your credit cards builds your credit (it doesn’t—owing more than $0.00 on your statement each month and then making a payment does).

Many Americans don’t investigate or put up a fight when getting a raw deal when it comes to their finances. For example, hospitals might over-bill you for services not received, or fail to process your insurance correctly, resulting in a higher bill at chargemaster pricing that ends up going to collections and damaging your credit. Although you can intercede by contacting the medical billing company to correct your insurance information, by negotiating a lower bill, or later on, by disputing the derogatory marks on your Equifax, TransUnion, and Experian credit reports if they are erroneous, many people simply don’t look into this.

Although knowledge is power, inquisitiveness is a prerequisite.

Many people focus their energies on working harder rather than smarter. If the options for using your time are (a) pick up over-time shifts at work or (b) call your credit card and auto loan issuers and get your interest rates reduced from 20% to 15% with a few simple phone calls, clearly Option B is the better use of your time. Yet, doing more of the same is the easier, more comfortable option.

The returns on becoming financially educated and putting this knowledge into action are huge. It is perplexing to me that so many people find it boring and unmotivating. For instance, many Americans are working extra hours to bring in more money, while failing to claim their tax refunds, and, in aggregate, leaving billions of dollars on the table.

It is completely senseless to work more hours to make $15 per hour when doing some financial reading might be worth $500 per hour, in the long run. If this insight alone is not enough to incite Americans to want to learn about personal finance, then the cause might be hopeless, and the efforts of financial educators might be better focused on taking those who are already financially literate to the next level.

Even up to the tax filing deadline for the prior year, it is still possible to make contributions to individual retirement arrangement (IRAs) and health savings accounts (HSAs) for that year. For 2017, this means you have until April 17, 2018 to contribute.

On the other hand, 401(k) and 403(b) accounts must be made through employer payroll deductions, so you cannot go back and contribute for the prior year to receive the tax advantages. You can go through your employer’s HR or payroll department to start making contributions on your next paycheck, however.

If you have received a windfall (e.g., a tax refund!) or just learned about retirement accounts, you can make retirement contributions for the prior year in January–April of the next year. Typically, you would want to max our your IRA first and then your HSA.

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Lottery tickets graph

As a child, I was fascinated with lottery odds. I recall that the odds of winning the Florida lottery jackpot at that time were about 1 in 14 million, and that scratch-off tickets displayed the odds of winning a prize on the back, which was usually around 1 in 4.

The above graph (drawn by me) is actually far too optimistic. The odds of overall gains are lower than 1 in 4 because a typical scratch-off or instant-win ticket counts a prize of the same amount as the purchase price as “winning,” even though this is actually breaking even. Of course, buying a $2 ticket and “winning” $2 is the second commonest outcome, behind the most common outcome of losing $2. Further, the overall odds of making money decline precipitously as additional tickets are purchased. Although the “1 in X” odds of winning X fantastic prize increase with the purchase of additional tickets, the value of the improved odds is always far below the ticket price.

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Piggy Bank image

An emergency fund is basically a reserve of money you set aside in case of an emergency such as being unexpectedly fired from your job or your car’s transmission failing. Many people recommend analyzing your monthly income or cost of living and then aiming to have three, six, or even eight months of funds on hand. However, when you are starting out building the fund, you should first aim for one month of funds, then two, and so on. For example, if your cost of living is $3,000 per month, you would want $18,000 in your emergency fund to cover six months of expenses. Then, you would not be scrambling to pay bills or find another job. This flexibility allows you to reduce stress and make better long-term decisions about your next employer.

Why have an emergency fund? The emergency fund is the first step toward financial independence. Credit card issuers like to tout credit cards as an “emergency” lifeline, but this only encourages you to end up not being able to pay the balance back and being subjected to extraordinary interest rates that are often as high as 28% per year (annual percentage yield).

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