Are you a smart idiot?

I know the title of the post is somewhat offensive. But I decided to go with it in an effort to wake you up. According to Statistic Canada, 64.1% of adults between the ages of 25 to 64 had a post-secondary qualification in 2011. Today, we are more educated than ever and yet it seems all that education isn’t necessarily helping us make better choices or decisions. And why is that? One possible explanation could be that our education system is creating more smart idiots rather than better decision makers.

Someone once said the more you learn about a subject matter the more you become dumber about the subject. I think that best describes the effects higher education has on people’s finance. The problem isn’t so much that people don’t have the information or that they are unaware where to obtain the information; the problem is they think by virtue of their educational background they are financially competent as well.

Obtaining a diploma, bachelor, MBA, or PHD doesn’t also translate to you being financially competent. Education is about learning how to make good decisions based on the facts available to you.  Personal finance is not the same thing. It’s emotional and most of the things we seek and want our money to do aren’t necessarily rooted in logical decision making. We ignore the facts because everything we want to do with our money on some level is to satisfy some sort of emotional desire or gap.

Therefore, smart idiots can be found all over the world. And if you’re rolling your eyes because you’ve got a bachelor degree or perhaps you’ve got an MBA and can’t stand the fact my writing is grammatically incorrect, you’re likely a smart idiot. But since this is a finance blog, I will focus on smart idiots behaviours that hinder them from obtaining financial freedom.

I know people that are extremely smart, much smarter than me. I’m not going to name them to avoid inflating their egos any further. But when it comes to personal finance these same people are complete idiots.

They are smart idiots not because they don’t know the difference between an RRSP or TFSA. No, they are smart idiots because their education fools them into believing they are financial experts and cannot be fooled. They are smart idiots because they can’t be bothered with the boring stuff like saving and building an emergency fund. They rather focus on how to make money on shorting a stock or some fancy real estate idea or some get rich quick scheme they have discovered. They can’t see the warning signs because they are “smart” and “smart” people are rational and evaluate ideas on their merits to see if it’s something they should do. Unfortunately, they often fail to see their emotional blind spot that’s often driving their decisions.

But perhaps the biggest reason most people are smart idiots is due to the fact they never act on any information that might actually help them. Smart idiots enjoy reading about things for discussion points or party talk but adopting and sticking to something is hard for them.

Perhaps it’s not fair to say they completely don’t act because they do on some level. But their level of commitment to financial plans is on the same level as that friend who tells you about a new diet/ weight loss plan they’ve adopted every other month. And like that friend, you congratulate them fully aware they will move on to something else next month while smiling and pretending to interested in this month’s new diet/ weight loss plan.

What the friend fails to understand is losing weight isn’t complicated. The information is already out there. Don’t eat too much, eat reasonable portions, get lots of greens in your diet, and exercise. The recipe for success isn’t complicated rather what makes it complicated is developing the habits required. Smart idiots are looking for shortcuts to those habits rather than doing the small and often boring actions required for financial success. This is what the friend with the new monthly diet/ weight loss plan is doing, looking for a shortcut to avoid the often boring reality of being healthy.

I will keep saying it till it hits home. Personal finance is about our emotions and that’s why it’s a difficult thing to master. The math skills required for success is basic and by that I mean grade 6 level or lower. A grade 6 student is able to tell you that a 6% interest rate is better than a 16% interest rate if you are borrowing money.

If you want to avoid being a smart idiot you’ve got to stop reading about people who are doing the right things and start incorporating what they are doing right into your life. You have to start acting on the information you’re being provided. Having valuable information but never using it makes it useless. Financial success is a series of small good decisions not about one risky decision that yields you millions. There is no shortcut to being successful financially. It requires patience and time.

That’s what a smart idiot hates and can’t be bothered with; boring small decisions that require time to pay off. Don’t be a smart idiot!