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I have wondered why people avoid money management before.
But this post is about the visible and the hidden components of money management. In other words, the iceberg theory of money management.
Iceberg Theory of Money Management
As I said, knowledgeable people make financial mistakes too. This happens because despite knowledge they may not have the right skills or the attitude towards money management. Other characteristics like confidence, values they have learnt from their parents, fear of numbers,etc.
The Visible:We can see our knowledge level as well as our skills level. It’s about reading up blogs, dailies, magazines and upgrading your knowledge. Also about keeping your records tidily, operating the accounts like the demat, broking accounts, etc.
The bad news is that the visible part is only 10-15% of what it takes to manage your money.
The Hidden: My take is that 85-90% of your money management depends on your attitude and other characteristics. Like there’s laziness, greed for extraordinary returns, fear of numbers, fearing the markets, etc.
Some of us are benefitted with the values we have learnt from our parents/influencers. For some, the parent/influencer effect is a handicap.
Conclusion: Money management expertise has four components. 1. Knowledge 2. Skills 3. Attitude 4. Characteristics like confidence, values.
Just reading up a blog/magazine won’t help you with your money management. You need to be aware of your attitude and various other self concepts, values to make improved financial decisions.
Update: Ideasmithy has another example of the Iceberg model in her post Just Chemistry. She writes:
Good sex is a little more complicated – a combination of attraction, talent and emotions. The first, we’ve already established is plentiful. The second, talent, is slightly harder to come by. Yet, like some slightly expensive things, with some effort, it can be discovered and earned.
But the last, emotions, that’s the tricky bit. Emotions are that vital ingredient, the salt in a receipe.
I guess, attraction is the visible part & talent and emotions is the hidden elements. What do you say?
Do you agree? Disagree?
I edit Personal Finance Online Resources, deliver Financial Awareness Workshops and have built a desktop RupeeManager.
Invite me for a talk. Email me on ranjan@ranjanvarma.com or Call me on +919867755615
Hi there,
This site is much easier to read than your old blogspot site, best of luck with this one
bookmarked you.
Like the comparison. Often we are driven by greed for extraordinary returns and swayed by emotions when it comes to money management. The challenge is to get past that with time and experience. These posts are helpful to refresh your mind from time to time.