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5 Fundamental Financial Skills You Can Practice

This article was written by in Personal Finance. 9 comments.

An interesting article in Fortune explored how employees can practice basic career skills like professional musicians and athletes use their non-performance time or non-competitive time to practice. This struck a chord with me due to my background with music. I studied music education in college with the intent of being a high school teacher, and high-level performance with a variety of musical instruments was a big part of the curriculum.

Mastering all instruments in the orchestra to a level of competent teaching of those instruments requires a lot of practice. The Fortune article shows how applying the learning technique of practice to business skills can improve your efficacy at your job or as a business owner.

  • You can improve your presentation skills by giving presentations, even when they are not required for any business purpose.
  • Rotate who leads group meetings so everyone has a chance to improve leadership skills.
  • One of the reasons I enjoyed being a part of Toastmasters is because it gave me an opportunity to improve my speaking skills without consequences to the business.

Likewise, anyone can practice the basic, fundamental skills necessary to grow wealth. The more you find opportunities to use these skills, whether practicing or in situations with real results, you have the opportunity to better approach financial independence. “Practice makes permanent.”

1. Consider your choices while avoiding impulse decisions.

One reason many people don’t build wealth as steadily or as quickly as possible is due to a tendency to make decisions about money without thinking. When we decide we want to have something and one-click shopping makes it easy for us as consumers to part with our money, it’s tempting to spend money without thinking about the consequences.

The same is true when dealing with the stock market. A good press release might make it sound like a company is worth investing in, or a hot stock tip from a friend might sound too good to pass up. These can be high-pressure situations, where you feel waiting — or stopping to think — might destroy the opportunity.

You can practice be being more aware of the choices you make throughout the day. Every time you make a choice, whether money is involved or not, stop to think about the consequences. Consider what information you are using to make the choice, and whether that information is impartial, fair, unbiased, and true. Try skepticism.

2. Build your resistance to marketing.

In a capitalistic society, everyone’s goal is to increase wealth. Although I don’t consider wealth in and of itself a life goal, people you deal with in everyday life are looking out for their own best interests. For people who work for a company, their own best interests are often aligned with their company’s best interests: “If I help my company make money, the benefits will trickle down to me as an employee. I’ll get a raise or a promotion or respect from my boss.”

The same is true for business owners: “If my company earns more money, my wealth grows directly.” No one in business is looking out for anyone other than themselves. Even financial advisers with a fiduciary requirement to their clients are looking out for their own wealth. The better they are at representing their clients’ best interests, the more their business will grow.

The result of all this self-concern in business is that everyone is trying to sell something to everyone else. Advertisers and marketers are very savvy about creating the right messages to encourage people to part with their hard-earned money. We know that the thirty-second messages between television programs are advertisements, and we even may understand that advertising may not always be exactly true. But these messages affect us subconsciously, so we can’t resist the messages completely. Realizing we are slaves to our brain, the best we can do is recognize it and try to keep it in mind when making financial decisions.

You can practice this by challenging what you may know about a product or a brand. Ask yourself what has contributed to your impression.

3. Understand terms and conditions in your agreements.

When you enter a financial agreement with a company — signing up for a credit card, taking out a loan for a new car, or or opening a bank account, for example — you need to sign an agreement. You are agreeing to certain terms that define the relationship. These can involve fees, interest rates, and how you’re allowed to take action against the other party if you have any disagreements.

The terms that you agree to can be complex, printed in overwhelming documents spanning many pages. They could be printed in very small type, making it difficult and tiresome to try to read. If online, they can be presented only in the form of a link, which people are more likely to ignore. I do this frequently. I assume terms are generally the same from company to company, and I’ll sometimes speed past long documents in order to find and click the “I Agree” button. It’s a dangerous habit that can lead to misunderstandings about fees.

Practice by reading terms and conditions, even when you’re not opening a new financial relationship. It may not be fun, but it will increase your understanding of how large companies often take advantage of consumers. Research any words or phrases you don’t understand perfectly. Familiarize yourself with basic legal jargon like binding arbitration.

4. Take responsibility.

Part of securing a financially independent future is taking responsibility for your decisions and your situations. When you agree to pay your rent by the first of each month, this is an obligation you must respect, lest you suffer the consequence of eviction. When you borrow money using a credit card, you are agreeing to pay your bill by a certain date or face interest charges, late fees, and a damaged credit history.

Taking responsibility for your decisions will help you be responsible for your financial progress. Shift from an attitude where you believe your situation is driven by external forces to one where you accept that your situation is a direct result of the choices you make. Yes — sometimes a car accident can prevent you from getting to your office on time but chronic tardiness is a lifestyle choice that you’ve accepted.

Practice taking responsibility by identifying when you attribute your situation to forces outside of yourself. Consider what you may have done or choices you have made that might have affected that situation, and keep that in mind when faced with the same type of choice in the future.

5. Negotiation skills greatly affect your future.

Your financial independence can be significantly influenced by how you negotiate. Large purchases often see the biggest advantage in being a strong negotiator, but you may buy only one or two houses throughout your entire life. That’s not a lot of time to practice negotiating a big purchase. Better negotiation skills can save you tens of thousands of dollars, more or less. When you negotiate a job offer, you can significantly change your financial outlook, so it’s better to have practice negotiating before these situations arise.

You can’t just ask a friend to practice negotiations with you. They have no stake in the matter. You need to practice negotiating with real partners is circumstances that have consequences for both parties. I’ve been somewhat successful bargaining with salespeople for high-priced items in box stores. I’ve called service providers like cable companies to try to negotiate on rates — though these companies often must strict to some guidelines in their offers.

Better practice comes from dealing with private parties. If you’re selling or buying items on Craigslist, for example, or visiting flea markets or garage sales, you have great opportunities to work on your negotiation skills. These may be small items, but the practice pays off when the time comes to negotiate your salary or benefits, or when you’re looking to spend a few hundred thousand dollars on a house.

What are the basic financial skills you practice?

Photo: Flickr

Published or updated November 13, 2012.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 9 comments… read them below or add one }

avatar 1 Anonymous

My approach is always the same. I try to think like a “Steve Jobs” or CEO?CFO. It helps that I was a former CFO and business owner. I figure out what is the desired outcome and work backwards to achieve it. When I counsel my children about being promotable, I often make suggestions about picking up the skills you need for that next promotion. It seems to be working because my children are very successful.

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avatar 2 Anonymous

I always try to read anything I sign before I use it. There are some cases when I won’t but if it is something I have a choice on, like a mortgage, bank account, etc I will always read it.

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avatar 3 qixx

I find the easiest one to practice is negotiation. You can even find an iPhone app to help you negotiate your bills. Practice anywhere and everywhere. Go to a swap meet just to practice. This one seems to be the easiest.

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avatar 4 Anonymous

Negotiating can also be practiced with phone companies and cable/satellite tv companies. In most cases you can get a better deal just by threatening to go with a rival provider.

You can also practice your public speaking as well as organizing skills within clubs, civic organizations, and being on committees at your church, etc. Every little bit helps!

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avatar 5 Anonymous

Couldn’t agree more with “3. Understand terms and conditions in your agreements.” and I would add to that research before you buy!

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avatar 6 Anonymous

The only skill I would add is: Do the accounting and do it right. Properly done, basic family or business accounting will give you the insight needed make decision more wisely. You will be better able to avoid marketing and take responsibility if you have detailed knowledge of your current financial condition and clear goals.

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avatar 7 Anonymous

I’ve started teaching that resistance to marketing skill to my grandchildren. Starting slowly, I am currently just watching commercials with them and pointing out that someone is trying to get them to spend their money. Later I’ll do store walkthroughs and talk about displays. We’ll do sign spotting and talk about how those are advertisements and on and on.

One thing I need to practice is negotiation.

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avatar 8 Anonymous

Jokingly he said: “Wow great idea, you’ll either turn them into little cynics or advertising execs.” ;-)

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avatar 9 Anonymous

One of the things that helped me build up my resistance to marketing was a class I took in college titled “Language and Deception.” We spent some time looking at the ways companies can get away with misleading you through marketing. Ever since that class, I scrutinize every commercial or print ad I see to try and figure out if/where they’re stretching the truth.

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