Money Ignorance or Money Avoidance? Why we struggle to manage our finances.

January 15, 2019 by Paul Munguia

We love our freedom. Our country was built on it, both sides of the political aisle argue over where individual freedoms start and where they end, and we are conditioned to think that we would lose our individualistic essence if we were ever to lose our freedom.

Living as we please and building a life tailored to our own vision is the American Dream.

Young people graduate from college poised to begin building their lives. They obtain jobs, income starts to flow, but in no time at all, they’re not standing upon a solid foundation. Instead, many young people find themselves borrowing money and chomping at the bit awaiting their next paycheck.

A whopping 78% of Americans live a cash flow lifestyle, meaning they cover their expenses and indulgences from week-to-week or month-to-month, then run out of money and wait until the next check is deposited into their checking account. In a country that prides itself on having so much at its fingertips, how is it that the vast majority of its citizens can’t stretch their pay more than 6-8 weeks on average?

Societal factors play in, consumerism, inflation, stagnant wages, student loan debt – all of the things you hear on the news. Yes, these are all significant topics and they are all hurting Americans, but how then does e-commerce continue to grow around 15% annually and how did the Millennial generation manage to consume the most amount of wine ever consumed within a one year span?

While yes, many people are underpaid, many are struggling to pay off existing debts, and many are working jobs for which they’re overqualified. But at the end of the day, Americans are still spending a lot of money on a lot of non-essential things, and that is adding fuel to the fire of the aforementioned issues.  

So, what is going on?

The reason may come down to the psychological term “Money Avoidance.” It is one of four behavioral patterns associated with individuals and how they approach money. The term basically exists to describe the condition of someone who avoids organizing their finances in a responsible way and the associated typical behaviors: saying yes to engagements they can’t afford, frivolous spending, putting off paying bills, ignoring their bank account balance.

Perhaps a better term for this concept is “Money Ignorance,” as avoidance assumes this type of individual understands how their finances work. The numbers don’t lie: the vast majority of people don’t comprehend the full picture of their personal finance system, and so in many cases they are not just avoiding money management, but they are actually ignorant to it altogether.

The term financial literacy is thrown around a lot and many financial technology apps have gone to market to help consumers educate themselves and improve their financial behavior. However, without giving those individuals a holistic view of their finances, by only addressing specific verticals of financial mismanagement, and without a comprehensive and consumer-friendly product, investment in personal financial health will continue to follow many failed attempts of individuals trying to gain an understanding on their own.

We need our freedoms, our individual natures, but sometimes we also need to be tempered. Financial technologies like Namu are addressing the consumer space in a comprehensive and real-world manner. The company strives to align personal finance with thoughtful behavior and make the subject of money more rational and less taboo.

People don’t hate dealing with money, they just hate dealing with things they don’t fully understand.


Get Namu today to help with your finances!