How To Improve Your Wealth Creation Competence

If one of your New Year's resolutions was to improve your wealth creation process, you have to approach it as if you were developing a brand new skill set, such as learning a sport or a game. If you want to continually improve your ability to create wealth, you need to keep in mind these 4 stages of awareness:

Unconsciously Incompetent. This is the stage where you don’t know what you don’t know. This skill or thing isn’t even on your radar; like before you were interested in learning to drive, you didn’t even think about it, right? Learning to drive was a non-issue. Many people are unconsciously incompetent with wealth creation because while growing up, it wasn’t an issue for them. Things got bought and paid for and no one ever talked about money. However, there usually comes a time when you have a use for the specific skill and then you become . . .

Consciously Incompetent. You know you want to be able to do something, like drive that car, but you’re aware that you can’t just jump into the front seat and start driving (especially if you have manual transmission). This is where people start to apply their individual problem solving styles; some people jump in anyway, some people try to intellectually and theoretically understand before applying the new knowledge and others take driving classes or look for hands-on support. People usually become aware that they are consciously incompetent with wealth creation right after they make a money mistake, like accumulate credit card debt, or day trade their paycheck away.

Consciously Competent. When you’re consciously competent, you know how to perform the required skill, but you have to do it carefully. When you’re driving, you still think about easing off the clutch as you apply the gas. You take special measures to avoid certain routes that might require you to do something advanced like stopping on a steep hill. You already KNOW that managing the clutch on a hill without rolling into the car behind you is an iffy proposition at best. With wealth creation, you might limit your options with investing because you KNOW you don’t understand the more complicated investment products; or you manage your debt, but only because your credit cards are in your freezer, submerged in a tin car filled with water (because you can’t microwave a tin can).

Unconsciously Competent. Unconsciously competent people perform the skill without even really thinking about it. Have you ever gotten into your car to drive somewhere and suddenly you realize you have arrived, and don’t even remember a moment of the drive? It’s because your mind and your body have integrated the skill of driving so deeply into your brain that you don’t even have to think about it.

In Malcolm Gladwell’s book Outliers, he demonstrated how people who we see as supremely gifted in a skill usually have already spent about 10,000 hours doing the thing that we admire them for. For instance, Bill Gates used to sneak out of the house to go spend time in the university computer lab before he was in high school. He got his 10,000 in before he was 20. And The Beatles spent months playing sets around the clock in a divey strip club before they ever became famous.

When people are unconsciously competent about wealth creation, it usually looks like they just got lucky—often the way people perceive other successful people. The specific reasons for their competency vary between individuals; but one thing that DOESN’T vary is an early awareness about money and an environment that supported the idea that people do in fact have complete control over their financial situation. If people grow up believing this, they have already learned things that most of the world is still trying to master.

It’s rare for someone to think to themselves, “I need to get better with money, so I am going to devote X hours to improving myself every week.” Most people think that they would be required to take classes on investments and products, which is too boring to imagine—so they abandon the idea because they believe the cost for knowledge is too high. They forget that most people who are successful with money were typically B-C average students. Which means intellectual classroom knowledge has nothing to do with wealth creation.

Therefore, to move along the scale to consciously or unconsciously competent, you need to work on HOW you think about money, which is a completely different skill than having specific knowledge about investments or other personal finance topics. How do you do this? By questioning every premise you currently hold about money. This might be even tougher than learning it the right way in the first place, because you have to unlea all of the detracting things you think. The good news is, once you commit to doing the work, it doesn’t have to take 10,000 hours to reach true financial peace of mind—whatever your current situation.