In the work world, getting help from an experienced “mentor” can catapult a career. But the principles of mentoring also apply to money. That’s why linking up with a “money mentor” could boost your savings and personal finances.
Managing and budgeting money isn’t an area of expertise for most Americans. Doctors know medicine. Electricians know wiring. Attorneys know the law. But most people don’t know how to manage money and all the complexities that come with it.
That’s when getting help from a money mentor can be beneficial, says Kelly LaVigne, vice president of consumer insights for Allianz Life.
“Having someone you can look up to and go to for advice … is a good thing and can help you on the path of developing better financial habits,” LaVigne told USA TODAY. “A mentor can really be anyone who you consider to be ‘good with money’ and is willing to share some of the tips and good habits that have helped them achieve their financial goals.”
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Benefits of having a money ‘confidante’
Think of a money mentor as part confidante, part teacher. In short, someone who has the expertise and life experience to offer guidance on basic budgeting, setting spending limits, ways to control financial losses, how the stock market and retirement accounts work, and all things financial.
“A financial mentor is there to help you overcome the personal obstacles and lack of financial expertise that will inevitably get in your way on your path to financial success,” says Todd Tresidder, founder of FinancialMentor.com.
Two ways a money mentor’s specialized knowledge can help is by “shortening your learning curve” on financial topics and “saving you money by avoiding obvious mistakes,” says Tresidder.
The best athletes in the world have coaches. Top CEOs have mentors. Why not you?
There’s evidence that mentoring improves results. A 2015 Harvard Business Review survey of 45 CEOs with mentors found that 69% said they make “better decisions” and 84% said they’re avoiding “costly mistakes.”
When it comes to boosting your savings or growing a 401(k) account, minimizing mistakes and making sound decisions is key.
“Even if an individual believes he or she knows everything about what they need to do to manage their finances, the reality is there are bound to be missing pieces,” says Diahann Lassus, president and chief investment officer at Lassus Wherley. “It definitely makes sense to have a financial mentor.”
Breaking bad habits and behaviors
There are millions of “tips articles” on the internet about saving money. Yet, there’s a shortage of savings. The problem? There’s a disconnect, Tresidder says, between what people know about saving, what they say they want to do, and what they get done.
A money mentor, Tresidder says, can help you avoid emotional blockages and poor decisions, and break bad habits that get in the way of your savings goals.
This person, he says, must be more than someone simply dispensing conventional advice, such as the importance of diversifying and rebalancing your 401(k). The goal: get the client to change their behavior to put them on a path to financial success.
“You don’t need a mentor for things you can get from a single paragraph in a book,” Tresidder says. A mentor’s job, he says, is to help clients “cut through the mental clutter” so they can see the difference between financial decisions that help them, rather than hurt them.
“Most people are unaware of the patterns behind their decisions and how those decisions take them away from their goals rather than toward them,” Tresidder says. “The only strategy that produces permanent change and long-term results is shifting a client’s awareness so they can make smarter decisions.”
What to look for in a money mentor
A money mentor can potentially come from all walks of life, but the person you select must be someone you connect with, trust, and who’s willing to help you, says LaVigne.
It also helps if your mentor has specialized knowledge, is financially successful and is willing to speak openly about his or her experiences to better demonstrate successes and failures.
“It makes sense to start with someone in your personal life who you think sets a good financial example,” says LaVigne.
That person can be someone knowledgeable about financial markets, a successful business owner, a professional colleague, a teacher or instructor, financial coach, or experts in the field of finance.
“Many people learn best by example,” says LaVigne says, “so it’s crucial that your financial mentor can share real examples of things that have worked—and even things that have caused financial setbacks.”
The more expert the person is in the area that you’re seeking guidance, the better, Tresidder advises.
Unless your parent or friend is a “deep subject matter expert,” they’re likely not the best choices, he adds.
“Rarely will a parent qualify,” says Tresidder. “Parents are just being parents. They think they’re experts in everything, but they’re not.”
It’s also important to choose someone who is at a place in life that you would like to get to, adds Tresidder.
“You always want to look for someone who is where you want to go,” Tresidder says. “You want somebody who’s ahead of you, somebody who has learned from the school of hard knocks, so you don’t have to.”
Questions to ask a potential mentor
Are you comfortable sharing details about your money habits? “Discussing finances is taboo for many people, so it’s important that you connect with someone who’s willing to share specifics about their personal situation,” says LaVigne. “Normally, this is not done with a stranger, but rather someone you are familiar with or admire.”
Do you have any golden rules you follow? “It is smart to start small and learn about the little things that are making a difference in their financial life,” says LaVigne. “Then you can dive into bigger topics like investing and saving for retirement.”
*How often are you able to meet and how much time can you commit? “It’s important that there be a process and structure defined,” says Lassus.
*What’s your professional specialty? “You want to see if they have the expertise you want,” says Tresidder. “If you’re trying to build a business, you’ll be looking for specific entrepreneurial skills.”