Donald Rumsfeld famously stated that “there are known knowns; there are things that we know that we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns, the ones we don’t know we don’t know.” As confusing as it seems, this somewhat whimsical statement is both logical and true. And courtesy of the recent Charles Schwab ‘Money Myths Survey’ it appears the message relates to finance as much as whether Iraq had weapons of mass destruction.
The survey found that no matter how knowledgeable we believe we are, there are still a lot of financial misconceptions. Forbes reports that Carrie Schwab-Pomerantz, senior vice president at Charles Schwab and president of the financial education focused Schwab Foundation, claims “People want to make good decisions about money and many believe they’re on the right track with their finances, but often they just don’t know what they don’t know.”
In fact it appears the people with over confidence are the very ones who are misinformed. Whilst Charles Schwab is a US company and the survey is very US centric, many of the ‘myths’ hold true in Australia as well. If you’d like to see how you fare, visit the survey results here. The Myth that stood out to me was number 3 – If you need more money in retirement you can just get a job. 79% agree with this statement, but only 4% of retirees end up doing it.
The one key message that need to be known is that no matter what you know or don’t know (whether known or unknown), a suitably educated and experienced financial planner probably knows more about tax minimisation strategies, wealth creation and prudent portfolio construction than you.