They say that “Knowledge is power”, but is it really? And if knowledge isn’t power, then what is?

Knowledge is only potential power

Think about something you know you should or shouldn’t be doing. Is that knowledge powerful enough to make you do the smart thing? For example, we all know that smoking will eventually kill you, but some of us still choose to smoke. Other common pearls of wisdom that don’t always result in action are “eat a balanced diet”, “everything in moderation”, “don’t drink and drive”, and the list goes on.

So really, knowledge is only potential power until you act on it.

Saving for a rainy day

Since I was young, I knew saving was important but I didn’t really understand it. I mean, as a child, all your needs are cared for by your parents. Rainy days don’t really exist. When I was 22 my dad lost his job. At the same time I was about to start my first degree. In my country you have to pay for your degree upfront. No money = No degree. My parents had generously offered to help me pay 75% of my degree, but my dad losing his job definitely put a spanner in the works. My parents were still committed to helping me financially, but it would happen later than planned now.

I had been working hard and saving towards my degree for about a year by then. But I had been saving for 25% of my degree. Now I had to save for 100% of the costs. All the other things I had spent my money on didn’t seem so important anymore. I wished I had saved more. That experience was a turning point in my money personality. I became much more of a saver. In fact, you could probably call me a bit of a hoarder. In any case, you can be sure that I understood “saving for a rainy day” after that, and implemented it seriously.

What does this have to do with my money situation?

When you think about it, you really only need to do three things to improve your financial situation:

1. Spend less than you earn
2. Pay off your debt
3. Invest the rest wisely.

It’s not rocket science. But putting these simple rules into practice is easier said than done for some of us.

Knowing what to do with our money isn’t enough. We also need to have an action plan that takes into consideration our money personality, habits and triggers as well as the motivation to stick to the action plan. If you’re wondering what a money personality is, you can find out more about that here.

In a nutshell

If you don’t do what you know, then you don’t understand it. And understanding something is what leads to wisdom.

For example, we may know who or what irritates us, but we may not know why. Unless we choose to delve deeper into ourselves and understand why we feel this way about certain people, we will constantly be in a state of irritation around them. We frustrate ourselves and limit our ability to interact with them in a meaningful way.

Is there something in your life right now that you know but don’t understand? Perhaps you know you’re not in a good financial position, but you don’t understand why. Perhaps you know you should be saving more, but you don’t understand why you keep splurging on things you don’t need. Perhaps you know you can’t stick to a budget, but you don’t understand why.

Often when we don’t understand why, we say “it’s too hard”, or “it’s not for me”, or “it’s just who I am”. Using our genetic makeup or personality as a reason to stay knowledgeable but unwise is probably one of the most common and limiting lies we tell ourselves.

Ask yourself, is there something you know but don’t understand? How would your life change if you understood it?