One of the toughest parts of writing Your Money: The Missing Manual (and writing Get Rich Slowly every day) has been the constant feeling that I don’t know what I’m doing. I’m an accidental personal finance “expert”. I have no formal training in this stuff; instead, I’ve just read tons of books, blogs, and magazines, and have listened to other people’s stories. I know the things I’ve done worked for me, but how can I be sure they’ll work for other people?

As I wrote recently at my personal site, I’m filled with doubt every day. Every day, I expect to fail. I feel like a fraud. And yet the feedback on both the book and the blog is nearly always positive. Every week, I get e-mail from folks who thank me for helping them turn their financial lives around. How can this be?

I haven’t been able to reconcile these two things — my self-doubt and the actual good my writing seems to be doing — until today. At The Blog of Steve Schwartz, the author recently wrote that he, too, has felt like a fraud. So has his girlfriend:

I recently had a conversation with my girlfriend (going to school for her nursing degree) when she expressed her confusion with some praise she had received from her professor. Her professor had told her that she was the best nursing student she had had in years. “But how the hell could that be true?” she asked me.

See, she sometimes struggles studying, is often worried about doing poorly on exams, and stresses about all of the things she doesn’t quite understand or can’t quite remember. At the same time, she sees other people stroll into test-time confident and carefree. She sees others never asking questions and always seeming to just “get it”. By comparison, how could she possibly be any professor’s “best student in years?”

Schwartz says the secret is nobody knows what they’re doing — it’s just that some people don’t know they don’t know. And when you don’t know that you don’t know, it’s easy to become over-confident, and that’s dangerous. Schwartz says there are three types of knowledge:

  • Stuff you know. For me, this includes why index funds are good for most investors, where to open a savings account, and how to open a Roth IRA. This slice of knowledge is by far the smallest for everyone.
  • Stuff you know you don’t know. For me, this includes how the commodity market works, the math behind index funds (I know it’s there, but I can’t explain it very well), and just about anything related to student loans. This size of this slice varies depending on the person and the subject. In most cases, the more you stuff you know, the more you realize you don’t know.
  • Stuff you don’t know you don’t know. By definition, you can’t possibly know what’s sitting in this category. You may eventually learn it (less than four years ago, I’d never heard of an index fund), but for now, you don’t even know the knowledge exists. This is by far the biggest category of knowledge for all of us.

Schwartz argues that if you feel like you don’t know anything, if you feel like a fraud, it’s not because your “stuff you know” slice is small; it’s because your “stuff you know you don’t know” slice is large. And that’s a good thing.

And so that’s the issue I’ve been facing for years: The more I read about money, the more I know I don’t know, and the less confident I feel. I find blind spots I never knew I had! The more I wrote Your Money: The Missing Manual, the more distressed I was at the stuff I had to leave out. I wanted the book to be a complete guide to personal finance — and it wasn’t.

I’ve come to peace with that now. Not even Get Rich Slowly is a complete guide to personal finance, and this site probably contains more than a million words on the subject (and millions more in the comments from you folks). How could a book of 100,000 words possible contain all the answers? It can’t. So, I’ve done my best to point readers to places they can get more information.

What’s the bottom line here?

  • First, it’s okay to feel like a fraud; it means you recognize there’s more to learn.
  • Second, don’t be afraid to ask questions. I preach this all the time, and it’s important: If you don’t know, ask.
  • Finally, it’s more important to move knowledge from the “stuff you don’t know you don’t know” category than to move knowledge into the “stuff you know” category.

This last point is most important. There’s no harm in knowing you don’t know stuff; at least you know you’re lacking the knowledge, and you can look it up if needed. But when you’re completely ignorant, the stuff you don’t know you don’t know can really hurt you (and others).

[The Blog of Steve Schwartz: No one knows what they're doing, and an excellent follow-up discussion at Hacker News]

GRS is committed to helping our readers save and achieve their financial goals. Savings interest rates may be low, but that is all the more reason to shop for the best rate. Find the highest savings interest rates and CD rates from Synchrony Bank, Ally Bank, GE Capital Bank, and more.