Photo courtesy of Geraint Otis Warlow

Personal finance is a journey. Most of us start out in the real world, in our first job, with little knowledge about how to manage our money. At some point along the way we realize that it’s important and we start seeking out information on how to do it.

But it’s not like there’s an on/off switch. We can’t go from nothing to world-beating personal finance ninja overnight. It’s a process.

Each part of the process is important. Each one makes us smarter, stronger, and prepares us to take the next step. And if you can make it all the way through, you’ll find yourself in that perfect situation where your money is actively helping you create a happy life.

So today I want to talk about that process by introducing what I think are the three stages of your personal finance journey:

1. The Avoider
2. The Adherer
3. The Adapter

The Avoider

The Avoider is someone who isn’t dealing with the important parts of his financial life. It could be out of neglect, or it could simply be out of a lack of knowledge. It might be he’s ignoring everything, or it might just be certain parts.

In any case, The Avoider can only last so long before one of two things happens:

• He realizes that he needs to start taking control of his situation, or
• Years down the road he finds himself without enough in savings and/or too much in debt

Most of us start out as an Avoider, even if it’s only because we haven’t been taught another way. So there’s no shame in it. The only question is whether we’re able to take the next step.

The Adherer

The Adherer is usually a converted Avoider. The Adherer realizes he needs to get his financial life in order so he seeks out rules and advice. He learns all about what he’s “supposed” to do and goes about doing it.

He creates a system for managing his money. He learns how to invest. He even dives into some of the drier subjects like building an emergency fund and buying life insurance.

Because he’s learning how to do it for the first time, the Adherer does it all by the book. He finds some advice that he likes and he tries to follow it to a T.

This is an important step with some really good outcomes:

• He learns the ins and outs of managing his money
• He forms good habits
• He sets himself on the right path to financial success

But the Adherer is missing one important piece.

Sticking to the rules can set him on the right track, but they can’t help him answer the hard questions, the ones that really matter:

1. What does he want out of life?
2. How can he use his money to make that life a reality?

There’s no rulebook with answers to those questions. It takes a different kind of approach.

The Adapter

The Adapter has learned the rules of the game and she knows how to follow them. But she knows that the rules aren’t enough.

Most importantly, she knows that the “rules” are more like guidelines, and that some of them will have to be broken if she’s going to create the life she truly wants.

First, the Adapter gets the big things in place. She automates her savings. She gets the right insurance. She builds an emergency fund.

But once those big things are handled, she isn’t afraid to get a little creative in pursuit of her goals.

The Adapter knows when to temporarily stop saving for retirement so that one parent can stay home with the kids.

She knows when to raid the emergency fund in order to pursue a dream job.

And she knows that living withing your means doesn’t have to mean giving up your morning coffee.

She sees money for what it is: a tool that can help her lead a happy life. So she goes about using it for just that purpose, no matter what the rules might say.

Where are you on the journey?

Each of these stages teaches us important lessons and helps us to reach the next one.

The Avoider learns the negative consequences of ignoring his finances.

The Adherer learns the positive consequences of taking control of his financial situation.

The Adapter uses all of those lessons to create a financial plan that helps her reach her most important life goals

Where are you on the journey? And most importantly, what’s one step you can take that will get you closer to the next stage?