As many of you know, in addition to teaching financial literacy and money management classes, I also teach test prep for post-secondary education admission exams (i.e. for college and graduate school). While these two subjects may not, at first glance, seem to have much overlap—except for, perhaps, a little bit of math—appearances are deceiving. They actually have much more in common than most people think. I’m not going to go into every single similarity between the two since umm, not interesting, but here’s a big one—there is a ton of decent, free or low-cost information out there about both subjects, yet people still spend A LOT of money for additional advice and support.
Here’s one important difference—unlike with money management, with admissions exams, you can’t offload all the work and responsibility … though people try … so I’ve heard.
Let me share with you one tip from the test prep world that will help immensely with your finances, among other things—the review log. The review log is a rather anodyne name for the all-my-effing-mistakes file—ideally, an Excel file—that I force my students to keep and update throughout their preparation. I love love loooooooove mistakes (yay, mistakes!). And I don’t call them learning opportunities. My students aren’t stupid. In a tutoring session just today, my student, after getting the wrong answer on a problem, said, I’m so glad I did that. Now I know for the test.
And what’s the test you’re prepping your money management skills for? Only the rest of your life.
The review log essentially records four things—the mistake that happened (e.g. I missed this problem or … I took out too many student loans to go to that prestigious, private college), why it happened (e.g. the problem said greater than but I wrote down < or … I thought the brand name degree would be worth it), what broad takeaway or principle you can use next time you are faced with a similar situation (e.g. always double-check inequality symbols or … do my due diligence, run the numbers, and don’t believe the hype), and lastly, evidence that you learned your lesson.
As George W. Bush once famously said, Fool me once, shame on — shame on you. Fool me — you can’t get fooled again.*
For my students, the last item on the review log often comes from a subsequent, more successful re-do of the problem. For financial matters, where mistakes are frequently of the why-did-i-do-this-period variety, the evidence for learning your lesson may be a bit more elusive. How do you record something … not happening? Maybe as easily as starting entries with, I did not fall for the bright, shiny sales pitch for …
Finally, one of the best things about a review log is how unique it is to you. None of us have the same tendencies or blind spots or weaknesses when it comes to our finances. A review log lets us see where our idiosyncratic mistakes come from. Read through it every so often (*cringe*) or filter for certain words—it is an Excel file, right?—in the why it happened column. It’s no coincidence that I will never again attempt to buy tickets to the hottest show on Broadway on the same day that I have a biopsy scheduled, a.k.a don’t make big purchases under stress.
Even better—cheaper—is if we could learn from others’ mistakes. Alas, I can tell you from test prep—that doesn’t work. So embrace those errors. Record ’em. Review ’em. And don’t do ’em again.
* For the record, the quote is, Fool me once, shame on you. Fool me twice, shame on me.