If I gave you $300,000, would that be the key to solving your financial challenges?

If someone asked me that question, the smart-ass in me would quip, “Well, it wouldn’t hurt.”

OK, it would help, but would it solve your money problems? Probably not.

While a large chunk of cash would take care of a few challenges – knock off credit card debt, pay off the mortgage, etc – it wouldn’t make as much of a difference as you might think unless you have a key factor in place: the skills to ensure a lasting improvement in your situation.

Let’s backtrack and ask a fundamental question: What does it take to solve a financial problem?

Resolve? Yes.

Action? Of course.

Accountability? No question.

But there’s something else, and that key “something” is skills.

I’ve just finished reading two books that illustrate the importance of having the right skills when it comes to success. The first is Ash Maurya’s Running Lean: Iterate from Plan A to a Plan That Works, a business book about creating successful startups – how to develop a product or service that has traction and solves the right problem. I found the following gem in there:

“Money is an accelerant, not a silver bullet. It lets you do more of what you’re currently doing, but not necessarily do it better.”

Maurya points out that if you simply throw money at a small business that isn’t solving the right problem in the marketplace, it may well burn through the cash and be no further ahead. Money alone doesn’t make a business viable; founders with the right skills and the right approach do. First, find the right problem/solution combo, then match the resulting product/service to the right market, and you’re off. Money can accelerate the rate of growth for the right business under the right circumstances.

Now consider the second book, So Good They Can’t Ignore You: Why Skills Trump Passion in the Quest for Work You Love, by Cal Newport. Newport systematically tears apart the notion that passion is a good, or even effective, guide when it comes to choosing fulfilling work that meets your most important criteria. He uses multiple case studies to show that developing valuable skills is a key component to achieving success in the workplace, whether as an employee or an entrepreneur. A killer opportunity is wasted if you come to the table without the right skills in place.

It’s all about skills.

Back to money

If simply having more money were the solution to financial problems, then we would expect high-earners to be free of any issues, since they bring in ample cash flow every month. We all know that’s not the case.

In ten years of providing credit counseling through my former business, I can confirm that many of the highest earners – that is, those with more than $150,000 of family income – also had the biggest credit challenges: maxed out credit cards, six-figure lines of credit, outstanding tax bills, collections, and more lifestyle than they could afford. The more cash they made, the more they spent, and the bigger the resulting financial hole.

For specific examples, look up the backstory on Nicolas Cage or Kim Basinger, two among many celebrities to have made millions, then gone bankrupt.

An influx of cash is only really helpful when you know what to do with it, and that boils down to having the right financial skills in place to get yourself out of a tight spot and/or to a good place.

What kind of skills are most helpful?

• Planning: knowing how to live within your means, spending much less than you earn
• Saving: knowing how, and how much, money to set aside in emergency funds and discretionary spending accounts
• Borrowing: understanding how credit works and knowing how it can harm or help you
• Investing: understanding why growing your money is critical to your present and future well-being
• Investing, part 2: knowing how to do it and how the system works, even if an advisor does it for you (or perhaps, especially if an advisor does it for you)
• Investing, part 3: understanding the basic factors that have the biggest impact on your future returns
• Decision-making: being aware of human biases that cause so many people to make poor choices that damage their future returns

Newport recommends setting aside regular time for what he calls deliberate practice; that is, time spent building valuable skills that you can then leverage to obtain better results for yourself. When it comes to personal finance, you can develop the skills listed above in just a couple of hours per week on a consistent basis. If you’re tempted to use time constraints as an excuse not to grow your financial skills, don’t. I’ve already illustrated why that’s a cop-out here.

Consider the following from Barbara Stanny’s eBook So You’ve Made Good Money, Now What? Stanny grew up wealthy, then lost her fortune at the hands of a gambling husband, then built it back up again by herself. Here’s what she had to say about how she pulled it off:

I knew I had to get smart, but how? I was a single, working mom, trying to have a life, juggling a gazillion different balls…. So, out of desperation, I devised a three-step system…. That’s when I discovered it doesn’t take a lot of time to get smart:

1. Every day, read something about money.
2. Every week, have a conversation about money.
3. Get support.

Stanny recommends taking a class, joining a study group, participating in a financial book club, or hiring an experienced coach. These are all good suggestions, but for even better results, consider Newport’s advice and take a “deliberate practice” approach to your learning. Whatever you do, start somewhere and reach out to me if you hit a stumbling block. I’m here to help.

If you feel overwhelmed or daft because some of it seems impenetrable, remember that most women feel that way, too. We all start there. Keep going and stay focused on the goal: growing your skills to create better options for yourself.

(Quick note: Links to books in this post are affiliate links, which means I am paid a small commission if you buy using that link. There’s no extra cost to you and it helps to fund my work. I only recommend books I personally own and love.)