What does financial competency look like? What are its fundamentals? Everybody wants to be competent, especially when it comes to competency with money.
In this episode of the Finance for Physicians Podcast, Daniel Wrenne talks about the components of and how to gain financial competency.
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Hello, hello. I hope everyone's doing well today. I was reading an article recently about competency, how to gain it, or what the different components of it were. I thought it was really interesting. The article was not about finances, but I thought it would be great to explore financial competency and what that might look like.
That's what I wanted to talk about today. Going through what financial competency looks like. I think this is really important as far as fundamentals go. Everybody wants to go in that direction. Most people at least like the idea of competency with money. Exploring this, I think, will be helpful at a minimum as a refresh in some of the concepts. That's what we're going to dig into today and we'll get that going now.
For starters, what is competency? That would be, as you might think, the ability to do something successfully or efficiently. This article I was reading was breaking down those components. There are three main components. Number one was knowledge. What is knowledge? Knowledge is what is known of a particular subject. It's kind of theoretical. That’s like the book smarts.
The second component is skill. That would be the ability to do something. You're applying that knowledge to a specific situation. It's developed through experience and practice and is very much practical. The third component of competency is behavior. That would be like the way a person acts in response to a particular situation or stimulus, particularly in respect to others.
Behavior, skill, and knowledge are all necessary components to gaining competency in any given subject. If you think about people that are highly competent in something, you're going to notice they should be solid in all of these three areas.
I thought that was a good order, knowledge first, then skill, then behavior. I think you have to gain that knowledge first or at least some level of it before you start to work on the skill. Then when you get to the final level, it's like fine-tuning those behaviors and being aware of those. You got to learn the subject, you got to do it, then you got to learn those associated behaviors. I think that's a good order to follow for starters.
Some people have gained some knowledge but they're definitely not yet competent. Say you're a baseball wiz or something like that, but you can't actually play baseball or maybe you're a baseball wiz and you can play baseball really well. You can hit home runs all day long...
