When I think back about how much money I wasted by being utterly aloof about my personal finances, I cringe, and then get a strong urge to slap myself upside the head. But instead of dwelling on my past mistakes, I’ve decided to share them so maybe you can avoid them or help someone else get back on track.
I’m one of the lucky ones. I had my wake-up call early on in life, at the age of 22. Sometimes it takes a good friend (in this case my loving husband) to encourage change. During my young adult life, I thought I was pretty good with money. I rarely bought items at full-price, I ate for free as much as I could, and I shared clothes with my roommates instead of shopping.
Then I got married…
5 Warning Signs that you are Financially Illiterate
1. Do you know the interest rates on your loans?
If you answered no to this question, you aren’t alone. I had no idea what my interest rate was on my school loan, and for that, I ended up paying over $1,000 in interest on a $6,500 loan. UGH! Find out what you are paying (or will be paying if it is a student loan) and start making payments on that puppy right away, and avoid all loans possible in the future.
2. Do you know the hidden costs of your banking accounts?
I failed to read the fine print and to check my bank account closely every month. My bank was taking an $8 “holding fee” every month because I didn’t have the minimum amount in the account. So after 6 years at $8/month, I lost about $576. The worst part is that I could have avoided this entire account trauma by switching to one of the many free account options.
Always double-check the fine print.
3. Do you know how much you currently contribute to your 401K account and what percentage your company will match?
I had no clue. I just signed up for whatever the HR rep told me was normal. Then Jacob looked over the 401K and discovered that I was paying a super high expense ratio on a set of pre-selected mutual funds and they were charging me a few other silly fees. We adjusted the investments, and made sure we were contributing enough to receive the full employer match, but the damage had already been done. If you can’t do this yourself, try to find a friend who can help.
4. Do you get cash back on your credit cards?
I wasn’t getting cash back at all paying with a debit card. I thought that credit cards were for people who spent a lot of money, and so I foolishly ruled myself out. I could have been getting cash back the past 6 years. Instead, I let the darn credit card company keep it all. Be sure that once you sign up for a cash back credit card that you:
- Pay it off each month to avoid interest penalties
- Go online and actually SIGN UP for the special offers every quarter. Just because you have a cash back credit card doesn’t mean you reap all the possible benefits.
5. Do you know how much you pay for utilities and how to reduce the cost?
I have lived in an apartment for the past 2 years and I NEVER looked into trying to reduce the costs of my utilities. I now know that there are water saving faucet and shower heads, energy saving light bulbs, and windows that help ventilate your space instead of the AC/heater. Ok, super sarcastic on that last one, but if I would have had the brains to make small changes on my utility consumption, who knows how much money I could have saved.
So, how’d you do on those 5 questions?