5 Warning Signs That You Might Be Financially Illiterate

Last updated on May 6th, 2017

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…

And I didn’t marry a Borrow or a Consumer. I married the money master. He is highly aware of all things dollar sign related, and I soon realized I was not as savvy as I had assumed.

5 Warning Signs that you are Financially Illiterate

1. Do you know the interest rates on your loans?warning signs

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? 

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  5. Reply

    I am proud to say that I am no illiterate. I have a plan to be debt-free and this comes with the awareness that I need to know what I’m getting myself into. How can I free myself from debt if I don’t have a clue about it right? Knowledge is power.

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  7. Reply

    A confirmed fail?! Uh oh. Don’t worry though. I was there too. Better late than never! We all have our wake up call at one point or another. Sounds like you’ve got a great start on the frugal lifestyle though!

  8. Reply

    I fail miserably here. Flat out, no excuse FAIL!

    I’m terrible with money. I have no idea how much I have or how much I spend. I can’t answer any of these questions. Fail. Fail. And FAIL!

    I only have 2 things going for me here . . . absolutely no debt. Zero. Zich. Nada. And I don’t spend money on frivolity. I may occasionally treat myself to a book, but that’s it. No cable bill (I trashed my TV), no eating out, no fancy gadgets. I live fairly spartan in my little red barnhouse.

    Still, I need to get myself turned around in this matter. No more excuses.

    Thanks for the kick in the ass!

    Cheers!

      • Jacob
      • April 19, 2013
      Reply

      Trevor, I love that you’re so openly admitting the problem! Pretty inspiring stuff man!

  9. Reply

    I’ve just given Jacob a heart attack with my spending on shoes, but..

    1. Yes it’s 6% (reality is it’s less, I signed for 6% on my mortgage, but when it ‘settled’ it was 5.8% bonus!)

    2. I have none. Seriously. Legacy from my father being an employee when I set them up. I had up to 13 accounts when I blogged about it (now down to about 10 I think), none of them I pay fees on

    3. I contribute myself $50 per week. My employer does 9% and then another 6% on top (ok i had to check my pay slip re: 6% as it’s been ratcheting up annually for years, but it won’t go any higher than a total of 15% that it’s at now)

    4. Nope. But then I don’t have fees for the rewards on my credit card. I’m OK with this.

    5. Yep, I track them all annually. Water bills are magic (ie not a factor of consumption). I turn off the power at the wall – we have switches there, unlike in the US. I rug up over using the heater – lucky Australia’s not that cold!

    • Reply

      Sounds like you’ve got it all under control! Good for you Sarah! 🙂 Those power switches sound like a great idea. I think there are a couple of those in my husband’s parents house, but I had never seen them before. “Rug up”? I like this phrase a lot. 🙂

  10. I use to think everyone knew this information, but the world still amazes. I can’t imagine how some people go throughout life not knowing their basic financial situation. We really need to start honing in on this younger generation and teaching financial literacy early on.

    • Reply

      Absolutely. It should be taught from elementary on up!

  11. Reply

    Great post Vanessa,
    It may seem odd to those that follow all of these to a ‘T’ and know how much they spend, interest rates, cost of bills etc but for others it’s serious concern. Many people either rely on the system or their significant other to do the work without understanding how much and why. The more effort we as individuals put into investing in our future and present knowledge the better our path will be. Thanks for sharing. Mr.CBB

    • Reply

      I agree! I think there is definitely too much reliance on the “system”. I bet there are also couples who both have no clue what is going on with their finances. Now THAT is scary.

  12. Reply

    Luckily I pass all of those questions. It amazes me how many people don’t know basic financial information that ends up costing them all sorts of cash. Especially banking/credit card fees.

      • Jacob
      • April 17, 2013
      Reply

      I don’t think they give it any thought at all. If you weren’t taught and you don’t like to learn, I can see how it happens…

  13. Forgiving yourself is one of the most important stages of moving on with your financial destiny. I know it took me quite a while, but remember the moment vividly.

    You are fortunate you learned at 22. It took me until 34. Oh how much I wasted… but I have moved on, looking forward instead of dwelling on the past.

    I too was intentionally ignorant of many facets of my financial life. I have now become super aware, and thank you for reminding me of a couple I haven’t been so vigilant about.

    • Reply

      So glad to help, Mark! If you don’t mind sharing, I’d love to know what your wake up call was.

    • Eric
    • April 17, 2013
    Reply

    I’m all over #5. Our recent electric bill was only $32. I’m pretty and have USAA as a bank, the best bank in the whole wide world, who even get you ATM rebates!

    The 401(k) is a great call. Lots of millennials don’t take advantage of their company’s 401(k) offerings or don’t understand them when they do. A woman I work with was contributing 15% at one point and had no idea why her paycheck seemed off. She had a nice little bundle saved before she corrected it though!

    • Reply

      Ha! I hope you helped that lady at work figure out what was going on! Nice going on the electric bill by the way.

  14. Reply

    I love this! I think my wife would agree that I’m definitely the money master in our relationship, but then I did go and blow the budget on presents today for our 6th wedding anniversary. Great post Vanessa.

    • Reply

      Ha! Jacob is the money master, and I’m the apprentice. Learning more every day though! And congratulations on your 6 years of marriage! We have only been married one month. 🙂

  15. Great post. I was always pretty good with everything you listed above but ever since beginning my blog, I felt like I have gotten even better. After reading other’s blogs, it has really helped us out. The most difficult one for me is the utilities because they fluctuate throughout the year but I do know how to reduce them.

    • Reply

      That’s what is so great about the blogging community. You find out all kinds of better ways to save money than you would have thought of before. 🙂

    • Greg @ ThriftGenuity.com
    • April 17, 2013
    Reply

    Whew, I got nervous before reading this. I passed, but I don’t know that my younger self would have. I definitely agree with the cash back cards. Specifically, I had a mileage card before, but found I could get much better flight deals on my own and was way better to just get cash from my credit card than other “perks”.

    • Reply

      Oh definitely! Take the cash back every time. You’ll be a much better steward of your money than anyone else will be. Glad to see that you passed and you’re on to bigger and better things!

  16. Great tips, Vanessa! Reading through the list, I could imagine many young people going “no”, followed by an “uh-oh”. Of course, there are probably a few older people going “uh-oh” too. 🙂 Even though you may have wanted to give yourself a “head slap”, you’re incredibly fortunate to be so financially savvy at such a young age. So few are and instead are driving themselves deeper in debt. Thank you for participating in the carnival and sharing your story. I appreciate it greatly!

    • Reply

      I definitely know people my age who would bomb this quiz. I am in my last semester of college, and listening to the people sitting behind me in class talk about their lifestyle or financial situation is always eye opening. Thanks again for including us in this carnival!

    • anna
    • April 17, 2013
    Reply

    Great list, and also great that you learned early on in life! I’ve definitely wasted a lot of money on interest and it took someone more financially savvy than me to tell me to wake up, as well. Better late than never, I suppose.

    • Reply

      Absolutely. Still, it is so frustrating to think about all that lost money. I’m choosing to learn from it and move on.

  17. Reply

    I can relate to that feeling of embarrassment as I too was in that stage. I am so thankful for the wake up call I got and that I have been able to move on. I love the list and would say that I am on top of all of the ones that apply to me, thankfully. 🙂

    • Reply

      That is good news. If you don’t mind me asking, what was your wake up call? An ah-ha moment, or a friend telling you to wake up?

  18. Reply

    I wish I’d woken up as young as you did! I’d add car loans to your list. If you get a loan for a car, you’re definitely financially illiterate.

    • Reply

      I agree Pretired Nick. Cars are such a touchy subject amongst my friends and I. Some have them/need them for work and others for pleasure. The one thing most of them have in common is a car loan. Just one more thing thats tough to know if they really can afford it!

    • Reply

      Oh my word, Nick! You’re right. I totally forgot about that. I already paid my car off, and fortunately Jacob got as much out of it as I paid for it. But yes, I definitely screwed that up too. So I guess it is 6 ways I was financially illiterate.

  19. Reply

    Oh boy, Vanessa. Thank you, I think.

    CJ, where are you going??? To get one of those shower heads Vanessa mentions, you say?

    In all seriousness, thank you for using humor and rationalism to help us all.

    • Reply

      Well, stay tuned CJ and Tammy! I believe Jacob has a whole article on water saving tricks coming your way soon. 🙂

  20. Reply

    Good list. Prior to 5 years ago, I didn’t know much about my finances. I knew my minimum payments on my cards and that was about it. I didn’t know how much I was spending, but that all changed when I took my head out of the sand. It is eye-opening when you finally take the time to look at your debt head on. It helps come up with a plan when you know where you stand.

    • Reply

      Did you have an, “oh my word, what have I done?!” moment when you finally took your head out of the sand? I sure did. I think the fear of knowing is what keeps a lot of people in the dark about their spending habits. It’s the, “if I don’t know about it, it doesn’t exist” syndrome. But we’re here to help people realize that, indeed, a plan needs to be put in place.

    • cj
    • April 17, 2013
    Reply

    What a post! Vanessa, how brave and honest to use your past self as a non-example. We too, had to do this in order to move forward with our finances. “have places I would like to put that long lost mother lode of wasted cash” This concept of yours is so very important too. We save money not to simply save, but to put that money where it really matters, where it will fulfill us, where it has the best chance of creating meaning and happiness in our lives.

    • Love this! And agree with Vanessa – “creating meaning and happiness” is a great philosophy to live by. I find it’s not how much money you have, but what you “do” with your money that truly matters.

      • Reply

        Absolutely, Shannon! “It’s not how much money you have, but what you “do” with your money that truly matters.” — This sounds like a Facebook status waiting to happen. 🙂

    • Reply

      Absolutely, CJ! I like your phrase “creating meaning and happiness.” That’s a wonderful thing to strive towards.

    • Brian
    • April 17, 2013
    Reply

    I was lucky to grow up in a family that kept me from really making mistakes 1 – 4. We are currently working on #5. As light bulbs burn out we replace them with CFLs (and it some cases LEDs like my outdoor floodlights). We replaced out 25ish year old furnance a few years back and that saved us a ton and has already paid for itself in savings! We also added more insulation to our attic and that has also helped out a lot.

    • Reply

      Brian, thank you for those extra tips. We are not homeowners yet, so we will make sure to implement them when we are.

    • Pauline
    • April 17, 2013
    Reply

    Interesting list. I would hate to not know the answer to that but can see that the majority has no idea about it. You need to make your money work for you, whether you have little or a lot, otherwise it is wasteful.

    • Reply

      Pauline, where were you when I was 16?! I could have used some friendly advice like this. 🙂

    • CashRebel
    • April 17, 2013
    Reply

    Since I now consider myself fairly financially savvy, I love helping my friends with these types of issues. I’m always surprised by how people my age don’t even know their interest rates!
    In terms of utility bills, getting a programmable thermostat is typically the number one thing that will move the needle. And since they’re cheap, they typically pay for themselves in a few months.

    • Reply

      I think helping friends and family (if they want to be helped) is hugely important. So glad you do this. We have been looking into the programmable thermostats. Is there a certain one you would recommend?

  21. Great story, Vanessa. I thankfully have all 5 of those in place, and largely always have. Our screw ups were from one mistake only: thinking that stuff could buy us happiness – big UGH!!! Funny how one tiny little mistake can make such a big mess. GO FINANCIAL LITERACY!

    • Reply

      Thanks Laurie! I think everyone has their own mistakes that seem small but then add up in the end. I’m just glad we both figured it out eventually!

  22. Excellent post and I have 4 out of your 5 items all sorted – with the 5th being credit cards which I don’t use.

    • Reply

      That’s great, Glen! I love to hear it when people are more on top of things than I was.

 

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