5 Warning Signs That You Might Be Financially Illiterate

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?

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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49 Comments on "5 Warning Signs That You Might Be Financially Illiterate"

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KC @ genxfinance
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KC @ genxfinance

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.

Trevor
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Trevor
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… Read more »
Jacob Lumby, PhD
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Jacob Lumby, PhD

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

SarahN
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SarahN
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… Read more »
Brick By Brick Investing | Marvin
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Brick By Brick Investing | Marvin

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.

Canadian Budget Binder
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Canadian Budget Binder

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

Justin
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Justin

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 Lumby, PhD
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Jacob Lumby, PhD

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…

Mark Adam Douglass (Minimalist Couple)
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Mark Adam Douglass (Minimalist Couple)

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.

Eric
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Eric

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!