5 Warning Signs That You Might Be Financially Illiterate

September 21, 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?

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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Money Bulldog
Money Bulldog

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.

Alan@escapingmydebt

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.

Greg @ ThriftGenuity.com
Greg @ ThriftGenuity.com

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”.

Shannon @ The Heavy Purse
Shannon @ The Heavy Purse

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!

anna
anna

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.

John S @ Frugal Rules
John S @ Frugal Rules

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. 🙂

Pretired Nick
Pretired Nick

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.

Russell Matthews
Russell Matthews

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!

Tammy R
Tammy R

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.

Grayson @ Debt RoundUp
Grayson @ Debt RoundUp

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.

cj
cj

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.

Shannon @ The Heavy Purse
Shannon @ The Heavy Purse

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.

Brian
Brian

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.

Pauline
Pauline

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.

CashRebel
CashRebel

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.

Laurie @thefrugalfarmer
Laurie @thefrugalfarmer

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!

Glen @ Monster Piggy Bank
Glen @ Monster Piggy Bank

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

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