Most educational systems do an abysmal job, if any job at all, in teaching young people about personal finance. Beyond that, many people growing up are not afforded good examples of sound money management at home, given the fact that many parents are dysfunctional around money.
People very often feel uncomfortable in carrying on discussions about money, sometimes to the point of embarrassment. This can be chalked up to the generalized feeling of vagueness that seems to pervade much of the population when it comes to personal finances.
Just by way of example, not much in the way of sane thinking seems to exist when it comes to using credit cards. In 1992, in the United State alone, the credit card debt nationally was $273 billion. As of 2007, has swollen to more than $800 billion and shows no signs of slowing down. Statistics establish that the average American household has over $9,000 in credit card debt. All too often people use credit cards without a clear idea how mounting balances will be paid back fully in a timely manner.
Relatively few people can accurately and truthfully answer even basic questions relating to their personal financial situation, such questions as:
1. Do you know what your account balances are? This pertains, among other things, to bank and savings accounts, brokerage accounts and loans, all of which are part of almost everyone's personal finance landscape.
2. Do you know what interest rates you are paying on such things as credit cards, home equity loans and auto loans?
3. Do you know what the terms of payment are on loans and other contractual obligations?
4. Do you have a plan for setting aside funds for payment of taxes, retirement contributions and other irregularly recurring items? Do you react with surprise when they come due?
5. Do you have a budget which you actually live by?
These are very sensible questions. Those who can answer them in the affirmative without breaking a sweat are in a definite minority.
One thing is certain. Banks and other financial institutions in the business of granting credit know that the majority of people do not have a clear grasp of their personal finances. They implement ways to prey upon this societal vagueness with hidden charges and fees that rarely are questioned.
If the questions posed earlier make you feel uneasy, you might be well advised to come to grips with whatever vagueness and lack of clarity you have around your own finances. One thing is certain. Getting a grip on this part of your life will yield many long term dividends.
Robert G. Knechtel operates a number of websites, many covering financial matters, including
Personal and Business Finance- FinancialNotebook.Com,
Bring Sanity to Using Credit Cards - CreditCardSanity.Com and
Guide to Secured Loans - SecuredLoan101.Com.
