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The limit to greater financial literacy isn't in the lack of availability of short "tip lists" like this. It's in the willingness of people to research, learn,

The limit to greater financial literacy isn't in the lack of availability of short "tip lists" like this. It's in the willingness of people to research, learn, and change behaviors. It doesn't help that you'd be lucky to encounter any financial literacy education in public schools (in the US).

Mikeb85 11y ago
Part of it is that banks don't want you to have financial literacy. If you did, you likely wouldn't purchase most of their products.
- theseatoms 11y ago
  I agree. They make the rules, they write the fine print, they hide the fees, etc... Are there any consumer advocacy groups that represent the interests of consumers of financial services? Seems like that should be a thing.
  - superuser2 11y ago
    Obama's Consumer Financial Protection Bureau [0] and related initiatives provide an advocate in disputes with banks, limits and disclosure requirements on fees, etc. The CARD Act of 2009 also standardized credit card rate and fee disclosures. On the non-regulatory side, there's not much meaningful pushback against the big banks, but you can choose to opt out of them by banking with a local credit union (university, employer, city, etc.) or potentially an internet bank like Ally or Simple.
  - Mikeb85 11y ago
    It's not just fine print and fees. That's the least of our worries. It's more about the misuse of debt (line of credit for a vacation), taking on too much debt (furniture and appliances on layaway, and other such things), and inappropriate investment vehicles.
  - logfromblammo 11y ago
    From my limited knowledge of such things, I think it would be possible to set up a credit union where the "common bond" among members is the ability to spot banking practices hostile to banking customers. If all the members know how to spot a scam, it is unlikely that anyone would vote that everyone should try to run one on themselves. Excerpt from the membership application exam: ... B) Take the lower rate with the higher monthly payment. C) Buy a used car that is about 2 years old instead. 22. Your bank offers to upgrade your debit card such that, for a fee, a transaction that would ordinarily be declined--or a check that would have bounced--is instead approved. How do you react? A) Wow, that sounds convenient. I'm in. B) If I wanted credit, I would have used a credit card. C) If I can't opt out, I'm closing my account. 23. You need $40 in cash. Your bank does not have any no-fee ATMs in the area. A) A fee is no big deal. Withdraw $40 and pay $3. B) Withdraw the maximum, to minimize the percentage lost. C) Buy a pack of gum with debit and get $40 cashback. D) As in C, but also return the gum for a refund. 24. Your bank offers...
    - beambot 11y ago
      The Credit Union would end up with so few members and so few persistent deposits (since all your smart members would immediately transfer assets into investment accounts, muni bonds, and ETFs), that the Credit Union would operate in the red... costing all the founding members dearly, both in time and money, when the Credit Union goes into bankruptcy. It turns out that the smartest folks, who saw through the charade, were thrown out with the bath water by not joining to begin with. ;-)
- johnward 11y ago
  I know there is a personal responsibility part of this but banks end up prying on the financial illiterate. Somehow my wife has a student loan with 12% interest. I'm not even sure how that happens. I also don't understand how interest rates are so low but CC interest is so high. They are basically borrowing free money and then charging people 29% on it.
  - charlesdm 11y ago
    CC interest is high because: 1. Most people pay off the balance each month; the people who don't _really_ need the credit. 2. The default rate of those people is probably (very) high. Given a default means a bank loses their capital, they need to make it back somehow. Also, a student loan with 12% interest? If the loan still carries a significant balance, she should refinance at a much lower interest rate (pledge some collateral if you have to, like a car/house/existing share portfolio).
  - icebraining 11y ago
    I'm not saying it justifies the whole 29%, but CCs have a much higher rate of default, which leads to higher interest rates.
pbreit 11y ago
But that's the thing: research and learning are unnecessary. Just change your behavior. Which is easier than people think. Just do it. As far as this card goes, it's spot-on. I would put "pay off your credit cards" at the top of the list. You should not invest a nickel until you've paid off all your credit cards (and any other debt where you're paying more than 10% interest).
- charlesdm 11y ago
  I doubt the people who have significant credit card debts (and are paying 10% interest p/a) are investing. They're probably spending.
  - pbreit 11y ago
    There are tons of people who carry credit balances who also have money in stocks, bonds & mutual funds. They don't equate paying off 15% credit card balances with a 20-25% stock gain.
  - logfromblammo 11y ago
    They may be investing indirectly, like with their 401(k). People with significant credit card balances may be paying 15%, 18%, 25%, or more on them. Even with the tax advantage of the retirement account, it's better to suspend contributions and pay off debt. Assume you're in the 25% tax bracket. If you have a $100 debt accruing interest at 24.99% for 10 years, you end up owing $931. If you have $133 in a pre-tax account earning at 7% for 10 years, and withdraw it and pay 25% in tax on the $262, you have $196 left. You don't have to be a genius to figure out that still leaves you $735 in the hole, which is far worse than paying the tax on your $133 paycheck up front and using the $100 to pay off your debt instead of investing it. As it turns out, your interest on debt doesn't need to be nearly that high. If you owe at 10% and invest pre-25% tax at 7%, it still makes sense to stop investing entirely until paying off the debt.
rconti 11y ago
Discipline. As a full-time employee, I more than doubled my take-home pay between 2006 and 2015. In that period, my spending didn't go up. Actually, it went down, because I paid off my car. In the process, I paid off credit cards, student loans, and managed to increase my standard of living. I remember after a big pay bump (job change), noting that my take-home pay going into my primary checking account was unchanged from what it had been 6 years prior, because, almost without thinking about it, I went from single-digit 401k contribution to maxed out, and doubled the amount that went into my medium-term savings/investment accounts. It just seemed natural; I'll be making more, time to save more. It was essentially a coincidence that the take-home number remained the same. This is not to say it's so easy for everyone; everyone has different circumstances. My point is more that there are so many people NOT doing this for whom it WOULD be easy.
- pmorici 11y ago
  Once you get in the habit of spending too much or god forbid run up a large credit card debt I can see how it might be hard to return to a lifestyle of frugality akin to the difficulty of quitting smoking or a morning coffee habit. I do agree that discipline is the name of the game though.
  - rconti 11y ago
    Absolutely. Habits are hard to quit. For me, it's the "time to spend" habit. I put off making a big purchase, but once I do (say, building a home theater system or something) it becomes easy to just keep spending on it because you've already mentally committed to the project. All fine and good so far. But then you notice something else you 'need' or that's wearing out, and you buy that without thinking about it. Then you buy another thing without thinking about it, because you're in the habit. Sometimes you need to do a spending detox after those splurges.
- johnward 11y ago
  It's taking me about 10 years but the last time I got a significant increase I did not actually increase my spending/lifestyle, which is a first. It's strange. I used to always imagine if I had X amount of money I would never be able spend it. Then when I got there it was so easy to spend it. I'm hoping to be in your position after I get some of my debt paid off.

Mikeb85 11y ago

Part of it is that banks don't want you to have financial literacy. If you did, you likely wouldn't purchase most of their products.

theseatoms 11y ago
I agree. They make the rules, they write the fine print, they hide the fees, etc... Are there any consumer advocacy groups that represent the interests of consumers of financial services? Seems like that should be a thing.
- superuser2 11y ago
  Obama's Consumer Financial Protection Bureau [0] and related initiatives provide an advocate in disputes with banks, limits and disclosure requirements on fees, etc. The CARD Act of 2009 also standardized credit card rate and fee disclosures. On the non-regulatory side, there's not much meaningful pushback against the big banks, but you can choose to opt out of them by banking with a local credit union (university, employer, city, etc.) or potentially an internet bank like Ally or Simple.
- Mikeb85 11y ago
  It's not just fine print and fees. That's the least of our worries. It's more about the misuse of debt (line of credit for a vacation), taking on too much debt (furniture and appliances on layaway, and other such things), and inappropriate investment vehicles.
- logfromblammo 11y ago
  From my limited knowledge of such things, I think it would be possible to set up a credit union where the "common bond" among members is the ability to spot banking practices hostile to banking customers. If all the members know how to spot a scam, it is unlikely that anyone would vote that everyone should try to run one on themselves. Excerpt from the membership application exam: ... B) Take the lower rate with the higher monthly payment. C) Buy a used car that is about 2 years old instead. 22. Your bank offers to upgrade your debit card such that, for a fee, a transaction that would ordinarily be declined--or a check that would have bounced--is instead approved. How do you react? A) Wow, that sounds convenient. I'm in. B) If I wanted credit, I would have used a credit card. C) If I can't opt out, I'm closing my account. 23. You need $40 in cash. Your bank does not have any no-fee ATMs in the area. A) A fee is no big deal. Withdraw $40 and pay $3. B) Withdraw the maximum, to minimize the percentage lost. C) Buy a pack of gum with debit and get $40 cashback. D) As in C, but also return the gum for a refund. 24. Your bank offers...
  - beambot 11y ago
    The Credit Union would end up with so few members and so few persistent deposits (since all your smart members would immediately transfer assets into investment accounts, muni bonds, and ETFs), that the Credit Union would operate in the red... costing all the founding members dearly, both in time and money, when the Credit Union goes into bankruptcy. It turns out that the smartest folks, who saw through the charade, were thrown out with the bath water by not joining to begin with. ;-)
johnward 11y ago
I know there is a personal responsibility part of this but banks end up prying on the financial illiterate. Somehow my wife has a student loan with 12% interest. I'm not even sure how that happens. I also don't understand how interest rates are so low but CC interest is so high. They are basically borrowing free money and then charging people 29% on it.
- charlesdm 11y ago
  CC interest is high because: 1. Most people pay off the balance each month; the people who don't _really_ need the credit. 2. The default rate of those people is probably (very) high. Given a default means a bank loses their capital, they need to make it back somehow. Also, a student loan with 12% interest? If the loan still carries a significant balance, she should refinance at a much lower interest rate (pledge some collateral if you have to, like a car/house/existing share portfolio).
- icebraining 11y ago
  I'm not saying it justifies the whole 29%, but CCs have a much higher rate of default, which leads to higher interest rates.

pbreit 11y ago

But that's the thing: research and learning are unnecessary. Just change your behavior. Which is easier than people think. Just do it. As far as this card goes, it's spot-on. I would put "pay off your credit cards" at the top of the list. You should not invest a nickel until you've paid off all your credit cards (and any other debt where you're paying more than 10% interest).

charlesdm 11y ago
I doubt the people who have significant credit card debts (and are paying 10% interest p/a) are investing. They're probably spending.
- pbreit 11y ago
  There are tons of people who carry credit balances who also have money in stocks, bonds & mutual funds. They don't equate paying off 15% credit card balances with a 20-25% stock gain.
- logfromblammo 11y ago
  They may be investing indirectly, like with their 401(k). People with significant credit card balances may be paying 15%, 18%, 25%, or more on them. Even with the tax advantage of the retirement account, it's better to suspend contributions and pay off debt. Assume you're in the 25% tax bracket. If you have a $100 debt accruing interest at 24.99% for 10 years, you end up owing $931. If you have $133 in a pre-tax account earning at 7% for 10 years, and withdraw it and pay 25% in tax on the $262, you have $196 left. You don't have to be a genius to figure out that still leaves you $735 in the hole, which is far worse than paying the tax on your $133 paycheck up front and using the $100 to pay off your debt instead of investing it. As it turns out, your interest on debt doesn't need to be nearly that high. If you owe at 10% and invest pre-25% tax at 7%, it still makes sense to stop investing entirely until paying off the debt.

rconti 11y ago

Discipline. As a full-time employee, I more than doubled my take-home pay between 2006 and 2015. In that period, my spending didn't go up. Actually, it went down, because I paid off my car. In the process, I paid off credit cards, student loans, and managed to increase my standard of living. I remember after a big pay bump (job change), noting that my take-home pay going into my primary checking account was unchanged from what it had been 6 years prior, because, almost without thinking about it, I went from single-digit 401k contribution to maxed out, and doubled the amount that went into my medium-term savings/investment accounts. It just seemed natural; I'll be making more, time to save more. It was essentially a coincidence that the take-home number remained the same. This is not to say it's so easy for everyone; everyone has different circumstances. My point is more that there are so many people NOT doing this for whom it WOULD be easy.

pmorici 11y ago
Once you get in the habit of spending too much or god forbid run up a large credit card debt I can see how it might be hard to return to a lifestyle of frugality akin to the difficulty of quitting smoking or a morning coffee habit. I do agree that discipline is the name of the game though.
- rconti 11y ago
  Absolutely. Habits are hard to quit. For me, it's the "time to spend" habit. I put off making a big purchase, but once I do (say, building a home theater system or something) it becomes easy to just keep spending on it because you've already mentally committed to the project. All fine and good so far. But then you notice something else you 'need' or that's wearing out, and you buy that without thinking about it. Then you buy another thing without thinking about it, because you're in the habit. Sometimes you need to do a spending detox after those splurges.
johnward 11y ago
It's taking me about 10 years but the last time I got a significant increase I did not actually increase my spending/lifestyle, which is a first. It's strange. I used to always imagine if I had X amount of money I would never be able spend it. Then when I got there it was so easy to spend it. I'm hoping to be in your position after I get some of my debt paid off.