Featured, Finance 101

Obvious Finance Facts We Take For Granted

This post may contain affiliate links. Please read my disclosures for more info.

The more I blog about personal finance, the more I realize just how many basic finance facts I take for granted. I realized just how much I don’t know about financial products. The more I blog, the more I realize I understand 100% of the negative consequences of certain financial decisions and how to avoid/minimize them, but I only understand 50% of the underlying financial product and concepts working for/against it.

How is this possible?

I’m an extremist. I like a good distance from any margin of error that’s going to cost me money.

Let’s take credit cards for example. I would never ever be in a position where I would be paying interest. I make 99% certain (ok, one time I forgot to setup auto pay on a new card and got charged 3 days interest and a fee that I had waived) that never happens.

So 99% of the time, I pay off the full balance on my card every month. I don’t even let the grace period pass before I pay the balance–I pay the balance before the grace period begins.

Which brings me to my point, I vaguely knew you could wait a certain number of days before you actually had to pay the balance, but

1.) I didn’t even know this period had an official name

2.) I didn’t know exactly how many days that was or whether it varied from credit card to credit card

I didn’t really think about how interest on credit cards work because I made sure I would never have to pay interest. It’s actually pretty easy to reason about the inner workings once you stop and think about it. But the point is, I didn’t really ever have THE reason to take the extra step to take that moment of reflection.

Until I stopped to think about. Until my boyfriend was refinancing his loans, and I realized interest works differently for credit cards vs. loans (duh?).

I didn’t think about it until my friend told me he’s only paying the $200 minimum on his credit card with an $8000 balance. And then I thought, well how the hell am I going to convince someone this is bad for them if I can’t fully explain the consequences?

I’m not for judging other’s financial decisions, but I’m convinced most people don’t understand the full consequences of their financial decisions. I’ve been reading about personal finance things for years now and didn’t realize the true dollar cost of a poor financial choice. If more people knew, at least then, they would be making a fair decision!

These are facts that I’ve never stopped to think about, things I assume I understood. So this is the beginning of a PSA series with the knowledge I thought was obvious, but isn’t.

Follow the series:

  1. Investments Don’t Earn Compound Interest

Jing is currently a software engineer based in Oakland, CA. She left her job in New York, moved to San Francisco unemployed, and more than doubled her salary in 4 months.

12 thoughts on “Obvious Finance Facts We Take For Granted

    1. Haha, it’s good to hear there are others like me, Lance! I started out reading article after article on Investopedia 4 years ago, and have continued to follow books and blogs and podcasts and still get so stumped by the smallest stuff!

  1. I find that blogging has made me so much more aware of the things I thought I knew but really don’t. I think sometimes words like “budgeting” or “investing” get thrown around so often that I just stop trying to learn more. There are always ways to optimize though and do things better. Looking forward to the series!

    1. Yep, it’s always surprising when you find out another little thing that can be optimized! I didn’t know until last week that ETFs are apparently more tax efficient than Mutual Funds, and I still can’t say EXACTLY why even though I understand the general gist now.

  2. Very true. Being able to explain to someone else why something works the way it does is the true test of knowledge. Interestingly, I find when people really get it, they’re are also better able to work it to their advantage. I usually also play the cautious approach, because there’s so much I don’t know, so this series should be really interesting.

    1. I feel especially cautious when explaining to others, so my explanation ends up more watered down because I don’t want to point to something I’m not 100% of. Even if I have the intuition that it’s 90% correct, I feel it’s not enough to give someone else an informed recommendation!

  3. I have been reading books, blogs and listening to podcasts on personal finance for a few years now and think I know a lot of info until I forgot something about my 401K. I remember reading up a month ago on high fees on certain funds for 401K accounts and thought it was good to know but did not take any immediate action. But last week I found out that my 401K has high fees on most of my funds so i adjusted my portfolio so my fees are minimized. I know what your talking about, we know these facts but we just forget to implement to our own situations.
    BTW, I’m from the bay area too. Yayyy, the city to be exact

    1. So true! I actually find I’ll forget things I know if I don’t take action on it! Or if I don’t repeat what I know to someone else…the blog is definitely a great place for that 🙂

      So cool you’re from the Bay too! I’m happy to have someone else to lament the high cost of living here 😁

  4. Better than me! I read it and I sometimes still don’t get it. When I do get it, it’s a struggle to keep it in my brain. I think that’s just me…I repeat it back to my husband after I’ve learned it so hubby is on the same page. 1 year later, I can’t recall but HE CAN. WHAT! How is that fair. Well at least one of us knows it. I have to relearn dividends again…#dory

    1. I had to read about dividends on probably 20 separate blog posts over years and years. I think I finally get it, well, again, I get how they make me money but don’t really understand the nature behind why they’re paid out! When I read one personal finance post that’s related to investing, I feel like I go down a huge research rabbit hole. 😅

  5. You’re right. I always assumed that most people knew. I think most people hear but don’t pay attention. This is why they need people like you to connect with them and show them the light.

  6. Dear Jing,

    I recently purchased parts for my car valued at over $300. I purchased them at a store where I also hold their credit card. The cashier told me that I was eligible to receive “12 months, No payment, 0% interest”. Even though it was free and cost me nothing, even if I accepted and didn’t use it, I declined. It would have messed up my numbers.

    Every month, I receive an email THE DAY that my credit cards issues my monthly statement and I pay it that day. I figure since I only buy things that I can afford and have the money for, at the time, it’s best to pay it in full and not worry about it for another month. Besides, I don’t accrue my cashback $ (in this case 4% so $12) until I pay the amount and I don’t earn even 1 cent (ONE CENT!?) on the money sitting my my bank account.

    I’d hate to use the credit card for the 1-4% cashback and be charged 20% interest due to being forgetful.

    Besos Sarah

Leave a Reply

Your email address will not be published. Required fields are marked *