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: