8 Big Reasons Why You’re Getting an F in Personal Finance 101

My 12-year-old son, God bless him, brought home his mid-term progress report a few weeks ago and I noticed he was getting an F in one of his classes.

What was most infuriating was that the F was in Physical Education.

“How in the world do you fail phys ed?” I asked the Honeybee, shaking Matthew’s mid-term report card in my hand for added emphasis.

“Beats me, Len. Why don’t you ask him?”

Genius. Where would I be without the Honeybee? So I marched upstairs and confronted my son.

“Matthew, why are you getting an F in phys ed?” I said in my calmest possible voice.

Of course, almost as an afterthought, I did manage to shake the report card that was still in my hand to convey the gravity of the situation. The fact that I shook it two seconds late didn’t seem to phase my son.

“Beats me, Dad. I don’t think coach likes me.”

Of course. The old my-teacher-hates-me-and-that’s-why-I’m-getting-an-F excuse.

Needless to say Matthew and I had a nice little talk about his grade and, unless he decides the domestic equivalent of your typical penitentiary chain gang is a great way to spend his summer vacation, I sincerely doubt he’ll be finishing the year with an F in PE.

8 Big Reasons Why You’re Getting an ‘F’ in Personal Finance 101

That little incident with my son got me thinking about what people would have to do to earn an F in Personal Finance 101. To me, Personal Finance 101 is all about mastering my first commandment of personal finance: spend less than you earn.

If you find yourself swimming in debt and living paycheck to paycheck the odds are you would be getting an F in Personal Finance 101. Here are eight of the most likely reasons why that is so:

1. You don’t have an emergency fund.

In life you should expect the unexpected, such as the sudden loss of a job, and the last thing you want to do is be caught off-guard and forced to rely on credit cards or a loan which could get you into deeper financial trouble.

Extra Credit: Establish an emergency fund of at least three to six months of expenses. And don’t delay; you should start building your emergency fund as soon as you get your first pay check.

2. You don’t know how much money you have in your bank accounts.

Overdrawing a checking account by just a few cents could result in lots of expensive bank fees. To ensure you’ll never write a check for more than what you have, you should always know how much money you’ve got in all your accounts.

Extra Credit: Set your overdraft limit to $0, and your debit card will not be allowed to overdraft your account. True, you could bounce a check. But if you are being a responsible household CFO and balancing your checkbook regularly, that shouldn’t ever be a problem. You can also consider using money management software to help manage your finances more closely.

3. You don’t understand the difference between a want and a need.

Being able to distinguish between wants and needs is directly tied to your ability to accept personal responsibility.

Extra Credit: Understand that when taken down to the most basic level, all of us have only four or five primary needs. Those needs are food/water, clothing, shelter, transportation (for most of us), and health care. Everything else is a want.

4. You don’t know how much money you spend.

It’s pretty simple. What you save is the difference between how much you make and how much you spend. But it’s tough to save anything if you don’t know how much you can afford to save. That’s why it’s important to take a critical look at your expenses so you know exactly how much money you are spending.

Extra Credit: Audit your expenses by writing down everything you spend your money on for a couple months. The trick is to be as detailed as possible; try to capture even the smallest purchases. Assign each purchase or expenditure a category such as: Housing, Automobile, Food, Phone Bill, Cable Bill, Utilities, Entertainment, etc. Here is a budget worksheet to help get you started.

5. Your tastes exceed your spending capability.

Understand that this is not a problem, so much as an excuse. Kind of like my son arguing that he’s getting an F in his PE class because the teacher doesn’t like him. When your expensive tastes starts impacting your ability to save, you’re in for trouble.

Extra Credit: If your tastes exceed your budget, ratchet them down a notch or three – and stop making lame excuses.

6. You can’t say no.

Many people do understand the difference between a want and a need, but they have trouble saying no anyway. Being able to say no is a crucial skill in the world of personal finance. Those that can’t will always have the most trouble keeping their personal finances on an even keel.

Extra Credit: Master the art of saying no.

7. You’re an impulse shopper.

Impulse buying is a nasty habit that can best be cured by careful planning.

Extra Credit: Establish a household budget. When going out shopping, know exactly how much you will be spending at each establishment. When buying groceries, make a list of everything you need before you go shopping. In short, think before you buy.

8. You worry about what others think about you.

People that worry about what others think of them suffer from a predilection to conspicuous consumption, otherwise known as the desire to keep up with the Joneses. There are many reasons why people do this: the urge to advertise their success in life (be it real or imagined), the desire to have what others have, and instant gratification, just to name a few. Unfortunately, people with a poor grip on their personal finances fail to understand this little piece of reality: the Joneses are broke.

29 comments to 8 Big Reasons Why You’re Getting an F in Personal Finance 101

  • I think you could relate all of these back to the same problem your son had. Complete indifference or lack of effort. If you don’t try and you don’t care you are going to fail.

    • Absolutely, Kyle. You and I both know maintaining your personal finances requires effort and constant review. We can’t put them on auto-pilot and hope for the best. :-)

  • Jenna

    I’ve been talking to a lot of friends about your number one point: 1. You don’t have an emergency fund. As a recent college graduate how long does it usually take to set up an emergency fund? Seems to be tricky to save up 6 months of salary your first couple years at a job.

  • I’ll have to co-sign (I know, bad thing to do right!?) Kyle’s comment. The thing to note is once you do wake up, you’ll have nobody to blame but yourself. I’m sure you’ll let your son know that when/if he has to join the summer chain gang. ;)

  • Great post! In the past when I was getting an F in personal finance, I think it was mainly due to the face that I was indifferent to where my money went, and I just wasn’t paying close attention. My wants and needs were blurred together, and I just had no plan. thankfully things have changed!

  • All great points. The best part about the whole post, you can earn an A just by making a stand and follow the rules/reasons. We don’t have to settle for an F. A little work and focus can turn everything around.

    And here I thought you were going to tell us how to do a jumping jack. That’s the exercise you do while lying on your back right, oops that’s a snow angel :-)

  • T-Bone

    I really like this one. Everybody is right. I discovered most of my money issues (like overdrafts and ending the month with not quite enough money to cover the rent because I spent too much bar hopping every weekend) went away as soon as I started setting aside about 15 minutes every week making sure my personal finances were being attended to.

    It’s amazing what a little attention to detail can do for your money situation!

    • @Jenna: Actually, I think you’ll be happy to know it is three to six months of expenses – not salary! :-) Hopefully, that should be a fairly significant difference – assuming you haven’t already over-extended yourself. If you have to, save up gradually – even if it is only $10 or $25 per week. The important thing is to just keep plugging away.
      @Chris: If Matthew is not in denial, he’ll know before I do whether he’ll be “cracking rocks” all summer long.
      @MoneySmarts: Thank you, Mr. Money! I’m glad to hear you’ve brought your personal finance grades up to par!
      @Jeff: Ha! If I had my way, I would much rather prefer to do my jumping jacks lying on my back! ;-)
      @T-bone: It really doesn’t take a lot of effort to manage our personal finances, does it? It may take a bit of effort when you first get things started, tracking your expenses and establishing a budget, but then it’s like you said: a few minutes each week keeping track of everything.

  • hey Len

    He probably thinks he is Manny Ramirez! As long as he can hit, who give a sh*t! So maybe you can cut him some slack!! haha!

  • “the Joneses are broke.”

    BEST encapsulation of personal finance advice I have ever seen.

    • @Jennifer: Stay strong, Jen. Although I could easily afford any car I wanted, I still drive a 1997 Honda Civic that looks pretty bad on the one side thanks to my kids scratching the paint every time they pull their bikes and toys out of the garage. LOL It runs like a top though and I keep it well maintained. The Honeybee drives a 9-year old Honda too. I don’t give a darn what people think. Besides, cars as status symbols are SO overrated. I have neighbors who had a house foreclosed upon who drove two brand new BMWs. Maybe if they drove a couple of beater cars they’d still have their house.
      @Mr. CC: You aren’t helping, sir. LOL
      @Aaron: Thank you, Aaron, but I can’t take all the credit – I’ve heard that one more than a few times in my life. :-)

  • I have to agree with the previous point that giving attention to personal finance as an important subject often seems to help many of the issues mentioned in this post take care of themselves. It’s good that a lot of solid personal finance advice is “good common sense.” Unfortunately, common sense doesn’t appear too common presently.

  • bubba51297

    yh dad i agree with mr.credit card cut me some slack rotfl !! xD :D

  • Good list Len,
    It is interesting that you start out with a savings goal and follow up with a bunch of ways to control spending. Goal setting with saving (emergency fund in this case) can be a great motivator to curtail spending.

    To Matthew: listen to your dad. He isn’t kidding about the chain gang stuff!

    • @Roshawn: “Unfortunately, common sense doesn’t appear too common presently.” LOL! Sad but true. :-)
      @Bubba: Shouldn’t you be in bed right about now, Matthew? :-)
      @Joe: Re: goal setting as a great motivator: Absolutely! :-)

  • Oy Ye Vay! My son gives the same darn excuses!

  • The last one (number 8) is one I see lots of people struggling with. But keeping up with the Joneses can cause financial headaches.

    Maybe we should ask ourselves, “Do I want to look rich, or actually BE rich?”

  • Jennifer Barry

    Very good list, and I also got a chuckle out of the story with your son :) In addition to the lack of effort and attention is the sense of entitlement I see in many people. I know a woman who is a single mother and hit up her friends for money to replace the engine in her SUV. I declined to participate because even though I have a lot more money than her, I have a 9 year old car that’s worth maybe $2000, and hers is worth about $30K. Her engine cost more than my whole car. She really needed to scale down to a vehicle she can afford instead of repeatedly getting in financial trouble. This breaks your rules #1, 3, and 5.

    I will admit that peer pressure is real though. I’ve had many people mock my car, and if I cared, I would run out and get a fancier one.

  • Jennifer Barry

    Don’t worry Len, I’m not going to fold. :) The car is paid for (in cash when I bought it). I hardly drive since I work at home, so what’s the point of a new one?

    You could get some matching car paint and do a touch up on your Civic one day.

  • Reading your article, I’ll be honest and say I was a major F myself as I checked off way too many of your top 8 reasons… luckily I’ve also been lucky to crawl my way out of those weaknesses or laziness and been holding on tightly to the reins of my finances since then.. Great job on the article! ;p

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