Personal finance comes up a lot in my life.
Once someone finds out that I write about personal finance for a living, the conversations about a person's financial situation never seem to stop coming.
That’s no problem, though, as I love talking about financial topics and helping others.
However, one thing that comes up often is that many are somewhat clueless about their financial situation.
There have been many times when someone has told me that they had no idea what their monthly mortgage or rent payment is, they don’t know how much they are putting towards retirement, they are unaware about how much debt they have, and so on.
More shockingly, some can’t even give me an estimate and have no clue whatsoever about what the amount would be. Or, when they do give me a number, their significant other chimes in about how they are extremely wrong.
This is a problem.
Everyone should be aware of their financial situation. I believe a person should know what their:
- Mortgage or rent payment is;
- How much debt they have;
- How much savings and retirement they have;
- What their financial goals are; and more!
I understand that sometimes a person is not aware because they are not the person who manages their family’s finances. However, I believe there are many benefits of understanding your family’s financial situation.
Below are some of the many reasons for why you should be aware of your financial situation.
Knowing your financial situation will help you keep a budget.
It would be very hard to create and keep a realistic budget if you had no clue about your financial situation. By being aware, you will understand what you are working towards with your budget.
Knowing your financial situation can help you when it comes to creating a budget, keeping track of expenses, lowering costs, saving more, and so on. It would be very hard to do any of this if you had no clue what was going on.
Related: Paying Off Debt And Budgeting: Tricks For Staying Motivated
Being aware may prevent everything from falling on one person.
What problems would arise if something happened to the person who is in charge of your family's finances?
By not taking part in the finances of your family, you may be in for a rude awakening. You would already have enough on your plate if something happens to a loved one so it is much better to stay aware now than having to worry about the little things later.
Plus, what if the person who is in charge of your financial situation wants YOU to be aware as well? Maybe they want some help every now and then so that the family’s finances are not always weighing them down.
It is not a healthy situation for one person to have to deal with all of the stress from an unwanted financial situation.
Related: Do You Have A Financial Emergency List?
Knowing may stop financial infidelity.
No one wants to be a victim of financial infidelity. However, if a person is unaware of their financial situation then the other person may be able to keep big financial secrets quite easily.
It's best to always know your financial situation so that you have open communication.
Related: Financial Infidelity And The Problems It Can Create
Being aware can help you with your goals.
If someone in your family has no clue what the family’s financial situation is, how would they really know and understand what the family’s financial goals are?
They most likely wouldn’t have the same financial motivation as someone who is aware, which may be holding you back from completing your goals.
Are you aware of your financial situation? Do you think others should be aware?
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I couldn’t agree more Michelle. People are disconnected from their finances, one of the main reasons I feel is shame. Perhaps they are not where they would like to be, or they have compared themselves to someone else. It shouldn’t be that way all our circumstances are different, and when we take responsibility for our own finances the possibilities are endless.
Yes!
Abolutely agree when I decided to have a budget one of reason is been the fact that I didn’t know exactly how much money I had into my bank account, and having a little debt to repay I needed to be more organized and have clearly situation:D…now I am debt free and more conscious about spending habits with some important financial goals to achieve!!!
Congrats!
Yes, very good point. It was actually only recently that I finally took the leap and looked up how much I owed in student loans — I had a sort of vague idea of how much it was but had been avoiding checking the true number for several years. It was scary to find this out, but also empowering, because it allowed me to assess my situation and make a plan.
Thanks for posting. 🙂
Great job!
Yes a million times over! This is SO important. I am aware and I always preach being aware. It’s too important not to.
I agree!
It’s great that so many people are preaching to be aware.
Honestly I don’t know how someone wouldn’t know what the rent payment is?
I personally did have a small time when I didn’t know how much I had in my 401k. I set it up and then almost never looked at it. But now I check it about once a month.
During that same time though I was huper vigalent of my debt balances. Being aware when paying off debt is so important because the extra funds don’t always go were you want them too.
So checking up often is a must
I agree!
I have definitely experienced how financial awareness and tracking progress has been highly motivating to pay off debt. It has accelerated our progress so much!
Great job!
I am very aware of my financial situation and I believe its an absolute must for everyone to be knowledgeable of their situation. I am responsible for most of our finances, but I keep my husband up to date through bi-monthly meetings. I also keep passwords, bills, websites, statements, etc where he can locate them. I’m even adamant about sometimes having him pay some of the bills I usually pay, and I pay some he usually pays, just so we both stay aware of all of our bills in case one of us is unable to do it. It amazes me as well, the amount of people I know who live in financial blindness is scary!
Good job!
I definitely think everyone should be aware of his or her personal finance situation. I also think that in partnerships and marriages, it’s important that both people have voices. However, I would also argue that it’s fine to let people play to their strong suits as well. I don’t keep my husband in the dark about anything, but I also know that he would never chase savings accounts to find a higher percentage (“they’re all low”) and he’s not someone to really try to churn credit cards. He’s more than happy to let me take the reigns on those things. But we’re always talking about it (probably too much from his perspective!). 🙂
Thanks Penny!
It blows my mind when people don’t know their basic monthly financial commitments – like rent or student loan minimum. Seriously? How do you live?!
I don’t get it either!
It kind of reminds me of when I was afraid to step on the scale and admit how much weight I had gained. But we all have to start from somewhere, right? The same thing goes for our money. You can only stick your head in the sand for so long. Taking that first peek at scary numbers sucks. But it gets easier after that!
Yes, it’s exactly like that!
I used to deny my own financial situation when I was in my early 20’s. I just didn’t pay attention and I never thought I need to know all of that. I surely was living above my means. But the good thing is that we learn from our mistakes 🙂
Yes, we can all learn from our mistakes 🙂
Many people say they want to do better, save more, or whatever else would be an improvement, but if you don’t know what you currently have, how can you improve on it? Understanding where you are today is the only way to build a foundation for improvement tomorrow.
Exactly!
I’m very aware of my financial situation and my wife is just as involved. I have a difficult time imagining being so oblivious to such an important subject, but I think it has much to do with denial and fear. So while knowing the facts seems like the main obstacle, it’s really the emotional aspects that need to be dealt with first.
Yes!
I’m always a little bit shocked at how little people actually know about their own financial situations. Sometimes it’s because their spouse handles everything financially (though the should still know what’s going on) and sometimes it’s because they just don’t pay attention to their own spending and saving. It’s crazy to me!
Yes, definitely crazy!
Wise words Michelle. Interestingly, in my household, I used to be the one not aware of our financial situation. The paradigm has shifted for us, as I took thing under control, my wife almost instantly lost interest. Now I know exactly how much we have and where we’re headed, but she admitted to not knowing much anymore.
I agree it’s a problem. If anything happened to me, I’m not sure she even knows how to get most of the money back.
Thanks!
I’m probably hyperaware of our financial situation but there was a time in my life that I wasn’t. I knew we could make minimum payments but didn’t know how to really manage our money and it was terrifying!
We used to be the same way!
Wise words and I completely agree!
Esteban
Thanks!
I am completely aware of mine, but I’m shocked at some of my clients who are clueless. One client’s husband passed away and it took her 3 years to figure out her financial situation and really get a hold of it. She was not only grieving her husband but stressed about where to find her money. A few simple conversations when he was alive would have saved her years of stress and worry.
Yes, this is exactly what I’m talking about. Best just to clue yourself in.
We work together on our money, but I usually pay the bills, but every so often I have my wife do it just to make sure we know all the passwords and where everything is located financially.
My parents recently traveled to Europe and I already have all their financial information “just in case” but then added how much the family was getting from my grandpa recently passing away. “Just be sure to split it with your sister if something happens if we get run over while taking pictures at the Mona Lisa,” and off they went. I think it is great when families can communicate and feel empowered by their finances.
Yes, communication is always great!
I guess this is true. I usually provide my husband with a generic view of our current finances, but it would probably prevent him from thinking that it’s okay to apply for a credit card with a $10k limit if he knew the specifics of our financial situation, more specifically, how I’m currently trying to eliminate ALL debt not just department store credit card debt.
Yes, I try to inform my husband of everything and I believe it really helps.
I agree. As they say, “if you don’t know where you are going, you’ll never get there”.
Exactly!
That scares the dickens out of me that people don’t know what their mortage payment is or how much debt they have. My husband and I set the budget together, he pays the bills, but we know where everything is and what everything costs. If anything were to happen between us or to one of us, we would both be okay (financially speaking of course).
I know, right?!
I’m extremely aware of our financial situation. My husband is less so, because I handle all of the bill-paying and banking for our family. He’s more likely to know details, like how much our mortgage payment is, than how much we have saved for retirement.
Awesome!
I was kind of in denial about our financial situation for a long time because I thought it was too painful to deal with. That kind of thinking just makes it worse. Being aware of what’s going on, good and bad, is the only way to have control of your life.
Yes, definitely!
Haha how does someone not know what they pay for their mortgage or rent??? That’s crazy. If you had talked to me a few years ago I would’ve been in the same boat – not knowing what I owed for student loans, car loan, etc. In the past two years I’ve brought down the principal on those two by over $30k. It sucks but now that I’m aware I will have a drastically different financial future for the better.
Great job!
I don’t think I’d feel comfortable not knowing! Even if I were with someone who wanted to handle it all – I’d want to be kept in the loop. And I don’t think I’d be ok with it if I were with someone who had no interest in knowing what was going on, even if I handled the day to day bill paying.
I agree! I would be so embarrassed if I didn’t know.
Oh yea…I’m definitely aware! I probably spend a little too much time thinking about it. I have co-workers who are not aware and seem to avoid thinking about it entirely. Avoiding the problem won’t make it go away. You need to have a plan.
Yes, a plan is so very important.
Wha????!!!! How do you NOT know what your house/rent payment is? That’s insane! Now I really fear for humanity.
Sadly, I’ve come across quite a few people who had no idea.
Awesome info here, Michelle. Rick used to refuse to have anything to do with our finances, mostly out of fear from how money was handled in his house growing up. He had a “head in the sand” attitude. Nowadays he’s willing to be involved in larger spending decisions and I catch him randomly glancing over the Excel spreadsheet that holds all of our annual expenses and asset/liability numbers. It’s a start. 🙂
Yes, a great start!
I 100% agree with everything you just said. I am pretty passionate about personal finance, so I am open to talking with friends who want to learn more. I try not to impose and only discuss if they ask, but I have honestly been shocked by friends who have no idea about their personal finances. Many don’t know the balance of their student loans, how much their monthly expenses add up to or even how much money they make every paycheck!
My husband is not nearly as invested in finances as I am, but I still make it a point to encourage him to be involved. I track our information pretty often (weekly usually) and then we sit down monthly to review. It’s not his favorite two hours of the month, but he does it. We both recognize it’s important that we set goals, work toward them and accomplish them TOGETHER. There is no way I could be married to someone who refuses or neglects to participate in finances. It’s fine if one person takes the lead, provided the other person still participates. But it’s so worrisome for couples where one person is completely in the dark, especially if it is by choice.
“Side hustle millionaire mentality” should be the concentration of any affiliate marketer, blogger or side hustler when they think about their current financial situation. They’ll work that much harder for themselves vs. working for a narcissist day job employer who doesn’t give a rats behind about their employees. “Side hustle millionaire” can be anyone who turns their financial situation from nothing to something.