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

Failing a class in school is one thing. Failing your financial goals as an adult is another. Here’s how to earn an A-plus in personal finance.

Last year, my son brought home a midterm progress report that showed he was getting an F in one of his classes. What was infuriating was that the F was in physical education.

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

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

Why didn’t I think of that?

Needless to say, Matthew and I had a nice little heart-to-heart talk about his failing grade and, I’m happy to say, he actually ended up finishing the school year with a C in PE.

That little incident got me thinking about what people would have to do to earn an F in personal finance. If you find yourself swimming in debt and living paycheck-to-paycheck, the odds are you’re already getting one. Here are the most likely reasons why:

1. You don’t have an emergency fund.

In life, you should expect the unexpected, such as the sudden loss of a job. The last thing you want to do is be caught off guard and be forced to rely on credit cards or a loan that 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 paycheck.

2. You don’t know how much 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 won’t be allowed to overdraft your account. True, you could bounce a check. But if you’re running your household like a business and balancing your checkbook regularly, that shouldn’t ever be a problem. 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.

One of the biggest impediments to getting your financial house in order is the inability to properly distinguish discretionary and nondiscretionary expenses (otherwise known as wants and needs).

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, and health care. Everything else is a want.

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

It’s pretty simple: The amount 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 of months. The trick is to be as detailed as possible. Try to capture even the smallest purchases. 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 wants and needs, but they have trouble saying no anyway. Being able to say no is a crucial skill in the world of personal finance. Those who 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. Before going out to shop, know exactly how much you will be spending at each establishment. Make a shopping list before you go to the supermarket or the mall. In short, think before you buy.

8. You worry about what others think about you.

People who worry about what others think of them suffer from a desire to keep up with the Joneses. There are many reasons why people do this, including: the urge to advertise their success in life (be it real or imagined), the desire to have what others have, and instant gratification. Whatever the reason, once they reach the checkout counter, they tend to ignore this little slice of reality: Unlike the Joneses, they probably can’t afford it.

Stacy Johnson

It's not the usual blah, blah, blah

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  • Great article.  Two things I would add to the list.

    1. You think your credit card is a checking account – just because you have the access, it doesn’t mean you should use it.

    2. You are afraid to negotiate – You might be amazed at what prices you will receive if you just ask.  I negotiated my appliances at Sears and even my wedding dress!

    – Jaclyn Schell, CFP®
         Money MindEd

  • Anonymous

    I too liked the article, one other thing I would add and I just experienced this recently is to check your statements and bills for charges that do not belong to you. I received my cable bill and there were two movies on there that I nor anyone else in my home ordered. Little things like this tend to get overlooked. I go over my utility bill with a fine toothed comb as well and especially credit card statements.

    Little charges really add up. I had a friend who had some calls on her land line she did not make. She ignored them and just paid the bill. A year later these calls were still being charged to her bill. She told me about them and I told her not to pay them and to call the phone company, she said it was no big deal because it was only two dollars here and five dollars there. I asked her to add up the bills from the entire year and we discovered she had paid $475 in charges that were not hers. I asked her what she would have done with that money????? She immediately called the phone company.

  • Alan Suen

    I dont mean to troll but I totally read — “8 Reasons Why You’re Getting F(ed) in Personal Finance”
    Oh well! It means the same thing tho!
    Dont get me wrong! I love Money Talks News!

  • Wow, it’s like you went back in time to my life before I decided to get my finances under control! I used to do every single one of those things, and my money situation (as well as my bank account) were earning a big fat F.

    This is a great post for anyone who hasn’t taken the necessary steps toward a better financial life.

  • I would add a #9 – You don’t “pay yourself first”. Emergency funds are a great start and more is needed. If you automate your saving right at the source or via a payday transfer, you won’t touch the money…out of sight, out of mind. I am shocked at how many people get an “F” in this area. We pay for everything else and don’t address our own long term needs.

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