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Are You Financially Illiterate?

Half of the country is financially illiterate.

If you find finance worrying and stressful, you are not alone.

Research carried out by debt management company Lowell has found that a significant number of Brits don’t understand key financial terms such as ‘overdraft’, ‘mortgage’ and ‘arrears’.

44% of Brits didn’t fully understand the term ‘Overdraft’

46% of Brits didn’t fully understand the term ‘Mortgage’

52% of Brits didn’t fully understand the term ‘Arrears’

The study also found that just a third of people claim to feel “very confident” when handling their finances. Almost half of young people wouldn’t say they were confident with their finances

One in 10 claims to have no confidence at all in their own understanding of personal finance. And we wonder why finance causes worry and stress. If you do, you are not alone. So what do we do about it?

Tidy Up Your Finances

From time to time you need to ‘visit’ your finances and give them a tidy.

  • Check your bank and credit card statements for payments you don’t recognise/no longer need and get them cancelled.
  • Check your credit cards have a competitive rate
  • Check your loans have competitive rates
  • Ensure you are paying down debt
  • Look at your spending profile and change it if it no longer works for you.

How you spent in your early twenties, for example, will undoubtedly differ dramatically from how you need to spend when you are 35. So ensure your spending profile adapts to your current life and income.

Does your saving profile meet your imminent needs and your 2-5 year plan? If you are in a mess; don’t bury your head. Go and take advice and get some help to sort it out.

There are lots of online offerings, phone numbers, citizen’s advice or perhaps an accountant if you are in business. Honestly, no one is judging.
The person writing this has been an accountant for 30 years and I normally find that for the length of time it takes you to get in a mess, it takes twice as long to earn/organise yourself out of it. So be realistic and dig in for the long haul. There are NO quick fixes.


Bankruptcy is personal, insolvency is corporate; neither are straightforward. They work when there really is no other solution, but they shouldn’t be your first choice and they come with ‘down-the-road’ consequences. It’s not complicated. Money comes in, money goes out. The latter must not exceed the former or you end up in a negative situation and owe somebody and they’ll want it back.


This is debt/an overdraft/a mortgage/arrears, which are all the same thing. You took money off of someone, to be paid back another time.
So sit with a bit of paper and do the math. Make a list. Take one from the other. But remember to include bills/debts/liabilities that might come later, such as tax bills. If you have a negative figure from this task you need to earn more, or spend less.

Borrowing Rather Than Saving

You ideally need savings. It’s boring, but unplanned costs will arise and having a buffer will help. But you can borrow; money can be cheap to acquire – but not normally when you need it. Don’t borrow to fund discretionary spending: ie holidays, clothes – things that are transient, that’s where your savings should come in. If you are borrowing money at more than 7% APR then know that it is not cheap (based on 2021 interest rates). If someone gives you a ‘flat rate’ and ‘not the APR’, a very crude rule of thumb is to double it to give yourself the APR.

To summarise – just think about your money in the context of where you are in your life and align everything to that. Consider how much you do have and what your responsibilities are, and you won’t go far wrong…

If you or a loved one is in immediate crisis...