The surprising truth behind costly mistakes

The Financial Industry Regulatory Authority (FINRA), a private US company that self-regulates financial institutions, found in its 2025 National Financial Literacy Study that 64% of Americans believe they have a high level of financial literacy.

But are Americans as good with money as they think?

The confidence gap: When self-perception meets reality

Despite the confidence Americans express in their financial prowess, overall they are engaging in increasingly risky financial behavior. The study found, for example, that since 2021, the number of people who claim they always pay their credit card bill in full each month has fallen by six percentage points.

Additionally, the number of Americans who claimed to have a balance on their card and made only the minimum payment each month rose compared to 2021. Overall, 59% of credit card holders made at least one financial mistake that would result in either increased interest on their cards or higher fees. Forty-one percent of holders work in two or more.

Why do smart people make expensive financial mistakes?

The problem with self-perception is that people think that any level of intelligence will automatically translate to the financial field. But this is not always the case.

“Finance is a skill that needs to be studied and learned,” says Lawrence Sprong, founder and wealth advisor at Mitlin Financial. “Many smart people have a broad knowledge base, but many of them have not been taught about money.” “Having an increased knowledge base can lead these individuals into a false sense of security, causing them to take additional risks.”

Dr. Carolyn McClanahan, president and founder of Life Planning Partners, agrees: “Smart people are the worst. Many doctors fall victim to this. They think that because they went through medical school, they can do a better job than professionals in many other areas of their lives.”

Warning signs that you are overestimating your financial skills

How do you know if you’re one of those Americans who thinks they’re better off with money than they really are? According to Margarita Cheng, founder and CEO of Blue Ocean Global Wealth, you have to start with the numbers.

“Some warning signs include increasing debt levels and low levels of emergency funds,” she says. Sprung agrees that debt is a good place to start: “Increasing credit balances over time may be an indicator that you may be making financial mistakes.”

“If you think you have a good enough knowledge base and you see debt starting to pile up, that could be a signal to hire someone to help educate you on credit and financial basics,” he adds.

How to bridge the gap between confidence and competence

How can you bring your self-perceptions in line with reality? For starters, be sure to educate yourself on a variety of financial topics. “Be in tune with your money scripts, what you’ve learned, and what you know. You don’t need to know everything, but it’s a good idea to have a basic knowledge base,” Sprung says.

But he stresses that this shouldn’t make you cocky: “You also need to know when you might be on your skis, and talking to a professional might be helpful.”

Additionally, McClanahan says you should be vigilant with your money. “Many people subconsciously know that life can change at any moment, and a large number of these people translate this basic idea into their spending habits,” she says. “So, even though they are smart, sometimes they don’t care. They may become lazy in managing debt or saving for the future.”

Finally, make sure you’re talking about your money with your loved ones and with certified financial advisors. “Sharing your worries and concerns with others who don’t judge you can help improve financial confidence. This can include peers, friends, mentors, family, or professional advisors,” says Cheng. She adds that talking about finances with others can help people overcome shame and guilt caused by past poor financial decisions.

Bottom line

Most Americans believe they are financially savvy, but the numbers tell a different story. While many people are smart and capable in other aspects of life, they mistakenly believe that this will trickle down to their wallets and investment portfolios. But this is not the case.

If your debts are rising and your savings are dwindling, you may be one of these Americans. If you think you’re overestimating your financial skills, there’s a way to align your self-perception with reality: by educating yourself, staying vigilant about your money, and talking about your money with loved ones and trusted advisors.