What are the 5 questions you should ask about your finances? Money plays a huge role in your life and being able to answer these questions about your finances helps you plan for the future as well as the present. These questions are a good place to start as you consider your personal finances.
1. Do I know how much I actually make and owe each month?
Information from your pay stubs, credit card statements, or insurance bills can yield some interesting insights. Details like deductions and interest make a big difference when it comes managing your money. Knowing when you get paid and exactly how much you owe at each point in the month can help you avoid a month-end cash crunch.
Tracking payroll deductions allows you to monitor retirement savings balances and year-to-date tax deductions. Also, understanding your credit card billing cycle helps you keep interest charges low and extra fees in check.
2. If I need $500 for an emergency, do I have a way to get it?
The best way to prepare for any financial emergency is to have money set aside—just in case. If you have been putting off saving for a rainy day, try to put a little aside each pay period.
If you’re in a financial bind, a savings can’t protect you from being tempted by payday or title loans. These predatory loans are almost impossible to pay off and will leave you with a larger financial emergency than you started with. In an emergency, asking for help from friends or family is a much better solution.
3. What will happen if I die?
No one likes to think about dying, but questions about your finances and wishes are best answered during your life. How will your spouse be affected financially? Preparing a will clarifies things like who will pay for your funeral, take care of your children, and inherit your possessions.
If you have life insurance, your beneficiary information should be current. You should also know how much your policy is worth and how it will be administered.
4. If I lose my job tomorrow, what will I do?
Drawing up a job loss plan helps you face employment-related uncertainty with greater peace of mind. Your plan should include things like an emergency savings account and updated resume.
Living within your means, networking, and refinancing your home to take advantage of better terms are all things to do before a job loss.
5. Do I know the rates I pay and earn?
Paying the smallest amount of interest possible on debt and earning the most interest possible on savings and investments add up to greater cash gains for you. Make sure you are paying the lowest possible interest rate for auto loans, credit cards and other unsecured debt, and your mortgage.
Understanding your money well enough to answer these five questions about your finances helps you reach your financial goals. Don’t worry if you don’t have all of the answers now—just take a little time to learn more about how your money can work for you.