How well do you know your money? Odds are you are more familiar with your finances than anyone else in the world. If that isnt the case, its time to make a change. Find out if you know enough about your money with this quick personal finance quiz.
Are you saving enough for retirement?
How much do you need saved for retirement? Are you on track to reach that target? Many Americans never calculate how much they need for retirement. The average baby boomer is destined to see a dramatic lifestyle change after paychecks stop in retirement. Even with social security and the increasingly rare pension, most Americans are far from saving what they need for retirement.
SmartAsset suggests the average retiree should have between nine and 11 times their annual salary saved for retirement. It doesnt matter if you are five years from retirement or 50, make sure you are saving enough to maintain the same standard of living in retirement.
Along with many online brokers and financial institutions, the AARP and Personal Capital offer free retirement planning tools to assess where you are relative to your personal finance goals for retirement.
Do you have enough life insurance?
Although term life insurance is surprisingly affordable, only 59 percent of consumers own life insurance according to Life Happens, an industry organization. Consumers cite the thought of leaving dependents with financial hardship due to a premature death as their primary motivation for life insurance, but only 20 percent of households have adequate coverage to protect their family.
Life insurance needs to do much more than cover burial costs. Loss of wages from a primary or even secondary household earner can mean the difference between home ownership and foreclosure, covering college tuition, or leaving behind an adequate safety net. The dollars and cents add up fast and many people fall far short of their insurance needs. How much money would your family need to survive the next five years without your income? How about 10 years and beyond? If you dont know, its time to calculate that number and ensure your insurance has your family covered. Visit www.selectquote.com or call 888-787-3878 and get a free life insurance consultation with a licensed SelectQuote agent today.
How much interest are you paying every month?
How much are you paying in interest every month on your mortgage, credit cards, auto loans, student loans and other borrowing? If the number is higher than zero, you have room for improvement!
Paying interest is a regular part of borrowing, but as the famous saying about interest goes, those who understand it earn it, those who dont pay it. Undebt.it offers a free tracking tool to help assess your debt and interest status.
Are you on track to get out of debt?
Speaking of interest, you only have to pay it when you are in debt. The fastest way to stop paying interest is to pay off your loans for good. A mortgage is often worthwhile because it comes with a place to live, but you dont get any benefit from keeping student loans, credit card debt and auto loans for the long haul. Those should be paid off as quickly as possible so you can stop paying and start saving.
To get out of debt, mathematically the smartest debt payoff is to focus on highest interest debt first. If you are intense about your debt payoff, you are destined for personal finance success.
Sofi is a great resource for consolidating and lowering student loan, personal loan, credit card debts or for optimizing your mortgage.
Do you have enough cash for an emergency?
The average American family doesnt have enough savings to handle a $400 emergency without tapping into credit. How would you fare if your car broke down tomorrow? If you couldnt afford to quickly come up with $1,000 for repairs, you may be in bad shape, but are far from alone.
It turns out that keeping up with the Joneses means living paycheck-to-paycheck and with crippling debt. Forget about new cars and fancy purchases, get back to basics and make sure you spend less than you earn and contribute to a growing emergency fund every month.
Where does your money go every month?
Do you know if you spend less than you earn? If you feel the crunch waiting for payday, its time to get on a better budget, barring the ability to increase your income and earn more.
Personal Capital offers a free mobile app and desktop dashboard that enables you to track your savings and expenses, including bank and savings accounts, brokerage investments, credit cards, student loans etc. to calculate your net worth in real-time. Its a useful way to keep tabs on your spending and savings habits and watch your portfolio change over time.
Budgeting doesnt have to feel restrictive and difficult. Look through your monthly expenses and sort out the wants from the needs. You may think you need a new pair of Prada shoes or a new Xbox, but those really fall into the want category.
Mint is another free tool for budgeting and staying on top of your personal finances. Using Mints free app and dashboard, you get visibility into where your money is going and where you can cut back through budgeting and better tracking of your investments and savings.
Are there any recurring bills you can cut?
Cord cutting is a great place to start saving in the neighborhood of $70 a month. But you dont have to stop there. Think about what monthly and annual subscription services you can end to save money. Many Americans are bad with money all around and the convenience of subscriptions just makes the problem worse.
Thanks to the app Trim, getting rid of subscriptions is easier than ever. Once you are setup, youll get a monthly text message letting you know every subscription fee you paid, with options to get help cancelling simply by replying. The app and service are both free to use.
Can you earn more on the side?
Do you think your income is capped at what you earn from your day job? Think again. Millions of Americans are picking up a side hustle to earn more. Those extra dollars can help you get out of debt, save more and stabilize your finances.
Uber, Lyft, and other driving apps have made getting additional work more accessible and popular but there are hundreds of potential side hustles that can earn you hundreds or thousands of dollars more every month. Flexjobs.com, Upwork.com and Freelancer.com are just a few of the popular sites for picking up part-time, freelance or gig work.
How does your paycheck get divided?
Your gross pay is the total amount you earn in a pay period and your net pay is what you actually receive in your paycheck. Taxes, insurance and other benefits are common deductions before you get your check.
Understanding deductions is key to personal finance success. You may find errors, or incorrect tax deductions. You dont have to look at each pay stub in detail but review every line every few months to make sure your paycheck is accurate. Credit.com offers excellent guidance on how to decipher the various deductions on your paycheck.
The lottery is not a retirement plan
Hitting the Powerball isnt a sound plan to keep you from worrying about saving for retirement. The only way to ensure you have a stable financial future is to take the reins and pave your own path forward. By getting to know your personal finances, you learn whats going well and what you have to work on. Once you have systems and plans in place, managing your money is a whole lot easier.