Eight questions about personal finance everyone should be able to answer

It’s probably not much of a revelation to say that understanding your personal financial situation is important. But how well do you know your money? Even if you’re able to comfortably manage your money on a month-to-month basis, there may be crucial gaps in your knowledge. Ask yourself the following eight questions. If you know all of the answers, you’ve got a pretty good handle on personal finance. And if you don’t know any of the answers, well, now’s a great time to get some answers.

How much do I have in savings?

You probably monitor your checking account a little more closely than you monitor your savings account, but it’s important that you keep an eye on both. If you haven’t already, see if your bank or financial institution offers online banking or a smartphone app to help you track your accounts easily.

How much debt do I have?

Credit cards, car loans, student loans, mortgages, and medical debts. If you’ve got automatic payments on any of your fixed bills, you may not be looking at your monthly statements, but you really should. Review statements every time they come in and verify your balances so you can keep a running total. Also, be sure to pull your credit report periodically in order to make sure all your debts are accounted for.

What’s my net worth?

Your assets are the accumulated value of your cash (checking, savings, investments), your home, your automobile, and anything else you own with value (think jewelry and other items with established re-sale value). Your liabilities are your debts, including the remaining balances on any loans. When you subtract your liabilities from your assets you get your net worth.

Obviously a negative net worth is a problem, but net worth is best used as a figure that you track over time. Ideally your net worth increases year over year, but if it’s going in the opposite direction that may indicate that changes need to be made.

What’s my credit score?

Here’s the thing about good credit scores: you don’t need them until you do, and by the time you need them it’s too late to do much about improving them. That’s why you should always be working on building a strong credit history and part of that is having an idea where you stand presently.

Fortunately, today it’s easier than ever to find out your score, thanks to sites like Credit Karma and the fact that many credit card companies and financial institutions have begun offering free scores and credit monitoring as a program perk.

Where are my retirement funds?

Just like our credit, the state of our retirement funds is something we tend to avoid thinking about until it’s much too late. Do you have a retirement account at work? How much is in that account? How much is taken out of each paycheck and how much of those funds does your employer match? These are questions you should be able to answer, no matter how far away retirement may be.

How much money would I need to manage 3 months without income?

Most experts agree that you should strive to have between 3-6 months’ worth of living expenses saved up in case of an emergency. Tackling the low end of that scale, do you know how much money you and your family would need to manage three months without income? It’s an important question, because one) it illustrates the cost of monthly essentials (shelter, food, utilities, etc.), and 2) it makes it very clear whether or not you’re financially prepared for an unexpected setback.

What are my tax deductions?

A lot of people assume they’re due for a tax refund every April and are caught completely off guard when they find out they actually owe money to the IRS. When it comes to your taxes, you should really avoid making assumptions.

If you aren’t sure, verify with your employer which deductions are being made from your paycheck. And if you’re self-employed, it’s not a bad idea to work with a certified public accountant to make sure you’re either paying your taxes throughout the year, or you’re saving enough to cover your tax bill when it comes due.

What will happen to my assets when I die?

It’s a grim thought, but sadly tragedy can strike at any time, so it’s in your best interests to be prepared. If you don’t have a will, you won’t have much say in what happens to your assets, as those will be distributed according to the laws of the state where those assets are located.

If you do want a say in what happens to your assets, however, it’s definitely in your best interests to speak with a qualified attorney and create a will (which should be reviewed and updated regularly).

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.