Questions to ask about money to set yourself up for financial success
Money questions may be personal, but they tend to
revolve around investing, debt, and real estate.
Setting yourself up for financial success means
answering the easy money questions, as well as dealing with the
We’ve outlined the 5 most important financial questions
you need to be able to answer to make sure you’re on the right
Everybody has money questions — but finding good financial advice
Only 40% of Americans have a financial
adviser they can look to for guidance. Even those who do
have their doubts about how trustworthy their adviser is. Most
people — 60% — suspect financial advisers prioritize the company
they work for over what is best for the client, according to a
recent survey from the CFP
As a certified financial planner, I’ve
seen first hand how hard it is for people to figure out what to
do with their money.
It seems like it should be simple: pay off debt, save money, live
happily ever after. But life gets in the way — the
refrigerator breaks or an unexpected surgery is needed — and
taking those setbacks in stride isn’t easy. Especially when you
don’t have anyone to answer your money questions.
Most money questions tend to be very personal and specific. But,
there are a handful of questions I hear over and over again,
typically revolving around investing, debt, and real estate. And
there are a couple questions I wish my clients would ask, but
very few ever do.
Below, the five most important questions to ask about your money,
as well as advice on how to find the answer to each.
When should I start investing?
This is probably the question I hear the most. Many people know
they “should” invest, but sorting through piles of investing
advice often leads to inaction and confusion rather than
Here’s the short answer: Start now.
Okay, but where? In a retirement account.
Investing through a retirement account means you save money on
taxes, while making sure your financial future is more
secure. Investing in a non-retirement account isn’t a bad
thing, but it should come after you’ve maxed out your
retirement savings accounts.
Unless you are able to invest more than $24,000 a year, you
should focus on investing through a retirement account. In
2018, you can save up to
$18,500 in a 401(k) plan, and $5,500 in an IRA. If you’re
flush with cash, you can use both.
Deciding what to invest in doesn’t have to be complicated. If you
aren’t sure where to start, choose a target date fund slated for
the year you plan to retire. If you’re 35 today, and want to
retire at 67, choose a target date 2050 fund. That
means the mutual fund will adjust over time to make sure your
investments are appropriate for your age.
How much debt is too much?
If you have debt, take a deep breath.
There’s something about owing money that has the ability to
overwhelm more so than any other financial topic.
Using debt to pay for something that has value, like a home or a
college degree, can help you get ahead. If we weren’t able to
become homeowners or graduate college until we saved enough money
to pay for it with cash, the vast majority of us would never do
But debts that carry a high interest rate (typically over
8%) and weren’t used to strategically help you afford a big
purchase, are more problematic.
You don’t need me to tell you that any amount of credit card debt
is too much. Paying it off should be your top priority, and we
have tips on how to get out of debt for
How much house can I afford?
Housing is probably your single largest monthly expense —
whether you’re renting or buying.
It’s the biggest chunk of the average American’s budget,
accounting for about 37% of take-home pay. Many people
Technically speaking, your housing costs should be limited
30% of your pretax income, the standard
measure of housing affordability. If you make $75,000 a year,
that breaks down to $6,250 a month before taxes. That means you
shouldn’t spend more than $1,875 a month (30%) on housing.
The 30% rule is a good guideline, but spending even less
will leave you with more flexibility for other spending — like on
vacations, or saving for retirement.
I tell my clients to aim to spend 25% of their take-home pay on housing. For
somebody who earns $75,000 in New
York City, that’s about $1,040 a month on housing. If you
found a place for that amount instead of paying $1,875 a month,
you’d save an extra $10,000 per year. Don’t tell me it’s not
possible — I’ve seen people who pay even less.
Am I earning as much money as I possibly can?
Cutting back on expenses will
only get you so far.
At some point, you’re going to need to make more money if you
want to achieve all of your financial goals.
Whenever I start working with a new client, I ask them when they
last got a raise, and how happy they are with their current
salary. I definitely have clients who are paid well, and who are
very satisfied with their income. But the vast majority could use
Sometimes that means switching jobs, or even careers, but often
it just means asking. Bosses are busy, and your raise isn’t top
of mind for anyone but you. Schedule a conversation to review
your progress, and present your case for earning more.
Don’t be afraid to ask for a raise, especially if it’s been over
a year or more since your last one. The worst they can do is say
no. And if they do, be prepared to ask for concrete goals you
need to hit to justify getting a raise. That way, next time you
ask, you’ll have even more evidence to prove your worth.
What would happen if something happened to me?
Thinking about what would happen to your stuff and your
money if your apartment caught on fire — or worse — isn’t fun. I
But it’s a really important part of setting yourself up for
We can’t control the world around us, and sometimes bad
things will happen. You need to have a plan for each.
Fortunately, there are some easy steps you can take to make sure
you’re prepared for the worst.
Having an emergency fund of cash on hand is a good place to
start. Even a cushion of a few hundred dollars can help prevent
you from racking up credit card debt if you have an unexpected
expense come up. Ideally, you’ll have at least 6 months of living
expenses set aside in a high-interest savings account, just in
case you ever needed it.
It also helps to ask yourself, how would I pay my bills if
I could no longer do my job? Or, how would I replace my stuff if
it was stolen or ruined in a fire? If you can’t answer those
questions easily, then you should look into getting an insurance
plan that will protect you.
Some types of insurance are required, like if you own a car
or a home. But other types of insurance can cover you if you have
a bigger emergency — something that your emergency fund wouldn’t
be able to cover. For example, renter’s insurance can protect you
if your apartment catches on fire or somebody steals your laptop.
Disability insurance can be a good idea if you are highly
dependent on your income to get by.
Other safety nets exist as well, to protect you and your
loved ones if you are no longer around or able to speak for
yourself. Everyone should have a health care proxy and living
will, and you should always keep your beneficiaries up-to-date on
your financial accounts.
Getting personalized advice can be helpful, but it’s not
the only way to set yourself up for long-term success. Answering
these five questions will go a long way toward making sure you’ve
got your bases covered.
If you have a question about money that you’ve been afraid to
ask, we want to hear from you. Please send us an email at