From paying for housing and groceries to covering electricity bills, education, and even entertainment, money touches everything you do. However, often people have complex relations with money and it can be difficult to manage.
Therefore, asking relevant questions about money can help you manage your finances and secure your financial future, which we will cover in this article.
10 Questions About Money
Here are 10 questions about money that you need to ask to improve your personal finances.
1. What Are My Financial Goals?
The initial step in managing your money is to identify your financial objectives. Specific goals are useful and keep you motivated and on track.
Financial goals can be short-term, like saving for a vacation, or long-term, like planning for retirement.
For example, if you aim to buy a home in the next 5 years, you should save a portion of your income regularly and invest wisely to build up the required amount for a down payment. Put goals on paper, and then divide them into achievable tasks.
Also Read: 8 Best Financial Planning Tips You Should Have
2. How Much Debt Do I Have?
You should focus on paying your debts to secure your financial future. When choosing a repayment plan, you can use the snowball method or the avalanche method.
The Snowball and the Avalanche Method are two strategies for paying off debt. The Snowball Method involves paying off the smallest debt first while making minimum payments on larger debts, which can boost motivation as you eliminate debts one by one.
On the flip side, the Avalanche Method targets the highest interest rate debt first, resulting in more money saved on interest over time. Both these methods get you to that debt-free goal, but they take a different route and impact how much you will spend on interest along the way.
3. What Is My Credit Score?
Your CIBIL Score, a three-digit number between 300 and 900, indicates your creditworthiness. The higher the score, the more your chances of getting a loan fast and at a better interest rate. For most banks and financial institutions anything above 750 score is good enough to approve a loan.
This score signals to lenders whether you are likely to repay your debts on time and in full. Regularly reviewing your credit report is a good idea to help ensure the information it contains is accurate.
4. How Much Am I Saving Each Month?
Saving money is important because it helps you prepare for unexpected expenses and future plans, such as buying a house or retirement.
One popular strategy is the 50/30/20 rule, which suggests you allocate 50% of your income to needs (like rent and groceries), 30% to wants (such as dining out and entertainment), and 20% to savings and debt repayment. For example, if you earn ₹50,000 a month, you should aim to save ₹10,000 (20%) each month.
5. Do I have an Emergency Fund?
Most people don’t realise that even a small emergency fund can prevent them from falling into debt.
For example, if your car breaks down and needs Rs 15,000 in repairs, having an emergency fund means you can cover the cost without using credit cards or taking out a loan.
Ideally, your emergency fund should cover 6 to 12 months of living expenses, ensuring you’re prepared for life’s surprises without disrupting your long-term financial goals.
6. What Are My Investment Options?
Investing is about putting your money into things that can grow over time, and there are various options to consider.
Some common types include stocks, bonds, mutual funds, and more. For example, if you invest in a mutual fund, your money is spread across many companies, which can reduce the risk of investing in individual stocks.
Investing depends on how much risk you’re comfortable with and your financial goals.
7. What Insurance Coverage Do I Need?
Insurance helps protect you from financial losses due to unexpected events. In India, it’s important to have different types of insurance: health insurance covers medical expenses, life insurance provides financial support to your family if something happens to you, and vehicle insurance is required if you own a car or bike.
Choosing the right insurance plan involves assessing your needs and comparing different options to find the best coverage at a reasonable cost.
8. What Are My Fixed and Variable Expenses?
You have to understand your fixed and variable expenses to manage your budget effectively.
Fixed expenses are regular payments that stay the same each month, such as rent or mortgage, utility bills, and loan repayments. Variable expenses change from month to month, like groceries, dining out, or entertainment.
Knowing these helps you track your spending and make adjustments to save more or manage your finances better.
9. How Do I Plan for Retirement?
Planning for retirement involves preparing for your financial needs once you stop working. Start by estimating how much money you’ll need to maintain your lifestyle in retirement. This includes considering future expenses, like healthcare and travel. For example, if you plan to retire at 60 and expect to live until 85, you’ll need to save enough to cover your expenses for 25 years.
In India, popular retirement savings options include the Employees’ Provident Fund (EPF), which is automatically contributed by employers, and the National Pension System (NPS), which allows you to make voluntary contributions and benefit from tax breaks.
10. What Are the Tax Benefits I Can Avail?
Maximising tax-saving opportunities involves understanding and utilising various tax deductions, exemptions, and credits available to you. This can include investing in tax-saving instruments such as the Public Provident Fund (PPF), National Pension System (NPS), and Equity-Linked Savings Schemes (ELSS).
Moreover, claiming deductions on home loan interest, education loan interest, and medical insurance premiums under different sections of the Income Tax Act can significantly reduce your taxable income. For example:
Conclusion
Asking these 10 questions about money can provide clarity on your financial situation. The best way to avoid such a situation is to review your financial status regularly and make the necessary changes.
