If you aren’t quite sure how your approach to personal finances differs from your friends, neighbors, or loved ones…well, you’re hardly alone.
Survey after survey shows Americans are extraordinarily reluctant to discuss money matters—even with those closest to them.
Which is a shame because understanding your current financial habits, beliefs, and behaviors is the critical first step in making the adjustments necessary to reduce money-related stress and achieving your short- and long-term financial goals.
That’s where this short, simple quiz comes in: Not only will you come away with a deeper awareness of your current “financial style,” but we’ll also provide tips along the way to increase your financial savviness and build better money habits.
Questions for the Quiz
Question 1: BUDGET - How do you budget?
A: Budget? What budget?
B: I try to use a system like an app or a spreadsheet, but don't always keep up with it.
C: I have an in-depth budget and plan my spending out to the dollar. There's not a penny that moves in or out of my accounts that I don't know about!
Explanation: Want to your money management game to the next level?
Track your spending. A budget helps you organize your spending and expenses and letting you keep up with what money goes where.
There is no shortage of budgeting strategies out there—or savers who swear by them. The bottom line is that which budget you ultimately the specific one that you use is less important than simply choosing one that you understand and can stick with over time.
Question 2: SAVINGS - Are you prepared to cover an unexpected cost or a financial emergency?
A: Can we talk about something else? I don't know what I would do if something went financially wrong.
B: If it was a small or temporary issue—say, a one-time car repair or medical bill—I could probably cover it. Something like unexpectedly losing my job might really set me back though.
C: I have an emergency fund and could cover my expenses for at least 3 to 6 months if something went sideways.
Explanation: Expect the unexpected! Life throws us all curveballs sometimes, but planning ahead can keep you in the game.
Aim to save at least 3 to 6 months' worth of expenses in a liquid savings account—i.e., a rainy day fund—but don’t let having to start small delay you:
Set aside $1,000 in cash to get started and work your way up. Just remember, this is for emergencies only. Avoid dipping into this fund for normal spending or splurges.
Question 3: INVESTMENTS & RETIREMENT - Which best describes your investments/retirement situation?
A: I'm not worried about it right now! Retirement is a long way away…
B: I contribute to an account through my employer. Isn’t that enough?
C: I have one (or more!) retirement accounts. I invest money in other ways, too.
Explanation: Saving money is good. But investing a portion of it can often prove to be even better: While it’s true that buying into an asset, security, or other investment vehicle carries some degree of risk, doing so also creates opportunities to earn a potential return, build wealth faster and more effectively, and protect your nest egg from being devalued by inflation.
Not sure where to begin? A 401(k) or Roth IRA are often great retirement investment vehicles. A brokerage, meanwhile, allows you to make other kinds of investments. The biggest difference? Retirement accounts may offer perks like employer contributions or tax advantages while brokerages do not take outside contributions or provide specific tax advantages. Retirement accounts also have limitations on how you can access/withdraw the money whereas you’re free to use the money in your brokerage account the way you want. Of course, it’s not an either/or proposition—diversification is often a smart bet.
Question 4: CREDIT SCORE - Do you know your credit score?
A: I did score a pretty good credit card recently.
B: I checked it once, but I don't know what it is right now.
C: I look at my estimated score every month to see if it's getting higher!
Explanation: Your credit score is a measure of your "creditworthiness," or the likelihood that you can and will repay the money you borrow. Lenders keep a close eye on this number, which can affect not only whether a given credit application is accepted or rejected, but also the interest rate an approved borrower receives.
Want to build a great credit score over time? Be sure all bills and loans are paid in full and on time. That’s perhaps the most essential component. Having a mix of credit—student loans, credit cards, car loan, and so on—can actually help, too. (Be careful though: You don't want to take out loans or open credit accounts just for the sake of having a different kind of debt.)
Finally, remain mindful of your credit limit on your credit card—even if you pay off the balance before billing date each month, rating agencies prefer you keep your credit utilization ratio low. If possible, try not to use more than 30% of your available credit in any given month.
Question 5: LOANS - If you have loans, have you thought about refinancing/consolidating?
A: Nah, I just make my loan payments every month and hope I'll be debtfree…one day.
B: I'm interested in the process, but I haven't really looked into it yet.
C: Yes, I'm currently evaluating different lenders to see who can give me the best rate.
Explanation: Refinancing and/or consolidating student loans can be a good way to simplify and manage student debt, but whether it makes sense for you ultimately depends on your income, current repayment plan, loan type (private or federal), current interest rate vs. the interest rate you could get if you refinanced, and other factors. You’ll also want to compare the amount of money you’ll save by lowering your interest rate to the process fees you’ll pay. Remember, changing the loan term can impact how much money you spend to repay that debt over time.
Reach out to several lenders for a variety of quotes. Don’t focus solely on the interest rate offered, however—numbers are important, but feeling comfortable and secure matters too.
Results: Tally up your answers to find your financial style:
Mostly A's = Low-Key and Learning: Personal finances are currently on the back burner. The good news is that moving your financial future to the fore is likely a lot less burdensome and time-consuming than you may suspect.
First, aim to automate as much as possible—online banking portals or apps can help you here. Set up automated contributions to savings, create recurring reminders for bill due dates and other important deadlines, and opt-in to alerts that can warn you when something seems amiss with your finances—a suspicious transaction, for example.
Mostly B's = Cautiously Curious: Though you want to do more with your money, the process of doing your due diligence and taking those next steps can feel overwhelming at times. Our advice? Build on the foundation you have by breaking down big goals into smaller, more incremental bites. You don't have to do everything all at once, but keep that forward momentum going. Check one financial to-do off your list every month. Or peruse money magazines for a hot new money strategy with which to experiment. Stay engaged and you’ll likely begin to enjoy that slow but steady progress toward success.
Mostly C's = Savvy Strategist: You know your stuff and you're constantly working to increase your knowledge and optimize your financial life. You're doing a fantastic job on your own, but don't let your blind spots slow you down. Consider working with a professional who can help you learn what you don't know you don't know and introduce you to even more advanced financial planning strategies.
Regardless of how you scored, there are opportunities to level up your financial life and change your financial style to set you up for long-term success. Click here to set up an appointment if you're interested in taking that next step.
